01—Abstract
Summary
Summary of the 10-K filed February 16, 2018. Cited figures are marked; the original filing is the authoritative source.
Gardner Denver Holdings, Inc. reported 2017 revenues of $2,375.4 milliona, up from $1,939.4 million in 2016, with net income of $18.5 million (net income attributable to Gardner Denver Holdings, Inc. of $18.4 million) compared with a net loss of $31.3 million in 2016.
Results were driven by upstream energy recovery: Energy segment revenues rose to $1,014.5 millionb from $628.4 million, and Adjusted EBITDA increased to $561.5 million from $400.7 million. The company completed its initial public offering in May 2017, raising proceeds used to repay $851.8 million of long-term debt, and total debt fell to $2,040.2 million at year-end from $2,778.3 million. Net income was held down by $194.5 million of non-cash stock-based compensation charges tied to the IPO, a $84.5 million loss on debt extinguishment, and a $95.3 million net discrete tax benefit from the Tax Cuts and Jobs Act.
The Industrials segment generated $1,130.7 millionc in revenue and $242.7 million of Segment Adjusted EBITDA, while Energy produced $296.1 million and Medical $62.4 million. Aftermarket parts and services represented 41% of total company revenue in 2017.
Management noted that the company expects continued growth in U.S. land rig count and drilled-but-uncompleted wells, and that fourth-quarter 2017 orders rose 25% in Industrials, 62% in Energy, and 29% in Medical. The company acquired Runtech Systems Oy on February 8, 2018 for approximately $93 milliond in cash and does not intend to pay cash dividends in the foreseeable future.
02—Key points
Key Highlights
- Revenue grew 22.5% to $2,375.4 million in 2017, with upstream energy exposed markets contributing $405.5 million of the increase.
- Adjusted EBITDA rose to $561.5 million (23.6% of revenue) from $400.7 million in 2016; Free Cash Flow was $143.7 million versus $91.2 million.
- Energy segment revenue more than doubled to $1,014.5 million, with Segment Adjusted EBITDA of $296.1 million at a 29.2% margin.
- Net income turned positive at $18.5 million, helped by a $131.2 million income tax benefit that includes the effects of the Tax Act, offset by $194.5 million of stock-based compensation and other operating expense.
- Total debt was reduced to $2,040.2 million from $2,778.3 million after IPO proceeds were used to repay $851.8 million of long-term debt.
- Asbestos-related litigation reserve totaled $105.6 million, against an insurance recovery receivable of $100.4 million, with the Adams County Case pending against excess insurers.
- Company will not pay cash dividends in the foreseeable future; its IPO was on the NYSE under the symbol GDI on May 12, 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Ingersoll Rand kept $0.01.
- Revenue$2.38B100.0%
- Cost of revenue−$1.48B62.2%
- Gross profit$897.9M37.8%
- Operating costs−$788.8M33.2%
- Operating income$109.1M4.6%
- Interest, other & tax−$90.7M3.8%
- Net income$18.4M0.8%
Where FY2017 revenue went
$2.38B- Cost of revenue: $1.48B, 62% of revenue
- SG&A: $446.2M, 19% of revenue
- Other operating costs: $316.6M, 13% of revenue
- Net income: $18.4M, 0.8% of revenue
- R&D: $26.0M, 1.1% of revenue
- Interest, other & tax: $90.7M, 3.8% of revenue
Kept 0.8% as net incomeNet income $18.4M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 16, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $2.38B$1.94B | +22.5% |
| Cost of Revenue | $1.48B$1.22B | +20.8% |
| Gross Profit | $897.90M$716.70M | +25.3% |
| R&D Expenses | $26.00M$22.00M | +18.2% |
| SG&A Expenses | $446.20M$415.10M | +7.5% |
| Operating Income | $109.10M$103.50M | +5.4% |
| Interest Expense | $140.70M$170.30M | −17.4% |
| Net Income | $18.40M-$36.60M | +150.3% |
| EPS (Basic) | $0.10$-0.25 | +140.0% |
| EPS (Diluted) | $0.10$-0.25 | +140.0% |
| Shares Outstanding (Basic) | 182.20M149.20M | +22.1% |
| Shares Outstanding (Diluted) | 188.40M149.20M | +26.3% |
05—Questions
Frequently Asked Questions
Why did net income improve so much in 2017 despite large one-time charges?
Net income was $18.5 million in 2017 compared with a net loss of $31.3 million in 2016. The improvement reflected higher operating income on higher revenues and gross profit and lower interest expense, plus a larger income tax benefit driven by the Tax Act. These gains were partially offset by $194.5 million of stock-based compensation, including $97.4 million of DSU expense tied to the IPO, and an $84.5 million loss on debt extinguishment.
How much of the company's revenue comes from aftermarket sales?
The filing states that aftermarket revenue represented 41% of total company revenue and approximately 45% of combined Industrials and Energy segment revenue in 2017. The Energy segment's aftermarket share was 58.0% of its 2017 segment revenue, up from 47.3% in 2016.
What is the company's exposure to the upstream energy market?
The Energy segment generated approximately 43% of consolidated revenue in 2017. Fluid ends used in hydraulic fracturing represent approximately 30% of a pump's original cost and need replacement about four times per year per operating pump. The filing notes that the company holds the second largest installed-base share and the largest new-unit share in the global frac pump market, according to Spears & Associates and management estimates.
What were the main effects of the Tax Cuts and Jobs Act on 2017 results?
The company recorded a net discrete tax benefit of $95.3 million in 2017. This included a $89.6 million benefit from the corporate rate reduction, a $63.3 million one-time transition tax expense, and a $69.0 million reduction in the repatriation liability under ASC 740-30. The company stated that some elements of the accounting remain incomplete and may lead to further adjustments.
What are the company's main indebtedness terms and liquidity?
Total debt was $2,040.2 million at December 31, 2017, including $1,282.3 million of Dollar Term Loan and €613.5 million of Euro Term Loan, both due 2024. Availability was $352.6 million under the Revolving Credit Facility and $66.8 million under the Receivables Financing Agreement. The company was in compliance with all debt covenants as of year-end, and cash and cash equivalents totaled $393.3 million.
06—Continue