IDEX Corporation (NYSE: IEX) today announced its financial
results for the three month period ended June 30, 2016.
Second Quarter 2016
Highlights
- Orders and sales were up 5 and 7
percent, respectively
- EPS of 99 cents was up 10 cents, or 11
percent
- Completed a $200 million private
placement of senior notes
- Acquired AWG Fittings for €46 million
on July 1st
Second Quarter 2016
Orders of $529 million were up 5 percent (-2 percent organic, +8
percent acquisitions and -1 percent foreign currency translation)
compared with the prior year period. Sales of $550 million were up
7 percent (-1 percent organic and +8 percent acquisitions) 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 a $3.6 million pre-tax
inventory step-up charge related to the Akron Brass acquisition.
Operating margin of 20.6 percent was down 70 basis points primarily
due to the inventory step-up charge, partially offset by a $1.0
million pre-tax benefit from the reversal of the remaining
contingent consideration related to a 2015 acquisition.
Operating income of $113 million drove EBITDA of $137 million
which was 25 percent of sales and covered interest expense by more
than 12 times.
Net income of $76 million increased 9 percent compared with the
prior year period, while earnings per share of 99 cents increased
10 cents, or 11 percent, from the prior year period.
Cash from operations of $88 million resulted in free cash flow
of $80 million which was 106 percent of net income.
“In the second quarter of 2016, orders and sales increased 5 and
7 percent, respectively. Our Water, Scientific Fluidics and
Dispensing platforms continue to outperform, while the North
American industrial market remains challenged compared with a year
ago. Recently, we have seen signs that our North American
industrial markets are stabilizing, and within our Energy platform
large projects that had been delayed for several quarters shipped
late in the second quarter. Operating margin of 20.6 percent
decreased 70 basis points compared with the prior year period,
mainly due to 60 basis points of pressure from the remaining fair
value inventory step-up charge related to our Akron Brass
acquisition. I’m very pleased with the team’s ability to execute in
this difficult organic growth environment.
Total shareholder return remains our primary focus. In the first
half of the year, we deployed over $270 million toward the
strategic acquisitions of Akron Brass, and more recently, AWG. The
addition of these two businesses to our fire and rescue operations
establishes this platform as a global industry leader. Our
acquisition pipeline is robust and we remain committed to investing
in long-term organic growth opportunities, funding shareholder
dividends and opportunistically repurchasing our stock.
Looking ahead, the long-term impact from the recent Brexit
decision is relatively unknown, while the stabilization of the
North American industrial market is encouraging. Considering these
factors, along with the impact of incremental interest expense from
our recent private placement and the expected impact from the AWG
fair value inventory step-up charge, we are holding our prior EPS
guidance of $3.70 to $3.75 for the full year, with EPS of 90 to 92
cents in the third quarter. For the full year, we expect flat
organic growth with operating margin between 20.5 and 21.0
percent.”
Andrew K. SilvernailChairman and Chief Executive Officer
Second Quarter 2016 Segment
Highlights
Fluid & Metering Technologies
- Sales of $222 million reflected a 3
percent increase compared to the second quarter of 2015 (+1 percent
organic and +2 percent acquisitions).
- Operating income of $54 million was $2
million higher than the prior year period, while operating margin
of 24.3 percent represented a 20 basis point increase compared with
the second quarter of 2015 primarily due to higher volume within
our Energy platform.
- EBITDA of $61 million resulted in an
EBITDA margin of 27.7 percent, a 50 basis point increase compared
with the second quarter of 2015.
Health & Science Technologies
- Sales of $187 million reflected a 1
percent decrease compared to the second quarter of 2015 (-2 percent
organic, +2 percent acquisitions and -1 percent foreign currency
translation).
- Operating income of $41 million was $1
million lower than the prior year period, while operating margin of
22.0 percent represented a 30 basis point decrease compared with
the second quarter of 2015 primarily due to lower volume in the
more industrially-exposed portions of the segment.
- EBITDA of $53 million resulted in an
EBITDA margin of 28.4 percent, a 90 basis point increase compared
with the second quarter of 2015.
Fire & Safety/Diversified Products
- Sales of $142 million reflected a 27
percent increase compared to the second quarter of 2015 (-1 percent
organic and +28 percent acquisition).
- Operating income of $34 million was $3
million higher than the prior year period, while operating margin
of 24.1 percent represented a 400 basis point decrease compared
with the second quarter of 2015 primarily due to the fair value
inventory step-up charge related to the Akron Brass
acquisition.
- EBITDA of $38 million resulted in an
EBITDA margin of 26.9 percent, a 260 basis point decrease compared
with the second quarter of 2015.
For the second quarter of 2016, Fluid & Metering
Technologies contributed 40 percent of sales, 42 percent of
operating income and 40 percent of EBITDA; Health & Science
Technologies accounted for 34 percent of sales, 32 percent of
operating income and 35 percent of EBITDA; and Fire &
Safety/Diversified Products represented 26 percent of sales, 26
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 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.
- 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.
- Free cash flow is calculated as cash
flow from operating activities less capital expenditures.
Table 1: Reconciliations of Net Sales to Organic
Sales
For the
Three Months Ended June 30, 2016 For the Six Months Ended
June 30, 2016 FMT HST FSDP
IDEX FMT HST FSDP
IDEX Change in net sales 3% (1%) 27% 7% 0% 2%
13% 3%
- Net Impact from acquisitions/divestitures 2% 2% 28%
8% 3% 3% 17% 6%
- Impact from FX 0% (1%) 0% 0% (1%) (1%)
(1%) (1%)
Organic Sales 1% (2%) (1%) (1%) (2%) 0% (3%) (2%)
Table 2: Reconciliations of EBITDA to Net Income (in
thousands)
For the Three Months
Ended June 30, 2016 2015
Corporate Total Corporate Total
FMT HST FSDP
Office IDEX FMT HST
FSDP Office IDEX
Operating income (loss) $ 53,865 $
41,125 $ 34,116 $ (16,130
) $ 112,976 $ 51,857 $ 42,060 $ 31,482 $
(15,490 ) $ 109,909
- Other (income) expense - net
(47 ) (757 ) (754 )
(316 ) (1,874 ) (10 ) 661 18 158 827
+ Depreciation and amortization 7,587
11,020 3,250
318 22,175 6,649
10,487 1,529 422
19,087
EBITDA 61,499 52,902
38,120 (15,496 ) 137,025 58,516 51,886
32,993 (15,226 ) 128,169
- Interest expense 11,205
10,584
- Provision for income taxes 27,886 28,913
- Depreciation and amortization 22,175
19,087
Net income $ 75,759
$ 69,585
Net sales (eliminations)
$ 221,810 $ 186,568 $
141,611 $ (293 ) $
549,696 $ 215,293 $ 188,405 $ 111,941 $ (758 ) $ 514,881
Operating margin 24.3 % 22.0
% 24.1 % n/m 20.6 % 24.1
% 22.3 % 28.1 % n/m 21.3 %
EBITDA margin 27.7
% 28.4 % 26.9 % n/m
24.9 % 27.2 % 27.5 % 29.5 % n/m 24.9 %
For the Six Months Ended June 30, 2016 2015
Corporate Total Corporate Total
FMT HST FSDP
Office IDEX FMT HST
FSDP Office IDEX
Operating income (loss) $ 105,266 $
81,824 $ 59,520 $ (31,077
) $ 215,533 $ 107,755 $ 79,517 $ 58,644 $
(34,250 ) $ 211,666
- Other (income) expense - net
(214 ) (1,130 ) (844 )
(430 ) (2,618 ) (812 ) 530 (844 ) 230
(896 )
+ Depreciation and amortization 14,843
21,881 4,732
676 42,132 13,010
20,695 3,061 831
37,597
EBITDA 120,323 104,835
65,096 (29,971 ) 260,283 121,577 99,682
62,549 (33,649 ) 250,159
- Interest expense 21,694
21,181
- Provision for income taxes 52,568 55,842
- Depreciation and amortization 42,132
37,597
Net income $ 143,889
$ 135,539
Net sales (eliminations)
$ 433,653 $ 372,911 $
246,229 $ (525 ) $
1,052,268 $ 433,541 $ 367,525 $ 218,563 $ (2,550 ) $
1,017,079
Operating margin 24.3 %
21.9 % 24.2 % n/m 20.5
% 24.9 % 21.6 % 26.8 % n/m 20.8 %
EBITDA margin
27.7 % 28.1 % 26.4 %
n/m 24.7 % 28.0 % 27.1 % 28.6 % n/m 24.6 %
Table 3: Reconciliations of Free Cash Flow (in
thousands)
For the Three Months Ended June 30,
Mar 31, 2016 2015 2016
Cash flow from operating activities $
88,478 $ 99,024 $ 70,365
- Capital expenditures
8,402 13,749 8,650
+ Excess tax benefit from share-based
compensation * - 863 -
Free cash
flow $ 80,076 $ 86,138 $ 61,715
* 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.
Conference Call to be Broadcast over
the Internet
IDEX will broadcast its second quarter earnings conference call
over the Internet on Tuesday, July 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 #13620006.
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 Six Months Ended June 30, June
30, 2016 2015
2016 2015 Net sales $
549,696 $ 514,881
$ 1,052,268 $ 1,017,079
Cost of sales 305,638
283,266
584,875
559,423
Gross profit 244,058 231,615
467,393 457,656
Selling, general and administrative
expenses 131,082
121,706
251,860 245,990
Operating income 112,976 109,909
215,533 211,666
Other (income) expense - net
(1,874 ) 827
(2,618 ) (896 )
Interest expense 11,205
10,584
21,694
21,181
Income before income taxes 103,645
98,498
196,457 191,381
Provision for income taxes
27,886 28,913
52,568 55,842
Net
income $ 75,759 $ 69,585
$ 143,889 $ 135,539
Earnings per Common Share (a):
Basic earnings per common share $ 1.00 $ 0.89
$ 1.89 $ 1.74
Diluted earnings per common
share $ 0.99 $ 0.89
$ 1.87 $ 1.72
Share Data: Basic weighted average
common shares outstanding 75,690 77,466
75,719
77,731
Diluted weighted average common shares
outstanding 76,674 78,297
76,687 78,576
Condensed Consolidated Balance Sheets (in
thousands) (unaudited) June 30, December
31, 2016
2015 Assets Current assets
Cash and cash equivalents $ 361,488 $ 328,018
Receivables - net 296,481 260,000
Inventories
257,659 239,124
Other current assets
53,656
35,542
Total current assets 969,284 862,684
Property, plant and equipment - net 250,904 240,945
Goodwill and intangible assets 1,870,638 1,684,366
Other noncurrent assets
18,530 17,448
Total
assets $
3,109,356 $ 2,805,443
Liabilities and shareholders' equity Current
liabilities Trade accounts payable $
129,164 $ 128,911
Accrued expenses 141,408
153,672
Short-term borrowings 1,233 1,087
Dividends payable
25,908 25,927
Total current
liabilities 297,713 309,597
Long-term borrowings
1,054,325 839,707
Other noncurrent liabilities
260,388
212,848
Total liabilities 1,612,426
1,362,152
Shareholders' equity
1,496,930 1,443,291
Total liabilities and shareholders' equity
$ 3,109,356
$ 2,805,443
IDEX CORPORATION
Condensed Consolidated Statements of Cash Flow (in
thousands)
(unaudited)
Six Months Ended June 30, 2016
2015 Cash flows from operating
activities Net income $ 143,889 $ 135,539
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
18,986 17,460
Amortization of intangible assets
23,146 20,137
Amortization of debt issuance costs
758 860
Share-based compensation expense
11,603 11,802
Deferred income taxes 3,669 524
Excess tax benefit from share-based compensation -
(4,083 )
Non-cash interest expense associated with forward
starting swaps 3,443 3,539
Changes in (net of the
effect from acquisitions): Receivables (22,625
) (15,274 )
Inventories 11,386 (10,473 )
Other current assets (17,233 ) (630 )
Trade
accounts payable (3,367 ) 4,158
Accrued
expenses (12,675 ) (15,886 )
Other — net
(2,137 ) 755
Net cash flows provided by operating activities
158,843 148,428
Cash flows from investing activities
Purchases of property, plant and equipment (17,052
) (23,826 )
Acquisition of businesses, net of cash
acquired (221,556 ) (173,333 )
Other — net
27 (105 )
Net cash
flows used in investing activities (238,581 )
(197,264 )
Cash flows from financing activities
Borrowings under revolving facilities 280,391 350,342
Proceeds from 3.20% Senior Notes 100,000 -
Proceeds from 3.37% Senior Notes 100,000 -
Payments under revolving facilities (266,203 )
(240,586 )
Payment of 2.58% Senior Euro Notes -
(88,420 )
Debt issuance costs (92 ) (1,323 )
Dividends paid (51,430 ) (46,910 )
Proceeds
from stock option exercises 16,934 13,459
Excess tax
benefit from share-based compensation - 4,083
Purchase of common stock (55,971 ) (113,592 )
Unvested shares surrendered for tax withholding
(4,830 ) (3,202 )
Net cash
flows provided by (used in) financing activities 118,799
(126,149 )
Effect of exchange rate changes on cash and cash
equivalents (5,591 )
(22,657 )
Net increase (decrease) in cash 33,470
(197,642 )
Cash and cash equivalents at beginning of year
328,018 509,137
Cash and cash equivalents at end of period $
361,488 $ 311,495
IDEX CORPORATION Company and Segment
Financial Information (dollars in thousands)
(unaudited) Three Months Ended Six
months Ended June 30, (b) June 30,
(b) 2016 2015
2016 2015 Fluid &
Metering Technologies Net sales $ 221,810
$ 215,293
$ 433,653 $ 433,541
Operating income
(c) 53,865 51,857
105,266 107,755
Operating
margin 24.3 % 24.1 %
24.3 % 24.9 %
EBITDA $ 61,499 $ 58,516
$
120,323 $ 121,577
EBITDA margin 27.7 %
27.2 %
27.7 % 28.0 %
Depreciation and
amortization $ 7,587 $ 6,649
$
14,843 $ 13,010
Capital expenditures 4,323
8,555
7,613 13,524
Health & Science
Technologies Net sales $ 186,568 $ 188,405
$ 372,911 $ 367,525
Operating income
(c) 41,125 42,060
81,824 79,517
Operating
margin 22.0 % 22.3 %
21.9 % 21.6 %
EBITDA $ 52,902 $ 51,886
$
104,835 $ 99,682
EBITDA margin 28.4 %
27.5 %
28.1 % 27.1 %
Depreciation and
amortization $ 11,020 $ 10,487
$
21,881 $ 20,695
Capital expenditures 2,868
2,677
7,005 5,562
Fire & Safety/Diversified
Products Net sales $ 141,611 $ 111,941
$ 246,229 $ 218,563
Operating income
(c) 34,116 31,482
59,520 58,644
Operating
margin 24.1 % 28.1 %
24.2 % 26.8 %
EBITDA $ 38,120 $ 32,993
$
65,096 $ 62,549
EBITDA margin 26.9 %
29.5 %
26.4 % 28.6 %
Depreciation and
amortization $ 3,250 $ 1,529
$
4,732 $ 3,061
Capital expenditures 1,164 1,790
2,271 3,112
Corporate Office and Eliminations
Intersegment sales eliminations $ (293
) $ (758 )
$ (525 ) $ (2,550 )
Operating income (loss) (c) (16,130 )
(15,490 )
(31,077 ) (34,250 )
EBITDA
(15,496 ) (15,226 )
(29,971 ) (33,649 )
Depreciation and amortization 318 422
676 831
Capital expenditures 47 727
163 1,628
Company Net sales $ 549,696 $ 514,881
$ 1,052,268 $ 1,017,079
Operating income
112,976 109,909
215,533 211,666
Operating
margin 20.6 % 21.3 %
20.5 % 20.8 %
EBITDA $ 137,025 $ 128,169
$
260,283 $ 250,159
EBITDA margin 24.9 %
24.9 %
24.7 % 24.6 %
Depreciation and
amortization (d) $ 22,175 $ 19,087
$ 42,132 $ 37,597
Capital expenditures
8,402 13,749
17,052 23,826
(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 six 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 and
six 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
which are included in Corporate Office and Eliminations.
(d) Depreciation and amortization excludes amortization
of debt issuance costs.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160718006325/en/
IDEX CorporationInvestor Contact:Heath MittsSenior Vice
President and Chief Financial Officer(847) 498-7070
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