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IDEX Reports Third Quarter EPS of 88 Cents with Full Year EPS Guidance of $3.52 – $3.55

LAKE FOREST, Ill.--(BUSINESS WIRE)--Oct. 20, 2014-- IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended September 30, 2014.

Third Quarter 2014 Highlights

  • Sales increased 9 percent, 7 percent organically
  • Operating margin of 20.8 percent was up 100 basis points from the prior year
  • EPS of 88 cents was 13 percent higher than prior year EPS of 78 cents
  • Free cash flow of $92 million was over 128 percent of net income

Third Quarter 2014

Sales of $533 million were up 9 percent (+7 percent organic, +1 percent acquisition and +1 percent foreign currency translation) compared with last year. Orders in the quarter of $507 million were down 5 percent (-6 percent organic and +1 percent foreign currency translation) compared with the prior year period and flat excluding the prior period large dispensing equipment order.

Third quarter 2014 gross margin of 44.0 percent was up 90 basis points from the prior year period, while operating income of $111 million was up 14 percent from the prior year. This resulted in an operating margin of 20.8 percent, up 100 basis points from the prior year, primarily due to volume leverage and productivity.

Third quarter net income was $71 million, an increase of 12 percent from the prior year period. Third quarter earnings per share were 88 cents, an increase of 10 cents, or 13 percent, from the prior year. EBITDA of $131 million, which was a 12 percent increase from the prior year, was 25 percent of sales and covered interest expense by over 12 times, while free cash flow of $92 million was over 128 percent of net income.

The Company completed the repurchase of 831 thousand shares of common stock for $64 million in the quarter. Year-to-date, the Company has repurchased 2.0 million shares of common stock for $150 million.

“IDEX’s third quarter results were highlighted by continued sales growth and profitability improvements. Organic revenue grew 7 percent and operating margins increased 100 basis points. These gains were present in each segment and demonstrate the focus our teams have on delivering superior results. Third quarter orders were soft primarily due to difficult comparisons from specific projects booked in the prior year within our FSD segment. We expect fourth quarter organic revenue growth to be low-to-mid single digits, resulting in full year organic revenue growth of 5 to 6 percent with operating margins exceeding 20 percent. We also expect fourth quarter EPS in the range of 85 to 88 cents and full year 2014 EPS of $3.52 to $3.55.

I am proud of our year-to-date performance and excited about the organic and inorganic opportunities that lie ahead. Our capital deployment plan of growth investments, strategic acquisitions, shareholder dividends and share repurchases remains unaltered.

Finally, over the past two years we have more tightly aligned our organization to deliver for our customers, shareholders, and fund organic growth opportunities. This success allows us to take targeted cost-out actions in the fourth quarter that will enable further reinvestment and optimize our cost structure as we enter 2015. The impact of these cost-out actions has not been included in our guidance.”

Andrew K. Silvernail
Chairman and Chief Executive Officer

Third Quarter 2014 Segment Highlights

Fluid & Metering Technologies

  • Sales in the third quarter of $223 million reflected a 5 percent increase compared to the third quarter of 2013 (+4 percent organic and +1 percent acquisition).
  • Operating margin of 24.5 percent represented a 10 basis point increase compared with the third quarter of 2013 primarily due to higher volume and productivity initiatives.
  • EBITDA in the third quarter was $61.5 million, resulting in an EBITDA margin of 27.5 percent, up 10 basis points compared with the third quarter of 2013.

Health & Science Technologies

  • Sales in the third quarter of $191 million reflected a 7 percent increase compared to the third quarter of 2013 (+5 percent organic and +2 percent foreign currency translation).
  • Operating margin of 22.1 percent represented a 150 basis point increase compared with the third quarter of 2013 primarily due to higher volume and productivity initiatives.
  • EBITDA in the third quarter was $53.6 million, resulting in an EBITDA margin of 28.1 percent, up 150 basis points compared with the third quarter of 2013.

Fire & Safety/Diversified Products

  • Sales in the third quarter of $120 million reflected a 19 percent increase compared to the third quarter of 2013 (+18 percent organic and +1 percent foreign currency translation).
  • Operating margin of 26.1 percent represented a 420 basis point increase compared with the third quarter of 2013 primarily due to volume leverage and productivity.
  • EBITDA in the third quarter was $33.5 million, resulting in an EBITDA margin of 27.8 percent, up 420 basis points compared with the third quarter of 2013.

For the third quarter of 2014, Fluid & Metering Technologies contributed 42 percent of sales, 43 percent of operating income and 41 percent of EBITDA; Health & Science Technologies accounted for 36 percent of sales, 33 percent of operating income and 36 percent of EBITDA; and Fire & Safety/Diversified Products represented 22 percent of sales, 24 percent of operating income and 23 percent of EBITDA.

EBITDA and Free Cash Flow

Consolidated EBITDA is calculated as net income plus interest expense, income taxes, and depreciation & amortization, while segment EBITDA is calculated as operating income plus or minus other (income) expense plus depreciation & amortization. Free cash flow is calculated as cash flow from operating activities less capital expenditures plus the excess tax benefit from stock-based compensation. Management uses these non-GAAP financial measures as internal operating metrics and for enterprise valuation purposes. Management believes these measures are useful as analytical indicators of leverage capacity and debt servicing ability, and uses them to measure financial performance as well as for planning purposes. However, they should not be considered as alternatives to net income, cash flow from operating activities or any other items calculated in accordance with U.S. GAAP, or as an indicator of operating performance. The definitions of EBITDA and free cash flow used here may differ from those used by other companies.

Consolidated EBITDA and Free Cash Flow Bridge (dollars in thousands)

  For the Three Months Ended
September 30,     June 30,
2014   2013   Change 2014   Change
Net income $ 71,441 $ 63,799 12 % $ 71,777 -
Interest expense 10,461 10,570 (1 %) 10,405 1 %
Income taxes 29,889 22,812 31 % 29,769 -
Depreciation and amortization   19,609     19,779   (1 %)   19,416   1 %
EBITDA $ 131,400   $ 116,960   12 % $ 131,367   -
 
Cash flow from operating activities $ 100,403 $ 118,396 (15 %) $ 91,995 9 %
Capital expenditures (10,521 ) (7,318 ) 44 % (12,490 ) (16 %)
Excess tax benefit from stock-based compensation   1,680     2,126   (21 %)   755   123 %
Free cash flow $ 91,562   $ 113,204   (19 %) $ 80,260   14 %
 

Segment EBITDA Bridge (dollars in thousands)

  For the Three Months Ended September 30,
2014   2013
FMT   HST   FSD FMT   HST   FSD
Operating income $ 54,791   $ 42,214   $ 31,355 $ 51,736   $ 36,775   $ 22,119
Other (income) expense 55 (420 ) (531 ) 559 131 18
Depreciation and amortization   6,724     11,005     1,597     6,981   10,798     1,726  
EBITDA $ 61,460   $ 53,639   $ 33,483   $ 58,158 $ 47,442   $ 23,827  
 
For the Nine Months Ended September 30,
2014 2013
FMT   HST   FSD FMT   HST   FSD
Operating income $ 166,821 $ 114,580 $ 106,988 $ 155,930 $ 103,564 $ 74,027
Other (income) expense (371 ) (24 ) (644 ) 1,194 (296 ) (530 )
Depreciation and amortization   20,022     32,404     4,949     20,953   32,537     5,175  
EBITDA $ 187,214   $ 147,008   $ 112,581   $ 175,689 $ 136,397   $ 79,732  
 

Conference Call to be Broadcast over the Internet

IDEX will broadcast its third quarter earnings conference call over the Internet on Tuesday, October 21, 2014 at 9:30 a.m. CT. Chairman and Chief Executive Officer Andy Silvernail and Senior Vice President and Chief Financial Officer Heath Mitts will discuss the Company’s recent financial performance and respond to questions from the financial analyst community. IDEX invites interested investors to listen to the call and view the accompanying slide presentation, which will be carried live on its website at www.idexcorp.com. Those who wish to participate should log on several minutes before the discussion begins. After clicking on the presentation icon, investors should follow the instructions to ensure their systems are set up to hear the event and view the presentation slides, or download the correct applications at no charge. Investors will also be able to hear a replay of the call by dialing 877.660.6853 (or 201.612.7415 for international participants) using the ID # 13589617.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. These statements may relate to, among other things, capital expenditures, cost reductions, cash flow, and operating improvements and are indicated by words or phrases such as “anticipate,” “estimate,” “plans,” “expects,” “projects,” “should,” “will,” “management believes,” “the company believes,” “the company intends,” and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this news release. The risks and uncertainties include, but are not limited to, the following: economic and political consequences resulting from terrorist attacks and wars; levels of industrial activity and economic conditions in the U.S. and other countries around the world; pricing pressures and other competitive factors, and levels of capital spending in certain industries – all of which could have a material impact on order rates and IDEX’s results, particularly in light of the low levels of order backlogs it typically maintains; its ability to make acquisitions and to integrate and operate acquired businesses on a profitable basis; the relationship of the U.S. dollar to other currencies and its impact on pricing and cost competitiveness; political and economic conditions in foreign countries in which the company operates; interest rates; capacity utilization and the effect this has on costs; labor markets; market conditions and material costs; and developments with respect to contingencies, such as litigation and environmental matters. The forward-looking statements included here are only made as of the date of this news release, and management undertakes no obligation to publicly update them to reflect subsequent events or circumstances. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented here.

About IDEX

IDEX Corporation is an applied solutions company specializing in fluid and metering technologies, health and science technologies, and fire, safety and other diversified products built to its customers’ exacting specifications. Its products are sold in niche markets to a wide range of industries throughout the world. IDEX shares are traded on the New York Stock Exchange and Chicago Stock Exchange under the symbol “IEX”.

For further information on IDEX Corporation and its business units, visit the company’s website at www.idexcorp.com.

(Tables follow)

 
IDEX CORPORATION
Condensed Statements of Consolidated Operations
(in thousands except per share amounts)
(unaudited)
     
Three Months Ended Nine Months Ended
September 30, September 30,
      2014   2013   2014   2013
 
Net sales $ 533,179 $ 490,617 $ 1,623,868 $ 1,503,510
Cost of sales     298,533       279,108     903,670       857,155  
Gross profit 234,646 211,509 720,198 646,355
Selling, general and administrative expenses     123,799       114,140     383,428       354,715  
Operating income 110,847 97,369 336,770 291,640
Other (income) expense - net (944 ) 188 (1,651 ) (518 )
Interest expense     10,461       10,570     31,323       31,724  
Income before income taxes 101,330 86,611 307,098 260,434
Provision for income taxes     29,889       22,812     89,332       72,774  
Net income   $ 71,441     $ 63,799   $ 217,766     $ 187,660  
 
Earnings per Common Share:
 
Basic earnings per common share (a) $ 0.89 $ 0.78 $ 2.70 $ 2.28
 
Diluted earnings per common share (a) $ 0.88 $ 0.78 $ 2.68 $ 2.27
 
Share Data:
 
Basic weighted average common shares outstanding 79,558 81,259 80,064 81,762
 
Diluted weighted average common shares outstanding 80,561 82,218 81,093 82,701
 
 
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, December 31,
              2014   2013
 
Assets
Current assets
Cash and cash equivalents $ 487,066 $ 439,629
Receivables - net 270,466 253,226
Inventories 251,058 230,967
Other current assets             68,367       67,131  
Total current assets 1,076,957 990,953
Property, plant and equipment - net 219,824 213,488
Goodwill and intangible assets 1,620,709 1,660,683
Other noncurrent assets             21,822       22,453  
Total assets           $ 2,939,312     $ 2,887,577  
 
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable $ 134,406 $ 133,312
Accrued expenses 160,895 150,751
Short-term borrowings 103,250 1,871
Dividends payable             -       18,675  
Total current liabilities 398,551 304,609
Long-term borrowings 720,173 772,005
Other noncurrent liabilities             232,688       237,974  
Total liabilities 1,351,412 1,314,588
Shareholders' equity             1,587,900       1,572,989  
Total liabilities and shareholders' equity           $ 2,939,312     $ 2,887,577  
 
IDEX CORPORATION
Company and Business Group Financial Information
(dollars in thousands)
(unaudited)
           
Three Months Ended Nine Months Ended
September 30, (b) September 30, (b)
      2014     2013     2014     2013  
 
Fluid & Metering Technologies
Net sales $ 223,258 $ 212,337 $ 672,719 $ 649,580
Operating income (c) 54,791 51,736 166,821 155,930
Operating margin 24.5 % 24.4 % 24.8 % 24.0 %
EBITDA (d) $ 61,460 $ 58,158 $ 187,214 $ 175,689
EBITDA margin 27.5 % 27.4 % 27.8 % 27.0 %
Depreciation and amortization $ 6,724 $ 6,981 $ 20,022 $ 20,953
Capital expenditures 3,592 2,843 11,155 8,126
 
Health & Science Technologies
Net sales $ 190,852 $ 178,628 $ 562,899 $ 532,363
Operating income (c) 42,214 36,775 114,580 103,564
Operating margin 22.1 % 20.6 % 20.4 % 19.5 %
EBITDA (d) $ 53,639 $ 47,442 $ 147,008 $ 136,397
EBITDA margin 28.1 % 26.6 % 26.1 % 25.6 %
Depreciation and amortization $ 11,005 $ 10,798 $ 32,404 $ 32,537
Capital expenditures 5,164 2,823 13,991 9,777
 
Fire & Safety/Diversified Products
Net sales $ 120,313 $ 101,077 $ 393,779 $ 326,826
Operating income (c) 31,355 22,119 106,988 74,027
Operating margin 26.1 % 21.9 % 27.2 % 22.7 %
EBITDA (d) $ 33,483 $ 23,827 $ 112,581 $ 79,732
EBITDA margin 27.8 % 23.6 % 28.6 % 24.4 %
Depreciation and amortization $ 1,597 $ 1,726 $ 4,949 $ 5,175
Capital expenditures 1,018 776 5,517 2,997
 
Company
Net sales $ 533,179 $ 490,617 $ 1,623,868 $ 1,503,510
Operating income 110,847 97,369 336,770 291,640
Operating margin 20.8 % 19.8 % 20.7 % 19.4 %
EBITDA (e) $ 131,400 $ 116,960 $ 396,703 $ 351,853
EBITDA margin 24.6 % 23.8 % 24.4 % 23.4 %
Depreciation and amortization (f) $ 19,609 $ 19,779 $ 58,282 $ 59,695
Capital expenditures 10,521 7,318 33,820 23,140
                                 
 
(a) Calculated by applying the two-class method of allocating earnings to common stock and participating securities as required by ASC 260, Earnings Per Share.
 
(b) Three and nine month data includes acquisitions of Aegis (April 2014) in the Fluid & Metering Technologies segment and FTL (March 2013) in the Health & Science Technologies segment from the date of acquisition.
 
(c) Segment operating income excludes unallocated corporate operating expenses.
 
(d) Segment EBITDA calculated as operating income plus or minus other (income) expense plus depreciation & amortization.
 
(e) Consolidated EBITDA calculated as net income plus interest expense, income taxes and depreciation & amortization.
 
(f) Depreciation and amortization excludes amortization of debt issuance expenses.
 

Source: IDEX Corporation

IDEX Corporation
Investor Contact:
Heath Mitts
Senior Vice President and Chief Financial Officer
(847) 498-7070