Apergy Corporation (“Apergy”) (NYSE: APY) today announced
preliminary first quarter 2020 results. Revenue for the quarter was
$261.4 million and net loss attributable to Apergy was $659.5
million, which includes an estimated non-cash pre-tax charge of
$682.8 million related to the impairment of goodwill and long-lived
assets in our Production & Automation Technologies
segment. The final computation of the loss resulting from the
impairment calculation is expected to be in a range of $650 million
to $750 million. The impairment loss was triggered by the
substantial negative impact on oil demand caused by COVID-19, in
combination with the significant increases in supply coming from
OPEC+ members. Adjusted net income attributable to Apergy was $2.8
million, and adjusted EBITDA was $53.3 million. Loss before income
taxes margin was (262.4)%, and adjusted EBITDA margin was 20.4%.
Cash provided by operating activities was $29.2 million, an
increase of $9.3 million on a year-over-year basis, and free cash
flow was $21.8 million. i
“We have responded to the COVID-19 pandemic with a comprehensive
response plan to protect the health and safety of our employees as
we continue to support vital oil and gas infrastructure around the
world,” said Sivasankaran “Soma” Somasundaram, President and Chief
Executive Officer. “Apergy’s businesses are classified as critical
infrastructure; therefore, our manufacturing and field locations
remain operational. Our response plan includes enacting social
distancing policies, equipping employees with additional personal
protective equipment, and following government and heath authority
guidelines, including those of the Centers for Disease Control and
Prevention and the World Health Organization. The health and safety
of employees during this pandemic is paramount, and we are
committed to taking all the necessary steps to do that. I want to
thank all of our employees for their continued dedication and we
are confident we will navigate this challenging environment
responsibly and successfully”
“During the first quarter, our teams continued to execute well
and support our customers against a challenging macro backdrop. We
generated consolidated revenue of $261 million and adjusted EBITDA
of $53 million for the quarter, which was within our guidance
range. We also took proactive measures as part of a comprehensive
contingency plan designed to maintain profitability and strong free
cash flow despite the decline in oil prices from the OPEC+ actions
in early March and reduced demand due to the COVID-19 pandemic. In
response to continued difficult market conditions, we have
increased the actions we are taking, and we now expect that our
actions will result in $85 million of annualized cost savings, an
increase of $20 million from the previous $65 million savings
target announced. We will have completed most of the planned
restructuring actions as we exit the second quarter, with the
remaining actions completed by the middle of the third quarter.
Additionally, we stand ready to take further actions as market
conditions develop.
“We continue to maintain a strong financial position with
liquidity of $298 million at the end of the first quarter,
including $54 million in cash and available borrowing capacity of
$244 million. During the first quarter we increased our available
cash balance by generating free cash flow of $22 million, or 8% of
revenue. Our performance during the quarter continues to
demonstrate the profitability and cash generating capabilities of
our portfolio and contributed to the higher cash balance. We have a
disciplined capital management process and we reacted swiftly to
changing market dynamics. In preparation for settling transaction
expenses associated with our planned merger with ChampionX, as well
as in the spirit of proactive and prudent liquidity management, on
April 24th we increased our cash balance by drawing $125 million on
our revolver leaving $119 million of available borrowing
capacity.
“Due to the short-cycle nature of our business and recent global
events, visibility is challenging. We are seeing meaningful
sequential declines in our order rates, and we are prepared for
market conditions to remain challenging throughout 2020, and
potentially longer, as the shape of global oil demand recovery from
the COVID-19 pandemic remains unclear. However, we are confident
that we will be a long-term winner in the industry. We have taken
and will continue to, take aggressive actions in response to market
conditions. Consistent with our ‘top box’ value creation framework,
we are focused on being an indispensable partner to our customers,
delivering products that are critical to maintaining existing
production, and continuing to deliver strong free cash flow.
“We are also excited by our future after our merger with
ChampionX, which is on track for an expected close by the end of
June. Integration planning is proceeding well and has confirmed our
synergy targets. A key aspect of the strategic rationale for the
combination is to create a stronger, more diversified, and more
resilient production-focused global company. Financially, the
combination immediately reduces leverage and the strong free cash
flow of the combined company will support further deleveraging over
time. We think this merger is exactly the type of smart
strategic combination the industry needs in the face of challenging
market conditions.” ii
|
|
|
|
Three Months Ended |
|
|
Variance |
(dollars in thousands,
except per share amounts) |
|
Mar. 31, 2020(1) |
|
|
Dec. 31, 2019 |
|
|
Mar. 31, 2019 |
|
|
Sequential |
|
Year-over-year |
Revenue |
$ |
261,434 |
|
|
$ |
247,748 |
|
|
$ |
300,494 |
|
|
|
6 |
% |
|
(13 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to
Apergy |
$ |
(659,489 |
) |
|
$ |
(1,823 |
) |
|
$ |
19,656 |
|
|
|
N/M |
|
|
N/M |
|
Diluted earnings (loss) per share
attributable to Apergy |
$ |
(8.51 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.25 |
|
|
|
N/M |
|
|
N/M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income attributable
to Apergy |
$ |
2,774 |
|
|
$ |
10,287 |
|
|
$ |
22,265 |
|
|
|
(73 |
)% |
|
(88 |
)% |
Adjusted diluted earnings per
share attributable to Apergy |
$ |
0.04 |
|
|
$ |
0.13 |
|
|
$ |
0.29 |
|
|
|
(69 |
)% |
|
(86 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
$ |
(686,010 |
) |
|
$ |
(10,622 |
) |
|
$ |
25,507 |
|
|
|
N/M |
|
|
N/M |
|
Income (loss) before income taxes
margin |
|
(262.4 |
)% |
|
|
(4.3 |
)% |
|
|
8.5 |
% |
|
|
N/M |
|
|
N/M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
53,258 |
|
|
$ |
44,643 |
|
|
$ |
69,371 |
|
|
|
19 |
% |
|
(23 |
)% |
Adjusted EBITDA margin |
|
20.4 |
% |
|
|
18.0 |
% |
|
|
23.1 |
% |
|
|
240
bps |
|
|
(270)
bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities |
$ |
29,222 |
|
|
$ |
32,509 |
|
|
$ |
19,910 |
|
|
$ |
(3,287 |
) |
$ |
9,312 |
|
Capital expenditures |
$ |
7,467 |
|
|
$ |
8,191 |
|
|
$ |
9,718 |
|
|
$ |
(724 |
) |
$ |
(2,251 |
) |
|
|
|
|
|
|
N/M – not
meaningful |
|
|
|
|
|
(1) See
Preliminary First Quarter 2020 Results section within this
release. |
|
|
|
|
|
|
Three Months Ended |
|
Variance |
(dollars in
thousands) |
|
Mar. 31, 2020(1) |
|
|
Dec. 31, 2019 |
|
|
Mar. 31, 2019 |
|
Sequential |
|
Year-over-year |
Production & Automation
Technologies |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
205,479 |
|
|
$ |
203,625 |
|
|
$ |
222,959 |
|
|
1 |
% |
|
(8 |
)% |
Operating profit
(loss) |
$ |
(674,140 |
) |
|
$ |
2,175 |
|
|
$ |
13,064 |
|
|
N/M |
|
|
N/M |
|
Operating profit
margin |
|
(328.1 |
)% |
|
|
1.1 |
% |
|
|
5.9 |
% |
|
N/M |
|
|
N/M |
|
Adjusted segment
EBITDA |
$ |
40,031 |
|
|
$ |
35,668 |
|
|
$ |
42,990 |
|
|
12 |
% |
|
(7 |
)% |
Adjusted segment EBITDA
margin |
|
19.5 |
% |
|
|
17.5 |
% |
|
|
19.3 |
% |
|
200
bps |
|
|
20 bps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Drilling Technologies |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
55,955 |
|
|
$ |
44,123 |
|
|
$ |
77,535 |
|
|
27 |
% |
|
(28 |
)% |
Operating profit |
$ |
11,359 |
|
|
$ |
8,644 |
|
|
$ |
26,806 |
|
|
31 |
% |
|
(58 |
)% |
Operating profit
margin |
|
20.3 |
% |
|
|
19.6 |
% |
|
|
34.6 |
% |
|
70 bps |
|
|
(1,430)
bps |
|
Adjusted segment
EBITDA |
$ |
15,770 |
|
|
$ |
11,412 |
|
|
$ |
29,315 |
|
|
38 |
% |
|
(46 |
)% |
Adjusted segment EBITDA
margin |
|
28.2 |
% |
|
|
25.9 |
% |
|
|
37.8 |
% |
|
230
bps |
|
|
(960)
bps |
|
N/M – not meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
(1) See
Preliminary First Quarter 2020 Results section within this
release. |
Production & Automation Technologies
In the first quarter of 2020, Production & Automation
Technologies revenue increased $1.9 million, or 1%, sequentially,
driven by growth in North America, partially offset by lower
international revenues due to the timing of rod lift sales in
international markets. On a year-over-year basis, Production
& Automation Technologies revenue decreased $17.5 million, or
8%, due to lower artificial lift and other production equipment
revenue in North America, partially offset by higher international
and digital revenue.
Revenue from digital products was $33.9 million in the first
quarter of 2020, a decrease of $0.7 million, or 2%, compared to
$34.6 million in the fourth quarter of 2019, and an increase of
$2.6 million, or 8%, compared to $31.3 million in the first quarter
of 2019.
In the first quarter of 2020, segment operating loss was $674.1
million, which includes a non-cash goodwill and long-lived asset
impairment charge of $682.8 million. Adjusted segment EBITDA
was $40.0 million, which increased $4.4 million sequentially, or
12%, due to cost reduction actions, productivity initiatives, and
isolated charges incurred in the fourth quarter of 2019 that did
not repeat. On a year-over-year basis, adjusted segment
EBITDA decreased $3.0 million, or 7%, due to the lower volume,
partially offset by strong cost discipline and productivity
initiatives.
Drilling Technologies
In the first quarter of 2020, Drilling Technologies revenue
increased by $11.8 million, or 27%, sequentially, driven by the
completion of an inventory destocking cycle by our drill bit
customers for polycrystalline diamond cutters in the fourth quarter
of 2019, as well as a 10% increase in diamond bearing revenues,
partially offset by lower U.S. and worldwide rig counts. On a
year-over-year basis, Drilling Technologies revenue decreased $21.6
million, or 28%, due to the significant reduction in U.S. drilling
activity and lower diamond bearing revenues.
In the first quarter of 2020, segment operating profit was $11.4
million, and adjusted segment EBITDA was $15.8 million.
Sequentially adjusted segment EBITDA increased by $4.4 million, or
38%, due to the higher volumes. Year-over-year, adjusted segment
EBITDA decreased by $13.5 million, or 46%, as a result of the lower
volume, partially offset by aggressive direct and SG&A cost
reductions.
Sequentially, the average worldwide rig count was approximately
unchanged and the average U.S. rig count declined 4% as of the end
of the quarter. On a year-over-year basis, the average worldwide
and U.S. rig counts declined 11% and 25%, respectively, at the end
of the quarter and this decline has accelerated in April.
2020 Capital Expenditure and Leased Asset
Guidance
Given limited visibility and significant uncertainty in the oil
and gas industry, Apergy will not be providing income statement
guidance for the three months ended June 30, 2020. During 2020, we
will maintain our focus on the continued implementation of cost
reduction actions to preserve adjusted EBITDA margins and positive
free cash flow.
We are restricting our capital expenditures to maintenance
requirements only, and we expect our full year 2020 capital
expenditures combined with investment in leased assets in the net
cash from operating activities section of our consolidated
statement of cash flows to be approximately $30 million.
Other Business Highlights
- Won a 5 year $40 million tender for progressive cavity pumps
and sucker rod solutions for the coal seam gas market in
Australia.
- Sold 16 AffirmedTM PowerFit motors for slim hole ESP
applications providing customers with increased productivity in
small diameter unconventional wells.
- ACE Downhole, a subsidiary of Apergy, commercially released the
RelianceTM Downhole Gauge for slim hole applications, providing
customers with a highly accurate and durable gauge for small bore
wells.
- U.S. rod lift revenues increased by a low single digit
percentage for the twelve months ended March 31, 2020.
- Strong sales in gas lift packages including downhole valves and
monitoring services in the first quarter of 2020.
- Introduced the virtual Artificial Lift Academy providing 15
unique classes to customers covering artificial lift equipment as
well as production optimization software tools. Over 3,000 class
seat registrations in the first quarter of 2020.
- Windrock, a subsidiary of Apergy, received a patent for a novel
magnetically mounted ultrasonic sensor that provides plug-and-play
monitoring on industrial machinery, providing customers with
accurate and sensitive measurements in an easily deployable
design.
- Seven patents were issued to Drilling Technologies in the first
quarter of 2020.
Conference Call Details
Apergy Corporation will host a conference call on Tuesday, April
28, 2020, to discuss its first quarter 2020 financial results. The
call will begin at 10:00 a.m. Eastern Time. Presentation materials
that supplement the conference call are available on Apergy’s
website at www.investors.apergy.com.
To listen to the call via a live webcast, please visit Apergy’s
website at www.apergy.com. The call will also be available by
dialing 1-888-424-8151 in the United States and Canada or
1-847-585-4422 for international calls. Please call approximately
15 minutes prior to the scheduled start time and reference Apergy
conference call number 6001 239.
A replay of the conference call will be available on Apergy’s
website. Also, a replay may be accessed by dialing 1-888-843-7419
in the United States and Canada, or 1-630-652-3042 for
international calls. The access code is 6001 239#.
Preliminary First Quarter 2020 Results
The first quarter 2020 financial results and disclosures in this
press release are preliminary and reflect Apergy management’s
current views, including with respect to estimated charges for
impairment of goodwill and long-lived assets. Final financial
results and other disclosures will be reported in our Quarterly
Report on Form 10-Q to be filed with the Securities and Exchange
Commission and may differ from the results and disclosures in this
press release due to, among other things, the completion of closing
and review procedures, changes in management’s views including of
estimates, and the occurrence of subsequent events. We urge
you to read the Form 10-Q when it becomes available.
About Non-GAAP Measures
In addition to financial results determined in accordance with
generally accepted accounting principles in the United States
(“GAAP”), this news release presents non-GAAP financial measures.
Management believes that adjusted EBITDA, adjusted EBITDA margin,
adjusted segment EBITDA, adjusted segment EBITDA margin, adjusted
net income attributable to Apergy, adjusted diluted earnings per
share attributable to Apergy, reflect the core operating results of
our businesses and help facilitate comparisons of operating
performance across periods. In addition, free cash flow and free
cash flow to revenue ratio are used by management to measure our
ability to generate positive cash flow for debt reduction and to
support our strategic objectives, while adjusted working capital
provides a meaningful measure of operational results by showing
changes caused by revenue or our operational initiatives. The
foregoing non-GAAP financial measures should be considered in
addition to, not as a substitute for or superior to, other measures
of financial performance prepared in accordance with GAAP. A
reconciliation of these non-GAAP measures to the comparable GAAP
measures is included in the accompanying financial tables.
About Apergy Apergy is a leading provider of
highly engineered equipment and technologies that help companies
drill for and produce oil and gas safely and efficiently around the
world. Apergy's products provide efficient functioning throughout
the lifecycle of a well - from drilling to completion to
production. Apergy’s Production & Automation Technologies
offerings consist of artificial lift equipment and solutions,
including rod pumping systems, electric submersible pump systems,
progressive cavity pumps and drive systems and plunger lifts, as
well as a full automation and digital offering consisting of
equipment and software for Industrial Internet of Things (“IIoT”)
solutions for downhole monitoring, wellsite productivity
enhancement, and asset integrity management. Apergy’s
Drilling Technologies offering provides market leading
polycrystalline diamond cutters and bearings that result in cost
effective and efficient drilling. To learn more about Apergy, visit
our website at http://www.apergy.com.
Forward-Looking Statements
This news release contains statements relating to future actions
and results, which are "forward-looking statements" within the
meaning of the Securities Exchange Act of 1934, as amended, and the
Private Securities Litigation Reform Act of 1995. Such statements
relate to, among other things, Apergy's market position and
growth opportunities. Forward-looking statements include, but
are not limited to, statements related to Apergy’s planned merger
with ChampionX, statements related to Apergy’s expectations
regarding the performance of the business, financial results,
liquidity and capital resources of Apergy, the effects of
competition, and the effects of future legislation or regulations
and other non-historical statements. Forward-looking statements are
subject to inherent risks and uncertainties that could cause actual
results to differ materially from current expectations, including,
but not limited to, tax and regulatory matters; and changes in
economic, competitive, strategic, technological, regulatory or
other factors that affect the operation
of Apergy's businesses. You are encouraged to refer to
the documents that Apergy files from time to time with
the Securities and Exchange Commission (the “SEC”), including
the “Risk Factors” in Apergy’s Annual Report on Form 10-K for the
year ended December 31, 2019, and in Apergy’s other filings with
the SEC, for a discussion of these and other risks and
uncertainties. Readers are cautioned not to place undue reliance on
Apergy’s forward-looking statements. Forward-looking statements
speak only as of the day they are made and Apergy undertakes
no obligation to update any forward-looking statement, except as
required by applicable law.
Important Information About the ChampionX Transaction
and Where to Find It
In connection with the proposed transaction, Apergy has filed a
preliminary proxy statement on Schedule 14A and a registration
statement on Form S-4 containing a prospectus with the Securities
and Exchange Commission (the “SEC”) and ChampionX Holding Inc. has
filed a registration statement on Form S-4 and Form S-1 containing
a prospectus. Both Apergy and ChampionX expect to file
amendments to the registration statements before they become
effective. INVESTORS AND SECURITYHOLDERS ARE ADVISED TO READ
THE REGISTRATION STATEMENTS/PROSPECTUSES AND DEFENITIVE PROXY
STATEMENT AND ANY FURTHER AMENDMENTS WHEN THEY BECOME AVAILABLE AS
WELL AS ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT APERGY,
ECOLAB, CHAMPIONX AND THE PROPOSED TRANSACTION. Investors and
securityholders may obtain a free copy of the registration
statements/prospectuses and preliminary proxy statement and any
further amendments (when available) and other documents filed by
Apergy, Ecolab and ChampionX with the SEC at the SEC’s website at
http://www.sec.gov. The registration statements/prospectuses
and preliminary proxy statement and other documents (when they are
available) can also be obtained free of charge from Ecolab upon
written request to Ecolab Inc., Attn: Investor Relations, 1 Ecolab
Place, St. Paul, MN 55102, or by e-mailing
investor.info@ecolab.com, or upon written request to Apergy,
Investor Relations, 2445 Technology Forest Boulevard, The
Woodlands, Texas 77381, or by e-mailing
david.skipper@apergy.com.
Participants in the Solicitation
This communication is not a solicitation of a proxy from any
security holder of Apergy. However, Apergy, Ecolab and certain of
their respective directors and executive officers may be deemed to
be participants in the solicitation of proxies from shareholders of
Apergy in connection with the proposed transaction under the rules
of the SEC. Information regarding the persons who are, under the
rules of the SEC, participants in the solicitation of the
stockholders of Apergy in connection with the proposed
transactions, including a description of their direct or indirect
interests, by security holdings or otherwise, will be set forth in
the proxy statement/prospectus when it is filed with the SEC.
Information about the directors and executive officers of Ecolab
may be found in its Annual Report on Form 10-K filed with the SEC
on February 28, 2020, and its preliminary proxy statement relating
to its 2020 Annual Meeting of Shareholders filed with the SEC on
March 20, 2020. Information about the directors and executive
officers of Apergy may be found in its Annual Report on Form 10-K
filed with the SEC on March 2, 2020, and its preliminary proxy
statement relating to its 2020 Annual Meeting of Stockholders filed
with the SEC on April 2, 2020.
No Offer or Solicitation
This communication is not intended to and shall not constitute
an offer to sell or the solicitation of an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote of approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Investor Contact: David
Skipperdavid.skipper@apergy.com713-230-8031
Media Contact: John
Breedjohn.breed@apergy.com 281-403-5751
APERGY CORPORATIONCONDENSED
CONSOLIDATED STATEMENTS OF
INCOME(UNAUDITED)
|
Three Months Ended |
|
Mar. 31 |
|
Dec. 31 |
|
Mar. 31 |
(in thousands, except
per share amounts) |
2020 (1) |
|
2019 |
|
2019 |
Revenue |
$ |
261,434 |
|
|
$ |
247,748 |
|
|
$ |
300,494 |
|
Cost of goods and services |
179,095 |
|
|
175,114 |
|
|
197,483 |
|
Gross
profit |
82,339 |
|
|
72,634 |
|
|
103,011 |
|
Selling, general and
administrative expense |
78,143 |
|
|
75,047 |
|
|
64,129 |
|
Goodwill and long-lived asset
impairment |
682,800 |
|
|
— |
|
|
1,746 |
|
Interest expense, net |
9,039 |
|
|
9,075 |
|
|
10,527 |
|
Other (income) expense, net |
(1,633 |
) |
|
(866 |
) |
|
1,102 |
|
Income (loss) before
income taxes |
(686,010 |
) |
|
(10,622 |
) |
|
25,507 |
|
Provision for (benefit from)
income taxes |
(26,794 |
) |
|
(9,048 |
) |
|
5,569 |
|
Net income
(loss) |
(659,216 |
) |
|
(1,574 |
) |
|
19,938 |
|
Net income attributable to
noncontrolling interest |
273 |
|
|
249 |
|
|
282 |
|
Net income (loss)
attributable to Apergy |
$ |
(659,489 |
) |
|
$ |
(1,823 |
) |
|
$ |
19,656 |
|
|
|
|
|
|
|
Earnings (loss) per share
attributable to Apergy: |
|
|
|
|
|
Basic |
$ |
(8.51 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.25 |
|
Diluted |
$ |
(8.51 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.25 |
|
|
|
|
|
|
|
Weighted-average shares
outstanding: |
|
|
|
|
|
Basic |
77,477 |
|
|
77,460 |
|
|
77,363 |
|
Diluted |
77,477 |
|
|
77,460 |
|
|
77,640 |
|
_______________________
(1) Includes estimated charges for goodwill and long-lived asset
impairment of $683 million in our Production & Automation
Technologies segment during the three months ended March 31, 2020,
with an expected range between $650 million and $750 million. See
Preliminary First Quarter 2020 Results section within this
release.
APERGY CORPORATIONBUSINESS SEGMENT
DATA(UNAUDITED)
|
Three Months Ended |
|
Mar. 31 |
|
Dec. 31 |
|
Mar. 31 |
(in
thousands) |
2020 (1) |
|
2019 |
|
2019 |
Segment
revenue: |
|
|
|
|
|
Production & Automation Technologies |
$ |
205,479 |
|
|
$ |
203,625 |
|
|
$ |
222,959 |
|
Drilling Technologies |
55,955 |
|
|
44,123 |
|
|
77,535 |
|
Total revenue |
$ |
261,434 |
|
|
$ |
247,748 |
|
|
$ |
300,494 |
|
|
|
|
|
|
|
Income
(loss) before income taxes: |
|
|
|
|
Segment operating
profit: |
|
|
|
|
|
Production & Automation
Technologies |
$ |
(674,140 |
) |
|
$ |
2,175 |
|
|
$ |
13,064 |
|
Drilling Technologies |
11,359 |
|
|
8,644 |
|
|
26,806 |
|
Total segment operating profit (loss) |
(662,781 |
) |
|
10,819 |
|
|
39,870 |
|
Corporate expense and other
(2) |
14,190 |
|
|
12,366 |
|
|
3,836 |
|
Interest expense, net |
9,039 |
|
|
9,075 |
|
|
10,527 |
|
Income (loss) before income taxes |
$ |
(686,010 |
) |
|
$ |
(10,622 |
) |
|
$ |
25,507 |
|
|
|
|
|
|
|
Bookings: |
|
|
|
|
|
Production & Automation
Technologies |
$ |
223,970 |
|
|
$ |
205,604 |
|
|
$ |
219,465 |
|
Book-to-bill ratio (3) |
1.09 |
|
|
1.01 |
|
|
0.98 |
|
Drilling Technologies |
$ |
54,039 |
|
|
$ |
43,958 |
|
|
$ |
78,586 |
|
Book-to-bill ratio (3) |
0.97 |
|
|
1.00 |
|
|
1.01 |
|
_______________________
- Includes estimated charges for goodwill and long-lived asset
impairment of $683 million in our Production & Automation
Technologies segment during the three months ended March 31, 2020,
with an expected range between $650 million and $750 million. See
Preliminary First Quarter 2020 Results section within this
release.
- Corporate expense and other includes costs not directly
attributable to our reporting segments such as corporate executive
management and other administrative functions, costs related to our
separation from Dover Corporation and the results attributable to
our noncontrolling interest.
- The book-to-bill ratio compares the dollar value of orders
received (bookings) relative to revenue realized during the
period.
APERGY CORPORATIONCONDENSED
CONSOLIDATED BALANCE
SHEETS(UNAUDITED)
(in
thousands) |
March 31, 2020 (1) |
|
December 31, 2019 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
53,636 |
|
|
$ |
35,290 |
|
Receivables, net |
218,903 |
|
|
219,874 |
|
Inventories, net |
206,948 |
|
|
211,342 |
|
Prepaid expenses and other
current assets |
14,384 |
|
|
26,934 |
|
Total current assets |
493,871 |
|
|
493,440 |
|
|
|
|
|
Property, plant and equipment,
net |
235,114 |
|
|
248,181 |
|
Goodwill |
324,989 |
|
|
911,113 |
|
Intangible assets, net |
125,106 |
|
|
238,707 |
|
Other non-current assets |
29,981 |
|
|
31,384 |
|
Total
assets |
$ |
1,209,061 |
|
|
$ |
1,922,825 |
|
|
|
|
|
Liabilities |
|
|
|
Accounts payable |
$ |
118,791 |
|
|
$ |
120,291 |
|
Other current liabilities |
69,331 |
|
|
79,390 |
|
Total current liabilities |
188,122 |
|
|
199,681 |
|
|
|
|
|
Long-term debt |
559,532 |
|
|
559,821 |
|
Other long-term liabilities |
94,875 |
|
|
127,109 |
|
Equity |
|
|
|
Apergy Corporation stockholders’
equity |
363,005 |
|
|
1,032,960 |
|
Noncontrolling interest |
3,527 |
|
|
3,254 |
|
Total liabilities and
equity |
$ |
1,209,061 |
|
|
$ |
1,922,825 |
|
_______________________
(1) Includes estimated charges for goodwill and long-lived
asset impairment of $683 million in our Production & Automation
Technologies segment during the three months ended March 31, 2020,
with an expected range between $650 million and $750 million. See
Preliminary First Quarter 2020 Results section within this
release.
APERGY CORPORATIONCONDENSED
CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)
|
Three Months
Ended March 31, |
(in
thousands) |
2020 (1) |
|
2019 |
Cash provided
(required) by operating activities: |
|
|
|
Net income |
$ |
(659,216 |
) |
|
$ |
19,938 |
|
Depreciation |
16,970 |
|
|
17,071 |
|
Amortization |
12,862 |
|
|
12,844 |
|
Goodwill and long-lived asset impairment |
682,800 |
|
|
1,746 |
|
Receivables |
(6,740 |
) |
|
(7,260 |
) |
Inventories |
2,717 |
|
|
664 |
|
Accounts payable |
3,068 |
|
|
(8,160 |
) |
Leased assets |
(3,900 |
) |
|
(20,501 |
) |
Other |
(19,339 |
) |
|
3,568 |
|
Net cash provided by
operating activities |
29,222 |
|
|
19,910 |
|
|
|
|
|
Cash provided
(required) by investing activities: |
|
|
|
Capital expenditures |
(7,467 |
) |
|
(9,718 |
) |
Proceeds from sale of fixed assets |
721 |
|
|
2,475 |
|
Net cash required by
investing activities |
(6,746 |
) |
|
(7,243 |
) |
|
|
|
|
Cash required by
financing activities: |
|
|
|
Repayment of long-term debt |
— |
|
|
(25,000 |
) |
Other |
(3,144 |
) |
|
(1,234 |
) |
Net cash required by
financing activities |
(3,144 |
) |
|
(26,234 |
) |
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
(986 |
) |
|
89 |
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents |
18,346 |
|
|
(13,478 |
) |
Cash and cash equivalents at
beginning of period |
35,290 |
|
|
41,832 |
|
Cash and cash
equivalents at end of period |
$ |
53,636 |
|
|
$ |
28,354 |
|
_______________________
(1) Includes estimated charges for goodwill and long-lived
asset impairment of $683 million in our Production & Automation
Technologies segment during the three months ended March 31, 2020,
with an expected range between $650 million and $750 million. See
Preliminary First Quarter 2020 Results section within this
release.
APERGY CORPORATIONRECONCILIATIONS OF
GAAP TO NON-GAAP FINANCIAL
MEASURES(UNAUDITED)
|
Three Months Ended |
|
Mar. 31 |
|
Dec. 31 |
|
Mar. 31 |
(in
thousands) |
2020 (1) |
|
2019 |
|
2019 |
Net income (loss) attributable to Apergy |
$ |
(659,489 |
) |
|
$ |
(1,823 |
) |
|
$ |
19,656 |
|
Pre-tax adjustments: |
|
|
|
|
|
Goodwill and long-lived asset impairment |
682,800 |
|
|
— |
|
|
1,746 |
|
Separation and supplemental benefit costs (2) |
368 |
|
|
331 |
|
|
780 |
|
Restructuring and other related charges |
2,766 |
|
|
2,556 |
|
|
896 |
|
Acquisition costs (3) |
384 |
|
|
492 |
|
|
— |
|
ChampionX acquisition and integration costs (4) |
11,124 |
|
|
9,323 |
|
|
— |
|
Material weakness remediation costs (5) |
2,744 |
|
|
— |
|
|
— |
|
Intellectual property defense |
211 |
|
|
400 |
|
|
— |
|
Extended filing costs (6) |
— |
|
|
2,780 |
|
|
— |
|
Tax impact of adjustments
(7) |
(38,134 |
) |
|
(3,772 |
) |
|
(813 |
) |
Adjusted net income
attributable to Apergy |
2,774 |
|
|
10,287 |
|
|
22,265 |
|
Tax impact of adjustments
(7) |
38,134 |
|
|
3,772 |
|
|
813 |
|
Net income attributable to
noncontrolling interest |
273 |
|
|
249 |
|
|
282 |
|
Depreciation and
amortization |
29,832 |
|
|
30,308 |
|
|
29,915 |
|
Provision for (benefit from)
income taxes |
(26,794 |
) |
|
(9,048 |
) |
|
5,569 |
|
Interest expense, net |
9,039 |
|
|
9,075 |
|
|
10,527 |
|
Adjusted
EBITDA |
$ |
53,258 |
|
|
$ |
44,643 |
|
|
$ |
69,371 |
|
|
|
|
|
|
|
Diluted earnings per
share attributable to Apergy: |
|
|
|
|
|
Reported |
$ |
(8.51 |
) |
|
$ |
(0.02 |
) |
|
$ |
0.25 |
|
Adjusted |
$ |
0.04 |
|
|
$ |
0.13 |
|
|
$ |
0.29 |
|
_______________________
- Includes estimated charges for goodwill and long-lived asset
impairment of $683 million in our Production & Automation
Technologies segment during the three months ended March 31, 2020,
with an expected range between $650 million and $750 million. See
Preliminary First Quarter 2020 Results section within this release.
During the three months ended March 31, 2019, we incurred an
impairment loss of $1.7 million related to the classification of
our pressure vessel manufacturing business as held for sale.
- Separation and supplemental benefit costs primarily relates to
separation costs, and to a lesser extent, enhanced or supplemental
benefits provided to employees no longer participating in Dover
Corporation benefit and compensation plans. Supplemental benefit
costs are expected to be incurred through the end of 2020.
- Includes compensation for post business combination services,
related to an acquisition that closed during the third quarter of
2019, which are expected to be incurred through the end of January
2021.
- Includes acquisition costs related to the planned merger of
ChampionX of $7.9 million and $9.3 million for the three months
ended March 31, 2020 and December 31, 2019, respectively, and
professional fees related to the planned integration of ChampionX
of $3.3 million incurred during the three months ended March 31,
2020.
- Includes professional fees of $2.7 million incurred during the
three months ended March 31, 2020 related to the remediation of
material weaknesses identified during 2019.
- Includes professional fees of $2.8 million incurred during the
three months ended December 31, 2019 related to the extended filing
of our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2019.
- We generally tax effect adjustments using a combined federal
and state statutory income tax rate of approximately 23 percent.
The estimated impairment loss for three months ended Q1 2020
includes non-taxable goodwill of $533.8 million.
|
|
|
Three months ended March 31, 2020 (1) |
(in thousands, except
percentages) |
Production
&AutomationTechnologies |
|
Drilling Technologies |
|
Corporate expense and other |
|
Total |
Revenue |
$ |
205,479 |
|
|
$ |
55,955 |
|
|
$ |
— |
|
|
$ |
261,434 |
|
|
|
|
|
|
|
|
|
Operating profit (loss)/
income (loss) before income taxes, as reported |
$ |
(674,140 |
) |
|
$ |
11,359 |
|
|
$ |
(23,229 |
) |
|
$ |
(686,010 |
) |
Depreciation and amortization |
27,572 |
|
|
2,105 |
|
|
155 |
|
|
29,832 |
|
Goodwill and long-lived asset impairment |
682,800 |
|
|
— |
|
|
— |
|
|
682,800 |
|
Separation and supplemental benefit costs (2) |
— |
|
|
— |
|
|
368 |
|
|
368 |
|
Restructuring and other related charges |
671 |
|
|
2,095 |
|
|
— |
|
|
2,766 |
|
Acquisition costs (3) |
384 |
|
|
— |
|
|
— |
|
|
384 |
|
ChampionX acquisition and integration costs (4) |
— |
|
|
— |
|
|
11,124 |
|
|
11,124 |
|
Material weakness remediation costs (5) |
2,744 |
|
|
— |
|
|
— |
|
|
2,744 |
|
Intellectual property defense |
— |
|
|
211 |
|
|
— |
|
|
211 |
|
Interest expense, net |
— |
|
|
— |
|
|
9,039 |
|
|
9,039 |
|
Adjusted EBITDA |
$ |
40,031 |
|
|
$ |
15,770 |
|
|
$ |
(2,543 |
) |
|
$ |
53,258 |
|
|
|
|
|
|
|
|
|
Operating profit margin /
income (loss) before income taxes margin, as reported |
(328.1 |
)% |
|
20.3 |
% |
|
|
|
(262.4 |
)% |
Adjusted EBITDA margin |
19.5 |
% |
|
28.2 |
% |
|
|
|
20.4 |
% |
_______________________
- Includes estimated charges for goodwill and long-lived asset
impairment of $683 million in our Production & Automation
Technologies segment during the three months ended March 31, 2020,
with an expected range between $650 million and $750 million. See
Preliminary First Quarter 2020 Results section within this
release.
- Separation and supplemental benefit costs primarily relates to
separation costs, and to a lesser extent, enhanced or supplemental
benefits provided to employees no longer participating in Dover
Corporation benefit and compensation plans. Supplemental benefit
costs are expected to be incurred through the end of 2020.
- Includes compensation for post business combination services,
related to an acquisition that closed during the third quarter of
2019, which are expected to be incurred through the end of January
2021.
- Includes acquisition costs related to the planned merger of
ChampionX of $7.9 million and professional fees related to the
planned integration of ChampionX of $3.3 million incurred during
the three months ended March 31, 2020.
- Includes professional fees of $2.7 million incurred during the
three months ended March 31, 2020 related to the remediation of
material weaknesses identified during 2019.
|
|
|
Three months ended December 31, 2019 |
(in thousands, except
percentages) |
Production
&AutomationTechnologies |
|
Drilling Technologies |
|
Corporate expense and other |
|
Total |
Revenue |
$ |
203,625 |
|
|
$ |
44,123 |
|
|
$ |
— |
|
|
$ |
247,748 |
|
|
|
|
|
|
|
|
|
Operating profit (loss) /
income (loss) before income taxes, as reported |
$ |
2,175 |
|
|
$ |
8,644 |
|
|
$ |
(21,441 |
) |
|
$ |
(10,622 |
) |
Depreciation and amortization |
27,954 |
|
|
2,184 |
|
|
170 |
|
|
30,308 |
|
Separation and supplemental benefit costs (1) |
— |
|
|
— |
|
|
331 |
|
|
331 |
|
Restructuring and other related charges |
2,337 |
|
|
184 |
|
|
35 |
|
|
2,556 |
|
Acquisition costs (2) |
422 |
|
|
— |
|
|
70 |
|
|
492 |
|
ChampionX acquisition and integration costs (3) |
— |
|
|
— |
|
|
9,323 |
|
|
9,323 |
|
Intellectual property defense |
— |
|
|
400 |
|
|
— |
|
|
400 |
|
Extended filing costs (4) |
2,780 |
|
|
— |
|
|
— |
|
|
2,780 |
|
Interest expense, net |
— |
|
|
— |
|
|
9,075 |
|
|
9,075 |
|
Adjusted EBITDA |
$ |
35,668 |
|
|
$ |
11,412 |
|
|
$ |
(2,437 |
) |
|
$ |
44,643 |
|
|
|
|
|
|
|
|
|
Operating profit margin /
income (loss) before income taxes margin, as reported |
1.1 |
% |
|
19.6 |
% |
|
|
|
(4.3 |
)% |
Adjusted EBITDA margin |
17.5 |
% |
|
25.9 |
% |
|
|
|
18.0 |
% |
_______________________
- Separation and supplemental benefit costs primarily relates to
separation costs, and to a lesser extent, enhanced or supplemental
benefits provided to employees no longer participating in Dover
Corporation benefit and compensation plans. Supplemental benefit
costs are expected to be incurred through the end of 2020.
- Includes compensation for post business combination services,
related to an acquisition that closed during the third quarter of
2019, which are expected to be incurred through the end of January
2021.
- Includes acquisition costs related to the planned merger of
ChampionX of $9.3 million.
- Includes professional fees of $2.8 million incurred during the
three months ended December 31, 2019 related to the extended filing
of our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2019.
|
|
|
Three months ended March 31, 2019 |
(in thousands, except
percentages) |
Production
&AutomationTechnologies |
|
Drilling Technologies |
|
Corporate expense and other |
|
Total |
Revenue |
$ |
222,959 |
|
|
$ |
77,535 |
|
|
$ |
— |
|
|
$ |
300,494 |
|
|
|
|
|
|
|
|
|
Operating profit (loss) /
income before income taxes, as reported |
$ |
13,064 |
|
|
$ |
26,806 |
|
|
$ |
(14,363 |
) |
|
$ |
25,507 |
|
Depreciation and amortization |
27,284 |
|
|
2,509 |
|
|
122 |
|
|
29,915 |
|
Long-lived asset impairment (1) |
1,746 |
|
|
— |
|
|
— |
|
|
1,746 |
|
Separation and supplemental benefit costs (2) |
— |
|
|
— |
|
|
780 |
|
|
780 |
|
Restructuring and other related charges |
896 |
|
|
— |
|
|
— |
|
|
896 |
|
Interest expense, net |
— |
|
|
— |
|
|
10,527 |
|
|
10,527 |
|
Adjusted EBITDA |
$ |
42,990 |
|
|
$ |
29,315 |
|
|
$ |
(2,934 |
) |
|
$ |
69,371 |
|
|
|
|
|
|
|
|
|
Operating profit margin /
income before income taxes margin, as reported |
5.9 |
% |
|
34.6 |
% |
|
|
|
8.5 |
% |
Adjusted EBITDA margin |
19.3 |
% |
|
37.8 |
% |
|
|
|
23.1 |
% |
_______________________
- During the three months ended March 31, 2019, we
incurred an impairment loss of $1.7 million related to the
classification of our pressure vessel manufacturing business as
held for sale.
- Separation and supplemental benefit costs primarily
relates to separation costs, and to a lesser extent, enhanced or
supplemental benefits provided to employees no longer participating
in Dover Corporation benefit and compensation plans. Supplemental
benefit costs are expected to be incurred through the end of
2020.
Adjusted Working Capital
(in
thousands) |
March 31, 2020 |
|
December 31, 2019 |
Receivables, net |
$ |
218,903 |
|
|
$ |
219,874 |
|
Inventories, net |
206,948 |
|
|
211,342 |
|
Accounts payable |
(118,791 |
) |
|
(120,291 |
) |
Adjusted working capital |
$ |
307,060 |
|
|
$ |
310,925 |
|
Free Cash Flow
|
Three Months Ended |
|
Mar. 31 |
|
Dec. 31 |
|
Mar. 31 |
(in
thousands) |
2020 |
|
2019 |
|
2019 |
Free Cash
Flow |
|
|
|
|
|
Cash provided by operating activities |
$ |
29,222 |
|
|
$ |
32,509 |
|
|
$ |
19,910 |
|
Less: Capital
expenditures |
(7,467 |
) |
|
(8,191 |
) |
|
(9,718 |
) |
Free cash flow |
$ |
21,755 |
|
|
$ |
24,318 |
|
|
$ |
10,192 |
|
|
|
|
|
|
|
Cash From
Operating Activities to Revenue Ratio |
|
|
Cash provided by operating
activities |
$ |
29,222 |
|
|
$ |
32,509 |
|
|
$ |
19,910 |
|
Revenue |
$ |
261,434 |
|
|
$ |
247,748 |
|
|
$ |
300,494 |
|
|
|
|
|
|
|
Cash from operating activities
to revenue ratio |
11 |
% |
|
13 |
% |
|
7 |
% |
|
|
|
|
|
|
Free Cash
Flow to Revenue Ratio |
|
|
|
|
Free cash flow |
$ |
21,755 |
|
|
$ |
24,318 |
|
|
$ |
10,192 |
|
Revenue |
$ |
261,434 |
|
|
$ |
247,748 |
|
|
$ |
300,494 |
|
|
|
|
|
|
|
Free cash flow to revenue
ratio |
8 |
% |
|
10 |
% |
|
3 |
% |
i Adjusted net income attributable to Apergy, adjusted EBITDA,
adjusted EBITDA margin, adjusted segment EBITDA, adjusted segment
EBITDA margin, free cash flow, and free cash flow to revenue are
non-GAAP measures. See section titled “About Non-GAAP Measures”
below for details on the non-GAAP measures used in this
release.
ii The transaction with ChampionX is subject to customary
closing conditions, including the effectiveness of Apergy and
Ecolab Inc. (“Ecolab”) filings with the Securities and Exchange
Commission, Apergy shareholder approval, consummation of the
ChampionX separation from Ecolab, and regulatory approvals.
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