01—Abstract
Summary
Summary of the 10-K filed February 26, 2020. Cited figures are marked; the original filing is the authoritative source.
Gardner Denver Holdings, Inc. reported 2019 revenues of $2,451.9 milliona, down from $2,689.8 million in 2018, with net income of $159.1 million versus $269.4 million a year earlier.
Diluted EPS was $0.76b compared with $1.29. The decline was driven mainly by lower revenue from upstream energy-exposed markets, which fell $235.6 million, and an unfavorable currency impact of $65.2 million. Operating income dropped to $275.3 million from $443.0 million, and Adjusted EBITDA fell to $564.8 million from $681.8 million.
Free cash flow was $300.1 millionc, compared with $392.3 million in 2018. The Energy segment was the weakest performer, with revenue down 22.4% to $870.2 million and Segment Adjusted EBITDA down 33.4% to $225.1 million. Industrials revenue was roughly flat at $1,301.3 million, while Segment Adjusted EBITDA rose 2.9% to $296.6 million.
Medical revenue grew 5.7% to $280.4 milliond, and its Segment Adjusted EBITDA increased 12.5% to $84.4 million. The company ended 2019 with total debt of $1,611.4 million and cash of $505.5 million. Fourth-quarter orders fell in Energy (down 36.3%) and Industrials (down 4.6%).
The filing is dominated by a pending merger with the industrial segment of Ingersoll-Rand plc, expected to close on February 29, 2020. Under the Merger Agreement, Gardner Denver will issue shares so that Ingersoll Rand Industrial stockholders own at least 50.1% of the fully diluted common stock, and Ingersoll Rand will receive approximately $1.9 billion in cash funded by new debt.
The combined company is expected to be renamed Ingersoll Rand and trade on the NYSE under the ticker "IR". The filing also notes a potential termination fee of approximately $176 million.
02—Key points
Key Highlights
- Revenue declined 8.8% to $2,451.9 million in 2019, driven primarily by lower upstream energy-exposed revenue ($235.6 million) and unfavorable foreign currency ($65.2 million).
- Net income fell to $159.1 million from $269.4 million; diluted EPS was $0.76 versus $1.29 in 2018.
- Energy segment revenue fell 22.4% to $870.2 million and Segment Adjusted EBITDA fell 33.4% to $225.1 million, while Industrials and Medical held up better.
- Adjusted EBITDA decreased $117.0 million to $564.8 million, with the margin at 23.0% versus 25.3% in 2018.
- Free cash flow was $300.1 million, down from $392.3 million, as operating cash flow decreased to $343.3 million.
- Total indebtedness was $1,611.4 million at year-end, with $445.6 million of unused revolver availability; the company reported compliance with all debt covenants.
- The pending Ingersoll Rand industrial merger would give legacy Ingersoll Rand shareholders at least 50.1% of the combined company, with approximately $1.9 billion in cash paid to Ingersoll Rand.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Ingersoll Rand kept $0.08.
- Revenue$2.02B100.0%
- Cost of revenue−$1.24B61.4%
- Gross profit$778.3M38.6%
- Operating costs−$584.2M29.0%
- Operating income$194.1M9.6%
- Interest, other & tax−$35.0M1.7%
- Net income$159.1M7.9%
Where FY2019 revenue went
$2.02B- Cost of revenue: $1.24B, 61% of revenue
- SG&A: $409.6M, 20% of revenue
- Net income: $159.1M, 7.9% of revenue
- R&D: $22.0M, 1.1% of revenue
- Other operating costs: $152.6M, 7.6% of revenue
- Interest, other & tax: $35.0M, 1.7% of revenue
Kept 7.9% as net incomeR&D $22.0M · 1.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 26, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $2.02B$2.69B | −25.0% |
| Cost of Revenue | $1.24B$1.68B | −26.1% |
| Gross Profit | $778.30M$1.01B | −23.1% |
| R&D Expenses | $22.00M$24.00M | −8.3% |
| SG&A Expenses | $409.60M$434.60M | −5.8% |
| Operating Income | $194.10M$443.00M | −56.2% |
| Interest Expense | $88.40M$99.60M | −11.2% |
| Net Income | $159.10M$269.40M | −40.9% |
| EPS (Basic) | $0.78$1.34 | −41.8% |
| EPS (Diluted) | $0.76$1.29 | −41.1% |
| Shares Outstanding (Basic) | 203.50M201.60M | +0.9% |
| Shares Outstanding (Diluted) | 208.90M209.10M | −0.1% |
05—Questions
Frequently Asked Questions
What is the Ingersoll Rand transaction and when is it expected to close?
Gardner Denver will combine with the industrial segment of Ingersoll-Rand plc through a merger in which Ingersoll Rand Industrial stockholders will own approximately, but not less than, 50.1% of Gardner Denver's common stock on a fully diluted basis. Ingersoll Rand will receive about $1.9 billion in cash funded by newly issued debt. The merger is expected to close on February 29, 2020, and the combined company is expected to be renamed Ingersoll Rand and trade on the NYSE under the symbol "IR".
Why did revenue and profitability decline in 2019?
The filing attributes the revenue decline mainly to lower revenue from upstream energy-exposed markets, which reduced revenue by $235.6 million, and to unfavorable foreign currency effects of $65.2 million. These were partly offset by improved pricing of $36.8 million. Gross profit fell $100.8 million, and other operating expense rose to $75.7 million from $9.1 million, largely due to higher acquisition-related expenses and non-cash charges.
How is the Energy segment performing?
Energy segment revenue fell 22.4% to $870.2 million in 2019, primarily because of lower upstream energy-exposed revenue. Segment Adjusted EBITDA fell 33.4% to $225.1 million, and segment margin declined to 25.9% from 30.1%. The filing notes that demand for upstream products depends heavily on oil and natural gas prices and drilling and hydraulic fracturing activity.
What is the company's debt and liquidity position?
At December 31, 2019, total debt was $1,611.4 million and cash and cash equivalents were $505.5 million. The company had $445.6 million of unused availability under the Revolving Credit Facility and $62.4 million under the Receivables Financing Agreement. The filing states the company was in compliance with all debt covenants as of December 31, 2019 and 2018, and that a substantial portion of its liquidity needs arise from debt service.
Does the company pay dividends or repurchase shares?
The company did not declare or pay common stock dividends in 2019 or 2018 and does not intend to pay cash dividends in the foreseeable future. It had a $250.0 million share repurchase program authorized through July 31, 2020, but made no repurchases under it in 2019. Its Q4 2019 repurchases were limited to shares acquired in connection with net stock option exercises.
06—Continue