01—Abstract
Summary
Summary of the 10-K filed February 19, 2019. Cited figures are marked; the original filing is the authoritative source.
nVent Electric plc, a leading global provider of electrical connection and protection solutions, filed its first annual report on Form 10-K for fiscal 2018 after separating from Pentair plc on April 30, 2018.
The company operates three segments: Enclosures, Thermal Management, and Electrical & Fastening Solutions, which contributed 46%, 28% and 26% of 2018 total revenues, respectively. Net sales rose to $2,213.6 milliona in 2018 from $2,097.9 million in 2017, a 5.5% increase driven by organic growth of 4.7% and favorable currency effects. Net income fell to $230.8 million from $361.7 million, largely because 2017 included a $84.8 million provisional tax benefit from U.S. tax reform and 2018 included $45.0 million of non-recurring separation costs.
Diluted EPS was $1.28b, versus $2.00 in 2017. Cash flow and balance sheet items show free cash flow of $306.4 million in 2018, compared with $382.1 million in 2017. Total debt was $941.7 million at year-end 2018, following $1.0 billion of senior notes and a term loan issued in March 2018, and the company repaid $52.5 million of term loan principal during the year.
Cash and equivalents rose to $159.0 millionc. Backlog was $279.7 million at December 31, 2018, essentially flat with the prior year. The Board declared a quarterly dividend of $0.175 per share and authorized an additional $380.0 million share repurchase program on February 19, 2019, on top of $441.0 million remaining under the July 2018 authorization.
Key risks highlighted include exposure to energy-sector capital spending, foreign currency and tariff effects, goodwill and intangibles representing 75% of total assets, and tax exposure tied to the Proposed Regulations on interest deductibility and the company's Irish incorporation and U.K. tax residency. The filing also notes that 2018 outlook priorities include differentiated revenue growth, operating excellence, and capital expenditures expected to be approximately $55 milliond in 2019.
02—Key points
Key Highlights
- Net sales of $2,213.6 million in 2018, up 5.5% from $2,097.9 million in 2017, with organic growth of 4.7%
- Net income of $230.8 million, down from $361.7 million in 2017, which included an $84.8 million provisional U.S. tax reform benefit
- Separation-related costs of $45.0 million in 2018 compared with $16.1 million in 2017
- Free cash flow of $306.4 million in 2018 versus $382.1 million in 2017; operating cash flow was $343.5 million
- Total debt of $941.7 million at December 31, 2018, including $300.0 million 3.950% notes due 2023 and $500.0 million 4.550% notes due 2028
- Backlog of $279.7 million at December 31, 2018, compared with $280.4 million a year earlier
- Board authorized an additional $380.0 million share repurchase on February 19, 2019, and declared a quarterly dividend of $0.175 per share
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, nVent Electric kept $0.10.
- Revenue$2.21B100.0%
- Cost of revenue−$1.34B60.4%
- Gross profit$876.1M39.6%
- Operating costs−$565.3M25.5%
- Operating income$310.8M14.0%
- Interest, other & tax−$80.0M3.6%
- Net income$230.8M10.4%
Where FY2018 revenue went
$2.21B- Cost of revenue: $1.34B, 60% of revenue
- SG&A: $519.7M, 23% of revenue
- Net income: $230.8M, 10% of revenue
- R&D: $45.6M, 2.1% of revenue
- Interest, other & tax: $80.0M, 3.6% of revenue
Kept 10% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 19, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $2.21B$2.10B | +5.5% |
| Cost of Revenue | $1.34B$1.26B | +6.5% |
| Gross Profit | $876.10M$841.90M | +4.1% |
| R&D Expenses | $45.60M$42.50M | +7.3% |
| SG&A Expenses | $519.70M$483.30M | +7.5% |
| Operating Income | $310.80M$316.10M | −1.7% |
| Interest Expense | $31.20M$200K | +15500.0% |
| Net Income | $230.80M$361.70M | −36.2% |
| EPS (Basic) | $1.29$2.02 | −36.1% |
| EPS (Diluted) | $1.28$2.00 | −36.0% |
| Shares Outstanding (Basic) | 178.60M179.00M | −0.2% |
| Shares Outstanding (Diluted) | 180.80M181.20M | −0.2% |
05—Questions
Frequently Asked Questions
How did nVent perform financially in 2018 compared with 2017?
Net sales grew 5.5% to $2,213.6 million, driven by organic growth of 4.7% and favorable currency effects. Operating income declined 1.7% to $310.8 million, and net income fell to $230.8 million from $361.7 million, mainly because 2017 included a $84.8 million provisional tax benefit from U.S. tax reform. Diluted EPS was $1.28 versus $2.00.
Which business segments drive nVent's revenue?
Enclosures contributed 46% of total 2018 revenues ($1,019.7 million), Thermal Management 28% ($623.2 million), and Electrical & Fastening Solutions 26% ($570.7 million). Enclosures segment income was $174.8 million, Thermal Management $154.2 million, and Electrical & Fastening Solutions $144.5 million.
What is nVent's debt and liquidity position?
Total debt was $941.7 million at December 31, 2018, with 84% fixed-rate and 16% variable-rate exposure. The company had $159.0 million of cash and cash equivalents and a $600.0 million revolving credit facility with no outstanding borrowings. Management stated it was in compliance with all financial covenants.
What are the main risks flagged in the filing?
Key risks include cyclical demand from industrial and energy customers, a sustained downturn in oil and gas capital spending, currency and tariff exposure (about 40% of net sales were outside the U.S.), goodwill and intangible assets equal to 75% of total assets, and tax risks tied to Proposed Regulations on interest deductibility and the company's Irish incorporation with U.K. tax residency.
06—Continue