IDEX Reports Record Third Quarter Results - EPS of 78 Cents and Free Cash Flow of $113 Million Business Wire LAKE FOREST, Ill. -- October 21, 2013 IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended September 30, 2013. Orders in the quarter of $532 million were up 14 percent from the prior year period. Sales in the quarter totaled $491 million, 2 percent higher than the prior year period. For the quarter, on an organic basis, orders were 13 percent higher and sales were 1 percent higher than the prior year period. Orders benefitted from a large dispensing equipment order received in the quarter. Third quarter 2013 operating income was $97 million. This resulted in an operating margin of 19.8 percent, up 150 basis points from the prior year adjusted operating margin, primarily due to productivity and benefits from our structural cost actions taken in the prior year. Third quarter net income was $64 million, an increase of 16 percent from the adjusted prior year. Third quarter earnings per share were 78 cents, an increase of 12 cents, or 18 percent, from the adjusted prior year. Third quarter net income and earnings per share include $2.1 million of tax benefits realized in the quarter. Free cash flow was $113 million for the quarter, a 23 percent increase from prior year third quarter due to higher earnings and improved operating working capital. Third Quarter Highlights *Orders of $532 million increased 14 percent compared to the prior year (+13 percent organic and +1 percent acquisition). *Sales of $491 million increased 2 percent compared to the prior year (+1 percent organic and +1 percent acquisition). *Gross margin of 43.1 percent was up 250 basis points from the prior year. *Operating margin of 19.8 percent was up 150 basis points from the adjusted prior year. *Net income of $64 million represents an increase of 16 percent compared to the prior year adjusted net income of $55 million. *EPS of 78 cents was 12 cents, or 18 percent, higher than the prior year adjusted EPS of 66 cents. *EBITDA of $117 million, which represents a 17 percent increase from the prior year, was 24 percent of sales and covered interest expense by 11 times. *Free cash flow of $113 million, which represents a 23 percent increase from the prior year, was over 175 percent of net income. *In the third quarter, the Company completed the repurchase of 881 thousand shares of common stock for $53 million. Year-to-date, the Company has repurchased over 2.5 million shares of common stock for $138 million. “Order growth of 14 percent built a healthy backlog and positions us well for the balance of the year and start of 2014. Five points of the order growth was from a large dispensing equipment order which is scheduled to ship primarily during the first half of 2014. Free cash flow in the third quarter of $113 million brings our year-to-date total to $284 million, both IDEX records. Earlier this year I outlined a goal of driving productivity to deliver strong margins, earnings, and cash flows, while providing resources to invest in organic growth. I am pleased with our progress. In the third quarter, despite continued volatility across the global markets, our strong execution resulted in solid margin expansion and cash flow generation. Our ability to convert cash fuels our capital deployment strategy. We have continued our disciplined approach, focusing on a combination of funding organic growth, strategic acquisitions, shareholder dividends and share repurchases. Throughout the year we have invested significantly in commercial and new product initiatives. We have also returned $192 million of capital to shareholders in dividends and share repurchases, and we continue to maintain a steady funnel of active M&A opportunities. As we make our key investment decisions, we will maintain our focused strategy and our commitment to deliver attractive financial returns. For the foreseeable future, we expect the global end markets to remain uneven. However, our ability to execute in this environment should generate organic revenue growth of approximately 5 percent in the fourth quarter. We are projecting fourth quarter 2013 EPS to be in the range of 78 to 80 cents. We are also increasing our full year 2013 EPS guidance to $3.05 – $3.07 and estimate free cash flow conversion will be approximately 145 to 150 percent of net income for the full year 2013.” Andrew K. Silvernail Chairman and Chief Executive Officer Third Quarter 2013 Business Highlights (Operating margin excludes restructuring charges in 2012) Fluid & Metering Technologies *Sales in the third quarter of $212 million reflected a 7 percent increase compared to the third quarter of 2012 (+6 percent organic and +1 percent foreign currency translation). *Operating margin of 24.4 percent represented a 300 basis point improvement compared with the third quarter of 2012 primarily due to higher volume and productivity initiatives. Health & Science Technologies *Sales in the third quarter of $179 million reflected a 1 percent increase compared to the third quarter of 2012 (-2 percent organic, +4 percent acquisitions and -1 percent foreign currency translation). *Operating margin of 20.6 percent represented a 330 basis point increase compared with the third quarter of 2012 primarily due to productivity and cost reduction initiatives. Fire & Safety/Diversified Products *Sales in the third quarter of $101 million reflected a 6 percent decrease compared to the third quarter of 2012 (-7 percent organic and +1 percent foreign currency translation). *Operating margin of 21.9 percent represented a 290 basis point decrease compared with the third quarter of 2012 primarily due to lower volume and unfavorable product mix across the segment. For the third quarter of 2013, Fluid & Metering Technologies contributed 43 percent of sales and 47 percent of operating income; Health & Science Technologies accounted for 36 percent of sales and 33 percent of operating income; and Fire & Safety/Diversified Products represented 21 percent of sales and 20 percent of operating income. EBITDA and Free Cash Flow EBITDA means earnings before interest, income taxes, depreciation and amortization, while free cash flow means 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. EBITDA and Free Cash Flow Bridge (dollars in millions) For the Quarter Ended September 30, June 30, 2013 2012 Change 2013 Change Income before Taxes $ 86.6 $ 70.2 23 % $ 88.4 (2 %) Depreciation and 19.8 19.5 2 % 20.1 (1 %) Amortization Interest Expense 10.6 10.5 1 % 10.6 - EBITDA 117.0 100.2 17 % 119.1 (2 %) Restructuring - 7.1 (100 %) - - Charge Adjusted EBITDA $ 117.0 $ 107.3 9 % $ 119.1 (2 %) Cash Flow from Operating $ 118.4 $ 101.0 17 % $ 109.3 8 % Activities Capital (7.3 ) (9.4 ) (22 %) (8.2 ) (11 %) Expenditures Excess Tax Benefit from Stock-Based 2.1 0.8 n/m 2.3 (9 %) Compensation Free Cash Flow $ 113.2 $ 92.4 23 % $ 103.4 9 % Conference Call to be Broadcast over the Internet IDEX will broadcast its third quarter earnings conference call over the Internet on Tuesday, October 22, 2013 at 9:30 a.m. CT. Chairman and Chief Executive Officer Andy Silvernail and 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 855.859.2056 (or 404.537.3406 for international participants) using the ID # 26074681. 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, 2013 2012 2013 2012 Net sales $ 490,617 $ 479,859 $ 1,503,510 $ 1,463,420 Cost of sales 279,108 285,019 857,155 862,578 Gross profit 211,509 194,840 646,355 600,842 Selling, general and 114,140 107,167 354,715 332,431 administrative expenses Restructuring - 7,085 - 14,604 expenses Operating income 97,369 80,588 291,640 253,807 Other (income) 188 (132 ) (518 ) (19 ) expense - net Interest expense 10,570 10,536 31,724 31,734 Income before 86,611 70,184 260,434 222,092 income taxes Provision for 22,812 20,057 72,774 65,443 income taxes Net income $ 63,799 $ 50,127 $ 187,660 $ 156,649 Earnings per Common Share: Basic earnings per common share $ 0.78 $ 0.60 $ 2.28 $ 1.88 ^(a) Diluted earnings per common share $ 0.78 $ 0.60 $ 2.27 $ 1.87 ^(a) Share Data: Basic weighted average common 81,259 82,482 81,762 82,820 shares outstanding Diluted weighted average common 82,218 83,370 82,701 83,785 shares outstanding Condensed Consolidated Balance Sheets (in thousands) (unaudited) September 30, December 31, 2013 2012 Assets Current assets Cash and cash $ 399,805 $ 318,864 equivalents Receivables - 255,977 256,095 net Inventories 236,771 234,950 Other current 58,216 71,956 assets Total current 950,769 881,865 assets Property, plant and equipment - 214,253 219,161 net Goodwill and intangible 1,665,576 1,663,099 assets Other noncurrent 18,783 21,265 assets Total assets $ 2,849,381 $ 2,785,390 Liabilities and shareholders' equity Current liabilities Trade accounts $ 130,683 $ 117,341 payable Accrued expenses 155,235 150,176 Short-term 4,379 7,335 borrowings Dividends 18,745 16,575 payable Total current 309,042 291,427 liabilities Long-term 780,043 779,241 borrowings Other noncurrent 245,772 249,724 liabilities Total 1,334,857 1,320,392 liabilities Shareholders' 1,514,524 1,464,998 equity Total liabilities and $ 2,849,381 $ 2,785,390 shareholders' equity IDEX CORPORATION Company and Business Group Financial Information (dollars in thousands) (unaudited) Three Months Ended Nine Months Ended September 30, ^(b) September 30, ^(b) 2013 2012 ^(c) 2013 2012 ^(c) Fluid & Metering Technologies Net sales $ 212,337 $ 198,000 $ 649,580 $ 621,433 Operating 51,736 42,368 155,930 136,175 income ^(c) Operating 24.4 % 21.4 % 24.0 % 21.9 % margin Depreciation and $ 6,981 $ 7,246 $ 20,953 $ 22,194 amortization Capital 2,843 2,702 8,126 9,752 expenditures Health & Science Technologies Net sales $ 178,628 $ 176,225 $ 532,363 $ 520,574 Operating 36,775 30,480 103,564 90,494 income ^(c) Operating 20.6 % 17.3 % 19.5 % 17.4 % margin Depreciation and $ 10,798 $ 10,273 $ 32,537 $ 29,293 amortization Capital 2,823 4,622 9,777 10,435 expenditures Fire & Safety/Diversified Products Net sales $ 101,077 $ 108,199 $ 326,826 $ 328,173 Operating 22,119 26,807 74,027 78,165 income ^(c) Operating 21.9 % 24.8 % 22.7 % 23.8 % margin Depreciation and $ 1,726 $ 1,622 $ 5,175 $ 5,225 amortization Capital 776 1,230 2,997 5,183 expenditures Company Net sales $ 490,617 $ 479,859 $ 1,503,510 $ 1,463,420 Operating 97,369 87,673 291,640 268,411 income ^(c) Operating 19.8 % 18.3 % 19.4 % 18.3 % margin Depreciation and $ 19,779 $ 19,545 $ 59,695 $ 57,938 amortization ^(d) Capital 7,318 9,208 23,140 27,266 expenditures (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. Three and nine month data includes acquisitions of FTL (March 2013), Matcon (b) (July 2012) and ERC (April 2012) in the Health & Science Technologies segment from the date of acquisition. Group operating income excludes unallocated corporate operating expenses while (c) both Group and Company operating income excludes restructuring related charges for 2012. (d) Depreciation and amortization excludes amortization of debt issuance expenses. Contact: IDEX Corporation Investor Contact: Heath Mitts Vice President – Chief Financial Officer (847) 498-7070
IDEX Reports Record Third Quarter Results - EPS of 78 Cents and Free Cash Flow of $113 Million
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