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IDEX Reports Third Quarter Adjusted EPS of 89 Cents with Full Year Adjusted EPS Guidance of $3.50 -- $3.53

LAKE FOREST, Ill.--(BUSINESS WIRE)--Oct. 19, 2015-- IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended September 30, 2015.

Third Quarter 2015 Highlights

  • Adjusted EPS of 89 cents with adjusted operating margin of 21.5 percent
  • Free cash flow of $105 million was 132 percent of net income
  • Repurchased 911 thousand shares of common stock for $66 million
  • Restructuring actions resulted in a pre-tax charge of $4.7 million, or 4 cents of EPS
  • Ismatec business sold for a pre-tax gain of $18.1 million, or 17 cents of EPS
  • Acquired CiDRA Precision Services

Third Quarter 2015

Orders of $485 million were down 4 percent (-2 percent organic, +2 percent acquisitions and -4 percent foreign currency translation) compared with the prior year period. Sales of $504 million were down 6 percent (-4 percent organic, +2 percent acquisitions and -4 percent foreign currency translation) compared with the prior year period.

Gross margin of 44.3 percent was up 30 basis points from the prior year period, while adjusted operating margin of 21.5 percent was up 70 basis points from the prior year.

Adjusted net income of $69 million decreased 3 percent from the prior year period, while adjusted earnings per share of 89 cents increased 1 cent, or 1 percent, from the prior year period. Adjusted EBITDA of $130 million was 26 percent of sales and covered interest expense by almost 13 times, while free cash flow of $105 million was 132 percent of net income.

The Company repurchased 911 thousand shares of common stock for $66 million in the third quarter of 2015. Year-to-date, the Company has repurchased 2.4 million shares of common stock for $179 million.

IDEX’s third quarter was highlighted by a solid 89 cents of adjusted EPS and 21.5 percent adjusted operating margins, a 70 basis point operating margin expansion from the third quarter of 2014. Our teams faced continued market headwinds, but executed by delivering strong margin improvement and $105 million of free cash flow. North American industrials slowed during the quarter, contributing to the 2 and 4 percent decreases for organic orders and sales, respectively.

The challenging third quarter demand environment means we now expect fourth quarter organic sales to be down 1 to 2 percent, with full year organic sales down 2 to 3 percent. Restructuring actions executed in the third quarter will provide incremental efficiencies going forward. In the third quarter, these actions cost $4.7 million, and the total 2015 cost is now expected to be in the range of $8 to $10 million. These are permanent cost-out actions and the full benefit will be realized in 2016.

Continuing to deliver total shareholder returns is critical to our long term success. Year-to-date we have repurchased 2.4 million shares for $179 million, deployed nearly $200 million on three strategic acquisitions across three platforms, retired €81 million of European private placement notes, and, in the third quarter, divested our Ismatec business. This was a non-strategic product line in our Health and Science segment, which sold for $28 million, and resulted in an $18.1 million pre-tax gain. Additionally, the acquisition pipeline is very strong, and our free cash flow and debt capacity allows us to use the strength of our balance sheet for a steady, disciplined pace of acquisitions for the foreseeable future.

For the fourth quarter, we expect adjusted EPS in the range 88 to 91 cents and full year 2015 adjusted EPS of $3.50 to $3.53 with adjusted operating margins of 21 percent. This guidance excludes the charges from the restructuring actions in the second half of 2015, and the gain from the Ismatec divestiture.”

Andrew K. Silvernail
Chairman and Chief Executive Officer

Third Quarter 2015 Segment Highlights

Fluid & Metering Technologies

  • Sales of $212 million reflected a 5 percent decrease compared to the third quarter of 2014 (-4 percent organic, +3 percent acquisition and -4 percent foreign currency translation).
  • Adjusted operating margin of 23.3 percent represented a 120 basis point decrease compared with the third quarter of 2014 primarily due to non-cash acquisition fair value inventory charges recorded in the quarter as well as lower volume.
  • Adjusted EBITDA of $56.8 million resulted in an adjusted EBITDA margin of 26.8 percent, down 70 basis points compared with the third quarter of 2014.

Health & Science Technologies

  • Sales of $185 million reflected a 3 percent decrease compared to the third quarter of 2014 (-3 percent organic, +4 percent acquisitions and -4 percent foreign currency translation).
  • Adjusted operating margin of 21.7 percent represented a 40 basis point decrease compared with the third quarter of 2014 primarily due to decreased volume.
  • Adjusted EBITDA of $52.2 million resulted in an adjusted EBITDA margin of 28.2 percent, up 10 basis points compared with the third quarter of 2014.

Fire & Safety/Diversified Products

  • Sales of $107 million reflected an 11 percent decrease compared to the third quarter of 2014 (-5 percent organic and -6 percent foreign currency translation).
  • Adjusted operating margin of 30.7 percent represented a 460 basis point increase compared with the third quarter of 2014 primarily due to gross margin improvements at the dispensing and fire suppression platforms driven by favorable mix within these platforms along with productivity improvements across the entire segment.
  • Adjusted EBITDA of $34.6 million resulted in an adjusted EBITDA margin of 32.3 percent, up 450 basis points compared with the third quarter of 2014.

For the third quarter of 2015, Fluid & Metering Technologies contributed 42 percent of sales, 40 percent of operating income and 39 percent of EBITDA; Health & Science Technologies accounted for 37 percent of sales, 33 percent of operating income and 36 percent of EBITDA; and Fire & Safety/Diversified Products represented 21 percent of sales, 27 percent of operating income and 25 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. There were no adjustments to U.S. GAAP financial performance metrics other than the items noted below.

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

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

               
For the Three Months Ended September 30,
2015 2014
FMT   HST   FSDP   IDEX FMT   HST   FSDP   IDEX
Reported operating income $ 46,910 $ 38,371 $ 32,536 $ 121,813 $ 54,791 $ 42,214 $ 31,355 $ 110,847
Restructuring expenses 2,505 1,774 279 4,723 - - - -
Gain on sale of business   -     -     -     (18,070 )   -     -     -     -  
Adjusted operating income $ 49,415   $ 40,145   $ 32,815   $ 108,466   $ 54,791   $ 42,214   $ 31,355   $ 110,847  
 
Net sales $ 212,101 $ 184,893 $ 107,009 $ 503,791 $ 223,258 $ 190,852 $ 120,313 $ 533,179
Operating margin 22.1 % 20.8 % 30.4 % 24.2 % 24.5 % 22.1 % 26.1 % 20.8 %
Adjusted operating margin 23.3 % 21.7 % 30.7 % 21.5 % 24.5 % 22.1 % 26.1 % 20.8 %
 
For the Nine Months Ended September 30,
2015 2014
FMT   HST   FSDP   IDEX FMT   HST   FSDP   IDEX
Reported operating income $ 154,665 $ 117,888 $ 91,180 $ 333,479 $ 166,821 $ 114,580 $ 106,988 $ 336,770
Restructuring expenses 2,505 1,774 279 4,723 - - - -
Gain on sale of business   -     -     -     (18,070 )   -     -     -     -  
Adjusted operating income $ 157,170   $ 119,662   $ 91,459   $ 320,132   $ 166,821   $ 114,580   $ 106,988   $ 336,770  
 
Net sales $ 645,642 $ 552,418 $ 325,572 $ 1,520,870 $ 672,719 $ 562,899 $ 393,779 $ 1,623,868
Operating margin 24.0 % 21.3 % 28.0 % 21.9 % 24.8 % 20.4 % 27.2 % 20.7 %
Adjusted operating margin 24.3 % 21.7 % 28.1 % 21.0 % 24.8 % 20.4 % 27.2 % 20.7 %
 

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

       
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2015 2014 2015 2014
Reported net income $ 79,505 $ 71,441 $ 215,044 $ 217,766
Restructuring expenses, net of tax 3,085 - 3,085 -
Gain on sale of business, net of tax   (13,231 )   -   (13,231 )   -
Adjusted net income $ 69,359   $ 71,441 $ 204,898   $ 217,766
 
Reported EPS $ 1.02 $ 0.88 $ 2.75 $ 2.68
Restructuring expenses, net of tax 0.04 - 0.04 -
Gain on sale of business, net of tax   (0.17 )   -   (0.17 )   -
Adjusted EPS $ 0.89   $ 0.88 $ 2.62   $ 2.68
 
Diluted weighted average shares 77,646 80,561 78,266 81,093
 

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

       
For the Three Months Ended
September 30, June 30,
2015 2014 2015
Net income $ 79,505 $ 71,441 $ 69,585
Interest expense 10,229 10,461 10,584
Provision for income taxes 32,772 29,889 28,913
Depreciation and amortization   20,377     19,609     19,087  
EBITDA 142,883 131,400 128,169
Restructuring expenses 4,723 - -
Gain on sale of business   (18,070 )   -     -  
Adjusted EBITDA $ 129,536   $ 131,400   $ 128,169  
 
 
Cash flow from operating activities $ 113,353 $ 100,403 $ 99,024
Capital expenditures (8,785 ) (10,521 ) (13,749 )
Excess tax benefit from share-based compensation   267     1,680     863  
Free cash flow $ 104,835   $ 91,562   $ 86,138  
 

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

           
For the Three Months Ended September 30,
2015 2014
FMT   HST   FSDP FMT   HST   FSDP
Operating income $ 46,910 $ 38,371 $ 32,536 $ 54,791 $ 42,214 $ 31,355
Other income (expense) 82 877 247 (55 ) 420 531
Depreciation and amortization   7,311     11,179     1,513     6,724     11,005     1,597  
EBITDA 54,303 50,427 34,296 61,460 53,639 33,483
Restructuring expenses   2,505     1,774     279     -     -     -  
Adjusted EBITDA $ 56,808   $ 52,201   $ 34,575   $ 61,460   $ 53,639   $ 33,483  
 
Net sales $ 212,101 $ 184,893 $ 107,009 $ 223,258 $ 190,852 $ 120,313
EBITDA margin 25.6 % 27.3 % 32.0 % 27.5 % 28.1 % 27.8 %
Adjusted EBITDA margin 26.8 % 28.2 % 32.3 % 27.5 % 28.1 % 27.8 %
 
 
For the Nine Months Ended September 30,
2015 2014
FMT   HST   FSDP FMT   HST   FSDP
Operating income $ 154,665 $ 117,888 $ 91,180 $ 166,821 $ 114,580 $ 106,988
Other income (expense) 894 347 1,091 371 24 644
Depreciation and amortization   20,321     31,874     4,574     20,022     32,404     4,949  
EBITDA 175,880 150,109 96,845 187,214 147,008 112,581
Restructuring expenses   2,505     1,774     279     -     -     -  
Adjusted EBITDA $ 178,385   $ 151,883   $ 97,124   $ 187,214   $ 147,008   $ 112,581  
 
Net sales $ 645,642 $ 552,418 $ 325,572 $ 672,719 $ 562,899 $ 393,779
EBITDA margin 27.2 % 27.2 % 29.7 % 27.8 % 26.1 % 28.6 %
Adjusted EBITDA margin 27.6 % 27.5 % 29.8 % 27.8 % 26.1 % 28.6 %
 

Conference Call to be Broadcast over the Internet

IDEX will broadcast its third quarter earnings conference call over the Internet on Tuesday, October 20, 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 # 13604137.

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 Nine Months Ended
September 30, September 30,
    2015   2014   2015   2014
 
Net sales $ 503,791 $ 533,179 $ 1,520,870 $ 1,623,868
Cost of sales     280,531       298,533       839,954       903,670  
Gross profit 223,260 234,646 680,916 720,198
Selling, general and administrative expenses 114,794 123,799 360,784 383,428
Restructuring expenses 4,723 - 4,723 -
Gain on sale of business     (18,070 )     -       (18,070 )     -  
Operating income 121,813 110,847 333,479 336,770
Other (income) expense - net (693 ) (944 ) (1,589 ) (1,651 )
Interest expense     10,229       10,461       31,410       31,323  
Income before income taxes 112,277 101,330 303,658 307,098
Provision for income taxes     32,772       29,889       88,614       89,332  
Net income   $ 79,505     $ 71,441     $ 215,044     $ 217,766  
 
 
Earnings per Common Share:
Basic earnings per common share (a) $ 1.03 $ 0.89 $ 2.77 $ 2.70
Diluted earnings per common share (a) $ 1.02 $ 0.88 $ 2.75 $ 2.68
 
 
Share Data:
 
Basic weighted average common shares outstanding 76,831 79,558 77,431 80,064
 
Diluted weighted average common shares outstanding 77,646 80,561 78,266 81,093
 
 
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, December 31,
            2015   2014
 
Assets
Current assets
Cash and cash equivalents $ 306,482 $ 509,137
Receivables - net 272,008 256,040
Inventories 252,518 237,631
Other current assets             75,391       72,983  
Total current assets 906,399 1,075,791
Property, plant and equipment - net 240,270 219,543
Goodwill and intangible assets 1,701,899 1,592,441
Other noncurrent assets             22,586       20,295  
Total assets           $ 2,871,154     $ 2,908,070  
 
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable $ 129,224 $ 127,462
Accrued expenses 169,907 163,409
Short-term borrowings 471 98,946
Dividends payable             24,584       22,151  
Total current liabilities 324,186 411,968
Long-term borrowings 852,780 765,006
Other noncurrent liabilities             265,595       244,645  
Total liabilities 1,442,561 1,421,619
Shareholders' equity             1,428,593       1,486,451  
Total liabilities and shareholders' equity           $ 2,871,154     $ 2,908,070  
   
IDEX CORPORATION
Condensed Consolidated Statements of Cash Flow
(in thousands)
(unaudited)
 
Nine Months Ended September 30,
    2015   2014
 
Cash flows from operating activities
Net income $ 215,044 $ 217,766
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of business (18,070 ) -
Depreciation and amortization 26,634 25,330
Amortization of intangible assets 31,340 32,952
Amortization of debt issuance costs 1,233 1,290
Share-based compensation expense 14,735 16,445
Deferred income taxes 1,277 (5,170 )
Excess tax benefit from share-based compensation (4,350 ) (5,360 )
Non-cash interest expense associated with forward starting swaps 5,287 5,432
Changes in (net of the effect from acquisitions):
Receivables (1,689 ) (21,394 )
Inventories (6,474 ) (17,888 )
Other current assets (2,742 ) (2,570 )
Trade accounts payable (4,002 ) 2,188
Accrued expenses 2,340 19,069
Other — net     1,218       (1,507 )
Net cash flows provided by operating activities 261,781 266,583
Cash flows from investing activities
Purchases of property, plant and equipment (32,611 ) (33,820 )
Disposition of business 27,677 -
Acquisition of businesses, net of cash acquired (193,165 ) (25,442 )
Other — net     649       (52 )
Net cash flows used in investing activities (197,450 ) (59,314 )
Cash flows from financing activities
Borrowings under revolving facilities 383,621 105,014
Payments under revolving facilities (295,934 ) (46,780 )
Payment of 2.58% Senior Euro Notes (88,420 ) -
Debt issuance costs (1,698 ) -
Dividends paid (71,673 ) (63,525 )
Proceeds from stock option exercises 15,167 13,787
Excess tax benefit from share-based compensation 4,350 5,360
Purchase of common stock (177,772 ) (146,042 )
Unvested shares surrendered for tax withholding     (3,217 )     (4,903 )
Net cash flows used in financing activities (235,576 ) (137,089 )
Effect of exchange rate changes on cash and cash equivalents     (31,410 )     (22,743 )
Net increase (decrease) in cash (202,655 ) 47,437
Cash and cash equivalents at beginning of year     509,137       439,629  
Cash and cash equivalents at end of period   $ 306,482     $ 487,066  
         
IDEX CORPORATION
Company and Segment Financial Information
(dollars in thousands)
(unaudited)
 
 
Three Months Ended Nine Months Ended

September 30, (b)

September 30, (b)
    2015   2014   2015   2014
 
 
Fluid & Metering Technologies
Net sales $ 212,101 $ 223,258 $ 645,642 $ 672,719
Adjusted operating income (c) 49,415 54,791 157,170 166,821
Adjusted operating margin 23.3 % 24.5 % 24.3 % 24.8 %
Adjusted EBITDA (d) $ 56,808 $ 61,460 $ 178,385 $ 187,214
Adjusted EBITDA margin 26.8 % 27.5 % 27.6 % 27.8 %
Depreciation and amortization $ 7,311 $ 6,724 $ 20,321 $ 20,022
Capital expenditures 4,325 3,592 17,849 11,155
 
Health & Science Technologies (e)
Net sales $ 184,893 $ 190,852 $ 552,418 $ 562,899
Adjusted operating income (c) 40,145 42,214 119,662 114,580
Adjusted operating margin 21.7 % 22.1 % 21.7 % 20.4 %
Adjusted EBITDA (d) $ 52,201 $ 53,639 $ 151,883 $ 147,008
Adjusted EBITDA margin 28.2 % 28.1 % 27.5 % 26.1 %
Depreciation and amortization $ 11,179 $ 11,005 $ 31,874 $ 32,404
Capital expenditures 3,193 5,164 8,755 13,991
 
Fire & Safety/Diversified Products
Net sales $ 107,009 $ 120,313 $ 325,572 $ 393,779
Adjusted operating income (c) 32,815 31,355 91,459 106,988
Adjusted operating margin 30.7 % 26.1 % 28.1 % 27.2 %
Adjusted EBITDA (d) $ 34,575 $ 33,483 $ 97,124 $ 112,581
Adjusted EBITDA margin 32.3 % 27.8 % 29.8 % 28.6 %
Depreciation and amortization $ 1,513 $ 1,597 $ 4,574 $ 4,949
Capital expenditures 1,016 1,018 4,128 5,517
 
Company
Net sales $ 503,791 $ 533,179 $ 1,520,870 $ 1,623,868
Adjusted operating income (c) 108,466 110,847 320,132 336,770
Adjusted operating margin 21.5 % 20.8 % 21.0 % 20.7 %
Adjusted EBITDA (f) $ 129,536 $ 131,400 $ 379,695 $ 396,703
Adjusted EBITDA margin 25.7 % 24.6 % 25.0 % 24.4 %
Depreciation and amortization (g) $ 20,377 $ 19,609 $ 57,974 $ 58,282
Capital expenditures 8,785 10,521 32,611 33,820
 
                         
 
(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 acquisition of Aegis (April 2014) and Alfa Valvole (June 2015) in the Fluid & Metering Technologies segment and Novotema (June 2015) and CiDRA Precision Services (July 2015) 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 exclude restructuring expenses and the gain on sale of a business in 2015.
(d) Segment adjusted EBITDA calculated as adjusted operating income plus or minus other income (expense) plus depreciation and amortization.
(e) Three and nine month data for 2015 includes the results of Ismatec through the date of disposition in July 2015.
(f) Consolidated adjusted EBITDA calculated as net income plus interest expense plus provision for income taxes plus depreciation and amortization plus restructuring expenses less the gain on sale of a business.
(g) Depreciation and amortization excludes amortization of debt issuance costs.

Source: IDEX Corporation

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