Note 16. Segment Results

A description of the Company’s three reportable segments, including the specific products manufactured and sold follows below.

In the Industrials segment, the Company designs, manufactures, markets and services a broad range of air compression, vacuum and blower products across a wide array of technologies and applications. Almost every manufacturing and industrial facility, and many service and process industries, use air compression and vacuum products in a variety of applications such as operation of pneumatic air tools, vacuum packaging of food products and aeration of waste water. The Company maintains a leading position in its markets and serves customers globally. The Company offers comprehensive aftermarket parts and an experienced direct and distributor-based service network world-wide to complement all of its products.

In the Energy segment, the Company designs, manufactures, markets and services a diverse range of positive displacement pumps, liquid ring vacuum pumps and compressors, and engineered loading systems and fluid transfer equipment, consumables, and associated aftermarket parts and services. It serves customers in the upstream, midstream, and downstream oil and gas markets, and various other markets including petrochemical processing, power generation, transportation, and general industrial. The Company is one of the largest suppliers in these markets and has long-standing customer relationships. Its positive displacement pumps are used in the oilfield for drilling, hydraulic fracturing, completion and well servicing. Its liquid ring vacuum pumps and compressors are used in many power generation, mining, oil and gas refining and processing, chemical processing and general industrial applications including flare gas and vapor recovery, geothermal gas removal, vacuum de-aeration, enhanced oil recovery, water extraction in mining and paper and chlorine compression in petrochemical operations. Its engineered loading systems and fluid transfer equipment ensure the safe handling and transfer of crude oil, liquefied natural gas, compressed natural gas, chemicals, and bulk materials.

In the Medical segment, the Company designs, manufactures and markets a broad range of highly specialized gas, liquid and precision syringe pumps and compressors primarily for use in the medical, laboratory and biotechnology end markets. The Company’s customers are mainly medium and large durable medical equipment suppliers that integrate the Company’s products into their final equipment for use in applications such as oxygen therapy, blood dialysis, patient monitoring, wound treatment, and others. Further, with the recent acquisitions, the Company has expanded into liquid handling components and systems used in biotechnology applications including clinical analysis instrumentation. The Company also has a broad range of end use deep vacuum products for laboratory science applications.

The Chief Operating Decision Maker (“CODM”) evaluates the performance of the Company’s reportable segments based on, among other measures, Segment Adjusted EBITDA. Management closely monitors the Segment Adjusted EBITDA of each reportable segment to evaluate past performance and actions required to improve profitability. Inter-segment sales and transfers are not significant. Administrative expenses related to the Company’s corporate offices and shared service centers in the United States and Europe, which includes transaction processing, accounting and other business support functions, are allocated to the business segments. Certain administrative expenses, including senior management compensation, treasury, internal audit, tax compliance, certain information technology, and other corporate functions, are not allocated to the business segments.

The following table provides summarized information about the Company’s operations by reportable segment and reconciles Segment Adjusted EBITDA to Income (Loss) Before Income Taxes for the three month periods ended March 31, 2018 and 2017.

	For the Three Month Period Ended March 31, 2018			For the Three Month Period Ended March 31, 2017

Revenue
Industrials	$	316.9		$	248.0
Energy		242.2			178.3
Medical		60.5			55.4
Total Revenue	$	619.6		$	481.7
Segment Adjusted EBITDA
Industrials	$	66.8		$	47.2
Energy		68.0			38.5
Medical		15.9			14.6
Total Segment Adjusted EBITDA	$	150.7		$	100.3
Less items to reconcile Segment Adjusted EBITDA to
Income (Loss) Before Income Taxes⁽¹⁾:
Corporate expenses not allocated to segments^(a)	$	2.5		$	8.2
Interest expense		26.0			45.9
Depreciation and amortization expense		45.0			39.7
Sponsor fees and expenses^(b)		-			1.1
Restructuring and related business transformation costs^(c)		4.5			8.6
Acquisition related expenses and non-cash charges^(d)		4.6			0.7
Environmental remediation loss reserve^(e)		-			1.0
Expenses related to public stock offerings^(f)		1.4			1.3
Establish public company financial reporting compliance^(g)		0.8			1.3
Stock-based compensation^(h)		2.7			-
Foreign currency transaction losses, net		2.6			0.6
Shareholder litigation settlement recoveries⁽ⁱ⁾		(4.5	)		-
Other adjustments^(j)		(0.7	)		0.5
Income (Loss) Before Income Taxes	$	65.8		$	(8.6	)

⁽¹⁾

The reconciling items for the three month period ended March 31, 2017 have been reclassified to conform to the methodology used in the three month period ended March 31, 2018, and include the following.

^(a)

Includes insurance recoveries of asbestos legal fees of $5.6 million in the first quarter of 2018.

^(b)

Represents management fees and expenses paid to the Company’s Sponsor.

^(c)

Restructuring and related business transformation costs consist of the following.

	For the Three Month Period Ended March 31, 2018			For the Three Month Period Ended March 31, 2017

Restructuring charges	$	-		$	1.7
Severance, sign-on, relocation and executive search costs		2.0			1.0
Facility reorganization, relocation and other costs		0.6			1.1
Information technology infrastructure transformation		-			0.7
(Gains) losses on asset and business disposals		(1.2	)		3.0
Consultant and other advisor fees		2.6			0.4
Other, net		0.5			0.7
Total restructuring and related business transformation costs	$	4.5		$	8.6

^(d)

Represents costs associated with successful and/or abandoned acquisitions, including third-party expenses, post-closure integration costs and non-cash charges and credits arising from fair value purchase accounting adjustments. For the three month period ended March 31, 2018 and March 31, 2017, respectively, $3.0 million and $0.8 million, respectively, of acquisition related expenses and non-cash charges were recorded to the line “Other Operating Expense, net” in the Condensed Consolidated Statement of Operations.

^(e)

Represents estimated environmental remediation costs and losses relating to a former production facility.

^(f)

Represents certain expenses related to the Company’s initial public offering and subsequent secondary offerings.

^(g)

Represents third party expenses to comply with the requirements of Sarbanes-Oxley in 2018 and the accelerated adoption of the new revenue recognition standard (ASC 606 – Revenue from Contracts with Customers) in the first quarter of 2018, one year ahead of the required adoption date for a private company.

^(h)

Represents stock-based compensation expense recognized for the three month period ended March 31, 2018 of $3.4 million reduced by a $0.7 million decrease in the accrual for employer taxes related to DSUs granted to employees at the date of the initial public offering. Prior to the Company’s initial public offering which occurred in May 2017, no stock-based compensation expense was recorded because the Company’s repurchase rights created an implicit service period.

⁽ⁱ⁾

Represents an insurance recovery of the Company’ shareholder litigation settlement in 2014.

^(j)

Includes (i) the effects of the amortization of prior service costs and the amortization of gains in pension and other postretirement benefits (OPEB) expense, (ii) certain legal and compliance costs and (iii) other miscellaneous adjustments.