(EDGAR Online via COMTEX) -- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
OVERVIEW
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
We recorded non-cash pre-tax Widia goodwill and other intangible asset impairment charges of $15.6 million in the current quarter as a result of further deteriorating market conditions caused by the COVID-19 global pandemic. We reported current quarter earnings per diluted share (EPS) of $0.03. EPS for the current quarter was unfavorably affected by restructuring and related charges and goodwill and other intangible asset impairment charges. The earnings per diluted share of $0.82 in the prior year quarter included a discrete benefit from U.S. tax reform of $0.08 and restructuring and related charges of $0.03 per share.
RESULTS OF CONTINUING OPERATIONS
SALES
Three Months Ended Nine Months Ended
March 31, 2020 March 31, 2020
Constant Constant
(in percentages) As Reported Currency As Reported Currency
End market sales decline:
Energy (25)% (23)% (24)% (23)%
General engineering (20) (17) (14) (12)
Transportation (19) (17) (17) (16)
Aerospace (17) (16) (9) (8)
Earthworks (8) (6) (5) (3)
Regional sales decline:
Americas (20)% (18)% (16)% (14)%
Europe, the Middle East and Africa (EMEA) (19) (16) (15) (11)
Asia Pacific (17) (15) (13) (12)
GROSS PROFIT
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OPERATING EXPENSE
RESTRUCTURING AND RELATED CHARGES AND ASSET IMPAIRMENT CHARGES
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Intangible Asset Impairment Charges
LOSS ON DIVESTITURE
INTEREST EXPENSE
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The transitional provisions of Swiss tax reform allow companies to utilize a combination of lower tax rates and tax basis adjustments to fair value, which are used for tax depreciation and amortization purposes resulting in deductions over the transitional period. To reflect the federal and cantonal transitional provisions, as they apply to us, we recorded a deferred tax asset of $14.5 million during the three months ended December 31, 2019. We consider the deferred tax asset from Swiss tax reform to be an estimate based on our current interpretation of the legislation, which is subject to change based on further legislative guidance, review with the Swiss federal and cantonal authorities and modifications to the underlying valuation.
BUSINESS SEGMENT REVIEW
We operate three reportable segments consisting of Industrial, Widia and
Infrastructure. Our reportable operating segments have been determined in
accordance with our internal management structure, which is organized based on
operating activities, the manner in which we organize segments for allocating
resources, making operating decisions and assessing performance and the
availability of separate financial results. We do not allocate certain corporate
expenses related to executive retirement plans, our Board of Directors,
strategic initiatives, and certain other costs and report them in Corporate.
Our sales and operating (loss) income by segment are as follows:
Three Months Ended March 31, Nine Months Ended March 31,
(in thousands) 2020 2019 2020 2019
Sales:
Industrial $ 260,738 $ 318,636 $ 820,008 $ 956,515
Widia 42,721 50,966 131,115 148,592
Infrastructure 179,625 227,602 555,129 666,178
Total sales $ 483,084 $ 597,204 $ 1,506,252 $ 1,771,285
Operating income (loss):
Industrial $ 30,147 $ 57,218 $ 32,159 $ 173,279
Widia (13,528 ) (4 ) (31,410 ) 3,817
Infrastructure 21,941 24,934 7,679 69,407
Corporate (667 ) (277 ) (1,797 ) (2,622 )
Total operating income 37,893 81,871 6,631 243,881
Interest expense 7,897 8,104 23,834 24,305
Other income, net (2,438 ) (4,993 ) (9,330 ) (11,775 )
Income (loss) from continuing operations
before income taxes $ 32,434 $ 78,760 $ (7,873 ) $ 231,351
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
INDUSTRIAL
Three Months Ended March 31, Nine Months Ended March 31,
(in thousands, except operating
margin) 2020 2019 2020 2019
Sales $ 260,738 $ 318,636 $ 820,008 $ 956,515
Operating income 30,147 57,218 32,159 173,279
Operating margin 11.6 % 18.0 % 3.9 % 18.1 %
Three
Months Nine Months
Ended March Ended March
(in percentages) 31, 2020 31, 2020
Organic sales decline (17)% (13)%
Foreign currency exchange impact(1) (2) (1)
Business days impact(2) 1 -
Sales decline (18)% (14)%
Three Months Ended March Nine Months Ended March
31, 2020 31, 2020
Constant Constant
(in percentages) As Reported Currency As Reported Currency
End market sales decline:
General engineering (20)% (18)% (15)% (13)%
Transportation (19) (17) (17) (16)
Aerospace (17) (16) (9) (8)
Energy (7) (6) (9) (7)
Regional sales decline:
EMEA (22)% (19)% (18)% (15)%
Americas (16) (16) (11) (11)
Asia Pacific (14) (12) (12) (11)
For the three months ended March 31, 2020, Industrial sales decreased 18 percent from the prior year quarter due to the global manufacturing slowdown and deteriorating conditions across all end markets and regions. Transportation sales declined in all regions due to continued weakness in auto build rates caused by a slowdown in auto sales. Sales in our general engineering end market declined in all regions as a result of continued declines in manufacturing activity and, in Asia Pacific, partially related to the COVID-19 pandemic. Energy sales decreased primarily due to a decline in oil and gas drilling in the Americas, partially offset by continued strength in power generation in China. Aerospace sales declined in the Americas and EMEA, primarily driven by lower OEM production rates on certain platforms. In Asia, aerospace sales increased slightly due to inventory stocking orders from customers amid supply chain concerns. On a regional basis, the sales decrease in EMEA was primarily driven by declines in the general engineering and transportation end markets, in addition to declines in the aerospace end market, while the sales decrease in the Americas was driven by declines in all four end markets. The sales decrease in Asia Pacific was primarily driven by declines in the general engineering and transportation end markets, partially offset by increases in the energy and aerospace end markets.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
For the nine months ended March 31, 2020, Industrial sales decreased 14 percent from the prior year period. Transportation sales declined in all regions due to continued weakness in auto build rates, while sales in our general engineering end market declined in all regions driven by overall continued decline in global manufacturing activity. Energy sales decreased primarily due to a decline in oil . . .
May 05, 2020
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