UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report: July 25, 2017
(Date of earliest event reported)
IDEX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 1-10235 | 36-3555336 | ||
(State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
of incorporation) | Identification No.) | |||
1925 W. Field Court
Lake Forest, Illinois 60045
(Address of principal executive offices, including zip code)
(847) 498-7070
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02 – Results of Operations and Financial Condition.
On July 25, 2017, IDEX Corporation (the “Company”) issued a press release announcing financial results for the period ended June 30, 2017.
A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The information in this Current Report furnished pursuant to Item 2.02 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. This information shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended.
Item 7.01 - Regulation FD Disclosure.
Q2 2017 Presentation Slides
Presentation slides discussing IDEX Corporation’s quarterly operating results are attached to this Current Report on Form 8-K as Exhibit 99.2 and are incorporated herein by reference.
The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand the future prospects of a company and make informed investment decisions. This Current Report and the Exhibits hereto may contain “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 Current Report. 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 IDEX’s most recent annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) and the other risks discussed in the company’s filings with the SEC. The forward-looking statements included in this Current Report and the Exhibits hereto are only made as of the date of this Current Report, 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 herein.
The information in this Current Report furnished pursuant to Items 7.01 and 9.01 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. This information shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended. The furnishing of the information in this Current Report in not intended to, and does not, constitute a representation that such furnishing is required by Regulation FD or that the information this Current Report contains is material investor information that is not otherwise publicly available.
Item 9.01 – Financial Statements and Exhibits.
(d) | Exhibits |
99.1 | Press release dated July 25, 2017 announcing IDEX Corporation’s quarterly operating results |
99.2 | Presentation slides of IDEX Corporation’s quarterly operating results |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
IDEX CORPORATION | ||
By: | /s/ WILLIAM K. GROGAN | |
William K. Grogan | ||
Senior Vice President and Chief Financial Officer | ||
July 25, 2017 | ||
EXHBIT INDEX
Exhibit Number | Description | |
99.1 | Press release dated July 25, 2017 | |
99.2 | Presentation slides of IDEX Corporation’s quarterly operating results | |
EX-99.1
TRADED: NYSE (IEX)
For further information:
Investor Contact:
William K. Grogan
Senior Vice President and Chief Financial Officer
(847) 498-7070
TUESDAY, JULY 25, 2017
IDEX REPORTS RECORD SECOND QUARTER ORDERS, SALES AND EPS;
RAISES FULL YEAR GUIDANCE
LAKE FOREST, IL, JULY 25 - IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended June 30, 2017.
Second Quarter 2017 Highlights
• | Orders were up 11 percent overall and 9 percent organically |
• | Sales were up 4 percent overall and 3 percent organically |
• | Operating margin was 21.8 percent, up 110 basis points |
• | EPS was $1.08, up 9 cents, or 9 percent |
Second Quarter 2017
Orders of $585.7 million were up 11 percent (+9 percent organic, +3 percent acquisitions/divestitures and -1 percent foreign currency translation) compared with the prior year period.
Sales of $573.4 million were up 4 percent (+3 percent organic, +3 percent acquisitions/divestitures and -2 percent foreign currency translation) compared with the prior year period.
Gross margin of 44.8 percent was up 40 basis points from the prior year period. Excluding a $3.6 million fair value inventory step-up charge from the prior year period, gross margin would have been down 30 basis points primarily due to higher engineering investments related to organic growth initiatives and the effects from some isolated supply chain challenges.
Operating income of $125.1 million resulted in an operating margin of 21.8 percent, up 110 basis points from the prior year period. The increase in operating margin was primarily due to volume leverage, benefits from prior year restructuring initiatives and the inclusion in the prior year of a net $2.6 million charge related to the fair value inventory step-up and the reversal of a remaining contingent consideration. Operating income drove EBITDA of $146.6 million which was 26 percent of sales and covered interest expense by 13 times.
Net income was $83.8 million which resulted in EPS of $1.08, up 9 cents, or 9 percent, from the prior year period.
Cash from operations for the second quarter of $87.6 million led to free cash flow of $78.2 million, down 2 percent from the prior year period primarily due to the timing of income tax payments and higher working capital related to the timing of receivables. Cash from operations for the six months ended June 30, 2017 was $172.6 million which led to free cash flow of $153.0 million, up 8 percent from the comparable prior year period.
The Company repurchased 24 thousand shares of common stock for $2.2 million in the second quarter.
“Focused growth investments, strong execution, and improved market conditions drove solid results across all three segments. Operating margin was up 110 basis points which contributed to a 9 percent increase in EPS. Demand has continued to improve across the majority of our end-markets and I am pleased with 3 percent organic revenue growth, driven mainly by strength within FMT and HST. The 11 percent increase in orders was led by double digit organic order growth at HST along with high single digit organic order growth at FMT and FSDP. The continued strength in order activity generated an additional $12 million of backlog during the quarter. | |
We continue our commitment to fully fund investments in long-term organic growth opportunities. The growth we experienced in the first half of 2017 supports this investment philosophy as well as our segmentation strategy around our targeted and integrated growth businesses. Our overall capital deployment strategy has not changed as we will continue to pursue strategic M&A, fund shareholder dividends and opportunistically repurchase shares. | |
Based on the positive results from the first half of the year, combined with continued order strength, we are raising full year 2017 adjusted EPS guidance to $4.18 to $4.23, with third quarter EPS of $1.04 to $1.06. We are also increasing full year 2017 organic revenue growth expectations to approximately 5 percent, with 6 percent growth expected in the third quarter.” | |
Andrew K. Silvernail | |
Chairman and Chief Executive Officer | |
Second Quarter 2017 Segment Highlights
Fluid & Metering Technologies
• | Sales of $221.2 million were flat compared to the second quarter of 2016 (+4 percent organic, -3 percent divestitures and -1 percent foreign currency translation). |
• | Operating income of $60.0 million resulted in an operating margin of 27.1 percent, a 270 basis point increase compared to the prior year period operating margin primarily due to volume leverage on organic growth, cost savings from prior year restructuring initiatives and lower amortization. |
• | EBITDA of $65.6 million resulted in an EBITDA margin of 29.6 percent, a 190 basis point increase compared to the prior year period EBITDA margin. |
Health & Science Technologies
• | Sales of $204.4 million reflected a 10 percent increase compared to the second quarter of 2016 (+6 percent organic, +6 percent acquisitions/divestitures and -2 percent foreign currency translation). |
• | Operating income of $46.3 million resulted in an operating margin of 22.6 percent, a 60 basis point increase compared to the prior year period operating margin primarily due to higher volume and cost savings from prior year restructuring initiatives. |
• | EBITDA of $57.4 million resulted in an EBITDA margin of 28.1 percent, a 30 basis point decrease compared to the prior year period EBITDA margin. |
Fire & Safety/Diversified Products
• | Sales of $148.0 million reflected a 4 percent increase compared to the second quarter of 2016 (-1 percent organic, +7 percent acquisition and -2 percent foreign currency translation). |
• | Operating income of $37.2 million resulted in an operating margin of 25.1 percent, an 80 basis point increase compared to the prior year period operating margin primarily due to the inclusion of a fair |
value inventory step-up charge in the prior year period, partially offset by the dilutive impact from prior year acquisitions.
• | EBITDA of $40.3 million resulted in an EBITDA margin of 27.2 percent, a 30 basis point increase compared to the prior year period EBITDA margin. |
For the second quarter of 2017, Fluid & Metering Technologies contributed 38 percent of sales, 42 percent of operating income and 40 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 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. |
• | 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. |
Conference Call to be Broadcast over the Internet
IDEX will broadcast its second quarter earnings conference call over the Internet on Wednesday, July 26, 2017 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 #13652252.
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 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 Proprietary & Confidential
Second Quarter 2017 Earnings
July 26, 2017
IDEX Proprietary & Confidential
Brand names shown in this presentation are registered trademarks of IDEX Corporation and/or its subsidiaries
• IDEX’s Outlook
• Q2 2017 Financial Performance
• Q2 2017 Segment Performance
• Fluid & Metering
• Health & Science
• Fire & Safety / Diversified Products
• 2017 Guidance Detail
• Q&A
1
AGENDA
IDEX Proprietary & Confidential
Brand names shown in this presentation are registered trademarks of IDEX Corporation and/or its subsidiaries
• Dial toll–free: 877.660.6853
• International: 201.612.7415
• Conference ID: #13652252
• Log on to: www.idexcorp.com
2
Replay Information
IDEX Proprietary & Confidential
Brand names shown in this presentation are registered trademarks of IDEX Corporation and/or its subsidiaries
Cautionary Statement Under the Private Securities Litigation Reform Act; Non-GAAP Measures
This presentation and discussion will include 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 in this presentation and
discussion are only made as of today’s date, 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 in this presentation and discussion.
This presentation contains non-GAAP financial information. Reconciliations of non-GAAP measures are included either
in this presentation or our earnings release for the three-month period ending June 30, 2017, which is available on our
website.
3
IDEX Proprietary & Confidential
Brand names shown in this presentation are registered trademarks of IDEX Corporation and/or its subsidiaries
$60
$70
$80
$90
Q2
$80
$78
2016 2017
16.0%
18.0%
20.0%
22.0%
Q2
20.7%
21.8%
2016 2017
$0.90
$1.00
$1.10
$1.20
Q2
$0.99
$1.08
2016 2017
$500
$525
$550
$575
Q2
$550
$573
2016 2017
4
IDEX Q2 Financial Performance
Sales EPS
Operating Margin Free Cash Flow
110 bps increase
9% increase
2% decrease
Organic Sales growth of 3 percent drove a 9 percent increase in EPS
Organic: 3% increase
(Dollars in millions, excl. EPS)
IDEX Proprietary & Confidential
Brand names shown in this presentation are registered trademarks of IDEX Corporation and/or its subsidiaries
5
Fluid & Metering Technologies
Orders Sales
Q2 Sales Mix: Organic 4%
Divestitures -3%
FX -1%
Reported Sales 0%
Q2 Highlights:
FMT organic sales increased for the second quarter in a row
Double-digit growth in orders and sales at the Agriculture platform
Water market showing strong demand in U.S. distribution and municipal end
markets
Strong results in targeted growth areas for the Pump platform, especially in
oil & gas
Operating Margin
Organic Orders and Sales up 9 percent and 4 percent, respectively
$200
$215
$230
$245
Q2
$220
$232
2016 2017
22.0%
24.0%
26.0%
28.0%
Q2
24.4%
27.1%
2016 2017
$200
$210
$220
$230
Q2
$222 $221
2016 2017
270 bps increase Organic: 9% increase Organic: 4% increase
(Dollars in millions)
IDEX Proprietary & Confidential
Brand names shown in this presentation are registered trademarks of IDEX Corporation and/or its subsidiaries
6
Health & Science Technologies
Orders Sales Operating Margin
Q2 Sales Mix: Organic 6%
Acquisition/Divestitures 6%
FX -2%
Reported Sales
10%
Q2 Highlights:
New products and market share wins continue to drive growth at the
Scientific Fluidics and Optics platform
Global strength in pharma and nutritional end markets for MPT
Sealing platform benefitting from extremely strong semiconductor market
Industrial market within HST remains stable
Organic Orders and Sales up 11 percent and 6 percent, respectively
$150
$175
$200
$225
Q2
$182
$212
2016 2017
$180
$190
$200
$210
Q2
$187
$204
2016 2017
20.0%
21.0%
22.0%
23.0%
Q2
22.0%
22.6%
2016 2017
Organic: 11% increase Organic: 6% increase 60 bps increase
(Dollars in millions)
IDEX Proprietary & Confidential
Brand names shown in this presentation are registered trademarks of IDEX Corporation and/or its subsidiaries
7
Fire & Safety / Diversified Products
Orders Sales Operating Margin
Q2 Highlights:
Strength in OEM and municipal markets plus market share wins for the Fire
and Safety group
Strong quarter for Band-It with rebounding energy markets and continued
strength in automotive and industrial markets
Dispensing core markets in Asia and Europe performing well
Organic Orders up 7 percent
Q2 Sales Mix: Organic -1%
Acquisitions 7%
FX -2%
Reported Sales 4%
$100
$115
$130
$145
Q2
$127
$142
2016 2017
Organic: 7% increase
$120
$130
$140
$150
Q2
$142
$148
2016 2017
23.0%
24.0%
25.0%
26.0%
Q2
24.3%
25.1%
2016 2017
Organic: 1% decrease 80 bps increase
(Dollars in millions)
IDEX Proprietary & Confidential
Brand names shown in this presentation are registered trademarks of IDEX Corporation and/or its subsidiaries
Q3 2017
– EPS estimate range: $1.04 – $1.06
– Organic revenue growth: ~ 6%
– Operating margin: ~ 21.8%
– Tax rate: ~ 26.5%
– FX impact: Flat based on June 30, 2017 FX rates
– Corporate costs: ~ $17 million
FY 2017
– Adjusted EPS estimate range: $4.18 – $4.23
– Organic revenue growth: ~ 5%
– Operating margin: ~ 21.8%
– FX impact: Less than 1.0% topline headwind, based on June 30, 2017 FX rates
– Other modeling items
• Tax rate: ~ 27%
• Cap Ex: ~ $45M
• Free Cash Flow will be ~120% of net income
• EPS estimate excludes all future acquisitions and associated costs and any future restructuring charges
• Corporate costs ~ $68 million
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Outlook: 2017 Guidance Summary