- Third quarter 2013 revenue of £178.6 million, up 8.8% on Q2
'13
- Net income of £40.3 million or 35.56 pence per fully diluted
share
- Adjusted net income1of £25.8 million, or 22.76 pence per fully
diluted share
- Continuing strong momentum in Semiconductor and Flat panel
revenues
- Generated £46.0 million in cash from operations, and £38.5
million in management operating cash flow2
- Ended the quarter with cash and cash equivalents of £107.3
million after repaying $31.4 million (£20.3 million) of the term
loan during the quarter
- Adjusted EBITDA rose to £45.1 million, delivering a 25.3%
margin
Edwards Group Limited (Nasdaq:EVAC) ("Edwards" or the "Company")
announced results of its operations for the third quarter ended
September 30, 2013.
Jim Gentilcore, CEO of Edwards said: "We have continued to enjoy
a positive market environment in both semiconductor and flat panel.
Together these have helped to deliver another strong performance
for the quarter as a whole, well above our initial guidance given
at the end of July. Although General Vacuum revenues were
marginally down on the second quarter, order activity was positive
and positions us well for the final quarter of the year.
"The acquisition of Edwards by the Swedish group Atlas Copco was
announced on August 19 and ratified by our shareholders at an
Extraordinary General Meeting on October 4. We have been making
good progress with the anti-trust clearances in various
jurisdictions and will update the market in due course once they
have all been received and the timetable for completion becomes
clearer. Given this progress, and as previously announced, we are
not providing guidance for the fourth quarter.
"At this time I would also like to extend my personal thanks to
Edwards' CFO, David Smith who has announced that he will leave the
group at the end of the year to take up a significant new role.
Over his three years at Edwards, David was instrumental in the
fundamental transformation of the Edwards' business and operational
footprint, delivering a substantially improved financial basis for
the business."
David Smith, Edwards' CFO commented: "This has been a very good
quarterly result with all metrics close to or above the top of our
long term target range. Operating cash flow was extremely strong,
driven by gross margin up to over 41% and adjusted EBITDA margin
was up over 3 points from the prior quarter. These reflect the
operational gearing inherent in the business, despite some adverse
FX impact given the weakening dollar. On a 9 month basis revenues
are 5% above where we were at this time last year."
On a sequential quarterly basis, revenue increased 8.8% to
£178.6 million (Q2 2013: £164.1 million). The company recorded net
income of £40.3 million, or 35.56 pence per diluted share (Q2 2013:
£27.0 million, or 23.91 pence per diluted share) due to increased
revenue driving higher margins and significant exchange gains of
£21.5 million on the end-of-quarter revaluation of long term
loans.
Adjusted net income grew by 50.0% to £25.8 million, or 22.76
pence per diluted share (Q2 2013: £17.2 million or 15.23 pence per
diluted share), due to increased revenue and higher operating
margins more than off-setting increases in sales and marketing
expenses. Adjusted EBITDA3 increased to £45.1 million or 25.3% of
revenue (Q2 2013: £36.2 million or 22.1% of revenue) and gross
margin rose by 3.0 percentage points to 41.3%.
When compared to the third quarter of the prior year, revenue
increased 26.8% from £140.9 million to £178.6 million, with both
Semiconductor and Emerging Technology delivering strong growth.
Adjusted net income increased to £25.8 million or 22.76 pence per
diluted share from £12.5 million or 11.08 pence per diluted share.
Adjusted EBITDA increased from £26.0 million to £45.1 million and
gross margin increased by 5.5 percentage points.
Key Data
|
|
|
|
|
|
|
Three months
ended September 30 |
Three months
ended June 30 |
|
|
|
|
2013 |
2012 |
% Change |
2013 |
% Change |
|
£m |
£m |
|
£m |
|
Revenue |
178.6 |
140.9 |
26.8% |
164.1 |
8.8% |
|
|
|
|
|
|
Gross Profit |
73.7 |
50.4 |
46.2% |
62.9 |
17.2% |
Gross margin |
41.3% |
35.8% |
5.5pts |
38.3% |
3.0pts |
|
|
|
|
|
|
Net Income |
40.3 |
16.5 |
|
27.0 |
|
|
|
|
|
|
|
Weighted average shares |
|
|
|
|
|
- basic |
112,850,259 |
112,848,333 |
|
112,848,492 |
|
- diluted (4) |
113,334,750 |
112,848,333 |
|
112,919,230 |
|
|
|
|
|
|
|
|
(pence) |
(pence) |
|
(pence) |
|
Earnings per share -
basic |
35.71 |
14.62 |
|
23.93 |
|
Earnings per share -
diluted |
35.56 |
14.62 |
|
23.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(3) |
45.1 |
26.0 |
73.5% |
36.2 |
24.6% |
Adjusted EBITDA margin |
25.3% |
18.5% |
6.8pts |
22.1% |
3.2pts |
|
|
|
|
|
|
Adjusted Net Income(1) |
25.8 |
12.5 |
106.4% |
17.2 |
50.0% |
Adjusted Net Income margin |
14.4% |
8.9% |
5.5pts |
10.5% |
3.9pts |
|
|
|
|
|
|
|
(pence) |
(pence) |
|
(pence) |
|
|
|
|
|
|
|
Adjusted net income per share -
basic |
22.86 |
11.08 |
106.4% |
15.24 |
50.0% |
Adjusted net income per share -
diluted |
22.76 |
11.08 |
105.4% |
15.23 |
49.4% |
|
|
|
|
|
|
Management operating cash
flow(2) |
38.5 |
19.5 |
97.4% |
41.9 |
-8.1% |
|
|
|
|
|
|
Cash and cash
equivalents |
107.3 |
96.5 |
|
109.1 |
|
Net debt(5) |
(211.0) |
(280.3) |
|
(246.8) |
|
Net leverage(6) |
1.7x |
2.6x |
|
2.2x |
|
|
|
|
|
|
|
See Appendix for exchange rate
information. |
|
|
|
|
|
1 Adjusted net income represents
net income adjusted for restructuring and transaction costs,
currency translation gain/(loss) on external and intra-group debt,
purchase price accounting ("PPA") amortization, non-cash
compensation expense and tax shield on adjustments. |
|
|
|
|
|
|
2 Management operating cash flow
is defined as Adjusted EBITDA less change in trade working capital,
net cash payments for capital expenditures and other cash movements
and non-cash items. |
|
|
|
|
|
|
|
|
3 Adjusted EBITDA represents net
income excluding finance income and costs, taxation, depreciation,
amortization, restructuring and transaction costs, profit or loss
on sale of property, plant and equipment ("PP&E") and non-cash
compensation expense. |
|
|
|
|
|
|
4 On May 16, 2012, upon
consummation of the IPO, there were approximately 112.8 million
shares issued and outstanding. 1,250,000 options were issued in
conjunction with the IPO under the company's equity plan with a
further 300,000 issued in February 2013 and 60,000 issued on June
15, 2013. In October 2012, 2,149,340 options were issued to
employees under the Group-wide Share Save scheme. |
|
|
|
|
|
|
5 Net debt is defined as the sum
of the First Lien Credit Agreement debt, the aggregate of other
indebtedness including unamortized fees relating to bank term
loans, deferred consideration, capital lease obligations and
Japanese factoring in excess of US$30 million, less cash and
deposits. |
|
|
|
|
|
|
6 Net leverage is defined by the
First Lien credit agreement as amended and restated in March 2013
and is calculated in US Dollars. The amendment in March 2013
replaced Proforma Adjusted EBITDA as defined in the previous
version of the agreement with Adjusted EBITDA as defined by the
Company and used in this document. Reporting periods prior to Q1
2013 have not been restated for the leverage calculation. Net debt
excludes unamortized fees relating to bank term loans for the
purpose of calculating leverage. |
Application Sector Performance
|
|
|
|
Three months ended
September 30 |
Three months ended June
30 |
|
2013 |
2012 |
% increase/
decrease |
2013 |
% increase/
decrease |
|
£m |
£m |
|
£m |
|
|
|
|
|
|
|
Semiconductor |
71.0 |
45.4 |
56.4% |
66.4 |
6.9% |
General Vacuum |
40.5 |
42.4 |
-4.5% |
41.0 |
-1.2% |
Emerging Technologies |
24.7 |
11.4 |
116.7% |
14.6 |
69.2% |
Service |
42.4 |
41.7 |
1.7% |
42.1 |
0.7% |
|
178.6 |
140.9 |
26.8% |
164.1 |
8.8% |
|
|
|
|
|
|
Semiconductor revenues were up over 56% on the prior year and up
nearly 7% on the prior quarter, reflecting the ongoing momentum
seen throughout 2013. The US remained the strongest region,
driven by orders for sub-20nm fabs. Overall spend on Logic
continued to be very strong, while Memory sector investment
increased from the global majors and niche
specialists. Foundry investment was relatively stable in the
quarter and OEM revenues continued to be robust. On a year to
date basis, Semiconductor was 2.3% above the prior year.
General Vacuum was down 4.5% on the prior year where there were
some significant coating orders, but only marginally down on the
prior quarter. Scientific and R&D sectors were stable
against the prior year, while Process rose sharply as a couple of
significant power and refining infrastructure projects were
completed in the quarter. While order book momentum was
strong in the quarter, Industrial revenues were lower against the
strong prior year comparable, with the US region most affected by
macro weakness. On a year to date basis, General Vacuum was 4.7%
below the prior year.
Emerging Technologies' revenue growth continued to be very
positive, again delivering strong gains over both prior quarter and
prior year. With LED and Solar sectors stable, FPD sales were
the driver of revenues being up 117%. These included the
completion of significant LCD orders to 3 new fabs in China and
ongoing spend in Korea for OLED-related technology. On a year to
date basis, Emerging Technologies was 68.7% above the prior
year.
Service revenues grew 0.7% on the prior quarter, marking a third
record quarter in the past 12 months. Asia continued to perform
well, including China and Japan which were up strongly against both
the prior quarter and the prior year. While the poor macro
environment impacted activity at certain customers in Europe, there
was strong growth at a number of key semiconductor accounts in
Taiwan. The US macro environment was also a drag on regional
performance, but offset by ongoing work with a major customer on a
refresh project. On a year to date basis, Service was 2.4%
above the prior year.
Additional Quarterly Financial Information
Cost of sales for the third quarter was £104.9 million, an
increase of £14.4 million compared to the prior year period
reflecting high volumes. Gross profit margin was up 5.5 percentage
points on the prior year and up 3.0 percentage points on the prior
quarter at 41.3%.
Sales, general and administrative expenses were £27.0 million,
an increase of £4.8 million compared to the prior year period,
mainly due to an increase in variable compensation. Total spending
on research and development before capitalization was £7.5 million,
equating to 4.2% of revenue, with absolute spend increasing by £0.4
million compared to the prior year period. Restructuring and
transaction costs incurred totaled £2.4 million including an
accrual for £1.9 million with respect to fees to be incurred for
the sale of the business to Atlas Copco.
The Company's ending cash and cash equivalents balance at
September 30, 2013 was £107.3 million (Q2 2013: £109.1
million). During the third quarter, the Company generated
£46.0 million in cash from operations. Management operating cash
flow was strong at £38.5 million in the third quarter of 2013, an
85% cash conversion, up £19.0 million from the prior year period
(Q3 2012: £19.5 million) with improvements in net working capital
outweighing increased capital expenditure. Cash used in investing
activities totaled £15.5 million, through continued investment in
R&D, capex across manufacturing sites, the China/Taiwan
projects and the acquisition of Gamma Vacuum.
The Company's indebtedness at September 30, 2013 decreased by
£37.7 million in the quarter to £320.3 million, due to a repayment
of $31.4 million (£20.3 million) and favourable foreign exchange
revaluations. Overall, the Company's net debt decreased by
£35.8 million to £211.0 million with a net leverage ratio of 1.7x,
achieving the objective of a debt ratio of under 2x well before our
2013 year end.
The Company recorded a tax charge of £10.1 million for the
quarter, which equates to 20.0% of income before taxes.
Business Developments in Q3 2013
Within the quarter, Edwards announced and then completed the
acquisition of Gamma Vacuum, a market leader in the design,
manufacture and service of ultra-high vacuum (UHV) pumps. Founded
in 2003, Gamma has a very strong reputation for the manufacture and
distribution of Ion and Titanium Sublimation pumps, used in
applications principally in the R&D sector such as for high
energy physics, together with other R&D, Scientific and
Industrial applications. In 2012, Gamma had revenues in excess
of US$9.0 million.
The transaction expanded Edwards' General Vacuum product range
into UHV, giving the capability to supply a total vacuum package
from UHV through to atmospheric pumping. Since completion there has
been positive and active interest from customers for such total
vacuum solutions, for applications such as electron microscopy.
Edward's recent launch of the iPUP2 for less harsh semiconductor
applications has been very well received by the market after its
roll-out in various geographies, and has achieved a faster take-up
than initially expected. There has also been ongoing progress
within a number of development projects, including field trials on
450mm-related turbo and new etch pumping solutions. The ATEX
certification for the CXS pump for chemical applications was also
extended to cover pharmaceutical applications.
Further progress was made with the growth projects in China,
including the construction of the new factory in Qingdao where the
main building construction is underway and the factory steelwork
has already been completed. Alongside the infrastructure,
local recruitment is gaining momentum. In Xian, site
preparations and ground works were commenced for the new service
center following the granting of the business registration and
license. In the UK, the consolidation of the R&D teams
through the final relocations to the new Global Technology Centre
in Burgess Hill was completed on time.
About Edwards
Edwards is a leading developer and manufacturer of sophisticated
vacuum products, abatement systems and related value-added
services. These are integral to manufacturing processes for
semiconductors, flat panel displays, LEDs and solar cells; are used
within an increasingly diverse range of industrial processes
including power, glass and other coating applications, steel and
other metallurgy, pharmaceutical and chemical; and for both
scientific instruments and a wide range of R&D
applications.
Edwards has over 3,200 full-time employees and 500 temporary
workers operating in approximately 30 countries worldwide engaged
in the design, manufacture and support of high technology vacuum
and exhaust management equipment.
Edwards' American Depositary Shares trade on The NASDAQ Global
Select Market under the symbol EVAC. Further information about
Edwards can be found at www.edwardsvacuum.com.
Cautionary Statement Concerning Forward Looking
Statements
This release includes forward-looking statements, beliefs or
opinions, including statements with respect to the Company's
business, financial condition, results of operations and plans.
These forward-looking statements involve known and unknown risks
and uncertainties, many of which are beyond the Company's control
and all of which are based on management's current beliefs and
expectations about future events. Forward-looking statements are
sometimes identified by the use of forward-looking terminology such
as "believe," "expects," "may," "will," "could," "should," "shall,"
"risk," "intends," "estimates," "aims," "plans," "predicts,"
"continues," "assumes," "positioned" or "anticipates" or the
negative thereof, other variations thereon or comparable
terminology or by discussions of strategy, plans, objectives,
goals, future events or intentions. These forward-looking
statements include all matters that are not historical facts.
Forward-looking statements may and often do differ materially from
actual results. They appear in a number of places throughout this
release and include statements regarding the intentions, beliefs or
current expectations of management with respect to future events
and are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Company's business
concerning, among other things, the results of operations,
financial condition, liquidity, prospects, growth, strategies, and
the industry in which the Company operates, most of which are
difficult to predict and many of which are beyond the Company's
control. These risks, uncertainties and assumptions include, but
are not limited to, the following: conditions in the global credit
markets and the economy, including volatile conditions in Europe;
capital expenditure cycles in the semiconductor and emerging
technologies (FPD, Solar PV and LED) manufacturing industries; the
Company's ability to forecast demand for its products and services;
growth in various end-markets; the Company's ability to maintain
existing customer relationships; the Company's ability to timely
and successfully develop and commercialize new products; the
Company's ability to meet customers' quality standards,
specifications, process-related performance requirements or
delivery schedules; maintenance of the efficiency of the Company's
supply chain, the prices of its components and the capacity of its
manufacturing operations; the Company's ability to realize expected
benefits from its restructuring program or future investments; the
Company's ability to retain key management and recruit and retain
highly skilled and technical employees; reliance on proprietary and
non-proprietary technology and processes; competition in the
Company's markets; risks associated with doing business
internationally; fluctuations in foreign exchange rates;
environmental and health and safety liabilities, regulatory
compliance and expenditures; work stoppages or other labor
disputes; and risks associated with the Company's level of
financial indebtedness and operating and financial restrictions in
the First Lien Credit Agreement.
Edwards
Group Limited |
Consolidated Income
Statement |
|
|
|
|
|
(UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended September 30 |
Nine months ended
September 30 |
|
2013 |
2012 |
2013 |
2012 |
|
£m |
£m |
£m |
£m |
Revenue |
178.6 |
140.9 |
486.9 |
463.9 |
|
|
|
|
|
Cost of sales |
(104.9) |
(90.5) |
(298.1) |
(293.7) |
|
|
|
|
|
Gross Profit |
73.7 |
50.4 |
188.8 |
170.2 |
|
|
|
|
|
Sales, general & admin excluding
amortization |
(27.0) |
(22.2) |
(78.5) |
(71.8) |
R&D costs excluding amortization |
(5.4) |
(5.2) |
(15.9) |
(15.9) |
Restructuring and transaction (costs) /
releases |
(2.4) |
(2.8) |
8.9 |
(8.0) |
Amortization |
(4.9) |
(4.6) |
(15.1) |
(13.6) |
Total administrative expenses |
(39.7) |
(34.8) |
(100.6) |
(109.3) |
Other (losses)/gains |
(1.5) |
(1.7) |
0.4 |
(1.9) |
|
|
|
|
|
Operating Income |
32.5 |
13.9 |
88.6 |
59.0 |
|
|
|
|
|
Finance income and costs |
17.9 |
4.8 |
(24.8) |
(11.4) |
|
|
|
|
|
Income before income
taxes |
50.4 |
18.7 |
63.8 |
47.6 |
|
|
|
|
|
Income tax expense |
(10.1) |
(2.2) |
(13.9) |
(6.2) |
|
|
|
|
|
Net Income |
40.3 |
16.5 |
49.9 |
41.4 |
|
|
|
|
|
Weighted average number of shares –
basic |
112,850,259 |
112,848,333 |
112,849,035 |
106,917,676 |
Weighted average number of shares –
diluted |
113,334,750 |
112,848,333 |
113,079,540 |
106,917,676 |
|
|
|
|
|
Earnings per share attributable to the equity
holders of the company |
|
|
|
|
|
(pence) |
(pence) |
(pence) |
(pence) |
Earnings per share – basic |
35.71 |
14.62 |
44.22 |
38.72 |
Earnings per share – diluted |
35.56 |
14.62 |
44.13 |
38.72 |
|
|
|
|
|
|
Edwards
Group Limited |
Consolidated Balance
Sheets |
(UNAUDITED) |
|
|
|
|
|
|
|
September 30,
2013 |
December 31,
2012 |
|
£m |
£m |
Non-Current assets |
|
|
Goodwill |
202.6 |
205.0 |
Intangible assets |
181.6 |
190.7 |
Property, plant and equipment |
121.6 |
125.9 |
Other receivables |
7.3 |
7.9 |
Deferred tax assets |
14.1 |
19.4 |
Derivative financial instruments |
3.4 |
2.3 |
|
530.6 |
551.2 |
|
|
|
Current assets |
|
|
Inventories |
99.0 |
93.8 |
Trade receivables |
88.1 |
78.4 |
Other receivables |
21.2 |
15.6 |
Derivative financial instruments |
6.9 |
5.2 |
Current tax receivables |
0.4 |
1.6 |
Bank deposits |
2.0 |
2.0 |
Cash and cash equivalents |
107.3 |
98.2 |
|
324.9 |
294.8 |
Total assets |
855.5 |
846.0 |
|
|
|
Current liabilities |
|
|
Borrowings and finance leases |
(5.5) |
(4.0) |
Derivative financial instruments |
(5.9) |
(7.4) |
Trade payables |
(66.8) |
(48.5) |
Other payables |
(54.0) |
(39.1) |
Provisions |
(15.4) |
(15.2) |
Current tax liabilities |
(9.9) |
(1.5) |
|
(157.5) |
(115.7) |
|
|
|
Non-current liabilities |
|
|
Borrowings and finance leases |
(314.8) |
(361.6) |
Derivative financial instruments |
(2.8) |
(5.7) |
Other payables |
(3.9) |
(3.3) |
Provisions |
(14.5) |
(33.3) |
Retirement benefit obligations |
(14.4) |
(14.9) |
Deferred tax liabilities |
(39.9) |
(51.7) |
|
(390.3) |
(470.5) |
Share capital |
(0.2) |
(0.2) |
Share premium |
(53.8) |
(53.8) |
Reserves |
(253.7) |
(205.8) |
Total equity attributable to
shareholders of the company |
(307.7) |
(259.8) |
Total equity and
liabilities |
(855.5) |
(846.0) |
|
|
|
|
Edwards Group
Limited |
Consolidated Statement
of Cash Flows |
(UNAUDITED) |
|
|
|
|
|
|
Three months
ended September 30 |
Nine months ended
September 30 |
|
2013 |
2012 |
2013 |
2012 |
|
£m |
£m |
£m |
£m |
Net Income |
40.3 |
16.5 |
49.9 |
41.4 |
|
|
|
|
|
Adjusted for: |
|
|
|
|
-taxation |
10.1 |
2.2 |
13.9 |
6.2 |
-net finance cost |
6.6 |
7.1 |
20.2 |
23.7 |
-unrealized foreign exchange |
(23.9) |
(11.3) |
2.4 |
(13.9) |
-amortization |
4.9 |
4.6 |
15.1 |
13.6 |
-depreciation |
4.2 |
4.3 |
12.7 |
12.4 |
-loss/(profit) on sale of property, plant
& equipment |
0.1 |
-- |
0.3 |
(0.6) |
-share based compensation expenses |
1.0 |
0.4 |
2.3 |
0.6 |
-changes in working capital and other
items |
|
|
|
|
-changes in inventories |
(8.7) |
4.1 |
(5.1) |
(1.4) |
-changes in receivables |
4.4 |
11.8 |
(9.4) |
19.6 |
-changes in payables |
5.1 |
(18.8) |
29.8 |
(33.2) |
-changes in provisions |
1.9 |
(1.1) |
(16.5) |
(6.9) |
Cash generated from
operations |
46.0 |
19.8 |
115.6 |
61.5 |
Income tax paid |
(2.0) |
(2.4) |
(5.5) |
(4.7) |
Net cash generated from operating
activities |
44.0 |
17.4 |
110.1 |
56.8 |
Purchases of property, plant and
equipment |
(4.6) |
(3.7) |
(9.4) |
(11.6) |
Sales of property, plant and equipment |
0.1 |
0.2 |
0.1 |
0.3 |
Purchases of intangible assets |
(4.6) |
(2.4) |
(11.6) |
(8.0) |
Acquisition of businesses |
(6.5) |
-- |
(6.5) |
-- |
Interest received |
0.1 |
0.2 |
0.3 |
0.6 |
Bank deposits |
-- |
(2.1) |
-- |
(2.1) |
Total cash flows from investing
activities |
(15.5) |
(7.8) |
(27.1) |
(20.8) |
Interest paid |
(5.8) |
(6.4) |
(19.0) |
(21.0) |
Proceeds from issue of shares |
-- |
-- |
-- |
53.7 |
Drawdown of debt |
0.6 |
-- |
1.7 |
-- |
Repayment of debt |
(20.6) |
(5.6) |
(49.8) |
(63.9) |
Payment of transaction fees |
-- |
-- |
(6.5) |
-- |
Total cash flows from financing
activities |
(25.8) |
(12.0) |
(73.6) |
(31.2) |
|
|
|
|
|
Net increase in cash and cash
equivalents |
2.7 |
(2.4) |
9.4 |
4.8 |
|
|
|
|
|
Cash and cash equivalents at the beginning of
the period |
109.1 |
100.4 |
98.2 |
91.8 |
Effects of foreign exchange rate changes |
(4.5) |
(1.5) |
(0.3) |
(0.1) |
Cash and cash equivalents at the end
of the period |
107.3 |
96.5 |
107.3 |
96.5 |
Cash and cash equivalents comprise: |
|
|
|
|
Cash at bank and in hand |
107.3 |
96.5 |
107.3 |
96.5 |
|
|
|
|
|
Reconciliation of Non-GAAP Measures
Adjusted EBITDA, Adjusted net income and Management operating
cash flow are not measures of financial performance under IFRS and
should not be considered as an alternative to operating income or
net income as indicators of the Company's operating performance or
any other measure of performance derived in accordance with IFRS.
Further, because Adjusted EBITDA, Adjusted net income and
Management operating cash flow (or similar measures) may vary among
companies and industries, they may not be comparable to other
similarly titled measures.
Management uses Adjusted EBITDA as a performance measure. In
addition, management believes it is useful for investors because it
is used in the calculation of applicable interest rates, mandatory
prepayments and certain covenant baskets under the First Lien
Credit Agreement.
The Company believes Adjusted net income provides investors with
helpful information with respect to the performance of the
Company's operations and management uses Adjusted net income to
evaluate its ongoing operations and for internal planning and
forecasting purposes. Adjusted net income is not a measure of
liquidity.
Management uses Management operating cash flow, which is derived
from Adjusted EBITDA, to understand the factors that impact cash
flow generated by operations, absent various exceptional items that
effect cash generation and as a measure to help allocate resources.
In addition, management believes Management operating cash flow is
useful to investors as it provides them with additional information
about the Company's performance. Management operating cash flow is
not a measure of liquidity.
|
|
|
|
Unaudited |
Three months ended September 30 |
Three months
ended June 30 |
Nine months ended September
30 |
|
|
|
|
|
|
2013 |
2012 |
2013 |
2013 |
|
£m |
£m |
£m |
£m |
Net Income |
40.3 |
16.5 |
27.0 |
49.9 |
Interest |
6.6 |
7.1 |
6.4 |
20.2 |
Taxation |
10.1 |
2.2 |
7.7 |
13.9 |
Depreciation |
4.2 |
4.3 |
4.3 |
12.7 |
Amortization |
4.9 |
4.6 |
5.0 |
15.1 |
EBITDA |
66.1 |
34.7 |
50.4 |
111.8 |
|
|
|
|
|
Finance income and costs excluding
interest |
(24.5) |
(11.9) |
0.9 |
4.6 |
Restructuring and transaction costs /
(releases) |
2.4 |
2.8 |
(16.0) |
(8.9) |
Loss on sales of PP&E (excluding amounts
charged to restructuring and transaction costs) |
0.1 |
-- |
0.2 |
0.3 |
Share based compensation expenses |
1.0 |
0.4 |
0.7 |
2.3 |
Adjusted EBITDA |
45.1 |
26.0 |
36.2 |
110.1 |
|
|
|
|
|
Changes in trade working capital |
0.4 |
(3.3) |
11.8 |
14.4 |
Net cash payments for capital
expenditures |
(8.3) |
(5.1) |
(6.4) |
(19.5) |
Other cash movements and non-cash
items |
1.3 |
1.9 |
0.3 |
(1.9) |
Management operating cash
flow |
38.5 |
19.5 |
41.9 |
103.1 |
|
|
|
|
|
Net Income |
40.3 |
16.5 |
27.0 |
49.9 |
Restructuring and transaction costs /
(releases) |
2.4 |
2.8 |
(16.0) |
(8.9) |
Currency translation (gain) / loss |
(24.5) |
(11.9) |
0.9 |
4.6 |
PPA amortization |
2.4 |
2.6 |
2.4 |
7.3 |
Share based compensation expenses |
1.0 |
0.4 |
0.7 |
2.3 |
Tax shield on adjustments |
4.2 |
2.1 |
2.2 |
(1.4) |
Adjusted net
income |
25.8 |
12.5 |
17.2 |
53.8 |
|
|
|
|
|
Additional Information and Notes to the Financial
Statements
1. Basis
of Presentation
Edwards Group Limited was incorporated in the Cayman Islands on
February 10, 2012. To facilitate the issuing of ADSs on NASDAQ, on
April 5, 2012, the entire issued share capital of Edwards Holdco
Limited was acquired by Edwards Group Limited and implemented by
way of a Scheme of Arrangement. As a result, Edwards Group
Limited owns all of the outstanding ordinary shares of Edwards
Holdco Limited. Prior to the share offering the Company conducted
its business solely through Edwards Group plc (now known as Edwards
Holdco Limited) and its subsidiaries.
Subsequent to the restructuring, Edwards Group Limited has
become the parent of Edwards Holdco Limited and its subsidiaries.
Edwards Group Limited is a Cayman Islands exempt company
incorporated with limited liability. Edwards Group Limited is
resident for tax purposes in the United Kingdom.
The Quarterly Financial Report for the three months ended
September 30, 2013 has been prepared on the same basis as the
audited consolidated financial statements of Edwards Group Ltd for
the year ended December 31, 2012 and includes all adjustments
necessary for the fair presentation of the information for the
quarters presented. The Financial Statements are stated in pounds
sterling (GBP). The Quarterly Financial Report is unaudited.
2.
Revenue by Geography |
|
|
|
|
|
|
|
|
Three months
ended September 30, |
|
Three months
ended June 30, |
|
2013 |
2012 |
|
2013 |
|
|
£m |
£m |
% increase /
decrease |
£m |
% increase /
decrease |
Europe |
28.5 |
22.5 |
26.7% |
26.2 |
8.8% |
Americas |
60.6 |
45.1 |
34.4% |
57.7 |
5.0% |
South Korea |
33.3 |
21.2 |
57.1% |
25.3 |
31.6% |
Japan |
16.0 |
18.2 |
-12.1% |
14.8 |
8.1% |
Taiwan |
15.8 |
14.9 |
6.0% |
17.5 |
-9.7% |
China |
17.3 |
12.8 |
35.2% |
15.0 |
15.3% |
Other Asia |
7.1 |
6.2 |
14.5% |
7.6 |
-6.6% |
Total
sales |
178.6 |
140.9 |
26.8% |
164.1 |
8.8% |
|
|
|
3.
Administrative Expenses |
|
|
|
|
|
|
Three months ended
September 30, |
|
2013 |
2012 |
|
£m |
£m |
Sales and marketing |
12.0 |
11.4 |
General and administrative (excluding
amortization) |
9.0 |
9.0 |
Share based compensation |
0.9 |
0.4 |
Bonus |
5.1 |
1.4 |
Sales, general and administrative expenses
(excluding amortization) |
27.0 |
22.2 |
R&D excluding amortization |
5.4 |
5.2 |
Restructuring and transaction costs |
2.4 |
2.8 |
Amortization (excluding PPA
amortization) |
2.5 |
2.0 |
PPA amortization |
2.4 |
2.6 |
Total administrative
expenses |
39.7 |
34.8 |
|
|
|
4.
Restructuring and Transaction Costs |
|
|
|
|
|
|
Three months ended
September 30, |
|
2013 |
2012 |
|
£m |
£m |
Restructuring (releases)/costs |
(0.4) |
2.4 |
Transaction costs |
2.8 |
0.4 |
Restructuring and transaction
costs |
2.4 |
2.8 |
|
|
|
5.
Research and Development Costs (excluding
amortization) |
|
|
|
|
|
|
Three months ended
September 30, |
|
2013 |
2012 |
|
£m |
£m |
Research and development expensed in the
income statement excluding amortization |
5.4 |
5.2 |
Capitalization of development
expenditure |
2.1 |
1.9 |
Total research and development
spending |
7.5 |
7.1 |
Research and development spending as a
percentage of revenue |
4.2% |
5.0% |
|
|
|
6.
Finance Income and Costs |
|
|
|
|
|
|
Three months ended
September 30, |
|
2013 |
2012 |
|
£m |
£m |
Interest income and (costs) |
(5.6) |
(5.9) |
Foreign exchange gains on bank and
intra-group loans |
24.5 |
11.9 |
Fees and amortization of fees |
(1.0) |
(1.2) |
Finance income and
costs |
17.9 |
4.8 |
|
|
|
7.
Capital Expenditures |
|
|
|
|
|
|
Three months ended
September 30, |
|
2013 |
2012 |
|
£m |
£m |
Research and development
capitalized |
2.1 |
1.9 |
Property plant & equipment
(PP&E) and other intangibles |
6.2 |
3.4 |
Restructuring PP&E |
0.9 |
0.8 |
Total capital
expenditure |
9.2 |
6.1 |
8. Long
Term Debt
On March 26, 2013, Edwards entered into an amendment and
restatement agreement to the First Lien Credit Agreement. The
amendment, among other things, refinanced and replaced the
Company's existing credit facilities with a $560 million term loan
facility and a $90 million revolving facility which is undrawn, and
extended the maturity date of the term loan facility and the
revolving facility to March 31, 2020 and March 31, 2018,
respectively. Edwards incurred arrangement fees with respect to the
facilities of £6.5 million (USD 9.8 million). In connection with
the amendment the Company repaid an $11.5 million tranche of the
term loan due in May 2014 and $6.6 million of the original
loan.
On May 31, 2013, the Company repaid a further tranche of £15.2
million (USD 23.0 million) of the term loan and on June 28, 2013
made a scheduled repayment of £0.9 million (USD 1.4 million).
On August 30, 2013, the Company repaid a further tranche of
£19.4 million (USD 30.0 million) of the term loan and on September
30, 2013 made a scheduled repayment of £0.9 million (USD 1.4
million).
As a result of extending and amending the First Lien Agreement
the company took the opportunity to review its internal subsidiary
funding arrangements. As the Group does not have any plans to
repay certain intercompany loans, which are long term in nature, to
reflect this the Company has changed the treatment of these loans
to be net investments in foreign operations. This means the
loans from the Group's main UK subsidiary company Edwards Limited
to each of Edwards Korea and Edwards Japan and the loan from
Edwards Japan to Edwards Limited will be treated in a similar
method to Intercompany equity investments. One consequence is
that any foreign exchange gains or losses will be dealt with in
Other comprehensive income rather than included in Finance income
and costs in the Income Statement. Foreign exchange gains or losses
on intercompany loans will continue to be excluded from Adjusted
Net Income.
9.
Reconciliation of Net Debt |
|
|
|
|
|
|
|
|
|
|
|
|
As of January 1,
2013 |
Cash flow |
Other non- cash
movements |
Exchange
movements |
As of September 30,
2013 |
|
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
Cash and cash equivalents |
98.2 |
9.4 |
-- |
(0.3) |
107.3 |
Bank deposits |
2.0 |
-- |
-- |
-- |
2.0 |
Cash at bank |
100.2 |
9.4 |
-- |
(0.3) |
109.3 |
|
|
|
|
|
|
Bank term loans |
(355.6) |
48.3 |
-- |
(4.0) |
(311.3) |
Unamortized fees relating to the bank term
loans |
4.9 |
6.5 |
(1.8) |
-- |
9.6 |
Other loans |
(10.8) |
(0.6) |
-- |
-- |
(11.4) |
Deferred consideration |
-- |
(3.5) |
|
0.1 |
(3.4) |
Finance leases |
(4.1) |
0.4 |
-- |
(0.1) |
(3.8) |
Total borrowings and finance
leases |
(365.6) |
51.1 |
(1.8) |
(4.0) |
(320.3) |
|
|
|
|
|
|
Total Net Debt |
(265.4) |
60.5 |
(1.8) |
(4.3) |
(211.0) |
On August 30, 2013 the Group acquired the whole of the business
and assets of Gamma Vacuum.
The total purchase consideration comprised USD 10.0 million on
completion and USD 6.0 million deferred consideration. The deferred
consideration is payable in three equal instalments in August 2014,
2015 and 2016, and is discounted to its fair value of £3.5
million.
10.
Shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
Diluted |
|
Shares
Outstanding |
Weighted average shares
Quarter |
Weighted
average shares Year to date |
Weighted average shares
Quarter |
Weighted average shares Year
to date |
December 2012 |
112,848,333 |
112,848,333 |
108,408,442 |
112,848,333 |
108,408,442 |
March 2013 |
112,848,333 |
112,848,333 |
112,848,333 |
112,850,376 |
112,850,376 |
June 2013 |
112,849,128 |
112,848,492 |
112,848,413 |
112,919,230 |
112,859,179 |
September 2013 |
112,850,872 |
112,850,259 |
112,849,035 |
113,334,750 |
113,079,540 |
Appendix:
Supplemental Information for Lenders Under the First Lien Credit
Agreement
|
December 31,
2012 |
March 31,
2013 |
June 30,
2013 |
Sept 30,
2013 |
LTM |
Adjusted EBITDA |
$m
33.4 |
$m
44.8 |
$m
55.6 |
$m
70.3 |
$m
204.1 |
|
|
|
|
|
|
Secured
facilities |
|
|
|
|
|
First lien |
|
|
|
|
504.2 |
Total senior
debt |
|
|
|
|
504.2 |
|
|
|
|
|
|
Other borrowings |
|
|
|
|
30.1 |
Total senior debt and
other |
|
|
|
|
534.3 |
|
|
|
|
|
|
Less: |
|
|
|
|
|
Cash and cash
equivalents |
|
|
|
|
173.8 |
Bank deposits |
|
|
|
|
3.2 |
Total cash at
bank |
|
|
|
|
177.0 |
|
|
|
|
|
|
Consolidated net
debt |
|
|
|
|
357.3 |
|
|
|
|
|
|
Net
Leverage |
|
|
|
|
1.7x |
On March 26, 2013, The Company entered into an amendment and
restatement agreement to the First Lien Credit Agreement. The
amendment in March 2013 replaced Proforma Adjusted EBITDA as
defined in the previous version of the agreement with Adjusted
EBITDA as defined by the Company and used in this document. The
principal difference is that Proforma Adjusted EBITDA excluded the
capitalization of Development Expenditure. Net leverage in
reporting periods prior to Q1 2013 have not been restated.
Exchange Rates
Exchange rates for US Dollar against Pounds Sterling for the
four periods are based on the closing mid-point spot rates at 4:00
pm (London time) derived from WM /Reuters and as published by the
Financial Times. Quarterly average rates are calculated using the
average of the daily rates during the relevant period. Rates
for the three months ended, September 30, 2012, December 31, 2012,
March 31, 2013, June 30, 2013 and September 30, 2013 were: 1.5791,
1.6059, 1.5548, 1.5355 and 1.5587 respectively.
Exchange rates for US Dollar against Pounds Sterling are based
on the closing mid-point spot rates at 4:00 pm (London time)
derived from WM /Reuters and as published by the Financial Times,
and comprise 1.6148 for September 30, 2012, 1.6255 for December 31,
2012, 1.5185 for March 31, 2013, 1.5167 for June 30, 2013 and
1.6194 for September 30, 2013.
Monthly average rates are calculated using the average of the
daily rates during the month and comprise 1.5589 for July 2012;
1.5713 for August 2012: 1.6104 for September 2012; 1.6081 for
October 2012; 1.5965 for November 2012; 1.6133 for December 2012,
1.5988 for January 2013; 1.5512 for February 2013; 1.5077 for March
2013, 1.5295 for April 2013, 1.5305 for May 2013, 1.5478 for June
2013, 1.5450 for July 2013, 1.5496 for August 2013 and 1.5831 for
September 2013.
EVAC-F
CONTACT: Investor Relations:
Ross Hawley
Head of Investor Relations
Edwards
+44 (0)1293 528844
investors@edwardsvacuum.com
Monica Gould
The Blueshirt Group
+1 212 871-3927
monica@blueshirtgroup.com
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