EVOA WATEPAR The following discussion and analysis of our financial condition and results of our operations should be read in conjunction with Item 6, "Selected Financial and Operating Data" and Item 8, "Financial Statements and Supplementary Data," of this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the section titled "Cautionary Note Regarding Forward-Looking Statements" and in Item 1A, "Risk Factors" in this Annual Report. Unless otherwise indicated or the context otherwise requires, all references to the "Company," "Evoqua," "Evoqua Water Technologies Corp. ," "EWT Holdings I Corp ," "we," "us," "our" and similar terms refer toEvoqua Water Technologies Corp. , together with its consolidated subsidiaries. Unless otherwise specified, all dollar amounts in this section are referred to in millions. Our fiscal year ends onSeptember 30 of each year and references in this section to a year refer to our fiscal year. As such, references to: 2020 relates to the fiscal year endedSeptember 30, 2020 , 2019 relates to the fiscal year endedSeptember 30, 2019 and 2018 relates to the fiscal year endedSeptember 30, 2018 . Overview and Background We are a leading provider of mission critical water treatment solutions, offering services, systems and technologies to support our customers' full water lifecycle needs. With over 200,000 installations worldwide, we hold leading positions in the industrial, commercial and municipal water treatment markets inNorth America . We offer a comprehensive portfolio of differentiated, proprietary technology solutions sold under several market-leading and well-established brands to our global customer base. We have worked to protect water, the environment and our employees for over 100 years. As a result, we have earned a reputation for quality, safety and reliability and are sought out by our customers to solve the full range of their water treatment needs, and maintaining our reputation is critical to the success of our business. Our solutions are designed to ensure that our customers have the quantity and quality of water that meets their unique specifications. We enable our customers to achieve lower costs through greater uptime, throughput and efficiency in their operations and support their regulatory compliance and environmental sustainability. We deliver and maintain these mission critical solutions through the largest service network inNorth America , assuring our customers continuous uptime with 92 service branches as ofSeptember 30, 2020 . We have an extensive service and support network, and as a result, we have certified Evoqua Service Technicians within approximately a two-hour drive from more than 90% of our industrial North American customers' sites. Our vision "to be the world's first choice for water solutions" and our values of "integrity, customers, performance and sustainable" foster a corporate culture that is focused on establishing a workforce that is enabled, empowered and accountable, which creates a highly entrepreneurial and dynamic work environment. Our purpose is "Transforming water. Enriching life." We draw from a long legacy of water treatment innovations and industry firsts, supported by more than 1,300 granted or pending patents, which in aggregate are imperative to our business. Our core technologies are primarily focused on removing impurities from water, rather than neutralizing them through the addition of chemicals, and we are able to achieve purification levels which are 1,000 times greater than typical drinking water. Business Segments For the year endedSeptember 30, 2020 , we served our customers through two segments: Integrated Solutions and Services, a group entirely focused on engaging directly with end users, and Applied Product Technologies, a group focused on developing product platforms to be sold primarily through third party channels. Our segments draw from the same reservoir of leading technologies, shared manufacturing infrastructure, common business processes and corporate philosophies. The key factors used to identify our reportable segments are the organization and alignment of our internal operations, the nature of the products and services and customer type.
• Within the Integrated Solutions and Services segment, we primarily
provide tailored solutions in collaboration with our customers backed
by lifecycle services including ondemand water, outsourced water
(formerly
53
--------------------------------------------------------------------------------
known as build-own-operated), recycle and reuse and emergency response service
alternatives to improve operational reliability, performance and environmental
compliance.
• Within the Applied Product Technologies segment, we provide a highly
differentiated and scalable range of products and technologies
specified by global water treatment designers, OEMs, engineering firms
and integrators.
We evaluate our business segments' operating results based on income from
operations and net income (loss) before interest expense, income tax benefit
(expense) and depreciation and amortization ("EBITDA") on a segment basis.
Corporate activities include general corporate expenses, elimination of
inter-segment transactions, interest income and expense and other unallocated
charges, which have not been allocated to business segments. As such, the
segment results provided herein may not be comparable to other companies. In
addition, our chief operating decision maker uses Adjusted EBITDA of each
reportable segment to evaluate the operating performance of such segments.
Adjusted EBITDA of the reportable segments does not include certain unallocated
charges that are presented within Corporate activities. These unallocated
charges include certain restructuring and other business transformation charges
that have been incurred to align and reposition the Company to the current
reporting structure, acquisition related costs (including transaction costs,
integration costs and recognition of backlog intangible assets recorded in
purchase accounting) and share-based compensation charges.
For the years ended September 30, 2020 , 2019 and 2018, our segments accounted
for the following percentage of our revenues:
2020 2019 2018
Integrated Solutions and Services segment 66.1 % 63.1 % 62.4 % Applied Product Technologies segment 33.9 % 36.9 % 37.6 %
Organic Growth Drivers
Market Growth
We maintain a leading position among customers in growing industries that
utilize water as a critical part of their operations or production processes,
including pharmaceuticals and health sciences, microelectronics, food and
beverage, hydrocarbon and chemical processing, power, general manufacturing,
municipal drinking and wastewater, marine and aquatics. Water treatment is an
essential, nondiscretionary market that is growing in importance as access to
clean water has become an international priority. Underpinning this growth are a
number of global, longterm trends that have resulted in increasingly stringent
effluent regulations, along with a growing demand for cleaner and sustainable
waste streams for reuse. These trends include the growing global population,
increasing levels of urbanization and continued global economic growth, and we
have seen these trends manifest themselves within our various end markets
creating multiple avenues of growth. For example, within the industrial market,
water is an integral and meaningful component in the production of a widerange
of goods spanning from consumer electronics to automobiles.
Our Existing Customer Base
We believe our strong brands, leading position in highly fragmented markets,
scalable and global offerings, leading installed base and unique ability to
provide complete treatment solutions will enable us to capture a larger share of
our existing customers' water treatment spend while expanding with existing and
new customers into adjacent endmarkets and under-penetrated regions, including
by investing in our sales force and crossselling to existing customers. We
believe we are uniquely positioned to further penetrate our core markets, with
over 200,000 installations across over 38,000 global customers. We maintain a
customerintimate business model with strong brand value and provide
solutionsfocused offerings capable of serving a customer's full lifecycle water
treatment needs, both in current and new geographic regions.
54
--------------------------------------------------------------------------------
Our Service Model
We selectively target high value projects with opportunities for recurring
business through service, parts and other aftermarket opportunities over the
lifecycle of the process or capital equipment. In particular, we have developed
internetconnected monitoring technologies through the deployment of our
WaterOne® service platform, which enables customers to outsource their water
treatment systems and focus on their core business, offering customers system
optimization, predictive and proactive service, and simplified billing and
pricing. Our WaterOne® platform also enables us to transition our customers to
pricing models based on usage, which otherwise would not have been possible
without technological advancement. Our technology solutions provide customers
with increased stability and predictability in waterrelated costs, while
enabling us to optimize our service route network and on demand offerings
through predictive analytics, which we believe will result in market share
gains, improved service levels, increased barriers to entry and reduced costs.
Product and Technology Development
We develop our technologies through inhouse research, development and
engineering and targeted tuckin, vertical market and geographyexpanding,
technology-enhancing acquisitions. We have a reservoir of recently launched
technologies and a strong pipeline of new offerings designed to provide
customers with innovative, valueenhancing solutions. Furthermore, since April
2016 , we have successfully completed fourteen acquisitions and the acquisition
of a 60% interest in Frontier Water Systems LLC , expanding our vertical markets
and geographic reach and enhancing our technologies, strengthening our existing
capabilities and adding new capabilities and cross selling opportunities in
areas such as mobile wastewater treatment, soil and air treatment, regenerative
media filtration, anodes, UV and ozone disinfection, aerobic and anaerobic
biological treatment technologies and electrochemical and electrochlorination
cells. We are able to rapidly scale new technologies using our leading direct
and thirdparty sales channels and our relationships with key influencers,
including municipal representatives, engineering firms, designers and other
system specifiers. We believe our continued investment in driving penetration of
our recently launched technologies, robust pipeline of new capabilities and
bestinclass channels to market will allow us to continue to address our
customer needs across the water lifecycle.
Operational Excellence
We believe that continuous improvement of our operations, processes and
organizational structure is a key driver of our earnings growth. We have
identified and are pursuing several discrete initiatives that, if successful, we
expect could result in additional cost savings over the next two years. These
initiatives include our supply chain improvement program to consolidate and
manage global spending, our improved logistics and transportation management
program, capturing benefits of our WaterOne® platform and further optimizing our
engineering cost structure, our global shared services organization and our
sales, inventory and operations planning, including footprint rationalization.
These improvements focus on creating value for customers through reduced
leadtimes, improved quality and superior customer support, while also creating
value for shareholders through enhanced earnings growth. Furthermore, as a
result of significant investments we have made in our footprint and facilities,
we believe we have the capacity to support our planned growth without
commensurate increase in fixed costs.
Acquisitions
We believe that capex-like, tuckin acquisitions present a key opportunity
within our overall growth strategy, which we will continue to evaluate
strategically. These strategic acquisitions will enable us to accelerate our
growth by extending the critical mass in existing markets as well as expand in
new geographies and new end market verticals. Our existing customer
relationships, bestinclass channels to market and ability to rapidly
commercialize technologies provide a strong platform to drive rapid growth in
the businesses we acquire. To capitalize on these opportunities, we have built
an experienced team dedicated to mergers and acquisitions that has, since April
2016 , successfully completed fourteen acquisitions and the acquisition of a 60%
interest in Frontier Water Systems LLC , expanding our vertical markets and
geographic reach and enhancing our technologies, with purchase prices ranging
from approximately $2.0 million to approximately $283.7 million , and
preacquisition revenues ranging from approximately $2.1 million to
approximately $55.7 million .
55
--------------------------------------------------------------------------------
During the year ended September 30, 2020 , we acquired a 60% investment position
in San Diego -based Frontier Water Systems, LLC ("Frontier"), completed the sale
of the Memcor product line to DuPont de Nemours, Inc. ("DuPont"), and acquired
the assets of privately held Aquapure Technologies ("Aquapure"). The aggregate
purchase price paid by DuPont for the Memcor product line was $110.0 million in
cash, subject to certain adjustments. Following adjustments for cash and net
working capital, gross proceeds paid by DuPont were $131.0 million . The Company
recognized a $57.7 million net pre-tax benefit on the sale of the Memcor product
line, net of $8.3 million of discretionary compensation payments to employees in
connection with the transaction and $2.1 million in transaction costs incurred.
The Company and DuPont have a history of collaboration, and following the sale,
DuPont continues to supply the Company with Memcor products. During the year
ended September 30, 2019 , we acquired all of the issued and outstanding equity
securities of ATG UV Technology Limited ("ATG UV"). See Note 3, "Acquisitions
and Divestitures," in Item 8 in this Annual Report for a complete discussion.
We will continue to actively evaluate acquisition opportunities that are
consistent with our business strategy. We maintain a robust pipeline of
potential acquisition targets, developed by our management team as well as
various outside industry experts and consultants.
Key Factors and Trends Affecting Our Business and Financial Statements
Various trends and other factors affect or have affected our operating results,
including:
Impact of the COVID-19 pandemic. Our business has been considered essential
under federal and local standards, and we have maintained business continuity at
our critical service branches and manufacturing facilities to date. We have
taken measures to protect our employees, including implementation of remote
working practices where possible and managing our supply chain to ensure that
necessary personal protective equipment is available to our personnel. We have
also taken certain cost reduction actions, some of which are temporary in
nature, such as reduction of marketing travel activity as well as deferment of
headcount additions to preserve liquidity and reallocated existing resources to
maintain productivity levels where feasible.
We continue to evaluate the impact of the pandemic on our business and how the
economic downturn resulting from the pandemic might affect our customers'
willingness to make capital expenditures and our ability to collect from our
customers.
For more information regarding factors and events that may impact our business,
results of operations and financial condition from the effects of the COVID-19
pandemic, see Item 1A. "Risk Factors-The COVID-19 pandemic and other future
public health crises or pandemics could materially and adversely affect our
business, results of operations and financial condition."
Overall economic trends. The overall economic environment and related changes in
industrial, commercial and municipal spending impact our business. In general,
positive conditions in the broader economy promote industrial, commercial and
municipal customer spending, while economic weakness results in a reduction of
new industrial, commercial and municipal project activity. Macroeconomic factors
that can affect customer spending patterns, and thereby our results of
operations, include population growth, total water consumption, municipal
budgets, employment rates, business conditions, the availability of credit or
capital, interest rates, tax rates, imposition of tariffs and regulatory
changes. Since the businesses of our customers vary in cyclicality, periodic
downturns in any specific sector typically have modest impacts on our overall
business. For example, the recent weakness in global oil markets has created,
and may continue to create, some weakness in demand from customers that we serve
in the oil and gas industry. Additionally, the COVID-19 pandemic has increased
economic uncertainty and has caused an economic slowdown that is likely to
continue and may result in a sustained global recession.
Changes in costs and availability. We have significant exposures to certain
commodities, including steel, caustic, carbon, calcium nitrate and iridium, and
volatility in the market price and availability of these commodity input
materials has a direct impact on our costs and our business. For example,
restrictions on international trade, including tariffs imposed by the U.S.
government and other governments, as well as supply chain disruptions caused by
the COVID-19 pandemic, have increased and could further increase the cost of
certain materials and have restricted and could further restrict availability of
certain commodities, which may result in delays in our execution of projects.
Although we have offset a portion of these
56
--------------------------------------------------------------------------------
cost increases through price increases, there can be no assurance that we will
be able to continue to recuperate additional cost increases from our customers
through product price increases. If we are unable to manage commodity
fluctuations through pricing actions, cost savings projects and sourcing
decisions as well as through consistent productivity improvements, it may
adversely impact our gross profit and gross margin. Further, additional
potential acquisitions and international expansion will place increased demands
on our operational, managerial, administrative and other resources. Managing our
growth effectively will require us to continue to enhance our management
systems, financial and management controls and information systems. We will also
be required to hire, train and retain operational and sales personnel, which
affects our operating margins.
Inflation and deflation trends. Our financial results can be expected to be
directly impacted by substantial increases in costs due to commodity cost
increases or general inflation which could lead to a reduction in our revenues
as well as greater margin pressure as increased costs may not be able to be
passed on to customers.
Fluctuation in quarterly results. Our quarterly results have historically varied
depending upon a variety of factors, including funding, readiness of projects,
regulatory approvals and significant weather events. In addition, our contracts
for large capital water treatment projects, systems and solutions for
industrial, commercial and municipal applications are generally fixedprice
contracts with milestone billings. As a result of these factors, our working
capital requirements and demands on our distribution and delivery network may
fluctuate during the year.
New products and technologies. Our ability to maintain our appeal to existing
customers and attract new customers depends on our ability to originate, develop
and offer a compelling array of products, services and solutions responsive to
evolving customer innovations, preferences and specifications. We expect that
increased use of water in industrial and commercial processes will drive
increased customer demand in the future, and our ability to grow will depend in
part on effectively responding to innovation in our customers' processes and
systems. Further, our ability to provide products that comply with evolving
government regulations will also be a driver of the appeal of our products,
services and solutions to industrial and commercial customers.
Government policies. Decaying water systems in the United States ("U.S.") will
require critical drinking water and wastewater repairs, often led by municipal
governments. Further, as U.S. states increase regulation on existing and
emerging contaminants, we expect that our customers will increasingly require
sustainable solutions to their waterrelated needs. In general, increased
infrastructure investment and more stringent municipal, state and federal
regulations promote increased spending on our products, services and solutions,
while a slowdown in investment in public infrastructure or the elimination of
key environmental regulations could result in lower industrial and municipal
spending on water systems and products.
Availability of water. In general, we expect demand for our products and
services to increase as the availability of clean water from public sources
decreases. Secular trends that will drive demand for water across a multitude of
industrial, commercial and municipal applications include global population
growth, urbanization, industrialization and overall economic growth. In
addition, the supply of clean water could be adversely impacted by factors
including an aging water infrastructure within North America and increased
levels of water stress from seasonal rainfall, inadequate water storage options
or treatment technologies. Because water is a critical component and byproduct
of many processes, including in manufacturing and product development, we expect
that, as global consumption patterns evolve and water shortages persist, demand
for our equipment and services will continue to increase.
Operational investment. Our historical operating results reflect the impact of
our ongoing investments to support our growth. We have made significant
investments in our business that we believe have laid the foundation for
continued profitable growth. Activities related to operational investments
include employee training and development, integrating acquired businesses,
implementing enhanced information systems, research, development and engineering
investments and other activities to enable us to support our operating model.
Our ability to source and distribute products effectively. Our revenues are
affected by our ability to purchase our inputs in sufficient quantities at
competitive prices. While we believe our suppliers have adequate capacity to
meet our current and anticipated demand, our level of revenues could be
adversely affected in the event of constraints in our supply chain, including
the inability of our suppliers to produce sufficient quantities of raw materials
in a manner that is able to match demand from our customers.
57
--------------------------------------------------------------------------------
Contractual relationships with customers. Due to our large installed base and
the nature of our contractual relationships with our customers, we have high
visibility into a large portion of our revenue. The one to twentyyear terms of
many of our service contracts and the regular delivery and replacement of many
of our products help to insulate us from the negative impact of any economic
decline.
Exchange rates. The reporting currency for our Consolidated Financial Statements
is the U.S. dollar. We operate in numerous countries around the world and
therefore, certain of our assets, liabilities, revenues and expenses are
denominated in functional currencies other than the U.S. dollar, primarily in
the euro, U.K. sterling, Chinese renminbi, Canadian dollar, Australian dollar
and Singapore dollar. To prepare our Consolidated Financial Statements we must
translate those assets, liabilities, revenues and expenses into U.S. dollars at
the applicable exchange rate. As a result, increases or decreases in the value
of the U.S. dollar against these other currencies will affect the amount of
these items recorded in our Consolidated Financial Statements, even if their
value has not changed in the functional currency. While we believe we are not
susceptible to any material impact on our results of operations caused by
fluctuations in exchange rates because our operations are primarily conducted in
the U.S. , if we expand our foreign operations in the future, substantial
increases or decreases in the value of the U.S. dollar relative to these other
currencies could have a significant impact on our results of operations.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of
performance and financial measures. The key indicators of the financial
condition and operating performance of our business are revenue, gross profit,
gross margin, operating expenses, net income (loss) and Adjusted EBITDA (which
is a non-GAAP financial measure, as described more fully and reconciled to the
most directly comparable GAAP financial measure below).
Revenue
Our sales are a function of sales volumes and selling prices, each of which is a
function of the mix of product and service sales, and consist primarily of:
• sales of tailored light industry technologies, heavy industry
technologies and environmental products, services and solutions in
collaboration with our industrial customers, backed by lifecycle
services including emergency response services and outsourced water
alternatives, to a broad group of industrial customers in our U.S. ,
Canada and Singapore markets;
• sales of products, services and solutions to engineering firms andmunicipalities to purify drinking water and treat wastewater globally;
and
• sales of a wide variety of differentiated products and technologies, to
an array of OEM, distributor, enduser, engineering firm and integrator
customers in all of our geographic markets and aftermarket channels.
Cost of Sales, Gross Profit and Gross Margin
Gross profit is determined by subtracting cost of product sales and cost of
services from our product and services revenue. Gross margin measures gross
profit as a percentage of our combined product and services revenue.
Cost of product sales consists of all manufacturing costs required to bring a
product to a ready for sale condition, including direct and indirect materials,
direct and indirect labor costs including benefits, freight, depreciation,
information technology, rental and insurance, repair and maintenance, utilities,
other manufacturing costs, warranties and third party commissions.
Cost of services primarily consists of the cost of personnel and travel for our
field service, supply chain and technicians, depreciation of equipment and field
service vehicles and freight costs.
Operating Expenses
Operating expenses consist primarily of the following:
58
--------------------------------------------------------------------------------
General and Administrative. General and administrative expenses ("G&A expense")
consist of fixed overhead personnel expenses associated with our corporate
functions and our service organization (including district and branch managers,
customer service, contract renewals and regeneration plant management). We
expect our general and administrative expenses to increase due to the
anticipated growth of our business and related infrastructure as well as legal,
accounting, insurance, investor relations and other costs associated with being
a public company.
Sales and Marketing. Sales and marketing expenses ("S&M expense") consist
primarily of advertising and marketing promotions of our products, services and
solutions and related personnel expenses (including all Evoqua sales and
application employees' base compensation and incentives), as well as sponsorship
costs, consulting and contractor expenses, travel, display expenses and related
amortization. We expect our sales and marketing expenses to increase as we
continue to actively promote our products, services and solutions.
Research and Development. Research and development expenses ("R&D expense")
consist primarily of personnel expenses related to research and development,
patents, sustaining engineering, consulting and contractor expenses, tooling and
prototype materials and overhead costs allocated to such expenses. Substantially
all of our research and development expenses are related to developing new
products and services and improving our existing products and services. To date,
research and development expenses have been expensed as incurred, because the
period between achieving technological feasibility and the release of products
and services for sale has been short and development costs qualifying for
capitalization have been insignificant.
R&D expense can fluctuate depending on our determination to invest in developing
new products, services and solutions and enhancing our existing products,
services and solutions versus adding these capabilities through a mergers and
acquisitions strategy. R&D expenditures are concentrated in our products
businesses.
Net Income (Loss)
Net income (loss) is determined by subtracting operating expenses and interest
expense from, and adding other operating income (expense), equity income from
our partnership interest in Treated Water Outsourcing and income tax benefit
(expense) to gross profit. For more information on how we determine gross
profit, see "Gross Profit."
Adjusted EBITDA
Adjusted EBITDA, which is a non-GAAP financial measure, is one of the metrics
used by management to evaluate the financial performance of our business.
Adjusted EBITDA is defined as net income (loss) before interest expense, income
tax benefit (expense) and depreciation and amortization, adjusted for the impact
of certain other items, including restructuring and related business
transformation costs, purchase accounting adjustment costs, non-cash share-based
compensation, sponsor fees, transaction costs and other gains, losses and
expenses. We present Adjusted EBITDA, which is not a recognized financial
measure under accounting principles generally accepted in the United States
("GAAP"), because we believe it is frequently used by analysts, investors and
other interested parties to evaluate companies in our industry. Further, we
believe it is helpful in highlighting trends in our operating results and
provides greater clarity to management and our investors regarding the
operational impact of longterm strategic decisions regarding capital structure,
the tax jurisdictions in which we operate and capital investments. Management
uses Adjusted EBITDA to supplement GAAP measures of performance as follows:
• to assist investors and analysts in comparing our operating performance
across reporting periods on a consistent basis by excluding items that
we do not believe are indicative of our core operating performance;
• in our management incentive compensation which is based in part on
components of Adjusted EBITDA;
• in certain calculations under our senior secured credit facilities,
which use components of Adjusted EBITDA.
• to evaluate the effectiveness of our business strategies;
• to make budgeting decisions; and
59
--------------------------------------------------------------------------------
• to compare our performance against that of other peer companies using
similar measures.
In addition to the above, our chief operating decision maker uses EBITDA and
Adjusted EBITDA of each reportable operating segment to evaluate the operating
performance of such segments. EBITDA and Adjusted EBITDA of the reportable
operating segments does not include certain charges that are presented within
Corporate activities. These charges include certain restructuring and other
business transformation charges that have been incurred to align and reposition
the Company to the current reporting structure, acquisition related costs
(including transaction costs, integration costs and recognition of backlog
intangible assets recorded in purchase accounting) and share-based compensation
charges.
You are encouraged to evaluate each adjustment and the reasons we consider it
appropriate for supplemental analysis. In addition, in evaluating Adjusted
EBITDA, you should be aware that in the future, we may incur expenses similar to
the adjustments in the presentation of Adjusted EBITDA. Our presentation of
Adjusted EBITDA should not be construed as an inference that our future results
will be unaffected by unusual or nonrecurring items. In addition, Adjusted
EBITDA may not be comparable to similarly titled measures used by other
companies in our industry or across different industries.
The following is a reconciliation of our Net income (loss) to Adjusted EBITDA:
Year Ended September 30,
(In millions) 2020 2019 2018
Net income (loss) $ 114.4 $ (8.5 ) $ 7.9
Income tax expense 7.4 9.6 1.4
Interest expense 46.6 58.6 57.5
Operating profit $ 168.4 $ 59.7 $ 66.8
Depreciation and amortization 107.3 98.2 85.9
EBITDA $ 275.7 $ 157.9 $ 152.7
Restructuring and related business transformation
costs (a) 17.4 24.2 34.4
Share-based compensation (b) 10.5 20.0 15.8
Transaction costs (c) 1.9 11.6 7.6
Sponsor fees (d) - - 0.3
Other (gains) losses and expenses (e) (65.9 ) 21.3 6.1
Adjusted EBITDA $ 239.6 $ 235.0 $ 216.9 (a) Restructuring and related business transformation costs
Adjusted EBITDA is calculated prior to considering certain restructuring or
business transformation events. These events may occur over extended periods of
time and in some cases it is reasonably possible that they could reoccur in
future periods based on reorganizations of the business, cost reduction or
productivity improvement needs, or in response to economic conditions. For the
periods presented such events include the following:
(i) Certain costs and expenses in connection with various restructuring
initiatives, including severance costs, relocation costs, recruiting
expenses, and third-party consultant costs to assist with these
initiatives. This includes:
(A) costs related to our voluntary separation plan pursuant to
which approximately 220 employees accepted separation
packages;
(B) amounts related to the Company's restructuring initiatives to
reduce the cost structure and rationalize location footprint
following the sale of the Memcor product line;
60--------------------------------------------------------------------------------
(C) amounts related to the Company's transition from a
three-segment structure to a two-segment operating model
designed to better serve the needs of customers worldwide; and
(D) amounts related to various other initiatives implemented to
restructure and reorganize our business with the appropriate
management team and cost structure.
Year Ended September 30,
2020 2019 2018
Voluntary separation plan(1) $ - $ - $ 0.3
Post Memcor divestiture restructuring(2) $ 9.1 $ - $ -
Cost of product sales and services ("Cost of sales") 6.6 - -
S&M expense 0.2 - -
G&A expense 1.9 - -
Other operating (income) expense 0.4 - -
Two-segment restructuring(3) $ 2.1 $ 11.9 $ -
Cost of sales 1.0 5.2 -
R&D expense - 0.1 -
S&M expense - 1.1 -
G&A expense 1.1 5.5 -
Various other initiatives(4) $ 1.0 $ 1.4 $ 9.0
Cost of sales 0.7 0.8 2.8
R&D expense - - 0.6
S&M expense 0.1 - 0.7
G&A expense 0.2 0.6 4.7
Other operating (income) expense - - 0.2
Total $ 12.2 $ 13.3 $ 9.3
(1) all of which is reflected as a component of Restructuring
charges in Note 14, "Restructuring and Related Charges" in
Part II, Item 8 of this Annual Report (the "Restructuring
Footnote").
(2) of which $8.3 million is reflected in the Restructuring Footnote in 2020.
(3) of which $2.1 million and $11.1 million is reflected in the
Restructuring Footnote in 2020 and 2019, respectively.
(4) all of which is reflected in the Restructuring Footnote in
2020, 2019 and 2018.
(ii) legal settlement costs and intellectual property related fees
associated with legacy matters prior to the AEA Acquisition,
including fees and settlement costs related to product warranty
litigation on MEMCOR® products and certain discontinued products.
This includes:
Year Ended September 30,
2020 2019 2018Cost of sales$ 1.5 $ 0.8 $ 3.0 G&A expense 0.7 0.8 1.3 Total$ 2.2 $ 1.6 $ 4.3
(iii) expenses associated with our information technology and functional
infrastructure transformation subsequent to the AEA Acquisition,
including activities to optimize information technologysystems and
functional infrastructure processes. This includes:
61--------------------------------------------------------------------------------
Year Ended September 30,
2020 2019 2018
Cost of sales $ 0.1 $ 0.7 $ 4.2
G&A expense 0.9 8.4 10.5
Other operating (income) expense - - 0.3
Total $ 1.0 $ 9.1 $ 15.0
(iv) costs associated with our secondary public offering of common stock
held by certain shareholders of the Company, as well as costs
incurred by us in connection with our establishment of our public
company compliance structure and processes, includingconsultant
costs. This includes:
Year Ended September 30,
2020 2019 2018
G&A expense $ 2.0 $ 0.2 $ 5.8
Total $ 2.0 $ 0.2 $ 5.8 (b) Share-based compensation
Adjusted EBITDA is calculated prior to considering noncash sharebased compensation expenses related to equity awards. See Note 17, "Share-Based Compensation" in Part II, Item 8 of this Annual Report for further detail. (c) Transaction related costs
Adjusted EBITDA is calculated prior to considering transaction, integration and
restructuring costs associated with business combinations because these costs
are unique to each transaction and represent costs that were incurred as a
result of the transaction decision. Such costs may include, without limitation,
consulting and legal costs associated with due diligence and closing a
transaction, restructuring and integration costs such as severance, facility
consolidation costs, product rationalization or inventory obsolescence charges,
system integration or conversion costs, fair value changes associated with
contingent consideration, and costs associated with any litigation matters that
arise subsequent to our acquisition of a business for which the matter in
question preceded the transaction, but was not known, not probable or unresolved
at the date of acquisition. We believe that viewing earnings prior to
considering these charges provides investors with useful additional perspective
because the significant costs incurred in connection with business combinations
result primarily from the need to eliminate duplicate assets, activities or
employees - a natural result of acquiring or disposing a fully integrated set of
activities. Integration and restructuring costs associated with a business
combination may occur over several years. This includes:
Year Ended September 30,
2020 2019 2018
Cost of sales $ 0.1 $ 3.2 $ 0.5
G&A expense 1.8 8.4 7.1
Total $ 1.9 $ 11.6 $ 7.6
(d) Sponsor fees
Adjusted EBITDA is calculated prior to considering management fees paid to AEA
pursuant to a management agreement. Prior to our IPO, AEA provided advisory and
consulting services to us, including investment banking, due diligence,
financial advisory and valuation services. AEA also provided ongoing advisory
and consulting services to us pursuant to the management agreement. In
connection with our IPO, the management agreement was terminated. See Note 20,
"Related-Party Transactions" in Part II, Item 8 of this Annual Report for
further detail.
62
--------------------------------------------------------------------------------(e) Other (gains), losses and expenses
Adjusted EBITDA is calculated prior to considering certain other significant (gains), losses and expenses. Such significant items represent substantive and/or unusual items that are evaluated on an individual basis. Such evaluation considers both the quantitative and qualitative aspects of their nature and they may be highly variable and difficult to predict. Unusual items may represent items that are not part of our ongoing business, items that, either as a result of their nature or size, we would not expect to occur as part of our normal business on a regular basis, items that would be non-recurring, or items related to products we no longer sell. While not all-inclusive, examples of items that could be included as other (gains), losses and expenses would be amounts related to non-cash foreign currency exchange gains and losses on intercompany loans, significant warranty events, and certain disposals of businesses, products or facilities that do not qualify as discontinued operations under GAAP. For the periods presented such events include the following: (i) impact of foreign exchange gains and losses;
(ii) foreign exchange impact related to headquarter allocations;
(iii) expenses on disposal related to maintaining nonoperational business
locations, net of gain on sale;
(iv) expenses incurred by the Company related to the remediation of
manufacturing defects caused by a third-party vendor for which
partial restitution was received;
(v) charges incurred by the Company related to product rationalization
in its electro-chlorination business;
(vi) net pre-tax benefit on the sale of the Memcor product line, which is
net of $8.3 million of discretionary compensation payments to
employees in connection with the transaction and $2.1 million in
transaction costs incurred in 2020, a gain on the sale of property
at a location in our German operations in 2019 and a gain on the
sale of assets related to the disposition of land at our Windsor ,
Australia location in 2018; and
(vii) expenses incurred by the Company related to the write-off of
inventory associated with product rationalization and facility
consolidation.
(viii) expenses incurred by the Company as a result of the COVID-19
pandemic, including additional charges for personal protective
equipment, increased costs for facility sanitization and one-time
payments to certain employees.
Other (gains), losses and expenses include the following for the periods
presented below:
Year Ended
Other Adjustments
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Total
Cost of sales $ (0.2 ) $ - $ - $ - $ 0.7 $ 0.1 $ - $ 0.8 $ 1.4
G&A expense (8.5 ) - - - - 0.3 - 0.5 (7.7 )
Other operating
(income) expense - - - (1.5 ) - (58.1 ) - - (59.6 )
Total $ (8.7 ) $ - $ - $ (1.5 ) $ 0.7 $ (57.7 ) $ - $ 1.3 $ (65.9 )
63-------------------------------------------------------------------------------- Year EndedSeptember 30, 2019 Other Adjustments (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Total Cost of sales$ 0.4 $ -$ 0.3 $ 2.1 $ 4.1 $ -$ 5.0 $ -$ 11.9 G&A expense 10.1 - - - - - - - 10.1 Other operating (income) expense - - (0.3 ) - - (0.4 ) - - (0.7 ) Total$ 10.5 $ - $ -$ 2.1 $ 4.1 $ (0.4 ) $ 5.0 $ -$ 21.3 Year EndedSeptember 30, 2018 Other Adjustments (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Total Cost of sales$ 0.7 $ -$ 1.0 $ 3.9 $ -$ 0.1 $ 2.1 $ -$ 7.8 G&A expense 7.3 (0.5 ) - - - - 0.5 - 7.3 Other operating (income) expense (2.1 ) - - - - (6.9 ) - - (9.0 ) Total$ 5.9 $ (0.5 ) $ 1.0 $ 3.9 $ -$ (6.8 ) $ 2.6 $ -$ 6.1 64
--------------------------------------------------------------------------------
Results of Operations
The following tables summarize key components of our results of operations for
the periods indicated:
Year Ended September 30, % Variance
2020 2019
(In millions, except per share 2020
amounts) % of Revenue % of Revenue vs. 2019
Revenue from product sales and
services $ 1,429.5 100.0 % $ 1,444.4 100.0 % (1.0 )%
Cost of product sales and
services (979.7) (68.5 )% (1,018.4) (70.5 )% (3.8 )%
Gross profit $ 449.8 31.5 % $ 426.0 29.5 % 5.6 %
General and administrative
expense (192.6) (13.5 )% (217.1) (15.0 )% (11.3 )%
Sales and marketing expense (136.2) (9.5 )% (138.9) (9.6 )% (1.9 )%
Research and development expense (13.2) (0.9 )% (15.3) (1.1 )% (13.7 )%
Total operating expenses $ (342.0 ) (23.9 )% $ (371.3 ) (25.7 )% (7.9 )%
Other operating income, net 60.6 4.2 % 5.0 0.3 % 1,112.0 %
Interest expense (46.6) (3.3 )% (58.6) (4.1 )% (20.5 )%
Income before income taxes $ 121.8 8.5 % $ 1.1 0.1 % (10,972.7 )%
Income tax expense (7.4) (0.5 )% (9.6) (0.7 )% (22.9 )%
Net income (loss) $ 114.4 8.0 % $ (8.5 ) (0.6 )% 1,445.9 %
Net income attributable to
noncontrolling interest 0.8 0.1 % 1.0 0.1 % (20.0 )%
Net income (loss) attributable
to Evoqua Water Technologies
Corp. $ 113.6 7.9 % $ (9.5 ) (0.7 )% 1,295.8 %
Weighted average shares outstanding Basic 116.7 114.7 Diluted 121.1 114.7 Earnings (loss) per share Basic$ 0.97 $ (0.08 ) Diluted$ 0.94 $ (0.08 ) Other financial data: Adjusted EBITDA (1)$ 239.6 16.8%$ 235.0 16.3 % 2.0 %
(1) For the definition of Adjusted EBITDA and a reconciliation to net income
(loss), its most directly comparable financial measure presented in
accordance with GAAP, see "How We Assess the Performance of Our
Business-Adjusted EBITDA."
65-------------------------------------------------------------------------------- Years EndedSeptember 30, 2020 andSeptember 30, 2019 Consolidated Results Revenues-Revenues decreased$14.9 million , or 1.0%, to$1,429.5 million in the year endedSeptember 30, 2020 from$1,444.4 million in the prior year. The following table provides the change in revenues from product sales and revenues from services, respectively: Year Ended September 30, 2020 2019 % Variance % of % of Revenue Revenue Revenue from product sales$ 839.9 58.8 %$ 851.1 58.9 % (1.3 )% Revenue from services 589.6 41.2 % 593.3 41.1 % (0.6 )%$ 1,429.5 100.0 %$ 1,444.4 100.0 % (1.0 )% Revenues from product sales decreased$11.2 million , or 1.3% from the prior year. This decrease in product sales was primarily due to the divestiture of the Memcor product line of$44.4 million in the current year. Aftermarket product revenues declined$40.7 million in the current year and was related to the divestiture of the Memcor product line as well as site closures and delays due to COVID-19. The aftermarket revenue decrease was offset by an increase in capital revenues of$29.5 million . This increase was primarily related to projects in the microelectronics end market as well as$15.7 million related to the acquisitions of ATG UV and Frontier. Revenues from services decreased$3.7 million , or 0.6% from the prior year. This decrease was driven by the impact of COVID-19 shut-downs and delays, primarily in refining and oil and gas end markets, as well as the timing of completion of certain large projects in the prior year. This decrease was partially offset by price realization related to established service contracts. Cost of Sales and Gross Margin-Total gross margin increased to 31.5% in the year endedSeptember 30, 2020 from 29.5% in the prior year. The following table provides the change in cost of product sales and cost of services, respectively, along with related gross margins: Year Ended September 30, 2020 2019 Gross Gross Margin % Margin %
Cost of product sales
$ (979.7 ) 31.5 %$ (1,018.4 ) 29.5 % The gross margin for product sales increased 2.3% from the prior year. The increase in gross margin was primarily driven by costs incurred in the prior year of$8.2 million related to restructuring and product rationalization, that did not reoccur in the current year. Gross margin from services increased 1.6% from the prior year. This increase is mainly driven by price realization recognized in revenue as well as continued focus on labor productivity even as previous increases in revenue volumes were offset in the current period.
Operating Expenses-Operating expenses decreased
66
--------------------------------------------------------------------------------
translation on intercompany loans of $20.1 million along with a decrease in
share-based compensation expense of $9.5 million . In addition, the divestiture
of the Memcor product line resulted in a decrease of $7.5 million of operating
expenses in the current year. This decrease was partially offset by increased
costs of $10.2 million of employment and benefit expenses and increased costs of
$7.6 million related to the addition of operating expenses as a result of the
ATG UV and Frontier acquisitions, mainly due to amortization expense on
purchased intangibles. The remaining decrease is due to various efforts taken by
the Company to reduce costs across various areas in response to COVID-19
uncertainties, such as reduced travel and consulting costs.
A discussion of operating expenses by category is as follows:
Research and Development Expense-Research and development expense decreased $2.1
million , or 13.7%, to $13.2 million in the year ended September 30, 2020 from
$15.3 million in the prior year due to the Company's continued efforts to reduce
spending, offset partially by increased expenses by the addition of the Frontier
acquisition.
Sales and Marketing Expense-Sales and marketing expense decreased $2.7 million ,
or 1.9%, to $136.2 million in the year ended September 30, 2020 from $138.9
million in the prior year mainly due to a reduction in sales and marketing
expenses related to the divestiture of the Memcor product line in the current
year, as well as a reduction in certain marketing initiatives and travel related
expenses, offset by increased costs for salaries and incentive compensation and
the addition of the Frontier acquisition.
General and Administrative Expense-General and administrative expense decreased
$24.5 million , or 11.3%, to $192.6 million in the year ended September 30, 2020
from $217.1 million in the prior year. This decrease is primarily due to:
•favorable change in foreign currency translation on the intercompany loans of
$19.6 million
•reduction in share-based compensation expense of $9.2 million
•reduction in consulting fees of $4.4 million
•reduction in travel expenses of $4.3 million
•reduction in benefits of $3.7 million
The above factors were partially offset by:
•increased employee related costs of $8.8 million
•increased costs of $4.3 million related to the Frontier acquisition
• costs of $1.8 million incurred related to the secondary public
offering of shares of common stock held by certain
shareholders of the Company
•restructuring costs of $1.9 million following the sale of the Memcor product
line
Other Operating Income, Net-Other operating income, net increased $55.6 million ,
to income of $60.6 million in the year ended September 30, 2020 from income of
$5.0 million in the prior year. The increase is mainly due to the net pre-tax
benefit of $57.7 million on sale of the Memcor product line net of $8.3
million of discretionary compensation payments to employees in connection with
the transaction and $2.1 million in transaction costs incurred in the current
year.
Interest Expense-Interest expense decreased $12.0 million , or 20.5%, to $46.6
million in the year ended September 30, 2020 from $58.6 million in the prior
year. The decrease in interest expense was primarily driven by a reduction in
LIBOR year over year in addition to a $100.0 million debt repayment that
occurred in the current year, partially offset by a write-off of deferred
financing fees related to the debt paydown and interest expense associated with
additional equipment financings.
67
--------------------------------------------------------------------------------
Income Tax Expense-Income tax expense was $7.4 million for the year ended
September 30, 2020 , compared to expense of $9.6 million in the prior year. The
decrease in expense was primarily the result of the favorable impact on deferred
tax liabilities related to indefinite lived intangibles, a portion of which were
reversed in relation to the sale of the Memcor product line.
Net Income (loss) -Net income increased by $122.9 million , or 1,445.9%, to net
income of $114.4 million for the year ended September 30, 2020 from a net loss
of $8.5 million in the prior year. This increase was primarily due to the sale
of the Memcor product line, which resulted in a gain on sale of $68.1 million ,
less amounts paid for discretionary bonuses of $8.3 million and transaction
costs of $2.1 million . The resulting net pre-tax benefit was $57.7 million . In
addition to the net benefit of the sale, we saw operational efficiencies and a
favorable change in foreign currency translation resulting in a net gain
of $20.8 million . Finally, interest expense and income tax expense decreased
by $12.0 million and $2.2 million , respectively.
Adjusted EBITDA-Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA
increased $4.6 million , or 2.0%, to $239.6 million for the year ended
September 30, 2020 from $235.0 million for the prior year. The increase in
Adjusted EBITDA as compared to the prior year period was primarily driven by
operational efficiencies.
68
--------------------------------------------------------------------------------
Segment Results
Year Ended September 30,
2020 2019
% of Revenue % of Revenue % Variance
Revenues
Integrated Solutions and Services $ 944.2 66.1 % $ 910.8 63.1 % 3.7 %
Applied Product Technologies 485.3 33.9 % 533.6 36.9 % (9.1 )%
Total Consolidated $ 1,429.5 100.0 % $ 1,444.4 100.0 % (1.0 )%
Operating Profit
Integrated Solutions and Services $ 145.7 10.2 % $ 148.6 10.3 % (2.0 )%
Applied Product Technologies 134.3 9.4 % 69.4 4.8 % 93.5 %
Corporate (111.6 ) (7.8 )% (158.3 ) (11.0 )% (29.5 )%
Total Consolidated $ 168.4 11.8 % $ 59.7 4.1 % 182.1 %
EBITDA
Integrated Solutions and Services $ 213.1 14.9 % $ 205.8 14.2 % 3.5 %
Applied Product Technologies 148.5 10.4 % 87.1 6.0 % 70.5 %
Corporate and unallocated costs (85.9 ) (6.0 )% (135.0 ) (9.3 )% (36.4 )%
Total Consolidated $ 275.7 19.3 % $ 157.9 10.9 % 74.6 %
Adjusted EBITDA on a segment basis is defined as earnings before interest, taxes, depreciation and amortization adjusted for the impact of certain other items that have been reflected at the segment level. The following is a reconciliation of our segment operating profit to Adjusted EBITDA:
Year Ended September 30,
2020 2019
Integrated Integrated
Solutions and Applied Product Solutions and Applied Product
Services Technologies Services Technologies
Operating Profit $ 145.7 $ 134.3 $ 148.6 $ 69.4
Depreciation and amortization 67.4 14.2 57.2 17.7
EBITDA 213.1 148.5 205.8 87.1
Restructuring and related business
transformation costs (a) 0.6 9.7 0.5 1.1
Transaction costs (b) - (0.5 ) 0.5 0.7
Legal fees (c) - - - 0.6
Other (gains) losses and expenses (d) - (58.5 ) 0.1 10.4
Segment Adjusted EBITDA (e) $ 213.7 $ 99.2 $ 206.9 $ 99.9
(a) Represents costs and expenses in connection with restructuring initiatives
distinct to our Integrated Solutions and Services and Applied Product
Technologies segments, respectively, incurred in 2020 and 2019. Such
expenses are primarily composed of severance and relocation costs.
(b) Represents costs associated with a change in the current estimate ofcertain acquisitions achieving their earn-out targets, which resulted in a
(decrease) increase to the fair valued amount of the earn-out recorded
upon acquisition in 2020 and 2019, distinct to our Integrated Solutions
and Services and Applied Product Technologies segments.
69--------------------------------------------------------------------------------
(c) Represents warranty costs associated with the settlement of a legacy
warranty claim in 2019, distinct to our Applied Product Technologies
segment.
(d) Other (gains) and losses and expenses as discussed above in "How We Assess
the Performance of Our Business-Adjusted EBITDA" distinct to our
Integrated Solutions and Services and Applied Product Technologies
segments include the following:
Year Ended September 30,
2020 2019
Integrated Integrated
Solutions and Applied Product Solutions and Applied Product
(In millions) Services Technologies Services Technologies
Net pre-tax benefit on sale of the
Memcor product line $ - $ (57.7 ) $ - $ -
Gain on sale of property - - - (0.4 )
Remediation of manufacturing defects - (1.5 ) - 2.1
Product rationalization in
electro-chlorination business - 0.7 - 3.7
Expenses related to maintaining
non-operational business locations - - 0.1 -
Write-off of inventory - - - 5.0
Total $ - $ (58.5 ) $ 0.1 $ 10.4
(e) For the definition of Adjusted EBITDA and a reconciliation to net income
(loss), its most directly comparable financial measure presented in
accordance with GAAP, see "How We Assess the Performance of Our
Business-Adjusted EBITDA." Immaterial rounding differences may be present
in the tables above.
Integrated Solutions and Services Revenues in the Integrated Solutions and Services segment increased$33.4 million , or 3.7%, to$944.2 million in the year endedSeptember 30, 2020 from$910.8 million in the prior year, driven primarily by stronger capital growth of$38.3 million , inclusive of acquisitions, primarily related to projects in the microelectronics end market. Our recent investment in Frontier resulted in an increase of$4.9 million of revenue. These increases were offset by a reduction in aftermarket revenue of$3.7 million and a reduction in service revenue of$1.2 million . The segment also saw an unfavorable foreign currency translation impact of$0.7 million . [[Image Removed: chart-070dc32fca62597484a.jpg]] Operating profit in the Integrated Solutions and Services segment decreased$2.9 million , or 2.0%, to$145.7 million in the year endedSeptember 30, 2020 from$148.6 million in the prior year. Segment profitability improved$20.9 million in the period primarily driven by higher organic revenue volume, augmented by improved pricing, which was 70 -------------------------------------------------------------------------------- partially offset by$6.0 million of operational variances in the year related to lower service volumes and productivity due to customer shutdowns and enhanced safety protocols. The current period negative impacts were partially mitigated by$2.9 million of cost containment measures implemented in response to the uncertainties of COVID-19. Profitability in the current year was also favorably impacted by the non-recurrence of$0.5 million of charges related to the achievement of earn-out targets associated with the Pure Water acquisition. Profitability was also impacted by increased employment and benefit expenses of$11.0 million . Additional negative drivers to profitability included$10.2 million from higher depreciation and amortization. [[Image Removed: chart-7784636833285be39e1.jpg]] EBITDA in the Integrated Solutions and Services segment increased$7.3 million , or 3.5%, to$213.1 million in the year endedSeptember 30, 2020 from$205.8 million in the prior year. Applied Product Technologies Revenues in the Applied Product Technologies segment decreased by$48.3 million , or 9.1%, to$485.3 million in the year endedSeptember 30, 2020 from$533.6 million in the prior year. The divestiture of the Memcor product line resulted in a reduction in revenue of$51.2 million in the current period. This reduction was partially offset by increased revenues from the acquisition of ATG UV of$10.8 million . Additionally, revenues were down by$11.5 million in theAmericas predominantly due to COVID-19 slowdown and delays. The segment also saw an unfavorable foreign currency translation impact of$1.1 million . These declines were partially offset by revenue growth of$3.2 million and$1.5 million in theAsia Pacific and EMEA regions respectively. [[Image Removed: chart-c2a08193e9035f6393c.jpg]] 71 -------------------------------------------------------------------------------- Operating profit in the Applied Product Technologies segment increased$64.9 million , or 93.5%, to$134.3 million in the year endedSeptember 30, 2020 from$69.4 million in the prior year. The increase was mainly due to the net pre-tax benefit on the sale of the Memcor product line of$57.7 million , net of$8.3 million of discretionary compensation payments to employees in connection with the transaction and$2.1 million in transaction costs incurred. In addition, revenue volume and operational variances increased operating profit by$2.1 million , which is comprised of favorable operational variances of$7.1 million , as well as product mix augmented by improved pricing, partially offset by volume, netting to$2.1 million . These increases were partially offset by a net reduction in operating profit of$5.5 million related to the divestiture of the Memcor product line and the acquisition of ATG UV as well as increased inflation and employee related costs of$1.6 million . The increase in operating profit was also due to lower depreciation of$3.5 million . Further increases were due to net reduction in nonrecurring costs of$1.7 million related to: • Reduction in costs incurred by the Company of$4.9 million related to the write-off of inventory in the prior year associated with product rationalization and facility consolidation; • A$3.6 million reduction in costs incurred by the Company from a settlement with a third-party vendor associated with
remediation of
manufacturing defects caused by the vendor;
• Reductions in costs of $1.4 million related to the achievement of
earn-out targets associated with certain acquisitions;
• Reductions in product rationalization costs of $3.0 million related
to charges incurred by the Company in its electro-chlorination
business;
• A gain on sale recorded in the prior year of $0.4 million which did
not reoccur in the current year;
• Increases in restructuring charges of $8.0 million primarily due to
costs incurred following the sale of the Memcor product line; and
• Release of an acquisition related contingency due to thepassage of
time in the prior year for $2.8 million .
Operating profit was also reduced by foreign currency of
[[Image Removed: chart-13d64015a822567cb06.jpg]]
EBITDA in the Applied Product Technologies segment increased $61.4 million , or
70.5%, to $148.5 million in the year ended September 30, 2020 from $87.1 million
in the prior year.
72
--------------------------------------------------------------------------------
For a discussion of the results of operations for the years ended
Item 7. in the Company's 10-K filed with theSEC onNovember 25, 2019 . Liquidity and Capital Resources Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, other commitments and contractual obligations. We consider liquidity in terms of cash flows from operations and their sufficiency to fund our operating and investing activities. Our principal sources of liquidity are our cash generated by operating activities and borrowings under our$125.0 million Revolving Credit Facility. Historically, we have financed our operations primarily from cash generated from operations and increased equipment financings. Our primary cash needs are for day to day operations, to pay interest and principal on our indebtedness, to fund working capital requirements and to make capital expenditures. As part of our ongoing efforts to improve our cash flow and related liquidity, we work with suppliers to optimize our terms and conditions, including occasional extensions of payment terms. We also facilitate a voluntary supply chain finance program (the "Finance Program") to provide certain of our suppliers with the opportunity to sell receivables due from us to participating financial institutions at the sole discretion of both the suppliers and the financial institutions. A third party administers the Finance Program; our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether the supplier sells its receivable to a financial institution. We do not enter into agreements with any of the participating financial institutions in connection with the Finance Program. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the Finance Program. TheSeptember 30 year to date amounts settled through the Finance Program and paid to participating financial institutions were$38.9 million , and$8.6 million in fiscal 2020, and fiscal 2019, respectively. A downgrade in our credit rating or changes in the financial markets could limit the financial institutions' willingness to commit to participation in the Finance Program. We expect to continue to finance our liquidity requirements through internally generated funds and borrowings under our Revolving Credit Facility. We believe that our projected cash flows generated from operations, together with borrowings under our Revolving Credit Facility are sufficient to fund our principal debt payments, interest expense, our working capital needs and our expected capital expenditures for the next twelve months. Our capital expenditures for the years endedSeptember 30, 2020 and 2019 were$88.5 million and$88.9 million , respectively. However, our budgeted capital expenditures can vary from period to period based on the nature of capital intensive project awards. We may draw on our Revolving Credit Facility from time to time to fund or partially fund an acquisition. As ofSeptember 30, 2020 , we had total indebtedness of$885.5 million , including$819.3 million of borrowings under the Term Loan Facility, no borrowings under our Revolving Credit Facility,$63.9 million in borrowings related to equipment financings,$0.6 million of notes payable related to certain equipment related contracts and$1.7 million related to a mortgage. We also had$13.0 million of letters of credit issued under our Revolving Credit Facility and an additional$52 thousand of letters of credit issued under a separate uncommitted facility as ofSeptember 30, 2020 . Our senior secured credit facilities contain a number of covenants imposing certain restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. The restrictions these covenants place on our business operations, include limitations on our or our subsidiaries' ability to: • incur or guarantee additional indebtedness;
• make certain investments;
• pay dividends or make distributions on our capital stock;
• sell assets, including capital stock of restricted subsidiaries;
• agree to payment restrictions affecting our restricted subsidiaries;
73
--------------------------------------------------------------------------------• consolidate, merge, sell or otherwise dispose of all or substantially
all of our assets;
• enter into transactions with our affiliates;
• incur liens; or
• designate any of our subsidiaries as unrestricted subsidiaries.
We are a holding company and do not conduct any business operations of our own. As a result, our ability to pay cash dividends on our common stock, if any, is dependent upon cash dividends and distributions and other transfers from our operating subsidiaries. Under the terms of our senior secured credit facilities, our operating subsidiaries are currently limited in their ability to pay cash dividends to us, and we expect these limitations to continue in the future under the terms of any future credit agreement or any future debt or preferred equity securities of ours or of our subsidiaries. In addition, our Revolving Credit Facility, but not the First Lien Term Loan, contains a financial covenant which requires us to comply with the maximum first lien net leverage ratio of 5.55 to 1.00 as of the last day of any quarter on which the aggregate amount of revolving loans and letters of credit outstanding under the Revolving Credit Facility (net of cash collateralized letters of credit and undrawn outstanding letters of credit in an amount of up to 50% of the Revolving Credit Facility) exceeds 25% of the total commitments thereunder. As ofSeptember 30, 2020 and 2019, we were in compliance with the covenants contained in the senior secured credit facilities. Our indebtedness could adversely affect our ability to raise additional capital, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk and prevent us from meeting our obligations. See Item 1A, "Risk Factors-Our substantial indebtedness could adversely affect our financial condition and limit our ability to raise additional capital to fund our operations." Cash Flows The following table summarizes the changes to our cash flows for the periods presented: Year Ended September 30, (In millions) 2020 2019 2018 Statement of Cash Flows Data Net cash provided by operating activities$ 158.4 $ 125.2 $ 81.0 Net cash provided by (used in) investing activities 12.0 (94.5 ) (207.0 ) Net cash (used in) provided by financing activities (89.5 ) 5.7
150.6
Effect of exchange rate changes on cash 2.2 (1.6 ) (1.5 ) Cash and cash equivalents classified as held for sale - (7.3 ) - Change in cash and cash equivalents$ 83.1 $ 27.5
Operating Activities Cash flows from operating activities can fluctuate significantly from periodtoperiod as working capital needs and the timing of payments for restructuring activities and other items impact reported cash flows. Net cash provided by operating activities increased to$158.4 million in the year endedSeptember 30, 2020 from$125.2 million in the year endedSeptember 30, 2019 . 74 --------------------------------------------------------------------------------
• Operating cash flows in the year ended
increase in net income of
line.
• The add back of noncash charges increased operating cash flows by
$45.3 million for the year endedSeptember 30, 2020 as compared to an increase to operating cash flows of$132.5 million for the year ended
This reduction in the current year was primarily driven by the
adjustment for gain on sale of business, as well as decreased
share-based compensation expenses and foreign currency gains, offset by
an increase in depreciation and amortization expense.
• The aggregate of receivables, inventories, contract assets, accounts
payable and contract billings provided
flows in the year ended
the prior year. The amount of cash flow generated from or used by the
above mentioned accounts depends upon how effectively we manage our
cash conversion cycle, which is a representation of the number of daysthat elapse from the date of purchase of raw materials and components
to the collection of cash from customers. Our cash conversion cycle can
be significantly impacted by the timing of collections and payments in
a period.
• Income taxes provided
as compared to using $3.6 million during the year ended September 30,
2019 , resulting in an increase to cash flows of $4.2 million .
• The aggregate of prepaid expense and other assets and other non current
assets and liabilities provided $17.8 million in operating cash flows
in the year ended September 30, 2020 compared to the providing of $21.8
million in operating cash flows in the prior year.
• Accrued expenses and other liabilities provided $3.4 million in
operating cash flows in the year ended
use of
[[Image Removed: chart-1610d734f78759c5abf.jpg]]
Investing Activities
Net cash provided by investing activities increased $106.5 million to $12.0
million in the year ended September 30, 2020 from net cash used in investing
activities of $94.5 million in the year ended September 30, 2019 . This increase
was largely driven by proceeds from the sale of the Memcor product line in
fiscal 2020, partially offset by higher cash outflow associated with the
Frontier and Aquapure acquisitions that occurred in fiscal 2020. Other activity
related to purchase of capital or intangible assets remained relatively
consistent with the prior fiscal year.
75
--------------------------------------------------------------------------------
Financing Activities
Net cash used in financing activities increased $95.2 million to $89.5 million
in the year ended September 30, 2020 from net cash provided by financing
activities of $5.7 million in the year ended September 30, 2019 . This additional
amount of cash used in financing activities for year ended September 30,
2020 was primarily due to the $100 million debt payment, which was offset by
cash received from the issuance of common stock in connection with the exercise
of stock options. In addition, there was an increase in the issuance of debt and
higher borrowings under the credit facility and other financing arrangements
that occurred in 2019.
Seasonality
Our business may exhibit seasonality resulting from our customers' increasing
demand for our products and services during the spring and summer months as
compared to the fall and winter months. For example, our business servicing
municipal customers experiences increased demand for our odor control product
lines and services in the warmer months which, together with other factors,
typically results in improved performance in the second half of our fiscal year.
Inclement weather, such as hurricanes, droughts and floods, can also drive
increased demand for our products and services. As a result, our results from
operations may vary from period to period.
Seasonal trends historically displayed by our business could be impacted by the
COVID-19 pandemic, and past performance should not be considered indicative of
future results. For example, decreased customer demand resulting from the
economic slowdown caused by the pandemic and the measures taken to control its
spread could negate the seasonal factors that have historically resulted in
improved performance in the second half of our fiscal year.
OffBalance Sheet Arrangements
As of September 30, 2020 and 2019, we had letters of credit totaling $13.0
million outstanding under our credit arrangements. In addition, as of
September 30, 2020 and 2019, we had surety bonds totaling $153.0 million and
$144.7 million , respectively, outstanding under our credit arrangements. The
longest maturity date of the letters of credit and surety bonds in effect as of
September 30, 2020 was March 20, 2030 .
Contractual Obligations
We enter into longterm obligations and commitments in the normal course of
business, primarily debt obligations and noncancelable operating leases. As of
September 30, 2020 , our contractual cash obligations over the next several
periods were as follows:
Less than 1 to 3 to More than
(In millions) Total 1 year 3 years 5 years 5 years
Longterm debt obligations (a) $ 885.5 $ 16.5 $ 33.8 $ 804.3 $ 30.9
Interest payments on longterm
debt obligations 117.5 27.4 53.1 32.9 4.1
Operating lease commitments (b) 56.7 14.6 21.5 12.9 7.7
Finance lease commitments (c) 41.3 12.9 18.6 8.7 1.1
Total $ 1,101.0 $ 71.4 $ 127.0 $ 858.8 $ 43.8
76--------------------------------------------------------------------------------
(a) The amounts shown in this table do not include any net reductions for
deferred financing fees. The amounts for current and long-term debt shown
on the Consolidated Balance Sheets are net of deferred financing fees.
(b) We occupy certain facilities and operate certain equipment and vehicles
under noncancelable lease arrangements. Lease agreements may contain
lease escalation clauses and purchase and renewal options. We recognize
scheduled lease escalation clauses over the course of the applicable lease
term on a straightline basis.
(c) We lease certain equipment classified as finance leases. The leased
equipment is depreciated on a straight line basis over the life of the
lease and is included in depreciation expense.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions about future events that affect
amounts reported in our Consolidated Financial Statements and related notes, as
well as the related disclosure of contingent assets and liabilities at the date
of the financial statements. Management evaluates its accounting policies,
estimates and judgments on an ongoing basis. Management bases its estimates and
judgments on historical experience, current trends and various other factors
that are believed to be relevant at the time Consolidated Financial Statements
are prepared. Actual results may differ from these estimates under different
assumptions and conditions.
Management evaluated the development and selection of its critical accounting
policies and estimates and believes that the following involve a higher degree
of judgment, complexity or uncertainty and are most significant to reporting our
results of operations and financial position, and are therefore discussed as
critical. The following critical accounting policies reflect the significant
estimates and judgments used in the preparation of our Consolidated Financial
Statements. Other than the adoption of ASU No. 2016-02, Leases (Topic 842), in
the first quarter of fiscal 2020, we have not made any material changes to our
accounting policies or methodologies during the current year. More information
on all of our significant accounting policies can be found in Note 2, "Summary
of Significant Accounting Policies" in Part II, Item 8 of this Annual Report.
Acquisitions and Purchase Price Allocation
We record acquisitions using the purchase method of accounting in accordance
with ASC 805, Business Combinations, which requires that the assets acquired and
liabilities assumed, including contingent consideration, be recorded at their
respective fair values at the acquisition date. The excess of the purchase price
over the estimated fair values of the net tangible and intangible assets
acquired is recorded as goodwill. The application of the purchase method of
accounting requires management to make significant estimates and assumptions in
the determination of the fair value of assets acquired and liabilities assumed,
in order to properly allocate purchase price consideration. These assumptions
and estimates include a market participant's use of the asset and the
appropriate discount rates for a market participant. Our estimates are based on
historical experience, information obtained from the management of the acquired
companies and with the assistance of independent third-party appraisal firms.
Significant assumptions and estimates include quoted market prices, carrying
values, and expected future cash flows, which includes consideration of future
growth rates and margins, attrition rates, future changes in technology and
brand awareness, loyalty, and the appropriate weighted-average cost of capital
and the cost savings expected to be derived from acquiring an asset. These
estimates are inherently uncertain and unanticipated events and circumstances
may occur which could affect the accuracy or validity of estimates used in
purchase accounting. The purchase price allocation recorded in a business
combination may change during the measurement period, which is a period not to
exceed one year from the date of acquisition, as additional information about
conditions existing at the acquisition date becomes available.
We record contingent consideration arrangements at fair value on a recurring
basis as earn-outs related to acquisitions. The fair value of earn-outs related
to acquisitions is based on significant unobservable inputs including the
achievement of certain performance metrics. Significant changes in these inputs
would result in corresponding increases or decreases in the fair value of the
earn-out each period until the related contingency has been resolved. Changes in
the fair value of the contingent consideration obligations can result from
adjustments in the probability of achieving future
77
--------------------------------------------------------------------------------
development steps, sales targets and profitability and are recorded in General
and administrative expenses in the Consolidated Statements of Operations.
Goodwill Impairment Review
We review goodwill to determine potential impairment annually during the fourth
quarter of our fiscal year, or more frequently if events and circumstances
indicate that the asset might be impaired. Impairment testing for goodwill is
performed at a reporting unit level. A reporting unit is defined as an operating
segment or one level below the operating segment. We have determined that we
have three reporting units.
The fair values of reporting units are determined using a combination of two
methods, one utilizing market revenue and earnings multiples derived from stocks
of companies that are engaged in the same or similar lines of business and that
are actively traded on a free and open market applied to the corresponding
measure of our reporting unit's financial performance (the market approach -
guideline public company ("GPC") method), and the other derived from discounted
cash flow models with estimated cash flows based on internal forecasts of
revenues and expenses over a specified period plus a terminal value (the income
approach discounted cash flows ("DCF") method). In estimating the fair value of
the reporting unit utilizing a DCF valuation technique, we incorporate our
judgment and estimates of future cash flows, future revenue and gross profit
growth rates, terminal value amount, capital expenditures and applicable
weightedaverage cost of capital used to discount these estimated cash flows.
The estimates and projections used in the estimate of fair value are consistent
with our current budget and longrange plans, including anticipated change in
market conditions, industry trends, growth rates and planned capital
expenditures, among other considerations.
We believe these two approaches are appropriate valuation techniques and we
generally weight the two resulting values equally as an estimate of a reporting
unit's fair value for the purposes of our impairment testing. However, we may
weigh one value more heavily than the other when conditions merit doing so. If
market conditions change compared to those used in our market approach, or if
actual future results of operations fall below the projections used in the DCF
method, our goodwill could become impaired in the future. As a result of our
goodwill impairment assessment, we have concluded that none of our goodwill was
impaired as of September 30, 2020 , and we do not believe the risk of impairment
is significant at this time.
Impairment of LongLived Assets
Longlived assets, such as property, plant and equipment, and purchased
intangibles subject to amortization, are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset or
asset group may not be recoverable. Conditions that may indicate impairment
include, but are not limited to, a significant adverse change in customer demand
or business climate that could affect the value of an asset based on indicators
of reduced profits or losses generated by the asset or asset group, a product
recall or an adverse action by a regulator, such as a successful challenge of
patent rights.
When necessary, we record charges for impairments of long-lived assets for the
amount by which the fair value is less than the carrying value of the asset or
asset group. Fair value of long-lived assets are determined using an appraised
value (obtained with the assistance of independent third-party appraisal firms)
or using an income approach, specifically the discounted cash flow method.
Starting with a forecast of the expected future net cash flows associated with
an asset or group of assets, we then apply an asset-specific discount rate to
arrive at a net present value amount. There were no material impairments of
long-lived assets recorded in the current year.
We amortize long-lived assets with finite lives over their estimated useful
lives on a straightline basis. This amortization methodology best matches the
pattern of economic benefit that is expected from definitelived assets.
Revenue Recognition
For sales of aftermarket parts or products with a low level of customization and
engineering time, the Company recognizes revenues at the time risks and rewards
of ownership pass, which is generally when products are shipped or delivered to
the customer as the Company has no obligation for installation. The Company
considers shipping and handling
78
--------------------------------------------------------------------------------
services to be fulfillment activities and as such they do not represent separate
performance obligations for revenue recognition. Sales of service arrangements
are recognized as the services are performed.
For certain arrangements where there is significant customization to the product
and for long-term construction-type sales contracts, revenue may be recognized
over time as performance is completed. In these instances, revenue is recognized
using a measure of progress that applies an input method based on costs incurred
in relation to total estimated costs at completion (the percentage-of-completion
method). These arrangements include large water treatment projects, systems and
solutions for municipal and industrial applications. The nature of the contracts
is generally fixed price with milestone billings. In order for revenue to be
recognized over a period of time, the product must have no alternative use and
the Company must have an enforceable right to payment for the performance
completed to date, including a normal profit margin, in the event of termination
for convenience. If these two criteria are not met, revenues from these
contracts will not be recognized until construction is complete. Contract costs
include all direct materials, labor, subcontractors costs and indirect costs
related to contract performance. We believe this is the most accurate measure of
contract performance because it directly measures the value of the goods and
services transferred to the customer.
The percentage-of-completion method of revenue recognition requires us to
prepare estimates of cost to complete for contracts in progress. Due to the
nature of the work performed on many of our performance obligations, the
estimates of total revenue and cost at completion is complex, subject to many
variables and may require significant judgment. In making such estimates,
judgments are required to evaluate contingencies such as weather, potential
variances in schedule and the cost of materials, labor cost and productivity,
the impact of change orders, liability claims, contract disputes and achievement
of contractual performance standards. As a significant change in one or more of
these estimates could affect the profitability of our contracts, we routinely
review and update our significant contract estimates through a disciplined
project review process in which management reviews the progress and execution of
our performance obligations and estimates at completion. Contract revenues and
cost estimates are reviewed and revised monthly and the cumulative effect of
such adjustments are recognized in current operations. Such changes in contract
estimates can result in the recognition of revenue in a current period for
performance obligations which were satisfied or partially satisfied in a prior
period. Changes in contract estimates may also result in the reversal of
previously recognized revenue if the current estimate differs from the previous
estimate. The amount of such adjustments have not been material.
For contracts with multiple performance obligations, we allocate the transaction
price to each performance obligation using our best estimate of the standalone
selling price of each distinct good or service in the contract. In cases where
we do not provide the distinct good or service on a standalone basis, the
primary method used to estimate standalone selling price is the expected cost
plus a margin approach, under which we forecast our expected costs of satisfying
a performance obligation and then add an appropriate margin for that distinct
good or service. Our contracts are sometimes modified for changes in contract
specifications and requirements. Judgment is required to determine if such
modifications result in goods or services that are distinct from the existing
contract. For customized products and long-term construction type contracts,
most contract modifications are for goods and services that are not distinct due
to the significant integration provided in the context of the contract and are
accounted for as if they were part of the original contract on a cumulative
catch-up basis. We account for contract modifications prospectively when it
results in the promise to deliver additional goods and services that are
distinct and the increase in price of the contract is for the same amount as the
stand-alone selling price of the additional goods or services included in the
modification.
Our contracts sometimes contain variable consideration in the form of incentive
fees, performance bonuses, award fees, liquidated damages or penalties. Other
contract provisions also give rise to variable consideration such as claims and
unpriced change orders that may either increase or decrease the transaction
price. We estimate the amount of variable consideration at the most likely
amount we expect to be entitled. Variable consideration is included in the
transaction price when it is probable that a significant reversal of cumulative
revenue recognized will not occur or when the uncertainty associated with the
variable consideration is resolved. Our estimates of variable consideration and
determination of whether to include such amounts in the transaction price are
based largely on our assessment of legal enforceability, anticipated
performance, and any other information (historical, current or forecasted) that
is reasonably available to us. Variable consideration associated with claims and
unapproved change orders is included in the transaction price only to the extent
of costs incurred.
79
--------------------------------------------------------------------------------
Product Warranties
Accruals for estimated expenses related to warranties are made at the time
products are sold and are recorded as a component of cost of product sales in
the Consolidated Statements of Operations in our Consolidated Financial
Statements included elsewhere in this Annual Report. The estimated warranty
obligation is based on product warranty terms offered to customers, ongoing
product failure rates, material usage and service delivery costs expected to be
incurred in correcting a product failure, as well as specific obligations for
known failures and other currently available evidence. We assess the adequacy of
the recorded warranty liabilities on a regular basis and adjust amounts as
necessary.
Deferred Taxes, Valuation Allowances, and Tax Contingencies
Deferred tax assets and liabilities are recognized for the expected future tax
consequences of events that have been recognized in our Consolidated Financial
Statements or tax returns. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that included the enactment date. We record a
valuation allowance to reduce certain deferred tax assets to amounts that are
more-likely-than-not to be realized within a reasonable period of time. The
factors used to assess the likelihood of realization include our forecast of
future taxable income exclusive of reversing temporary differences and
carryforwards, future reversals of existing taxable temporary differences and
available tax planning strategies that could be implemented to realize the net
deferred tax assets.
We consider both positive and negative evidence when evaluating the need for a
valuation allowance on our deferred tax assets in accordance with ASC 740,
Income Taxes. Available evidence includes historical financial information
supplemented by currently available information about future years. Generally,
historical financial information is more objectively verifiable than projections
of future income and is therefore given more weight in our assessment. We
consider cumulative losses in the most recent twelve quarters to be significant
negative evidence that is difficult to overcome in considering whether a
valuation allowance is required. Conversely, we consider a cumulative income
position over the most recent twelve quarters, to be significant positive
evidence that a valuation allowance may not be required.
Income tax positions must meet a more-likely-than-not recognition threshold to
be recognized. Income tax positions that previously failed to meet the
more-likely-than-not threshold are recognized in the first subsequent financial
reporting period in which that threshold is met. Previously recognized tax
positions that no longer meet the more-likely-than-not threshold are
derecognized in the first subsequent financial reporting period in which that
threshold is no longer met. Uncertain tax positions are reviewed each balance
sheet date. We recognize potential interest and penalties related to
unrecognized tax benefits in income tax expense.
Recent Accounting Pronouncements
See Note 2, "Summary of Significant Accounting Policies" in Item 8, included in
this Annual Report for a complete discussion of recently adopted accounting
pronouncements and recently issued accounting pronouncements not yet adopted.
80--------------------------------------------------------------------------------
© Edgar Online, source
