01—Abstract
Summary
Summary of the 10-K filed February 27, 2019. Cited figures are marked; the original filing is the authoritative source.
Gardner Denver Holdings, Inc. reported 2018 revenues of $2,689.8 milliona, up from $2,375.4 million in 2017, with net income of $269.4 million compared with $18.5 million in 2017 (which was affected by large stock-based compensation and Tax Act items).
Operating income rose to $443.0 millionb from $109.1 million, and Adjusted EBITDA increased to $681.8 million from $561.5 million. The filing states that the Energy segment generated about 42% of consolidated revenues in 2018, while about 56% of revenues came from customers outside the United States. Cash flow from operations was $444.5 million in 2018 versus $200.5 million in 2017, and free cash flow was $392.3 million.
Total debt was reduced to $1,672.1 millionc from $2,040.2 million, with $337.6 million of long-term debt principal repaid in 2018. The company acquired four businesses in 2018, including Runtech and MP Pumps, for total cash consideration of $186.3 million net of cash acquired, and it authorized a $250.0 million share repurchase program running through July 31, 2020. The company did not pay dividends in 2018 or 2017.
The filing also highlights key risks: exposure to volatile oil and gas prices affecting the Energy segment, about 52% of revenues denominated in non-U.S. dollar currencies, and a $105.8 milliond asbestos-related litigation reserve, with an insurance recovery receivable of $103.0 million. Goodwill and other intangible assets totaled $2,657.9 million, or 59% of total assets.
02—Key points
Key Highlights
- Revenues rose to $2,689.8 million in 2018 from $2,375.4 million in 2017; the filing attributes the increase primarily to upstream energy markets, higher volume (including acquisitions), and improved pricing.
- Net income was $269.4 million in 2018, compared with $18.5 million in 2017, and operating income was $443.0 million versus $109.1 million.
- Adjusted EBITDA was $681.8 million in 2018 (25.3% of revenues) versus $561.5 million in 2017 (23.6%).
- Free cash flow was $392.3 million in 2018, up from $143.7 million, as operating cash flow reached $444.5 million.
- Total debt fell to $1,672.1 million at December 31, 2018 from $2,040.2 million, and the company was in compliance with all debt covenants.
- A $250.0 million share repurchase program was authorized on August 1, 2018, running through July 31, 2020; $29.2 million of shares were repurchased under it in 2018.
- Asbestos-related litigation reserve of $105.8 million, against a $103.0 million insurance recovery receivable, with the Adams County Case ongoing.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Ingersoll Rand kept $0.10.
- Revenue$2.69B100.0%
- Cost of revenue−$1.68B62.4%
- Gross profit$1.01B37.6%
- Operating costs−$569.5M21.2%
- Operating income$443.0M16.5%
- Interest, other & tax−$173.6M6.5%
- Net income$269.4M10.0%
Where FY2018 revenue went
$2.69B- Cost of revenue: $1.68B, 62% of revenue
- SG&A: $434.6M, 16% of revenue
- Net income: $269.4M, 10% of revenue
- R&D: $24.0M, 0.9% of revenue
- Other operating costs: $110.9M, 4.1% of revenue
- Interest, other & tax: $173.6M, 6.5% of revenue
Kept 10% as net incomeR&D $24.0M · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 27, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.69B$2.38B | +13.2% |
| Cost of Revenue | $1.68B$1.48B | +13.5% |
| Gross Profit | $1.01B$897.90M | +12.8% |
| R&D Expenses | $24.00M$26.00M | −7.7% |
| SG&A Expenses | $434.60M$446.20M | −2.6% |
| Operating Income | $443.00M$109.10M | +306.0% |
| Interest Expense | $99.60M$140.70M | −29.2% |
| Net Income | $269.40M$18.40M | +1364.1% |
| EPS (Basic) | $1.34$0.10 | +1240.0% |
| EPS (Diluted) | $1.29$0.10 | +1190.0% |
| Shares Outstanding (Basic) | 201.60M182.20M | +10.6% |
| Shares Outstanding (Diluted) | 209.10M188.40M | +11.0% |
05—Questions
Frequently Asked Questions
How did Gardner Denver's profitability change in 2018?
Net income attributable to Gardner Denver Holdings, Inc. was $269.4 million in 2018, versus $18.4 million in 2017. The filing attributes the increase mainly to higher operating income on higher revenues and gross profit, lower stock-based compensation expense (2017 included $175.0 million of such expense), and lower interest expense.
How much of the company's revenue depends on the energy industry?
The filing states that the Energy segment generated approximately 42% of consolidated revenues in 2018. Segment revenues were $1,121.1 million, and the filing notes that upstream energy demand is volatile and tied to oil and gas prices and drilling activity.
How exposed is the company to foreign currency and international operations?
Approximately 56% of 2018 revenues came from customers outside the United States, and about 52% of revenues were denominated in currencies other than the U.S. dollar. A 10% appreciation of the U.S. dollar would have reduced 2018 revenues by $72.1 million from the euro, $11.1 million from the British pound, and $13.3 million from the Chinese renminbi.
What is the company's debt position and how is it managing it?
Total debt was $1,672.1 million at December 31, 2018, down from $2,040.2 million a year earlier, after $337.6 million of long-term debt principal payments in 2018. Cash and cash equivalents were $221.2 million, and $263.4 million was available under the Revolving Credit Facility.
What legal exposures does the company disclose?
The company is a defendant in many asbestos and silica-related personal injury lawsuits, typically with about 25 or more named defendants. It carries a total litigation reserve of $105.8 million and an insurance recovery receivable of $103.0 million. The company believes these matters are not likely to have a material adverse effect, though the outcome of the Adams County Case could affect the result.
06—Continue