Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

October 30, 2018
Date of Report (Date of earliest event reported)

Apergy Corporation
(Exact name of registrant as specified in its charter)
 
 
Delaware
 
001-38441
 
82-3066826
 
 
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
2445 Technology Forest Blvd
Building 4, 12th Floor
The Woodlands, Texas 77381
(Address of principal executive offices and zip code)
(281) 403-5772
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  þ
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  þ





Item 2.02    Results of Operations and Financial Condition.

On October 30, 2018, Apergy Corporation issued a news release announcing its financial results for the fiscal quarter ended September 30, 2018. A copy of the news release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.

The information furnished pursuant to this Item 2.02 (including Exhibit 99.1) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (“Exchange Act”) or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any filing made by Apergy Corporation under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such filing.


Item 9.01    Financial Statements and Exhibits.

(d) Exhibits
Exhibit
No.
  
Description
 
 
 
99.1
  
News Release issued by Apergy Corporation dated October 30, 2018





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
Apergy Corporation
 
 
 
 
 
 
Date: October 30, 2018
 
By:
/s/ JAY A. NUTT
 
 
 
 
Jay A. Nutt
 
 
 
 
Senior Vice President and Chief Financial Officer
 





EXHIBIT INDEX

Exhibit
No.
  
Description
 
 
  



Exhibit


Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12519718&doc=3

Apergy Reports Third Quarter 2018 Results

Revenue of $316 million in Q3-18, up 22% year-over-year
Net income of $25 million and adjusted net income of $29 million in Q3-18
Diluted EPS of $0.33 and adjusted diluted EPS of $0.37 in Q3-18
Adjusted EBITDA of $78 million in Q3-18, up 35% year-over-year with margins improving 230 basis points to 25%
Repaid $20 million of term loan debt in Q3-18
Increasing full year 2018 adjusted EBITDA guidance to $289 to $294 million from $280 million


THE WOODLANDS, TX, October 30, 2018 - Apergy Corporation (“Apergy”) (NYSE: APY) today reported net income in the third quarter of 2018 of $25.3 million, compared to net income of $18.4 million in the third quarter of 2017. Diluted earnings per share in the third quarter of 2018 was $0.33 and includes total after-tax charges of $3.3 million, or $0.04 per diluted share, related to spin-off activities. Adjusted diluted earnings per share in the third quarter of 2018 was $0.37.

Revenue was $316.5 million in the third quarter of 2018, an increase of $57.8 million, or 22%, compared to $258.7 million in the third quarter of 2017, and an increase of $10.5 million, or 3%, compared to $305.9 million in the second quarter of 2018.

Adjusted EBITDA was $78.4 million in the third quarter of 2018, an increase of $20.2 million, or 35%, compared to $58.2 million in the third quarter of 2017, and an increase of $1.8 million, or 2%, compared to $76.5 million in the second quarter of 2018. Adjusted EBITDA margin was 24.8% in the third quarter of 2018, an increase of 230 basis points year-over-year.

Cash from operating activities was $33.9 million in the third quarter of 2018, compared to $15.6 million in the third quarter of 2017, and $51.6 million in the second quarter of 2018. In the third quarter of 2018, Apergy used available cash to fund a payment of $11.6 million to Dover Corporation associated with tax liabilities incurred as part of the spin-off transaction, as well as repaid $20 million of term loan debt.

1




 
 
Three Months Ended
 
Variance
(dollars in thousands, except per share amounts)
 
Sept. 30,
2018
 
June 30,
2018
 
Sept. 30,
2017
 
Sequential
 
Year-over-year
Revenue
 
$
316,468

 
$
305,928

 
$
258,654

 
3%
 
22%
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Apergy
 
$
25,263

 
$
22,183

 
$
18,421

 
14%
 
37%
Diluted earnings per share attributable to Apergy
 
$
0.33

 
$
0.29

 
$
0.24

 
14%
 
38%
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income attributable to Apergy
 
$
28,591

 
$
29,392

 
$
20,153

 
(3)%
 
42%
Adjusted diluted earnings per share attributable to Apergy
 
$
0.37

 
$
0.38

 
$
0.26

 
(3)%
 
42%
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
$
78,384

 
$
76,548

 
$
58,177

 
2%
 
35%
Adjusted EBITDA margin
 
24.8
%
 
25.0
%
 
22.5
%
 
(20) bps
 
230 bps
 
 
 
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
$
33,906

 
$
51,553

 
$
15,593

 
$(17,647)
 
$18,313
Capital expenditures
 
$
14,631

 
$
17,518

 
$
13,500

 
$(2,887)
 
$1,131

“We posted solid results in the third quarter driven by strong execution on our growth initiatives. Robust revenue growth, combined with productivity efforts and cost discipline, resulted in solid year-over-year incremental revenue to adjusted EBITDA conversion in the quarter,” said Sivasankaran “Soma” Somasundaram, President and Chief Executive Officer. “Specifically, on a year-over-year basis, our Drilling Technologies segment revenue increased 27% driven by higher average rig count, share gains, and continued bearings momentum. Our Drilling Technologies segment revenue growth significantly outpaced the year-over-year growth in the global rig count of approximately 8%. In the third quarter, our Production & Automation Technologies segment revenue increased 21% compared to the prior year period, driven by strong growth in both our artificial lift and digital product offerings. We continue to gain traction on our share gain and digital adoption initiatives.

“Compared to the prior year period, our strong performance resulted in adjusted EBITDA margin expansion of 230 basis points in the third quarter. Additionally, consistent with our commitment to our capital allocation priorities, we repaid $20 million of term-loan debt during the quarter.

“Due to our strong year-to-date performance, we are increasing our full year 2018 adjusted EBITDA guidance to $289 to $294 million from $280 million. Our adjusted EBITDA guidance reflects our current view of the market, including the potential impact of input cost inflation driven by tariffs, the risk of E&P capital budget exhaustion, and fewer working days in the fourth quarter. We remain focused on the factors under our control and delivering solid performance relative to the market.”

2




 
 
Three Months Ended
 
Variance
(dollars in thousands)
 
Sept. 30, 2018
 
June 30, 2018
 
Sept. 30, 2017
 
Sequential
 
Year-over-year
Production & Automation Technologies
 
 
 
 
 
 
 
 
 
 
Segment revenue
 
$
241,214

 
$
240,686

 
$
199,454

 
—%
 
21%
Segment operating profit
 
$
24,257

 
$
23,349

 
$
8,403

 
4%
 
189%
Segment operating profit margin
 
10.1
%
 
9.7
%
 
4.2
%
 
40 bps
 
590 bps
Adjusted segment EBITDA
 
$
51,523

 
$
54,322

 
$
36,574

 
(5)%
 
41%
Adjusted segment EBITDA margin
 
21.4
%
 
22.6
%
 
18.3
%
 
(120) bps
 
310 bps
 
 
 
 
 
 
 
 
 
 
 
Drilling Technologies
 
 
 
 
 
 
 
 
 
 
Segment revenue
 
$
75,254

 
$
65,242

 
$
59,200

 
15%
 
27%
Segment operating profit
 
$
26,209

 
$
21,340

 
$
20,420

 
23%
 
28%
Segment operating profit margin
 
34.8
%
 
32.7
%
 
34.5
%
 
210 bps
 
30 bps
Adjusted segment EBITDA
 
$
28,926

 
$
24,135

 
$
23,421

 
20%
 
24%
Adjusted segment EBITDA margin
 
38.4
%
 
37.0
%
 
39.6
%
 
140 bps
 
(120) bps

Production & Automation Technologies

Production & Automation Technologies revenue increased $41.8 million, or 21%, year-over-year driven by strong growth across our artificial lift and digital products. We continued to experience robust growth in our ESP product line driven by further penetration in U.S. onshore Electrical Submersible Pump (“ESP”) markets. Revenue from digital products was $31.1 million in the third quarter of 2018, an increase of $9.8 million, or 46%, compared to $21.3 million in the third quarter of 2017. Segment operating profit increased $15.9 million, or 189%, year-over-year as a result of leveraging revenue growth combined with continued cost discipline. Adjusted segment EBITDA increased $14.9 million, or 41%, year-over-year primarily driven by revenue growth and related operating leverage, with adjusted segment EBITDA margin expanding to 21.4% from 18.3% in the prior year period.

On a sequential basis, revenue increased $0.5 million. Segment operating profit increased $0.9 million, or 4%. Adjusted segment EBITDA decreased $2.8 million, or 5%, sequentially due to expected input cost inflation, anticipated higher allocated corporate expenses, investments in ESP & digital products to support our growth initiatives, and other non-recurring expenses.

Drilling Technologies

Drilling Technologies revenue increased $16.1 million, or 27%, year-over-year as a result of increased worldwide rig count, share gains, and continued bearings growth. Segment operating profit increased $5.8 million, or 28%. Adjusted Segment EBITDA increased by $5.5 million, or 24%, year-over-year driven by the increased volume.

On a sequential basis, revenue increased by $10.0 million, or 15%, due to higher average rig count, including the expected seasonal recovery in the Canadian rig count, share gains, and bearings growth. Segment operating profit increased $4.9 million, or 23%, sequentially. Adjusted segment EBITDA increased by $4.8 million, or 20%, due to higher sequential revenue, which more than fully offset anticipated higher allocated corporate expenses.

3



Other Business Updates

Frost & Sullivan, a global consulting & market research firm, award its 2018 Global Customer Value Leadership Award to Apergy based on their independent market research
Continue to see rod lift conversion orders from customers using ESP & gas lift in the U.S.
Over $9 million of new orders for rod lift systems in the third quarter from international operators
Commercially released next generation rod lift control package with SmartenTM Edge controller and variable frequency drive solution with advanced control and analytics
Launched Windrock Spotlight for engines, extending Apergy’s cloud based remote monitoring and predicative analysis platform beyond compressors
Forty-two patents have been issued to Drilling Technologies year-to-date in 2018, thirteen were issued in the third quarter of 2018
Drilling Technologies continues to advance diamond shaping capability for drill bit inserts, bearings, and other applications
On track to exit transition services agreement with Dover Corporation in Q4-18


Conference Call Details

Apergy Corporation will host a conference call on Wednesday, October 31, 2018, to discuss its third quarter 2018 financial results. The call will begin at 9:30 a.m. Eastern Time. Presentation materials that supplement the conference call are available on Apergy’s website at www.investors.apergy.com.

To listen to the call via a live webcast, please visit Apergy’s website at www.apergy.com. The call will also be available by dialing 1-888-424-8151 in the United States and Canada or 1-847-585-4422 for international calls. Please call approximately 15 minutes prior to the scheduled start time and reference Apergy conference call number 6190 441.

A replay of the conference call will be available on Apergy’s website. Also, a replay may be accessed by dialing 1-888-843-7419 in the United States and Canada, or 1-630-652-3042 for international calls. The access code is 6190 441#.


###
Basis of Presentation

For periods prior to May 9, 2018 (the “Separation”), our results of operations, financial position and cash flows are derived from the consolidated financial statements and accounting records of Dover Corporation (“Dover”) and reflect the combined historical results of operations, financial position and cash flows of certain Dover entities conducting its upstream oil and gas energy business within Dover’s Energy segment, including an allocated portion of Dover’s corporate costs. Our financial statements have been presented as if such businesses had been combined for all periods prior to the Separation. These pre-Separation combined financial statements may not include all of the actual expenses that would have been incurred had we been a stand-alone public company during the periods presented prior to the Separation and consequently may not reflect our results of operations, financial position and cash flows had we been a stand-alone public company during the periods presented prior to the Separation. All financial information presented after the Separation represents the consolidated results of operations, financial position and cash flows of Apergy.

4



About Non-GAAP Measures

This release presents information about Apergy’s adjusted EBITDA, adjusted EBITDA margin, adjusted segment EBITDA, adjusted segment EBITDA margin, adjusted net income attributable to Apergy, and adjusted diluted earnings per share, which are non-GAAP financial measures made available as a supplement, and not an alternative, to the results provided in accordance with generally accepted accounting principles in the United States of America (“GAAP”). See Reconciliations of GAAP to Non-GAAP Financial Measures included in the accompanying financial tables for the reconciliation of each non-GAAP financial measure to its most directly comparable financial measure in accordance with GAAP.

Adjusted EBITDA and adjusted segment EBITDA are defined as, or as a result of, net income excluding income taxes, interest income and expense, depreciation and amortization expense, separation and supplemental benefit costs associated with the spinoff from Dover Corporation, royalty expense incurred only prior to the spinoff, and restructuring and other related charges. Adjusted EBITDA margin and adjusted segment EBITDA margin are defined as adjusted EBITDA and adjusted segment EBITDA, respectively, divided by revenue.

Adjusted net income and adjusted diluted earnings per share are defined as net income and earnings per share, respectively, excluding separation and supplemental benefit costs associated with the spinoff from Dover Corporation, royalty expense incurred only prior to the spinoff, and restructuring and other related charges.

References to net income, diluted earnings per share, adjusted net income and adjusted diluted earnings per share are exclusive of non-controlling interests.

These non-GAAP financial measures are included to help facilitate comparisons of Apergy’s operating performance across periods by excluding items that do not reflect the core operating results of our businesses. As such, Apergy’s management believes making available non-GAAP financial measures as a supplemental measurement to investors is useful because it allows investors to evaluate Apergy's performance using the same methodology and information used by Apergy management.


About Apergy

Apergy is a leading provider of highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world. Apergy's products provide efficient functioning throughout the lifecycle of a well - from drilling to completion to production. Apergy’s Production & Automation Technologies offerings consist of artificial lift equipment and solutions, including rod pumping systems, electric submersible pump systems, progressive cavity pumps and drive systems and plunger lifts, as well as a full automation and digital offering consisting of equipment and software for Industrial Internet of Things (“IIoT”) solutions for downhole monitoring, wellsite productivity enhancement, and asset integrity management. Apergy’s Drilling Technologies offering provides market leading polycrystalline diamond cutters and bearings that result in cost effective and efficient drilling. To learn more about Apergy, visit our website at http://www.apergy.com.

5



Forward-Looking Statements
This news release contains statements relating to future actions and results, which are "forward-looking statements" within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, Apergy's market position and growth opportunities.  Forward-looking statements include, but are not limited to, statements related to Apergy’s expectations regarding the performance of the business, financial results, liquidity and capital resources of Apergy, the benefits resulting from Apergy’s separation from Dover Corporation, the effects of competition, and the effects of future legislation or regulations and other non-historical statements. Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from current expectations, including, but not limited to, the risk that the anticipated benefits from our separation from Dover Corporation may not be fully realized or may take longer to realize than expected; tax and regulatory matters; and changes in economic, competitive, strategic, technological, regulatory or other factors that affect the operation of Apergy's businesses. You are encouraged to refer to the documents that Apergy files from time to time with the Securities and Exchange Commission (the “SEC”), including the “Risk Factors” section of Amendment No. 1 to Apergy’s Form 10, filed with the SEC on April 12, 2018, as amended and supplemented, and in Apergy’s other filings with the SEC, for a discussion of these and other risks and uncertainties. Readers are cautioned not to place undue reliance on Apergy’s forward-looking statements. Forward-looking statements speak only as of the day they are made and Apergy undertakes no obligation to update any forward-looking statement, except as required by applicable law.


Investor Contact: David Skipper
david.skipper@apergy.com
713-230-8031

Media Contact: John Breed
john.breed@apergy.com
281-403-5751

6



APERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

 
Three Months Ended
 
Nine Months Ended
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
September 30,
(in thousands, except per share amounts)
2018
 
2018
 
2017
 
2018
 
2017
Revenue
$
316,468

 
$
305,928

 
$
258,654

 
$
906,318

 
$
745,093

Cost of goods and services
202,734

 
202,210

 
173,880

 
594,605

 
500,329

Gross profit
113,734

 
103,718

 
84,774

 
311,713

 
244,764

Selling, general and administrative expense
69,022

 
65,807

 
54,828

 
194,568

 
162,359

Interest expense, net
10,584

 
6,062

 
79

 
16,813

 
199

Other expense, net
910

 
364

 
2,941

 
3,724

 
7,929

Income before income taxes
33,218

 
31,485

 
26,926

 
96,608

 
74,277

Provision for income taxes
7,723

 
9,381

 
8,241

 
24,324

 
22,973

Net income
25,495

 
22,104

 
18,685

 
72,284

 
51,304

Net income (loss) attributable to noncontrolling interest
232

 
(79
)
 
264

 
295

 
860

Net income attributable to Apergy
$
25,263

 
$
22,183

 
$
18,421

 
$
71,989

 
$
50,444

 
 
 
 
 
 
 
 
 
 
Earnings per share attributable to Apergy:
 
 
 
 
 
 
 
 
 
Basic
$
0.33

 
$
0.29

 
$
0.24

 
$
0.93

 
$
0.65

Diluted
$
0.33

 
$
0.29

 
$
0.24

 
$
0.93

 
$
0.65

 
 
 
 
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
77,340

 
77,340

 
77,340

 
77,340

 
77,340

Diluted
77,569

 
77,770

 
77,890

 
77,742

 
77,890


7



APERGY CORPORATION
BUSINESS SEGMENT DATA
(UNAUDITED)

 
Three Months Ended
 
Nine Months Ended
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
September 30,
(in thousands)
2018
 
2018
 
2017
 
2018
 
2017
Segment revenue:
 
 
 
 
 
 
 
 
 
Production & Automation Technologies
$
241,214

 
$
240,686

 
$
199,454

 
$
696,591

 
$
578,429

Drilling Technologies
75,254

 
65,242

 
59,200

 
209,727

 
166,664

Total revenue
$
316,468

 
$
305,928

 
$
258,654

 
$
906,318

 
$
745,093

 
 
 
 
 
 
 
 
 
 
Income before income taxes:
 
 
 
 

 
 
 
 
Segment operating profit:
 

 
 
 
 

 
 
 
 
Production & Automation Technologies
$
24,257

 
$
23,349

 
$
8,403

 
$
57,957

 
$
26,247

Drilling Technologies
26,209

 
21,340

 
20,420

 
71,738

 
55,067

Total segment operating profit
50,466

 
44,689

 
28,823

 
129,695

 
81,314

Corporate expense and other (1)
6,664

 
7,142

 
1,818

 
16,274

 
6,838

Interest expense, net
10,584

 
6,062

 
79

 
16,813

 
199

Income before income taxes
$
33,218

 
$
31,485

 
$
26,926

 
$
96,608

 
$
74,277

 
 
 
 
 
 
 
 
 
 
Bookings:
 
 
 
 
 
 
 
 
 
Production & Automation Technologies
$
241,729

 
$
249,461

 
$
209,615

 
$
708,124

 
$
596,296

Book-to-bill ratio (2)
1.00

 
1.04

 
1.05

 
1.02

 
1.03

Drilling Technologies
$
75,834

 
$
70,450

 
$
56,142

 
$
215,468

 
$
170,786

Book-to-bill ratio (2)
1.01

 
1.08

 
0.95

 
1.03

 
1.02

_______________________
(1)
Corporate expense and other includes costs not directly attributable to our reporting segments such as corporate executive management and other administrative functions, costs related to our separation from Dover Corporation and the results attributable to our noncontrolling interest.
(2)
The book-to-bill ratio compares the dollar value of orders received (bookings) relative to revenues realized during the period.

8



APERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(in thousands)
September 30, 2018
 
December 31, 2017
Assets
 
 
 
Cash and cash equivalents
$
18,014

 
$
23,712

Receivables, net
277,926

 
202,024

Inventories, net
219,133

 
201,591

Prepaid expenses and other current assets
20,824

 
14,038

Total current assets
535,897

 
441,365

 
 
 
 
Property, plant and equipment, net
236,067

 
211,832

Goodwill
906,766

 
910,088

Intangible assets, net
297,397

 
338,510

Other non-current assets
7,229

 
2,980

Total assets
1,983,356

 
1,904,775

 
 
 
 
Liabilities
 
 
 
Accounts payable
127,103

 
98,826

Other current liabilities
90,042

 
52,239

Total current liabilities
217,145

 
151,065

 
 
 
 
Long-term debt
687,543

 
3,742

Other long-term liabilities
113,908

 
109,934

Equity
 
 
 
Apergy Corporation stockholders’ equity
962,547

 

Net parent equity in Apergy

 
1,635,285

Noncontrolling interest
2,213

 
4,749

Total liabilities and equity
$
1,983,356

 
$
1,904,775


9



APERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 
Nine Months Ended
September 30,
(in thousands)
2018
 
2017
Cash provided (required) by operating activities:
 
 
 
Net income
$
72,284

 
$
51,304

Depreciation
52,814

 
42,233

Amortization
38,863

 
40,190

Receivables
(79,533
)
 
(62,203
)
Inventories
(20,960
)
 
(28,245
)
Accounts payable
27,776

 
37,950

Other
1,562

 
(40,024
)
Net cash provided by operating activities
92,806

 
41,205

 
 
 
 
Cash provided (required) by investing activities:
 

 
 

Capital expenditures
(45,832
)
 
(29,445
)
Other
1,023

 
2,616

Net cash required by investing activities
(44,809
)
 
(26,829
)
 
 
 
 
Cash provided (required) by financing activities:
 

 
 

Issuances of debt, net of debt issuance costs
697,957

 

Repayment of long-term debt
(20,000
)
 

Distributions to Dover Corporation, net
(728,857
)
 
(19,220
)
Distribution to noncontrolling interest
(2,720
)
 
(1,212
)
Net cash required by financing activities
(53,620
)
 
(20,432
)
 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(75
)
 
3,476

 
 
 
 
Net decrease in cash and cash equivalents
(5,698
)
 
(2,580
)
Cash and cash equivalents at beginning of period
23,712

 
26,026

Cash and cash equivalents at end of period
$
18,014

 
$
23,446


10



APERGY CORPORATION
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)


 
Three Months Ended
 
Nine Months Ended
 
Sept. 30,
 
June 30,
 
Sept. 30,
 
September 30,
(in thousands)
2018
 
2018
 
2017
 
2018
 
2017
Net income attributable to Apergy
$
25,263

 
$
22,183

 
$
18,421

 
$
71,989

 
$
50,444

Pre-tax adjustments:
 
 
 
 
 
 
 
 
 
Separation and supplemental benefit costs (1)
4,403

 
5,137

 

 
9,540

 

Royalty expense (2)

 

 
2,473

 
2,277

 
7,406

Restructuring and other related charges
(39
)
 
2,030

 
8

 
2,473

 
21

Tax impact of adjustments (3)
(1,036
)
 
42

 
(749
)
 
(1,650
)
 
(2,271
)
Adjusted net income attributable to Apergy
$
28,591

 
$
29,392

 
$
20,153

 
$
84,629

 
$
55,600

Tax impact of adjustments (3)
1,036

 
(42
)
 
749

 
1,650

 
2,271

Net income (loss) attributable to
noncontrolling interest
232

 
(79
)
 
264

 
295

 
860

Depreciation and amortization
30,218

 
31,834

 
28,691

 
91,677

 
82,423

Provision for income taxes
7,723

 
9,381

 
8,241

 
24,324

 
22,973

Interest expense, net
10,584

 
6,062

 
79

 
16,813

 
199

Adjusted EBITDA
$
78,384

 
$
76,548

 
$
58,177

 
$
219,388

 
$
164,326

 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Apergy:
 
 
 
 
 
 
 
 
 
Reported
$
0.33

 
$
0.29

 
$
0.24

 
$
0.93

 
$
0.65

Adjusted
$
0.37

 
$
0.38

 
$
0.26

 
$
1.09

 
$
0.71

_______________________
(1)
Supplemental benefit costs relate to enhanced or supplemental benefits provided to employees no longer participating in Dover Corporation benefit and compensation plans. These costs are expected to be incurred through the end of 2020.
(2)
Patents and other intangible assets related to our business were conveyed by Dover Corporation to Apergy on April 1, 2018. No royalty charges were incurred after March 31, 2018.
(3)
We generally tax effect adjustments using a combined federal and state statutory income tax rate of approximately 24 percent in 2018, and approximately 30 percent for periods prior to 2018. Includes tax expense of $1.7 million during the three months ended June 30, 2018 and nine months ended September 30, 2018, associated with capital gains related to certain reorganizations of our subsidiaries as part of the Separation from Dover Corporation.

11



 
Three months ended
 
September 30, 2018
(in thousands, except percentages)
Production &
Automation
Technologies
 
Drilling Technologies
 
Corporate expense and other
 
Total
Revenue
$
241,214

 
$
75,254

 
$

 
$
316,468

 
 
 
 
 
 
 
 
Operating profit (loss) / income before income taxes, as reported
$
24,257

 
$
26,209

 
$
(17,248
)
 
$
33,218

Depreciation and amortization
27,305

 
2,717

 
196

 
30,218

Separation and supplemental benefit costs (1)

 

 
4,403

 
4,403

Restructuring and other charges
(39
)
 

 

 
(39
)
Interest expense, net

 

 
10,584

 
10,584

Adjusted EBITDA
$
51,523

 
$
28,926

 
$
(2,065
)
 
$
78,384

 
 
 
 
 
 
 
 
Operating profit margin, as reported
10.1
%
 
34.8
%
 
 
 
10.5
%
Adjusted EBITDA margin
21.4
%
 
38.4
%
 
 
 
24.8
%
_______________________
(1)
Supplemental benefit costs relate to enhanced or supplemental benefits provided to employees no longer participating in Dover Corporation benefit and compensation plans. These costs are expected to be incurred through the end of 2020.


 
Three months ended
 
June 30, 2018
(in thousands, except percentages)
Production &
Automation
Technologies
 
Drilling Technologies
 
Corporate expense and other
 
Total
Revenue
$
240,686

 
$
65,242

 
$

 
$
305,928

 
 
 
 
 
 
 
 
Operating profit (loss) / income before income taxes, as reported
$
23,349

 
$
21,340

 
$
(13,204
)
 
$
31,485

Depreciation and amortization
28,943

 
2,795

 
96

 
31,834

Separation and supplemental benefit costs (1)

 

 
5,137

 
5,137

Restructuring and other charges
2,030

 

 

 
2,030

Interest expense, net

 

 
6,062

 
6,062

Adjusted EBITDA
$
54,322

 
$
24,135

 
$
(1,909
)
 
$
76,548

 
 
 
 
 
 
 
 
Operating profit margin, as reported
9.7
%
 
32.7
%
 
 
 
10.3
%
Adjusted EBITDA margin
22.6
%
 
37.0
%
 
 
 
25.0
%
_______________________
(1)
Supplemental benefit costs relate to enhanced or supplemental benefits provided to employees no longer participating in Dover Corporation benefit and compensation plans. These costs are expected to be incurred through the end of 2020.


12




 
Three months ended
 
September 30, 2017
(in thousands, except percentages)
Production &
Automation
Technologies
 
Drilling Technologies
 
Corporate expense and other
 
Total
Revenue
$
199,454

 
$
59,200

 
$

 
$
258,654

 
 
 
 
 
 
 
 
Operating profit (loss) / income before income taxes, as reported
$
8,403

 
$
20,420

 
$
(1,897
)
 
$
26,926

Depreciation and amortization
25,690

 
3,001

 

 
28,691

Royalty expense (1)
2,473

 

 

 
2,473

Restructuring and other charges
8

 

 

 
8

Interest expense, net

 

 
79

 
79

Adjusted EBITDA
$
36,574

 
$
23,421

 
$
(1,818
)
 
$
58,177

 
 
 
 
 
 
 
 
Operating profit margin, as reported
4.2
%
 
34.5
%
 
 
 
10.4
%
Adjusted EBITDA margin
18.3
%
 
39.6
%
 
 
 
22.5
%
_______________________
(1)
Royalty expense represents charges for the right to use of Dover Corporation patents and other intangible assets.

13



 
Nine months ended
 
September 30, 2018
(in thousands, except percentages)
Production &
Automation
Technologies
 
Drilling Technologies
 
Corporate expense and other
 
Total
Revenue
$
696,591

 
$
209,727

 
$

 
$
906,318

 
 
 
 
 
 
 
 
Operating profit (loss) / income before income taxes, as reported
$
57,957

 
$
71,738

 
$
(33,087
)
 
$
96,608

Depreciation and amortization
83,006

 
8,379

 
292

 
91,677

Separation and supplemental benefit costs (1)

 

 
9,540

 
9,540

Royalty expense (2)
2,277

 

 

 
2,277

Restructuring and other charges
2,473

 

 

 
2,473

Interest expense, net

 

 
16,813

 
16,813

Adjusted EBITDA
$
145,713

 
$
80,117

 
$
(6,442
)
 
$
219,388

 
 
 
 
 
 
 
 
Operating profit margin, as reported
8.3
%
 
34.2
%
 
 
 
10.7
%
Adjusted EBITDA margin
20.9
%
 
38.2
%
 
 
 
24.2
%
_______________________
(1)
Supplemental benefit costs related to enhanced or supplemental benefits provided to employees no longer participating in Dover Corporation benefit and compensation plans. These costs are expected to be incurred through the end of 2020.
(2)
Royalty expense represents charges for the right to use of Dover Corporation patents and other intangible assets.

 
Nine months ended
 
September 30, 2017
(in thousands, except percentages)
Production &
Automation
Technologies
 
Drilling Technologies
 
Corporate expense and other
 
Total
Revenue
$
578,429

 
$
166,664

 
$

 
$
745,093

 
 
 
 
 
 
 
 
Operating profit (loss) / income before income taxes, as reported
$
26,247

 
$
55,067

 
$
(7,037
)
 
$
74,277

Depreciation and amortization
73,475

 
8,948

 

 
82,423

Royalty expense (1)
7,406

 

 

 
7,406

Restructuring and other charges
21

 

 

 
21

Interest expense, net

 

 
199

 
199

Adjusted EBITDA
$
107,149

 
$
64,015

 
$
(6,838
)
 
$
164,326

 
 
 
 
 
 
 
 
Operating profit margin, as reported
4.5
%
 
33.0
%
 
 
 
10.0
%
Adjusted EBITDA margin
18.5
%
 
38.4
%
 
 
 
22.1
%
_______________________
(1) Royalty expense represents charges for the right to use of Dover Corporation patents and other intangible assets.

14