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IDEX Reports First Quarter EPS of 89 Cents; Raises Full Year EPS Guidance to $3.70 -- $3.75

LAKE FOREST, Ill.--(BUSINESS WIRE)--Apr. 18, 2016-- IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended March 31, 2016.

First Quarter 2016 Highlights

  • EPS of 89 cents, up 6 percent
  • Operating margin of 20.4 percent, up 10 basis points
  • Free cash flow of $62 million, up 45 percent
  • Repurchased 628 thousand shares of common stock for $46 million
  • Acquired Akron Brass for $224 million
  • Announced a 6 percent increase in the quarterly dividend on April 6, 2016

First Quarter 2016

Orders of $526 million were flat (-3 percent organic, +4 percent acquisitions and -1 percent foreign currency translation) compared with the prior year period. Sales of $503 million were flat (-3 percent organic, +4 percent acquisitions and -1 percent foreign currency translation) compared with the prior year period.

Gross margin of 44.4 percent was down 60 basis points from the prior year period, primarily due to an inventory step-up charge related to the Akron Brass acquisition. Operating margin of 20.4 percent was up 10 basis points from the prior year period.

Net income of $68 million increased 3 percent compared with the prior year period, while earnings per share of 89 cents increased 5 cents, or 6 percent, from the prior year period.

Net income and EPS include a $3.7 million pre-tax benefit from the reversal of contingent consideration related to a 2015 acquisition, partially offset by a $2.2 million pre-tax charge for the inventory step-up related to the Akron Brass acquisition. In addition, the Company early adopted ASU 2016-09, which includes a change in accounting for income taxes associated with share-based compensation, resulting in a $2.6 million income tax benefit.

EBITDA of $123 million was 25 percent of sales and covered interest expense by nearly 12 times, while free cash flow of $62 million was 90 percent of net income.

The Company repurchased 628 thousand shares of common stock for $46 million in the first quarter of 2016, at an average price of $72.86.

“IDEX continues to perform well in a challenged macroeconomic growth environment. During the first quarter we built $23 million of backlog, generated operating margin of 20.4 percent and delivered EPS of 89 cents. We remain committed to our capital deployment plan of long-term organic growth investments, disciplined M&A, opportunistic share repurchases and returning capital to shareholders. In the first quarter, we delivered on this value creation model by acquiring Akron Brass, increasing the quarterly shareholder dividend by six percent and repurchasing $46 million of common stock at an average price of $72.86 per share.

Demand headwinds in our energy and agriculture businesses will be offset by improving demand in our water, scientific fluidics and dispensing businesses. These mixed market conditions are expected to remain throughout 2016, yet we reaffirm our revenue guidance for the year of flat organic growth with operating margins between 20.5 percent and 21 percent.

We are increasing full year EPS guidance to $3.70 to $3.75, driven primarily by the permanent tax benefit associated with new accounting guidance for share-based compensation. The 2016 operating contribution from the Akron Brass transaction will be offset by the acquisition fair value charges, purchase accounting amortization and incremental interest cost. Flat organic growth is anticipated in the second quarter of 2016, with EPS of 91 to 93 cents, which includes the remaining $5.4 million pre-tax inventory step-up charge related to the acquisition of Akron Brass.”

Andrew K. Silvernail
Chairman and Chief Executive Officer

First Quarter 2016 Segment Highlights

Fluid & Metering Technologies

  • Sales of $212 million reflected a 3 percent decrease compared to the first quarter of 2015 (-5 percent organic, +3 percent acquisition and -1 percent foreign currency translation).
  • Operating margin of 24.3 percent represented a 130 basis point decrease compared with the first quarter of 2015 primarily due to lower volume related to the energy and agriculture businesses.
  • EBITDA of $58.8 million resulted in an EBITDA margin of 27.8 percent, a 110 basis point decrease compared with the first quarter of 2015.

Health & Science Technologies

  • Sales of $186 million reflected a 4 percent increase compared to the first quarter of 2015 (+2 percent organic, +3 percent acquisitions and -1 percent foreign currency translation).
  • Operating margin of 21.8 percent represented a 90 basis point increase compared with the first quarter of 2015 primarily due to higher volume and productivity improvements.
  • EBITDA of $51.9 million resulted in an EBITDA margin of 27.9 percent, a 120 basis point increase compared with the first quarter of 2015.

Fire & Safety/Diversified Products

  • Sales of $105 million reflected a 2 percent decrease compared to the first quarter of 2015 (-6 percent organic, +5 percent acquisition and -1 percent foreign currency translation).
  • Operating margin of 24.3 percent represented a 120 basis point decrease compared with the first quarter of 2015 entirely due to the impact from the Akron Brass acquisition.
  • EBITDA of $27.0 million resulted in an EBITDA margin of 25.8 percent, a 190 basis point decrease compared with the first quarter of 2015.

For the first quarter of 2016, Fluid & Metering Technologies contributed 42 percent of sales, 44 percent of operating income and 43 percent of EBITDA; Health & Science Technologies accounted for 37 percent of sales, 35 percent of operating income and 38 percent of EBITDA; and Fire & Safety/Diversified Products represented 21 percent of sales, 21 percent of operating income and 19 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.

  • 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.
  • 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 Consolidated EBITDA and Free Cash Flow (in thousands)

       
For the Three Months Ended
March 31, Dec 31,
2016 2015 2015
Net income $ 68,130 $ 65,954 $ 67,763
Interest expense 10,489 10,597 10,226
Provision for income taxes 24,682 26,929 20,924
Depreciation and amortization   19,957     18,510     20,146  
EBITDA 123,258 121,990 119,059
Restructuring expenses   -     -     6,516  
Adjusted EBITDA $ 123,258   $ 121,990   $ 125,575  
 
 
Cash flow from operating activities $ 70,365 $ 49,404 $ 98,540
Capital expenditures (8,650 ) (10,077 ) (11,165 )
Excess tax benefit from share-based compensation *   -     3,220     915  
Free cash flow $ 61,715   $ 42,547   $ 88,290  
 

* The Company early adopted ASU 2016-09 effective in the first quarter of 2016. This ASU issued in March of 2016 simplifies the accounting for share-based payments, including the presentation of the excess tax benefit on the statement of cash flows.

 

Table 2: Reconciliations of Segment EBITDA (dollars in thousands)

           
For the Three Months Ended March 31,
2016 2015
FMT   HST   FSDP FMT   HST   FSDP
Operating income $ 51,401 $ 40,699 $ 25,404 $ 55,898 $ 37,457 $ 27,162
Other income (expense) - net 167 373 90 802 131 862
Depreciation and amortization   7,256   10,861   1,482   6,361   10,208   1,532
EBITDA $ 58,824 $ 51,933 $ 26,976 $ 63,061 $ 47,796 $ 29,556
 
Net sales $ 211,843 $ 186,343 $ 104,618 $ 218,248 $ 179,120 $ 106,622
 
EBITDA margin 27.8 % 27.9 % 25.8 % 28.9 % 26.7 % 27.7 %
 

Conference Call to be Broadcast over the Internet

IDEX will broadcast its first quarter earnings conference call over the Internet on Tuesday, April 19, 2016 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 #13620004.

Forward-Looking Statements

This news release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements may relate to, among other things, capital expenditures, acquisitions, cost reductions, cash flow, revenues, earnings, market conditions, global economies and operating improvements, and are indicated by words or phrases such as “anticipate,” “estimate,” “plans,” “expects,” “projects,” “forecasts,” “should,” “could,” “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. Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” section included in the Company’s most recent annual report on Form 10-K filed with the SEC and the other risks discussed in the Company’s filings with the SEC. 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, except as may be required by law. 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
March 31,
    2016   2015
 
Net sales $ 502,572 $ 502,198
Cost of sales     279,237       276,157  
Gross profit 223,335 226,041
Selling, general and administrative expenses     120,778       124,284  
Operating income 102,557 101,757
Other (income) expense - net (744 ) (1,723 )
Interest expense     10,489       10,597  
Income before income taxes 92,812 92,883
Provision for income taxes     24,682       26,929  
Net income   $ 68,130     $ 65,954  
 
 
Earnings per Common Share (a):
 
Basic earnings per common share $ 0.90 $ 0.84
 
Diluted earnings per common share $ 0.89 $ 0.84
 
 
Share Data:
 
Basic weighted average common shares outstanding 75,749 77,996
 
Diluted weighted average common shares outstanding 76,699 78,856
 
 
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
March 31, December 31,
    2016   2015
 
Assets
Current assets
Cash and cash equivalents $ 358,445 $ 328,018
Receivables - net 296,834 260,000
Inventories 278,230 239,124
Other current assets     42,999       35,542  
Total current assets 976,508 862,684
Property, plant and equipment - net 252,512 240,945
Goodwill and intangible assets 1,895,715 1,684,366
Other noncurrent assets     17,563       17,448  
Total assets   $ 3,142,298     $ 2,805,443  
 
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable $ 140,183 $ 128,911
Accrued expenses 150,766 153,672
Short-term borrowings 1,333 1,087
Dividends payable     -       25,927  
Total current liabilities 292,282 309,597
Long-term borrowings 1,094,232 839,707
Other noncurrent liabilities     262,874       212,848  
Total liabilities 1,649,388 1,362,152
Shareholders' equity     1,492,910       1,443,291  
Total liabilities and shareholders' equity   $ 3,142,298     $ 2,805,443  
   
IDEX CORPORATION
Condensed Consolidated Statements of Cash Flow
(in thousands)
(unaudited)
 
Three Months Ended March 31,
    2016   2015
 
Cash flows from operating activities
Net income $ 68,130 $ 65,954
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 9,067 8,580
Amortization of intangible assets 10,890 9,930
Amortization of debt issuance costs 378 434
Share-based compensation expense 6,442 6,882
Deferred income taxes 2,950 1,000
Excess tax benefit from share-based compensation - (3,220 )
Non-cash interest expense associated with forward starting swaps 1,724 1,772
Changes in (net of the effect from acquisitions):

Receivables

(19,267 ) (18,039 )
Inventories (270 ) (11,215 )
Other current assets (6,597 ) (4,591 )
Trade accounts payable 6,451 6,857
Accrued expenses (6,641 ) (14,230 )
Other — net     (2,892 )     (710 )
Net cash flows provided by operating activities 70,365 49,404
Cash flows from investing activities
Purchases of property, plant and equipment (8,650 ) (10,077 )
Acquisition of businesses, net of cash acquired (221,556 ) -
Other — net     91       (48 )
Net cash flows used in investing activities (230,115 ) (10,125 )
Cash flows from financing activities
Borrowings under revolving facilities 275,391 55,000
Payments under revolving facilities (20,994 ) (77 )
Dividends paid (24,662 ) (22,216 )
Proceeds from stock option exercises 8,258 9,250
Excess tax benefit from share-based compensation - 3,220
Purchase of common stock (46,864 ) (62,132 )
Unvested shares surrendered for tax withholding     (4,717 )     (3,107 )
Net cash flows provided by (used in) financing activities 186,412 (20,062 )
Effect of exchange rate changes on cash and cash equivalents     3,765       (33,858 )
Net increase (decrease) in cash 30,427 (14,641 )
Cash and cash equivalents at beginning of year     328,018       509,137  
Cash and cash equivalents at end of period   $ 358,445     $ 494,496  
     
IDEX CORPORATION
Company and Segment Financial Information
(dollars in thousands)
(unaudited)
 
 
Three Months Ended

March 31, (b)

    2016   2015
 
 
Fluid & Metering Technologies
Net sales $ 211,843 $ 218,248
Operating income (c) 51,401 55,898
Operating margin 24.3 % 25.6 %
EBITDA $ 58,824 $ 63,061
EBITDA margin 27.8 % 28.9 %
Depreciation and amortization $ 7,256 $ 6,361
Capital expenditures 3,290 4,969
 
Health & Science Technologies
Net sales $ 186,343 $ 179,120
Operating income (c) 40,699 37,457
Operating margin 21.8 % 20.9 %
EBITDA $ 51,933 $ 47,796
EBITDA margin 27.9 % 26.7 %
Depreciation and amortization $ 10,861 $ 10,208
Capital expenditures 4,137 2,885
 
Fire & Safety/Diversified Products
Net sales $ 104,618 $ 106,622
Operating income (c) 25,404 27,162
Operating margin 24.3 % 25.5 %
EBITDA $ 26,976 $ 29,556
EBITDA margin 25.8 % 27.7 %
Depreciation and amortization $ 1,482 $ 1,532
Capital expenditures 1,107 1,322
 
Company
Net sales $ 502,572 $ 502,198
Operating income (c) 102,557 101,757
Operating margin 20.4 % 20.3 %
EBITDA $ 123,258 $ 121,990
EBITDA margin 24.5 % 24.3 %
Depreciation and amortization (d) $ 19,957 $ 18,510
Capital expenditures 8,650 10,077
 
             
 
(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 month data includes acquisition of Alfa Valvole (June 2015) in the Fluid & Metering Technologies segment, Novotema (June 2015) and CiDRA Precision Services (July 2015) in the Health & Science Technologies segment and Akron Brass (March 2016) in the Fire & Safety/Diversified segment from the date of acquisition. Three month data for 2015 includes the results of Ismatec through the date of disposition (July 2015).
 
(c) Segment operating income excludes unallocated corporate operating expenses.
 
(d) 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