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. SilvernailChairman 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160418006719/en/
IDEX CorporationInvestor Contact:Heath MittsSenior Vice
President and Chief Financial Officer(847) 498-7070
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