IDEX Corporation (NYSE: IEX) today announced its financial
results for the three month period ended March 31, 2017.
First Quarter 2017
Highlights
- Orders were up 8 percent overall and 2
percent organically
- Sales were up 10 percent overall and 5
percent organically
- Operating margin was 20.9 percent with
adjusted operating margin of 21.8 percent, up 120 basis points
- Reported EPS was $0.99 with adjusted
EPS of $1.03, up 14 cents, or 16 percent
- Cash from operations of $85.0 million
led to free cash flow of $74.8 million, up 21 percent
First Quarter 2017
Orders of $568.8 million were up 8 percent (+2 percent organic,
+8 percent acquisitions/divestitures and -2 percent foreign
currency translation) compared with the prior year period.
Sales of $553.6 million were up 10 percent (+5 percent organic,
+7 percent acquisitions/divestitures and -2 percent foreign
currency translation) compared with the prior year period.
Gross margin of 45.3 percent was up 90 basis points from the
prior year period, primarily due to productivity, volume leverage
and a $2.2 million fair value inventory step-up charge in the prior
year period.
Operating income of $115.7 million resulted in an operating
margin of 20.9 percent. Adjusted for $4.8 million of
restructuring-related charges, adjusted operating income was $120.5
million with an adjusted operating margin of 21.8 percent, up 120
basis points from the prior year period operating margin primarily
due to operational efficiency and the prior year fair value
inventory step-up charge. Adjusted operating income drove adjusted
EBITDA of $141.5 million which was 26 percent of sales and covered
interest expense by more than 12 times.
Net income was $75.9 million which resulted in EPS of $0.99.
Excluding restructuring-related charges, adjusted EPS of $1.03
increased 14 cents, or 16 percent, from the prior year period
EPS.
The Company repurchased 82 thousand shares of common stock for
$7.6 million.
“Our first quarter results were strong as demand improved
significantly, particularly in North American industrial markets
with some improvement in larger capital projects. Organic revenue
growth of 5 percent, our first organic growth since the fourth
quarter of 2014, was driven by 6 percent organic growth in FMT and
5 percent in HST. I am proud of our team and their ability to
execute and deliver for our customers and shareholders. We
generated $15 million of backlog during the quarter and delivered
robust operating margin, EPS and free cash flow that exceeded our
prior expectations.
Last quarter, we were cautious about calling a recovery due to
ongoing market and geopolitical volatility. While these issues
continue to be a concern, we have seen broad-based recovery over
the past two quarters and we now expect better overall performance
in 2017.
With the strong start to 2017, combined with improved market
conditions, we are raising our full year 2017 adjusted EPS guidance
to $4.00 to $4.10 with second quarter EPS of $1.04 to $1.06. We are
also increasing our full year 2017 organic revenue growth
expectations to 3 to 4 percent with 2 to 3 percent growth in the
second quarter.”
Andrew K. SilvernailChairman and Chief Executive Officer
First Quarter 2017 Segment
Highlights
Fluid & Metering Technologies
- Sales of $216.8 million reflected a 2
percent increase compared to the first quarter of 2016 (+6 percent
organic, -3 percent divestitures and -1 percent foreign currency
translation).
- Operating income of $57.8 million
resulted in an operating margin of 26.7 percent. Adjusted for $1.6
million of restructuring-related charges, adjusted operating income
was $59.4 million with an adjusted operating margin of 27.4
percent, a 300 basis point increase compared to the prior year
period operating margin primarily due to higher volume and
productivity initiatives.
- EBITDA of $63.4 million resulted in an
EBITDA margin of 29.3 percent. Adjusted for $1.6 million of
restructuring-related charges, adjusted EBITDA of $65.0 million
resulted in an adjusted EBITDA margin of 30.0 percent, a 220 basis
point increase compared to the prior year period EBITDA
margin.
Health & Science Technologies
- Sales of $199.7 million reflected a 7
percent increase compared to the first quarter of 2016 (+5 percent
organic, +5 percent acquisitions/divestitures and -3 percent
foreign currency translation).
- Operating income of $42.2 million
resulted in an operating margin of 21.2 percent. Adjusted for $3.0
million of restructuring-related charges, adjusted operating income
was $45.2 million with an adjusted operating margin of 22.7
percent, a 90 basis point increase compared to the prior year
period operating margin primarily due to higher volume and
productivity initiatives.
- EBITDA of $53.4 million resulted in an
EBITDA margin of 26.7 percent. Adjusted for $3.0 million of
restructuring-related charges, adjusted EBITDA of $56.4 million
resulted in an adjusted EBITDA margin of 28.2 percent, a 30 basis
point increase compared to the prior year period EBITDA
margin.
Fire & Safety/Diversified Products
- Sales of $137.4 million reflected a 31
percent increase compared to the first quarter of 2016 (+1 percent
organic, +33 percent acquisition and -3 percent foreign currency
translation).
- Operating income of $32.6 million
resulted in an operating margin of 23.7 percent. Adjusted for $0.1
million of restructuring-related charges, adjusted operating income
was $32.7 million with an adjusted operating margin of 23.8
percent, a 70 basis point decrease compared to the prior year
period operating margin primarily due to the dilutive impact on
margins from prior year acquisitions.
- EBITDA of $36.1 million resulted in an
EBITDA margin of 26.3 percent. Adjusted for $0.1 million of
restructuring-related charges, adjusted EBITDA of $36.2 million
resulted in an adjusted EBITDA margin of 26.4 percent, a 60 basis
point increase compared to the prior year period EBITDA
margin.
For the first quarter of 2017, Fluid & Metering Technologies
contributed 39 percent of sales, 44 percent of operating income and
41 percent of EBITDA; Health & Science Technologies accounted
for 36 percent of sales, 32 percent of operating income and 35
percent of EBITDA; and Fire & Safety/Diversified Products
represented 25 percent of sales, 24 percent of operating income and
24 percent of EBITDA.
2017 Restructuring
Actions
During the first quarter of 2017, the Company recorded $4.8
million of restructuring costs as part of initiatives that support
the implementation of key strategic efforts. These efforts are
designed to facilitate long-term, sustainable growth through cost
reduction actions, primarily a site consolidation at our Material
Processing Technologies platform within our HST segment, along with
employee reductions primarily within FMT and HST.
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 should not be 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.
- Organic orders and sales are calculated
according to U.S. GAAP excluding amounts from acquired or divested
businesses during the first twelve months of ownership or
divestiture and the impact of foreign currency translation.
- 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
expense or benefit.
- EBITDA is calculated as net income plus
interest expense plus provision for income taxes plus depreciation
and amortization. We reconciled EBITDA to net income on a
consolidated basis as we do not allocate consolidated interest
expense or consolidated provision for income taxes to our
segments.
- Adjusted EBITDA is calculated as EBITDA
plus restructuring expenses.
- Free cash flow is calculated as cash
flow from operating activities less capital expenditures.
Table 1: Reconciliations of the Change in Net Sales to Net
Organic Sales
For the Quarter Ended March
31, 2017 FMT HST FSDP
IDEX Change in net sales 2% 7% 31% 10%
- Net
impact from acquisitions/divestitures (3%) 5% 33% 7%
-
Impact from FX (1%) (3%) (3%) (2%)
Change in net organic
sales 6% 5% 1% 5%
Table 2: Reconciliations of Reported-to-Adjusted Operating
Income and Margin (dollars in thousands)
For the Quarter Ended March 31, 2017
2016 (e)
FMT HST FSDP
Corporate IDEX FMT HST
FSDP Corporate IDEX
Reported operating income (loss) $ 57,813
$ 42,238 $ 32,626 $
(17,006 ) $ 115,671 $ 51,703 $ 40,682 $
25,654 $ (14,694 ) $ 103,345
+Restructuring expenses
1,566 3,028 73
130 4,797 -
- - - -
Adjusted operating income (loss) $
59,379 $ 45,266 $
32,699 $ (16,876 ) $
120,468 $ 51,703 $ 40,682 $ 25,654
$ (14,694 ) $ 103,345
Net sales
(eliminations) $ 216,770 $ 199,679
$ 137,447 $ (344 ) $
553,552 $ 211,843 $ 186,343 $ 104,618 $ (232 ) $ 502,572
Operating margin 26.7 % 21.2 %
23.7 % n/m 20.9 % 24.4 % 21.8 %
24.5 % n/m 20.6 %
Adjusted operating margin 27.4
% 22.7 % 23.8 % n/m
21.8 % 24.4 % 21.8 % 24.5 % n/m 20.6 %
Table 3: Reconciliations of Reported-to-Adjusted Net Income
and EPS (in thousands, except EPS)
For the Quarter Ended March 31, 2017
2016 Reported net income $
75,899 $ 68,130
+Restructuring expenses 4,797
-
+Tax impact on restructuring expenses (1,529
) -
Adjusted net income $ 79,167
$ 68,130
Reported EPS $ 0.99 $
0.89
+Restructuring expenses 0.06 -
+Tax impact on
restructuring expenses (0.02 ) -
Adjusted EPS $ 1.03 $ 0.89
Diluted weighted average shares 76,894 76,699
Table 4: Reconciliations of EBITDA to Net Income
(dollars in thousands)
For the
Quarter Ended March 31, 2017
2016 (e)
FMT HST FSDP
Corporate IDEX FMT HST
FSDP Corporate IDEX
Operating income (loss) $ 57,813 $
42,238 $ 32,626 $
(17,006 ) $ 115,671 $ 51,703 $ 40,682 $
25,654 $ (14,694 ) $ 103,345
- Other (income) expense - net
30 143 36 (517 ) (308
) 135 (390 ) 160 139 44
+ Depreciation and
amortization 5,644 11,264
3,577 207
20,692 7,256 10,861
1,482 358 19,957
EBITDA 63,427 53,359 36,167
(16,282 ) 136,671 58,824 51,933 26,976 (14,475
) 123,258
- Interest expense 11,552 10,489
-
Provision for income taxes 28,528 24,682
-
Depreciation and amortization 20,692
19,957
Net income $ 75,899
$ 68,130
Net sales (eliminations)
$ 216,770 $ 199,679 $
137,447 $ (344 ) $
553,552 $ 211,843 $ 186,343 $ 104,618 $ (232 ) $ 502,572
Operating margin 26.7 % 21.2
% 23.7 % n/m 20.9 % 24.4
% 21.8 % 24.5 % n/m 20.6 %
EBITDA margin 29.3
% 26.7 % 26.3 % n/m
24.7 % 27.8 % 27.9 % 25.8 % n/m 24.5 %
Table 5: Reconciliations of EBITDA to Adjusted EBITDA
(dollars in thousands)
For the Quarter Ended March 31, 2017
2016 (e)
FMT HST FSDP
Corporate IDEX FMT HST
FSDP Corporate IDEX
EBITDA $ 63,427 $ 53,359
$ 36,167 $ (16,282 ) $
136,671 $ 58,824 $ 51,933 $ 26,976 $ (14,475 ) $ 123,258
+Restructuring expenses 1,566
3,028 73 130
4,797 - -
- - -
Adjusted
EBITDA $ 64,993 $ 56,387
$ 36,240 $ (16,152
) $ 141,468 $ 58,824 $ 51,933
$ 26,976 $ (14,475 ) $ 123,258
Adjusted EBITDA margin 30.0 % 28.2
% 26.4 % n/m 25.6 % 27.8
% 27.9 % 25.8 % n/m 24.5 %
Table 6: Reconciliations of Free Cash Flow (in
thousands)
For the Quarter Ended March
31, Dec 31, 2017
2016
2016 Cash flow from operating activities
$ 84,979 $ 70,365 $ 115,593
- Capital
expenditures 10,162 8,650 9,600
Free cash flow $ 74,817 $ 61,715 $ 105,993
Conference Call to be Broadcast over
the Internet
IDEX will broadcast its first quarter earnings conference call
over the Internet on Thursday, April 20, 2017 at 9:00 a.m. CT.
Chairman and Chief Executive Officer Andy Silvernail and Senior
Vice President and Chief Financial Officer William Grogan 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 #13652253.
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) Quarter Ended
March 31, 2017
2016 (e)
Net sales $ 553,552 $ 502,572
Cost
of sales 302,611
279,237
Gross profit 250,941 223,335
Selling, general and administrative expenses 130,473
119,990
Restructuring expenses 4,797
-
Operating income
115,671 103,345
Other (income) expense - net
(308 ) 44
Interest expense
11,552 10,489
Income before
income taxes 104,427 92,812
Provision for income
taxes 28,528 24,682
Net income $ 75,899
$ 68,130
Earnings per Common
Share (a): Basic earnings per common share
$ 0.99 $ 0.90
Diluted earnings per common
share $ 0.99 $ 0.89
Share
Data: Basic weighted average common shares
outstanding 76,115 75,749
Diluted weighted
average common shares outstanding 76,894 76,699
Condensed Consolidated Balance Sheets (in
thousands) (unaudited) March 31, December
31, 2017 2016
Assets Current assets Cash and cash
equivalents $ 216,095 $ 235,964
Receivables -
net 294,707 272,813
Inventories 257,900
252,859
Other current assets 54,978
61,085
Total current assets
823,680 822,721
Property, plant and equipment - net
250,114 247,816
Goodwill and intangible assets
2,074,148 2,068,096
Other noncurrent assets
15,843 16,311
Total
assets $ 3,163,785 $
3,154,944
Liabilities and shareholders' equity
Current liabilities Trade accounts payable $
135,462 $ 128,933
Accrued expenses 142,670
152,852
Short-term borrowings 323 1,046
Dividends
payable - 26,327
Total current liabilities 278,455 309,158
Long-term borrowings 950,283 1,014,235
Other
noncurrent liabilities 293,742
287,657
Total liabilities
1,522,480 1,611,050
Shareholders' equity
1,641,305 1,543,894
Total liabilities and shareholders' equity $
3,163,785 $ 3,154,944
IDEX CORPORATION Condensed Consolidated Statements
of Cash Flows (in thousands) (unaudited)
Quarter Ended March 31, 2017
2016 Cash flows from operating activities
Net income $ 75,899 $ 68,130
Adjustments to
reconcile net income to net cash provided by operating
activities: Depreciation and amortization 8,903
9,067
Amortization of intangible assets 11,789 10,890
Amortization of debt issuance costs 329 378
Share-based compensation expense 6,159 6,442
Deferred income taxes 1,293 2,950
Non-cash
interest expense associated with forward starting swaps
1,677 1,724
Changes in (net of the effect from
acquisitions): Receivables (20,058 )
(19,267 )
Inventories (2,761 ) (270 )
Other
current assets 6,570 (6,597 )
Trade accounts
payable 5,188 6,451
Accrued expenses
(11,565 ) (6,641 )
Other — net
1,556 (2,892 )
Net cash flows
provided by operating activities 84,979 70,365
Cash
flows from investing activities Purchases of property, plant
and equipment (10,162 ) (8,650 )
Acquisition
of businesses, net of cash acquired - (221,556 )
Other — net 546 91
Net cash flows used in investing activities
(9,616 ) (230,115 )
Cash flows from financing
activities Borrowings under revolving facilities
13,000 275,391
Payments under revolving facilities
(80,224 ) (20,994 )
Dividends paid
(26,327 ) (24,662 )
Proceeds from stock option
exercises 6,074 8,258
Purchase of common stock
(7,005 ) (46,864 )
Unvested shares surrendered for
tax withholding (5,647 ) (4,717 )
Other
738 -
Net cash
flows provided by (used in) financing activities (99,391
) 186,412
Effect of exchange rate changes on cash and
cash equivalents 4,159
3,765
Net increase (decrease) (19,869
) 30,427
Cash and cash equivalents at beginning of
year 235,964 328,018
Cash and cash equivalents at end of period
$ 216,095 $ 358,445
IDEX CORPORATION Company and Segment
Financial Information - Reported (dollars in thousands)
(unaudited) Quarter Ended
March 31, (b)
2017
2016 (e)
Fluid & Metering Technologies Net
sales $ 216,770 $ 211,843
Operating income
(c) 57,813 51,703
Operating margin 26.7
% 24.4 %
EBITDA $ 63,427 $ 58,824
EBITDA margin 29.3 % 27.8 %
Depreciation
and amortization $ 5,644 $ 7,256
Capital
expenditures 5,386 3,290
Health & Science
Technologies Net sales $ 199,679 $ 186,343
Operating income (c) 42,238 40,682
Operating margin 21.2 % 21.8 %
EBITDA
$ 53,359 $ 51,933
EBITDA margin 26.7
% 27.9 %
Depreciation and amortization $
11,264 $ 10,861
Capital expenditures 3,573
4,137
Fire & Safety/Diversified Products Net
sales $ 137,447 $ 104,618
Operating income
(c) 32,626 25,654
Operating margin 23.7
% 24.5 %
EBITDA $ 36,167 $ 26,976
EBITDA margin 26.3 % 25.8 %
Depreciation
and amortization $ 3,577 $ 1,482
Capital
expenditures 1,195 1,107
Corporate Office and
Eliminations Intersegment sales eliminations $
(344 ) $ (232 )
Operating loss (c)
(17,006 ) (14,694 )
EBITDA (16,282
) (14,475 )
Depreciation and amortization 207
358
Capital expenditures 8 116
Company
Net sales $ 553,552 $ 502,572
Operating
income 115,671 103,345
Operating margin
20.9 % 20.6 %
EBITDA $ 136,671 $
123,258
EBITDA margin 24.7 % 24.5 %
Depreciation and amortization (d) $
20,692 $ 19,957
Capital expenditures 10,162
8,650
(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 the results of SFC Koenig (September
2016) in the Health & Science Technologies segment and Akron
Brass (March 2016) and AWG Fittings (July 2016) in the Fire &
Safety/Diversified segment from the date of acquisition. Three
month data also includes the results of Hydra-Stop (July 2016) and
IETG (October 2016) in the Fluid & Metering Technologies
segment and CVI Japan (September 2016) and CVI Korea (December
2016) in the Health & Science Technologies segment through the
date of disposition. (c) Segment operating
income excludes unallocated corporate operating expenses which are
included in Corporate Office and Eliminations.
(d) Depreciation and amortization excludes amortization
of debt issuance costs. (e) Certain amounts in
the prior year presentation have been reclassified to conform to
the current presentation due to the early adoption of ASU 2017-07,
Compensation-Retirement Benefits (Topic 715): Improving the
presentation of net periodic pension cost and net periodic
postretirement benefit cost.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170419006619/en/
IDEX CorporationInvestor Contact:William K. GroganSenior
Vice President and Chief Financial Officer(847) 498-7070
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