Segment Results

3 Months Ended

Mar. 31, 2020

Note 16. Segment Results

Effective immediately upon the closing of the Ingersoll Rand Industrial acquisition, the Company began operating with four reportable segments. As a result of these changes, information that the Company’s chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed. Therefore, beginning in the three month period ended March 31, 2020, the Company reports its financial performance based on its new segments. The Company recasted certain prior period amounts to conform to the way the Company is internally managed and how the Company monitors segment performance during the current fiscal year. A description of the Company’s four reportable segments, including the specific products manufactured and sold is presented below.

In the Industrial Technologies and Services segment, the Company designs, manufactures, markets and services a broad range of compressor, blower and vacuum solutions as well as fluid transfer equipment, loading systems, power tools and lifting equipment. The Company’s compressor, blower and vacuum products are used worldwide in industrial manufacturing, transportation, chemical processing, food and beverage production, energy, environmental and other applications. In addition to equipment sales, the Company offers a broad portfolio of service options tailored to customer needs and a complete range of aftermarket parts, air treatment equipment, controls and other accessories. The Company’s 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. The Company’s power tools and lifting equipment are used by customers in industrial manufacturing, vehicle maintenance, energy and other markets for precision fastening, bolt removal, grinding, sanding, drilling, demolition and the safe and efficient lifting, positioning and movement of loads. The Company sells its products primarily through independent distributors worldwide and also sells directly to the customer.

In the Precision and Science Technologies segment, the Company designs, manufactures and markets a broad range of specialized positive displacement pumps, fluid management equipment and aftermarket parts for medical, laboratory, industrial manufacturing, water and wastewater, chemical processing, energy, food and beverage, agriculture and other markets. The Company’s products are used for a diverse set of applications including precision dosing of chemicals and supplements, blood dialysis, oxygen therapy, food processing, fluid transfer and dispensing, spray finishing and coating, mixing, high-pressure air and gas management and others. The Company sells primarily through a broad global network of specialized and national distributors and original equipment manufacturers (“OEM”) who integrate the Company’s products into their devices and systems.

In the High Pressure Solutions segment, the Company designs, manufactures, markets and services a diverse range of positive displacement pumps, integrated systems and associated aftermarket parts, consumables and services. The Company’s positive displacement pump offering includes mission-critical oil and gas drilling pumps, frac pumps and well servicing pumps, in addition to sales of associated aftermarket parts, consumables and services. The products sold into upstream energy applications are highly aftermarket-intensive and are supported in the field through one of the industry’s most comprehensive service networks. The Company’s customers provide drilling, completions and well services to oil and gas operators, particularly in the major basins and shale plays in the North American land market. The Company is one of the leading suppliers in these upstream energy applications and has long-standing customer relationships.

In the Specialty Vehicle Technologies segment, the Company designs, manufactures and markets Club Car ® golf, utility and consumer low-speed vehicles. The Company has a long-standing track record as a leading premium manufacturer with strong brand recognition. Its customers include golf course operators, resorts and hospitality sites, government agencies and municipalities, manufacturing and construction firms, sports and other arenas, colleges and universities and other commercial establishments, as well as individual consumers. The Company sells its products primarily through independent distributors in over eighty countries worldwide and also sells its products directly to consumers.

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 (Loss) Income Before Income Taxes for the three month periods ended March 31, 2020 and 2019.

	For the Three Month Period Ended March 31,
	2020			2019⁽¹⁾
Revenue
Industrial Technologies and Services	$	504.0		$	405.1
Precision and Science Technologies		112.9			79.3
High Pressure Solutions		96.4			135.9
Specialty Vehicle Technologies		86.6			-
Total Revenue	$	799.9		$	620.3
Segment Adjusted EBITDA
Industrial Technologies and Services	$	94.8		$	85.5
Precision and Science Technologies		32.9			23.1
High Pressure Solutions		23.5			41.8
Specialty Vehicle Technologies		14.1			-
Total Segment Adjusted EBITDA	$	165.3		$	150.4
Less items to reconcile Segment Adjusted EBITDA to (Loss)
Income Before Income Taxes
Corporate expenses not allocated to segments	$	17.5		$	11.4
Interest expense		27.1			22.4
Depreciation and amortization expense^(a)		71.1			45.5
Restructuring and related business transformation costs^(b)		42.2			4.1
Acquisition related expenses and non-cash charges^(c)		96.1			1.6
Establish public company financial reporting compliance^(d)		-			0.6
Stock-based compensation^(e)		3.0			8.7
Foreign currency transaction losses, net		2.6			3.1
Loss on extinguishment of debt^(f)		2.0			-
Shareholder litigation settlement recoveries^(g)		-			(6.0	)
Other adjustments^(h)		(0.6	)		(0.1	)
(Loss) Income Before Income Taxes	$	(95.7	)	$	59.1

⁽¹⁾

For the three month period ended March 31, 2020, as a result of the acquisition of Ingersoll Rand Industrial, the Company changed its measurement methodology of Segment Adjusted EBITDA. Segment Adjusted EBITDA and the reconciliation to (Loss) Income Before Income Taxes was revised to conform to the methodology used for the three month period ended March 31, 2020.

^(a)

Depreciation and amortization expense excludes $1.2 million of depreciation of rental equipment.

^(b)

Restructuring and related business transformation costs consist of the following.

	For the Three Month Period Ended March 31,
	2020		2019
Restructuring charges	$	41.6	$	2.0
Facility reorganization, relocation and other costs		0.4		0.6
Other, net		0.2		1.5
Total restructuring and related business transformation costs	$	42.2	$	4.1

^(c)

Represents costs associated with successful and/or abandoned acquisitions, including third-party expenses, post-closure integration costs (including certain incentive and non-incentive cash compensation costs) and non-cash charges and credits arising from purchase accounting adjustments.

^(d)

Represents third party expenses to comply with the requirements of Sarbanes-Oxley and the accelerated adoption of the new accounting standard (ASC 842 - Leases) in the first quarter of 2019, one year ahead of the required adoption dates for a private company.

^(e)

Represents stock-based compensation expense recognized for the three month period ended March 31, 2020 of $3.5 million decreased by $0.5 million due to the reduction of an accrual related to employer taxes. Represents stock-based compensation expense of $7.5 million increased by $1.2 million due to costs associated with employer taxes for the three month period ended March 31, 2019.

^(f)

Represents losses on the extinguishment of the Company’s Original Dollar Term Loan and Original Euro Term Loan as a result of Amendment No. 5 to the Senior Secured Credit Facility.

^(g)

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

^(h)

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