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IDEX Reports 5 Percent Organic Revenue Growth and Record EPS for 2014

LAKE FOREST, Ill.--(BUSINESS WIRE)--Jan. 28, 2015-- IDEX Corporation (NYSE: IEX) today announced its financial results for the three- and twelve- month periods ended December 31, 2014.

2014 Highlights

  • Sales increased 6 percent in 2014, up 5 percent organically
  • Restructuring actions of $13.7 million, or 12 cents, were incurred in the fourth quarter of 2014
  • Adjusted operating margin of 20.7 percent was up 120 basis points from prior year
  • Adjusted EPS of $3.57 was 16 percent higher than prior year EPS of $3.09
  • The Company repurchased 3 million shares of common stock for $223 million in 2014, with 1 million of the shares, or $73 million, repurchased in the fourth quarter

Full Year 2014

Sales of $2.1 billion were up 6 percent (+5 percent organic and +1 percent acquisition) compared with the prior year. Orders of $2.1 billion were up 2 percent (+1 percent organic and +1 percent acquisition) compared with the prior year.

Gross margin of 44.2 percent was up 110 basis points from the prior year, while adjusted operating margin of 20.7 percent was up 120 basis points from the prior year.

Adjusted net income of $289 million increased 13 percent from the prior year, while adjusted earnings per share of $3.57 increased 48 cents, or 16 percent, from the prior year. Adjusted EBITDA of $525 million was over 24 percent of sales and covered interest expense by more than 12 times, while free cash flow of $326 million was 117 percent of net income.

On a U.S. GAAP reported basis, operating margin was 20.1 percent, net income was $279 million and EPS was $3.45. A reconciliation of reported-to-adjusted financial data is included within the Non-U.S. GAAP Measures of Financial Performance section of this report.

Fourth Quarter 2014

Sales of $524 million were up 1 percent (+2 percent organic, +1 percent acquisition and -2 percent foreign currency translation) compared with the prior year period. Orders in the quarter of $517 million were down 1 percent (+1 percent organic and -2 percent foreign currency translation) compared with the prior year period.

Gross margin of 43.7 percent was up 10 basis points from the prior year period, while adjusted operating margin of 20.6 percent was up 60 basis points from the prior year period.

Adjusted net income of $71 million increased 5 percent from the prior year period, while adjusted earnings per share of 89 cents increased 7 cents, or 9 percent, from the prior year period. Adjusted EBITDA of $128 million was over 24 percent of sales and covered interest expense by more than 12 times, while free cash flow of $88 million was 143 percent of net income.

On a U.S. GAAP reported basis, operating margin was 18.0 percent, net income was $62 million and EPS was 77 cents. A reconciliation of reported-to-adjusted financial data is included within the Non-U.S. GAAP Measures of Financial Performance section of this report.

“A solid fourth quarter finished an outstanding year for IDEX. In 2014, we generated 5 percent organic sales growth, expanded gross margin 110 basis points, improved adjusted operating margin 120 basis points, and grew adjusted EPS 16 percent. I am exceptionally proud of our team’s accomplishments, and believe we have built a solid foundation for future growth.

Meaningful headwinds in 2015 are expected from large 2014 non-recurring projects, the strong U.S. dollar, falling oil prices and an uncertain global economy. Based on current exchange rates, the FX translation impact alone is projected to be a 15 cent EPS headwind in 2015. Proactively, in the fourth quarter, we took the opportunity to further optimize our cost structure across all segments by taking targeted cost-out actions. The related restructuring expenses were kept within the quarter, and should generate $15 million of savings in 2015. The focus of our team during the past two years has been on tightly aligning our organization to focus on the best profit pools and create organic growth opportunities. As a result of these actions, and in spite of the non-recurring large projects, I expect IDEX to grow organic revenue 1 to 2 percent in 2015, while delivering operating margin around 21 percent.

Entering 2015, we also look to our capital deployment plan as a significant source of value creation. We will continue to fully-fund all organic growth opportunities, while maintaining a balanced share repurchase program and funding shareholder dividends. The strategic acquisition environment remains very active, and we are optimistic about an increase in completed deals in 2015.

We expect the challenges in front of us will remain throughout the year. Regardless, we remain committed to delivering for our customers and shareholders. In 2015, we anticipate full-year EPS of $3.65 to $3.75, with first quarter 2015 EPS in the range of 81 to 83 cents.”

Andrew K. Silvernail
Chairman and Chief Executive Officer

Fourth Quarter 2014 Segment Highlights

Fluid & Metering Technologies

  • Sales of $227 million reflected a 2 percent increase compared to the fourth quarter of 2013 (+2 percent organic, +2 percent acquisition and -2 percent foreign currency translation).
  • Adjusted operating margin of 24.9 percent was flat compared with the fourth quarter of 2013.
  • Adjusted EBITDA of $63.1 million resulted in an adjusted EBITDA margin of 27.8 percent, up 20 basis points compared with the fourth quarter of 2013.

Health & Science Technologies

  • Sales of $189 million reflected a 4 percent increase compared to the fourth quarter of 2013 (+5 percent organic and -1 percent foreign currency translation).
  • Adjusted operating margin of 22.9 percent represented a 470 basis point increase compared with the fourth quarter of 2013 primarily due to higher volume and productivity initiatives.
  • Adjusted EBITDA of $53.9 million resulted in an adjusted EBITDA margin of 28.5 percent, up 420 basis points compared with the fourth quarter of 2013.

Fire & Safety/Diversified Products

  • Sales of $109 million reflected an 8 percent decrease compared to the fourth quarter of 2013 (-5 percent organic and -3 percent foreign currency translation) due to lower volume within our Dispensing Equipment business.
  • Adjusted operating margin of 22.5 percent represented a 180 basis point decrease compared with the fourth quarter of 2013 primarily due to lower volume.
  • Adjusted EBITDA of $26.5 million resulted in an adjusted EBITDA margin of 24.3 percent, down 120 basis points compared with the fourth quarter of 2013.

For the fourth quarter of 2014, Fluid & Metering Technologies contributed 43 percent of sales, 45 percent of operating income and 43 percent of EBITDA; Health & Science Technologies accounted for 36 percent of sales, 34 percent of operating income and 37 percent of EBITDA; and Fire & Safety/Diversified Products represented 21 percent of sales, 21 percent of operating income and 20 percent of EBITDA.

Non-U.S. GAAP Measures of Financial Performance

The Company supplements certain U.S. GAAP financial performance metrics with non-U.S. GAAP financial performance metrics in order to provide investors with better insight and increased transparency while also allowing for a more comprehensive understanding of the financial information used by management in its decision making. Reconciliations of non-U.S. GAAP financial performance metrics to their most comparable U.S. GAAP financial performance metrics are defined and presented below and in no way are considered a substitute for, nor superior to, the financial data prepared in accordance with U.S. GAAP.

  • Adjusted operating income is calculated as operating income plus restructuring expenses.
  • Adjusted operating margin is calculated as adjusted operating income divided by net sales.
  • Adjusted net income is calculated as net income plus restructuring expenses, net of the statutory tax benefit.
  • Consolidated EBITDA is calculated as net income plus interest expense plus provision for income taxes plus depreciation and amortization expense; while segment EBITDA is calculated as operating income plus or minus other (income) expense plus depreciation and amortization expense.
  • Adjusted EBITDA is calculated as EBITDA plus restructuring expenses.
  • Free cash flow is calculated as cash flow from operating activities less capital expenditures plus the excess tax benefit from stock-based compensation.

Table 1: Reconciliations of Reported-to-Adjusted Operating Income and Margin (dollars in thousands)

               
For the Three Months Ended December 31,
2014 2013
FMT   HST   FSDP   IDEX FMT   HST   FSDP   IDEX
Reported operating income $ 50,065 $ 38,419 $ 23,506 $ 94,454 $ 55,326 $ 33,143 $ 28,703 $ 103,873

Restructuring expenses

  6,413     4,912     1,034     13,672     -     -     -     -  
Adjusted operating income $ 56,478   $ 43,331   $ 24,540   $ 108,126   $ 55,326   $ 33,143   $ 28,703   $ 103,873  
 
Net sales $ 226,869 $ 189,122 $ 108,970 $ 523,899 $ 222,234 $ 182,287 $ 118,223 $ 520,620
Operating margin 22.1 % 20.3 % 21.6 % 18.0 % 24.9 % 18.2 % 24.3 % 20.0 %
Adjusted operating margin 24.9 % 22.9 % 22.5 % 20.6 % 24.9 % 18.2 % 24.3 % 20.0 %
 

For the Year Ended December 31,

2014 2013
FMT   HST   FSDP   IDEX FMT   HST   FSDP   IDEX
Reported operating income $ 216,886 $ 152,999 $ 130,494 $ 431,224 $ 211,256 $ 136,707 $ 102,730 $ 395,513

Restructuring expenses

  6,413     4,912     1,034     13,672     -     -     -     -  
Adjusted operating income $ 223,299   $ 157,911   $ 131,528   $ 444,896   $ 211,256   $ 136,707   $ 102,730   $ 395,513  
 
Net sales $ 899,588 $ 752,021 $ 502,749 $ 2,147,767 $ 871,814 $ 714,650 $ 445,049 $ 2,024,130
Operating margin 24.1 % 20.3 % 26.0 % 20.1 % 24.2 % 19.1 % 23.1 % 19.5 %
Adjusted operating margin 24.8 % 21.0 % 26.2 % 20.7 % 24.2 % 19.1 % 23.1 % 19.5 %
 

Table 2: Reconciliations of Reported-to-Adjusted Net Income and EPS (dollars in thousands, except EPS)

       
For the Three Months

For the Year

Ended December 31, Ended December 31,
2014 2013 2014 2013
Reported net income $ 61,620 $ 67,555 $ 279,386 $ 255,215
Restructuring expenses, net of tax   9,437   -   9,437   -
Adjusted net income $ 71,057 $ 67,555 $ 288,823 $ 255,215
 
Reported EPS $ 0.77 $ 0.82 $ 3.45 $ 3.09
Restructuring expenses, net of tax   0.12   -   0.12   -
Adjusted EPS $ 0.89 $ 0.82 $ 3.57 $ 3.09
 
Diluted weighted average shares 79,632 81,854 80,728 82,489
 

Table 3: Reconciliations of Consolidated EBITDA and Free Cash Flow (dollars in thousands)

           
For the Three Months Ended

For the Year Ended

December 31, September 30, December 31,
2014 2013 2014 2014 2013
Net income $ 61,620 $ 67,555 $ 71,441 $ 279,386 $ 255,215
Interest expense 10,572 10,482 10,461 41,895 42,206
Provision for income taxes 23,722 25,140 29,889 113,054 97,914
Depreciation and amortization   18,625     19,639     19,609     76,907     79,334  
EBITDA 114,539 122,816 131,400 511,242 474,669
Restructuring expenses   13,672     -     -     13,672     -  
Adjusted EBITDA $ 128,211   $ 122,816   $ 131,400   $ 524,914   $ 474,669  
 
 
Cash flow from operating activities $ 101,378 $ 101,612 $ 100,403 $ 367,961 $ 401,522
Capital expenditures (14,177 ) (8,396 ) (10,521 ) (47,997 ) (31,536 )
Excess tax benefit from stock-based compensation   915     1,663     1,680     6,275     8,560  
Free cash flow $ 88,116   $ 94,879   $ 91,562   $ 326,239   $ 378,546  
 

Table 4: Reconciliations of Segment EBITDA (dollars in thousands)

           
For the Three Months Ended December 31,
2014 2013
FMT   HST   FSDP FMT   HST   FSDP
Operating income $ 50,065 $ 38,419 $ 23,506 $ 55,326 $ 33,143 $ 28,703
Other (income) expense (189 ) (518 ) (346 ) 595 (212 ) 188
Depreciation and amortization   6,431     10,074     1,634     6,680     10,959     1,677  
EBITDA 56,685 49,011 25,486 61,411 44,314 30,192

Restructuring expenses

  6,413     4,912     1,034     -     -     -  
Adjusted EBITDA $ 63,098   $ 53,923   $ 26,520   $ 61,411   $ 44,314   $ 30,192  
 
Net sales $ 226,869 $ 189,122 $ 108,970 $ 222,234 $ 182,287 $ 118,223
EBITDA margin 25.0 % 25.9 % 23.4 % 27.6 % 24.3 % 25.5 %
Adjusted EBITDA margin 27.8 % 28.5 % 24.3 % 27.6 % 24.3 % 25.5 %
 
 
 

For the Year Ended December 31,

2014 2013
FMT   HST   FSDP FMT   HST   FSDP
Operating income $ 216,886 $ 152,999 $ 130,494 $ 211,256 $ 136,707 $ 102,730
Other (income) expense (560 ) (542 ) (990 ) 1,789 (508 ) (342 )
Depreciation and amortization   26,453     42,478     6,583     27,633     43,496     6,852  
EBITDA 243,899 196,019 138,067 237,100 180,711 109,924

Restructuring expenses

  6,413     4,912     1,034     -     -     -  
Adjusted EBITDA $ 250,312   $ 200,931   $ 139,101   $ 237,100   $ 180,711   $ 109,924  
 
Net sales $ 899,588 $ 752,021 $ 502,749 $ 871,814 $ 714,650 $ 445,049
EBITDA margin 27.1 % 26.1 % 27.5 % 27.2 % 25.3 % 24.7 %
Adjusted EBITDA margin 27.8 % 26.7 % 27.7 % 27.2 % 25.3 % 24.7 %
 

Conference Call to be Broadcast over the Internet

IDEX will broadcast its fourth quarter earnings conference call over the Internet on Thursday, January 29, 2015 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 # 13598705.

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.

(Financial reports follow)

       
 
 
IDEX CORPORATION
Condensed Consolidated Statements of Operations
(in thousands except per share amounts)
(unaudited)
 
 
Three Months Ended Year Ended
December 31, December 31,
    2014   2013   2014   2013
 
Net sales $ 523,899 $ 520,620 $ 2,147,767 $ 2,024,130
Cost of sales     294,782       293,611     1,198,452       1,150,766
Gross profit 229,117 227,009 949,315 873,364
Selling, general and administrative expenses 120,991 123,136 504,419 477,851
Restructuring expenses     13,672       -     13,672       -
Operating income 94,454 103,873 431,224 395,513
Other (income) expense - net (1,460 ) 696 (3,111 ) 178
Interest expense     10,572       10,482     41,895       42,206
Income before income taxes 85,342 92,695 392,440 353,129
Provision for income taxes     23,722       25,140     113,054       97,914
Net income   $ 61,620     $ 67,555   $ 279,386     $ 255,215
 
 
Earnings per Common Share:
 
Basic earnings per common share (a) $ 0.78 $ 0.83 $ 3.48 $ 3.11
 
Diluted earnings per common share (a) $ 0.77 $ 0.82 $ 3.45 $ 3.09
 
 
Share Data:
 
Basic weighted average common shares outstanding 78,669 80,782 79,715 81,517
 
Diluted weighted average common shares outstanding 79,632 81,854 80,728 82,489
 
 
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31, December 31,
            2014   2013
 
Assets
Current assets
Cash and cash equivalents $ 509,137 $ 439,629
Receivables - net 256,040 253,226
Inventories 237,631 230,967
Other current assets             72,983       67,131
Total current assets 1,075,791 990,953
Property, plant and equipment - net 219,543 213,488
Goodwill and intangible assets 1,592,441 1,660,683
Other noncurrent assets             20,295       22,453
Total assets           $ 2,908,070     $ 2,887,577
 
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable $ 127,462 $ 133,312
Accrued expenses 163,409 150,751
Short-term borrowings 98,946 1,871
Dividends payable             22,151       18,675
Total current liabilities 411,968 304,609
Long-term borrowings 765,006 772,005
Other noncurrent liabilities             244,645       237,974
Total liabilities 1,421,619 1,314,588
Shareholders' equity             1,486,451       1,572,989
Total liabilities and shareholders' equity           $ 2,908,070     $ 2,887,577
   
 
IDEX CORPORATION
Condensed Consolidated Statements of Cash Flow
(in thousands)
(unaudited)
 
Year Ended December 31,
    2014   2013
 
Cash flows from operating activities
Net income $ 279,386 $ 255,215
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of fixed assets (351 ) (96 )
Asset impairments 2,473 2,747
Depreciation and amortization 33,720 35,007
Amortization of intangible assets 43,187 44,327
Amortization of debt issuance expenses 1,723 1,703
Share-based compensation expense 20,717 16,993
Deferred income taxes (8,590 ) (3,156 )
Excess tax benefit from share-based compensation (6,275 ) (8,560 )
Non-cash interest expense associated with forward starting swaps 7,223 7,430
Changes in (net of the effect from acquisitions):
Receivables (11,110 ) 6,195
Inventories (7,821 ) 9,088
Other current assets (5,201 ) 6,562
Trade accounts payable (2,466 ) 15,460
Accrued expenses 23,760 11,790
Other — net     (2,414 )     817  
Net cash flows provided by operating activities 367,961 401,522
Cash flows from investing activities
Purchases of property, plant and equipment (47,997 ) (31,536 )
Acquisition of businesses, net of cash acquired (25,443 ) (36,849 )
Proceeds from fixed asset disposals 1,460 567
Other — net     (280 )     (344 )
Net cash flows used in investing activities (72,260 ) (68,162 )
Cash flows from financing activities
Borrowings under revolving credit facilities 165,014 73,101
Payments under revolving credit facilities (61,951 ) (89,478 )
Dividends paid (85,726 ) (72,905 )
Proceeds from stock option exercises 17,161 35,306
Excess tax benefit from share-based compensation 6,275 8,560
Purchase of common stock (219,893 ) (167,503 )
Unvested shares surrendered for tax withholding (4,952 ) (1,902 )
Other     -       (4,224 )
Net cash flows used in financing activities (184,072 ) (219,045 )
Effect of exchange rate changes on cash and cash equivalents     (42,121 )     6,450  
Net increase in cash 69,508 120,765
Cash and cash equivalents at beginning of year     439,629       318,864  
Cash and cash equivalents at end of period   $ 509,137     $ 439,629  
       
 
 
IDEX CORPORATION
Company and Segment Financial Information
(dollars in thousands)
(unaudited)
 
 
Three Months Ended Year Ended
December 31, (b) December 31, (b)
    2014   2013   2014   2013
 
 
Fluid & Metering Technologies
Net sales $ 226,869 $ 222,234 $ 899,588 $ 871,814
Adjusted operating income (c) 56,478 55,326 223,299 211,256
Adjusted operating margin 24.9 % 24.9 % 24.8 % 24.2 %
Adjusted EBITDA (d) $ 63,098 $ 61,411 $ 250,312 $ 237,100
Adjusted EBITDA margin 27.8 % 27.6 % 27.8 % 27.2 %
Depreciation and amortization $ 6,431 $ 6,680 $ 26,453 $ 27,633
Capital expenditures 7,060 3,455 18,215 11,581
 
Health & Science Technologies
Net sales $ 189,122 $ 182,287 $ 752,021 $ 714,650
Adjusted operating income (c) 43,331 33,143 157,911 136,707
Adjusted operating margin 22.9 % 18.2 % 21.0 % 19.1 %
Adjusted EBITDA (d) $ 53,923 $ 44,314 $ 200,931 $ 180,711
Adjusted EBITDA margin 28.5 % 24.3 % 26.7 % 25.3 %
Depreciation and amortization $ 10,074 $ 10,959 $ 42,478 $ 43,496
Capital expenditures 5,170 2,503 19,161 12,280
 
Fire & Safety/Diversified Products
Net sales $ 108,970 $ 118,223 $ 502,749 $ 445,049
Adjusted operating income (c) 24,540 28,703 131,528 102,730
Adjusted operating margin 22.5 % 24.3 % 26.2 % 23.1 %
Adjusted EBITDA (d) $ 26,520 $ 30,192 $ 139,101 $ 109,924
Adjusted EBITDA margin 24.3 % 25.5 % 27.7 % 24.7 %
Depreciation and amortization $ 1,634 $ 1,677 $ 6,583 $ 6,852
Capital expenditures 1,244 2,043 6,761 5,040
 
Company
Net sales $ 523,899 $ 520,620 $ 2,147,767 $ 2,024,130
Adjusted operating income (c) 108,126 103,873 444,896 395,513
Adjusted operating margin 20.6 % 20.0 % 20.7 % 19.5 %
Adjusted EBITDA (e) $ 128,211 $ 122,816 $ 524,914 $ 474,669
Adjusted EBITDA margin 24.5 % 23.6 % 24.4 % 23.5 %
Depreciation and amortization (f) $ 18,625 $ 19,639 $ 76,907 $ 79,334
Capital expenditures 14,177 8,396 47,997 31,536
 
                         
 
(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 twelve 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 adjusted operating income excludes unallocated corporate operating expenses while both segment and Company adjusted operating income and adjusted EBITDA excludes restructuring expenses in 2014.
 
(d) Adjusted segment EBITDA calculated as adjusted operating income plus or minus other (income) expense plus depreciation and amortization expense.
 
(e) Consolidated adjusted EBITDA calculated as adjusted net income plus interest expense plus provision for income taxes plus depreciation and amortization expense.
 
(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