01—Abstract
Summary
Summary of the 10-K filed February 23, 2021. Cited figures are marked; the original filing is the authoritative source.
nVent Electric plc (NYSE: NVT) reported full-year 2020 net sales of $1,998.6 milliona, down from $2,204.0 million in 2019, with volume declines driven by a slowdown in capital spending attributable largely to the COVID-19 pandemic.
The company posted a net loss of $47.2 millionb, or $(0.28) per share, compared with net income of $222.7 million in 2019. The loss reflects a pre-tax, non-cash goodwill impairment of $212.3 million in the Thermal Management reporting unit and an $8.2 million trade name impairment, both recorded in the third quarter of 2020. Excluding these charges, segment income totaled $347.6 million for 2020 versus $424.3 million in 2019.
Cash generation remained solid, with net cash provided by operating activities of $344.0 millionc and free cash flow of $306.0 million, compared with $303.8 million in 2019. The company ended 2020 with $122.5 million of cash, total debt of $948.0 million, and $545.1 million available for share repurchases under its 2018 and 2019 authorizations. Shareholder dividends were maintained at $0.175 per quarter, and the Board declared the next quarterly dividend on February 22, 2021.
The filing states the company was in compliance with all financial covenants at year end. Investors should note the company's disclosure that the magnitude of the pandemic's ongoing impact cannot be determined at this time, along with the Thermal Management segment's sharp sales decline of 19.3%d and the Electrical & Fastening Solutions reporting unit's fair value exceeding carrying value by approximately 5%, indicating limited headroom for future impairment testing. The filing also notes that the Company's goodwill and intangible assets represented 73% of total assets at December 31, 2020.
02—Key points
Key Highlights
- Net sales declined 9.3% to $1,998.6 million in 2020 from $2,204.0 million in 2019, driven by a 13.5% volume decline partially offset by acquisitions adding $83.5 million in sales.
- Net loss of $47.2 million ($(0.28) per share) in 2020 versus net income of $222.7 million in 2019, primarily due to $220.5 million of impairment charges on goodwill and trade names.
- Goodwill impairment of $212.3 million recorded for the Thermal Management reporting unit in Q3 2020; Thermal Management net sales fell 19.3% to $476.6 million.
- Segment income totaled $347.6 million in 2020 versus $424.3 million in 2019; Enclosures segment income margin was 15.6% versus 17.5% in 2019.
- Operating cash flow of $344.0 million and free cash flow of $306.0 million in 2020, both broadly in line with 2019 levels of $336.3 million and $303.8 million.
- Total debt of $948.0 million at December 31, 2020, with $545.1 million remaining under share repurchase authorizations and quarterly dividends of $0.175 per share maintained.
- Acquired WBT LLC for $29.9 million in February 2020, adding cable tray systems across the Electrical & Fastening Solutions and Enclosures segments.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2020, nVent Electric lost $0.02.
- Revenue$2.00B100.0%
- Cost of revenue−$1.25B62.5%
- Gross profit$749.4M37.5%
- Operating costs−$711.0M35.6%
- Operating income$38.4M1.9%
- Interest, other & tax−$85.6M4.3%
- Net income−$47.2M2.4%
Where FY2020 revenue went
$2.00B- Cost of revenue: $1.25B, 63% of revenue
- SG&A: $447.0M, 22% of revenue
- Operating income: $38.4M, 1.9% of revenue
- R&D: $43.5M, 2.2% of revenue
- Other operating costs: $220.5M, 11% of revenue
Kept 1.9% as operating incomeOperating income $38.4M · 1.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 23, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $2.00B$2.20B | −9.3% |
| Cost of Revenue | $1.25B$1.34B | −6.7% |
| Gross Profit | $749.40M$865.80M | −13.4% |
| R&D Expenses | $43.50M$48.20M | −9.8% |
| SG&A Expenses | $447.00M$484.50M | −7.7% |
| Operating Income | $38.40M$333.10M | −88.5% |
| Interest Expense | $36.40M$44.70M | −18.6% |
| Net Income | -$47.20M$222.70M | −121.2% |
| EPS (Basic) | $-0.28$1.30 | −121.5% |
| EPS (Diluted) | $-0.28$1.29 | −121.7% |
| Shares Outstanding (Basic) | 169.60M171.60M | −1.2% |
| Shares Outstanding (Diluted) | 169.60M173.00M | −2.0% |
05—Questions
Frequently Asked Questions
Why did nVent report a net loss in 2020 after being profitable in 2019?
The net loss of $47.2 million was driven primarily by a $212.3 million pre-tax, non-cash goodwill impairment in the Thermal Management reporting unit and an $8.2 million trade name impairment, both recorded in the third quarter of 2020. These charges followed adverse market conditions tied to the COVID-19 pandemic and volatility in oil and gas prices. Net sales declines of 9.3% and lower volume also contributed to reduced profitability.
How did each of nVent's three segments perform in 2020?
Enclosures net sales fell 7.8% to $952.9 million with segment income of $148.5 million. Electrical & Fastening Solutions net sales declined 1.8% to $569.1 million, while segment income rose 0.3% to $150.2 million. Thermal Management net sales dropped 19.3% to $476.6 million, and segment income fell 35.4% to $93.9 million.
Is nVent's dividend at risk, and how strong is its liquidity?
The company paid dividends of $0.70 per share in both 2020 and 2019, and the Board declared a quarterly dividend of $0.175 on February 22, 2021. Year-end cash was $122.5 million, and availability under the $600.0 million Revolving Credit Facility was $565.4 million. The company stated it was in compliance with all financial covenants and that its intent is to maintain investment grade metrics and a solid liquidity position.
What is the outlook for the business given the COVID-19 pandemic?
The filing states that the magnitude of the pandemic's impact on financial condition, liquidity and results of operations cannot be determined at this time and depends on factors including its duration and effect on demand. Management has taken cost-reduction actions and reported quarterly organic sales declines of approximately 22%, 14% and 11% in the second, third and fourth quarters of 2020, respectively. Backlog at December 31, 2020 was $307.0 million, and the company expects the majority to ship in 2021.
What goodwill risk should investors be aware of going forward?
Goodwill and intangible assets totaled $3.2 billion and represented 73% of total assets at December 31, 2020. The Electrical & Fastening Solutions reporting unit's fair value exceeded its carrying value by approximately 5% as of the September 30, 2020 impairment test, indicating limited headroom. The filing notes that changes in economic and operating conditions could result in additional impairment charges in future periods.
06—Continue