LAKE FOREST, Ill.--(BUSINESS WIRE)--Jan. 29, 2019-- IDEX Corporation (NYSE: IEX) today announced its financial results for the three- and twelve- month periods ended December 31, 2018.

Full Year 2018 Highlights

• Orders were up 7 percent overall and 6 percent organically
• Sales were up 9 percent overall and 8 percent organically
• Reported operating margin was 22.9 percent with adjusted operating margin of 23.4 percent, up 150 bps
• Reported EPS was $5.29 with adjusted EPS of $5.41, up 26 percent
• Repurchased 1.3 million shares of common stock for $174 million
• Acquired Finger Lakes Instrumentation and the intellectual property assets of Phantom Controls

Full Year 2018

Orders of $2.5 billion were up 7 percent compared with the prior year (+6 percent organic and +1 percent foreign currency translation).

Sales of $2.5 billion were up 9 percent compared with the prior year (+8 percent organic and +1 percent foreign currency translation).

Gross margin of 45.0 percent was up 10 basis points compared with the prior year primarily due to productivity initiatives and volume leverage, partially offset by higher engineering costs.

Operating income of $569.1 million resulted in an operating margin of 22.9 percent. Excluding $12.1 million of restructuring expenses, adjusted operating income was $581.2 million with an adjusted operating margin of 23.4 percent, up 150 basis points from the prior year mainly due to volume leverage. Adjusted operating income drove adjusted EBITDA of $662.7 million which was 27 percent of sales and covered interest expense by 15 times.

Provision for income taxes of $118.4 million resulted in an effective tax rate (ETR) of 22.4 percent and included the tax impact from restructuring expenses. Excluding the tax impact from restructuring expenses, provision for income taxes was $121.4 million which resulted in an adjusted ETR of 22.4 percent.

Net income was $410.6 million which resulted in EPS of $5.29. Excluding restructuring expenses, adjusted EPS of $5.41 increased $1.10, or 26 percent, from prior year adjusted EPS.

Cash from operations of $479.3 million was up 11 percent from the prior year and led to free cash flow of $423.3 million, which was up 9 percent from the prior year and 101 percent of adjusted net income primarily due to working capital and capital expenditure investments to support long-term growth.

Fourth Quarter 2018

Orders of $610.3 million were up 1 percent compared with the prior year period (+2 percent organic and -1 percent foreign currency translation).

Sales of $614.1 million were up 5 percent compared with the prior year period (+5 percent organic, +1 percent acquisition/divestitures and -1 percent foreign currency translation).

Gross margin of 44.6 percent was up 10 basis points compared with the prior year period primarily due to productivity initiatives and volume leverage, partially offset by higher engineering costs.

Operating income of $139.4 million resulted in an operating margin of 22.7 percent. Excluding $3.8 million of restructuring expenses, adjusted operating income was $143.2 million with an adjusted operating margin of 23.3 percent, up 120 basis points from the prior year period mainly due to volume leverage. Adjusted operating income drove adjusted EBITDA of $162.0 million which was 26 percent of sales and covered interest expense by almost 15 times.

Provision for income taxes of $30.7 million resulted in an ETR of 23.8 percent and included the tax impact from restructuring expenses. Excluding the tax impact from restructuring expenses, provision for income taxes was $31.7 million which resulted in an adjusted ETR of 23.9 percent.

Net income was $98.1 million which resulted in EPS of $1.27. Excluding restructuring expenses, adjusted EPS of $1.31 increased 19 cents, or 17 percent, from the prior year period adjusted EPS.

Cash from operations of $153.6 million was up 13 percent from the prior year period and led to free cash flow of $137.4 million, which was up 14 percent from the prior year period and 136 percent of adjusted net income.

The Company repurchased 917 thousand shares of common stock for $122 million in the fourth quarter of 2018.

Fourth Quarter 2018 Segment Highlights

Fluid & Metering Technologies

• Sales of $237.2 million reflected a 7 percent increase compared to the fourth quarter of 2017 (+8 percent organic and -1 percent foreign currency translation).
• Operating income of $67.9 million resulted in an operating margin of 28.6 percent. Excluding $1.1 million of restructuring expenses, adjusted operating income was $69.0 million with an adjusted operating margin of 29.1 percent, a 70 basis point increase compared to the prior year period primarily due to higher volume and productivity initiatives.
• EBITDA of $73.1 million resulted in an EBITDA margin of 30.8 percent. Excluding $1.1 million of restructuring expenses, adjusted EBITDA of $74.2 million resulted in an adjusted EBITDA margin of 31.3 percent, a 50 basis point increase compared to the prior year period.

Health & Science Technologies

• Sales of $225.5 million reflected an 8 percent increase compared to the fourth quarter of 2017 (+7 percent organic, +2 percent acquisition and -1 percent foreign currency translation).
• Operating income of $52.2 million resulted in an operating margin of 23.1 percent. Excluding $0.6 million of restructuring expenses, adjusted operating income was $52.8 million with an adjusted operating margin of 23.4 percent, a 110 basis point increase compared to the prior year period primarily due to higher volume and productivity initiatives, partially offset by higher engineering costs.
• EBITDA of $62.2 million resulted in an EBITDA margin of 27.6 percent. Excluding $0.6 million of restructuring expenses, adjusted EBITDA of $62.8 million resulted in an adjusted EBITDA margin of 27.8 percent, a 10 basis point decrease compared to the prior year period.

Fire & Safety/Diversified Products

• Sales of $151.7 million reflected a 2 percent decrease compared to the fourth quarter of 2017 (-1 percent organic and -1 percent foreign currency translation).
• Operating income of $38.4 million resulted in an operating margin of 25.3 percent. Excluding $1.8 million of restructuring expenses, adjusted operating income was $40.2 million with an adjusted operating margin of 26.5 percent, flat compared to the prior year period primarily due to productivity initiatives offset by lower volume.
• EBITDA of $42.1 million resulted in an EBITDA margin of 27.8 percent. Excluding $1.8 million of restructuring expenses, adjusted EBITDA of $43.9 million resulted in an adjusted EBITDA margin of 28.9 percent, a 30 basis point increase compared to the prior year period.

For the fourth quarter of 2018, Fluid & Metering Technologies contributed 39 percent of sales, 43 percent of operating income and 41 percent of EBITDA; Health & Science Technologies accounted for 37 percent of sales, 33 percent of operating income and 35 percent of EBITDA; and Fire & Safety/Diversified Products represented 24 percent of sales, 24 percent of operating income and 24 percent of EBITDA.

Corporate Costs

Corporate costs decreased to $18.7 million in the fourth quarter of 2018 from $21.2 million in the fourth quarter of 2017 as a result of lower outside consulting costs.

Corporate costs increased to $78.7 million in 2018 compared to $74.2 million in 2017 as a result of a stamp duty tax in Switzerland associated with the restructuring of intercompany loans and higher stock compensation.

Restructuring Actions

The Company recorded $3.8 million and $12.1 million of restructuring expenses in the fourth quarter and full year 2018, respectively, as part of initiatives that support the implementation of key strategic efforts designed to facilitate long-term, sustainable growth through cost reduction actions, primarily consisting of employee reductions and facility rationalization. A portion of the restructuring expenses also relates to expenses associated with the consolidation of three facilities into our Optics Center of Excellence in Rochester, New York. The consolidation of these facilities is expected to be completed by early 2019.

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 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 plus or minus the net loss or gain on sale of businesses.
• Adjusted operating margin is calculated as adjusted operating income divided by net sales.
• Adjusted net income is calculated as net income plus restructuring expenses plus or minus the net loss or gain on sale of businesses, 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 plus or minus the net loss or gain on sale of businesses.
• Free cash flow is calculated as cash flow from operating activities less capital expenditures.

Table 1: Reconciliations of the Change in Net Sales to Organic Net Sales

Table 2: Reconciliations of Reported-to-Adjusted Operating Income and Margin (dollars in thousands)

Table 3: Reconciliations of Reported-to-Adjusted Net Income and EPS(in thousands, except EPS)

Table 4: Reconciliations of EBITDA to Net Income(dollars in thousands)

Table 5: Reconciliations of EBITDA to Adjusted EBITDA(dollars in thousands)

Table 6: Reconciliations of Free Cash Flow(in thousands)

Conference Call to be Broadcast over the Internet

IDEX will broadcast its fourth quarter earnings conference call over the Internet on Wednesday, January 30, 2019 at 9:30 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 #13684161.

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 “anticipates,” “estimates,” “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 the Company's results, particularly in light of the low levels of order backlogs it typically maintains; the Company's 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; developments with respect to trade policy and tariffs; 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 is a global fluidics leader serving high growth specialized markets. We are best known for our expertise in highly engineered fluidics systems and components, as well as for our expertise in fire and safety products including the Jaws of Life® family of rescue and recovery tools. Our products touch lives every day. Whether it’s a life-saving rescue operation, dispensing fresh juice to a first grader or fueling aircraft, IDEX is a leader in creating enabling technology used in many of the most common everyday activities. For more information, please visit www.idexcorp.com. IDEX shares are traded on the New York Stock Exchange under the symbol “IEX”.

(Financial reports follow)

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Source: IDEX Corporation

Investor Contact:
William K. Grogan
Senior Vice President and Chief Financial Officer
(847) 498-7070