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: October 23, 2018
(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 October 23, 2018, IDEX Corporation (the “Company”) issued a press release announcing financial results for the period ended September 30, 2018.
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.
Q3 2018 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 “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 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 the Compay'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 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 is 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.
(a) | Exhibits |
99.1 | Press release dated October 23, 2018 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 | ||
October 24, 2018 | ||
EXHBIT INDEX
For further information: TRADED: NYSE (IEX) EX-99.1
Investor Contact:
William K. Grogan
Senior Vice President and Chief Financial Officer
(847) 498-7070
TUESDAY, OCTOBER 23, 2018
IDEX REPORTS RECORD THIRD QUARTER RESULTS;
Q3 SALES UP 8 PERCENT OVERALL AND 9 PERCENT ORGANICALLY;
Q3 REPORTED EPS WAS $1.37 WITH ADJUSTED EPS OF $1.41
LAKE FOREST, IL, OCTOBER 23 - IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended September 30, 2018.
Third Quarter 2018 Highlights
• | Orders were up 7 percent overall and 8 percent organically |
• | Sales were up 8 percent overall and 9 percent organically |
• | Reported operating margin was 23.3 percent with adjusted operating margin of 24.0 percent, up 200 bps |
• | Reported EPS was $1.37 with adjusted EPS of $1.41, up 31 percent |
Third Quarter 2018
Orders of $615.1 million were up 7 percent compared with the prior year period (+8 percent organic and -1 percent foreign currency translation).
Sales of $622.9 million were up 8 percent compared with the prior year period (+9 percent organic and -1 percent foreign currency translation).
Gross margin of 45.0 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 $145.1 million resulted in an operating margin of 23.3 percent. Excluding $4.6 million of restructuring expenses, adjusted operating income was $149.8 million with an adjusted operating margin of 24.0 percent, up 200 basis points compared with the prior year period primarily due to lower amortization and consulting expenses. Adjusted operating income drove adjusted EBITDA of $167.4 million which was 27 percent of sales and covered interest expense by 15 times.
Provision for income taxes of $26.9 million in the third quarter of 2018 resulted in an effective tax rate (ETR) of 20.2 percent, which was lower than the prior year period ETR of 26.4 percent primarily due to the enactment of U.S. tax reform in 2017 as well as a higher excess tax benefit from stock option exercises in the third quarter of 2018.
Net income was $106.4 million which resulted in EPS of $1.37. Excluding restructuring expenses, adjusted EPS of $1.41 increased 33 cents, or 31 percent, from prior year period EPS.
Cash from operations of $133.3 million led to free cash flow of $114.4 million, which was down 1 percent from the prior year period and 104 percent of adjusted net income. The decrease in free cash flow was primarily due to a discretionary defined benefit pension contribution of $10.3 million along with higher capital expenditures in the third quarter of 2018.
The Company repurchased 210 thousand shares of common stock for $31.2 million in the third quarter.
“Continued strength across most end markets helped produce another quarter of excellent operating results for IDEX. Overall demand remained solid which helped deliver strong organic order and sales growth of 8 percent and 9 percent, respectively, our second consecutive quarter posting these organic growth rates. FMT and FSDP both achieved double-digit organic revenue growth rates, while HST realized mid-single digit organic revenue growth. Adjusted operating margin increased 200 basis points with robust margin expansion across all three segments. Third quarter adjusted EPS of $1.41 was a record and approximately 10 cents above the midpoint of our previous guidance, 6 cents of which was operational over-performance while 4 cents was due to a lower effective tax rate compared with our prior guidance. | |
We remain committed to fund our most encouraging organic opportunities across the Company, which was evidenced by record capital expenditures in the third quarter. This focus on organic growth has now led to nine consecutive quarters of organic order expansion and seven consecutive quarters of organic sales growth. M&A continues to be a top priority for the Company and the acquisition funnel is healthy. With gross debt-to-EBITDA of 1.3 times, our balance sheet stands ready and is able to support our disciplined capital deployment strategy. In the quarter, we distributed $33 million in dividends to shareholders and repurchased 210 thousand shares of common stock for approximately $31 million. | |
Based on our strong third quarter operating results, we are raising our full year organic revenue growth expectations to approximately 8 percent, with approximately 5 to 6 percent expected in the fourth quarter. We are also increasing full year EPS guidance to $5.35 to $5.37, with fourth quarter EPS of $1.25 to $1.27. Our EPS guidance assumes a higher than expected fourth quarter tax rate of 26 percent due to potential changes in certain assumptions associated with the 2017 tax reform.” | |
Andrew K. Silvernail | |
Chairman and Chief Executive Officer | |
Third Quarter 2018 Segment Highlights
Fluid & Metering Technologies
• | Sales of $239.2 million reflected an 8 percent increase compared to the third quarter of 2017 (+12 percent organic, -3 percent divestiture and -1 percent foreign currency translation). |
• | Operating income of $69.8 million resulted in an operating margin of 29.2 percent. Excluding $0.8 million of restructuring expenses, adjusted operating income was $70.6 million with an adjusted operating margin of 29.5 percent, a 140 basis point increase compared to the prior year period primarily due to higher volume and productivity initiatives. |
• | EBITDA of $74.8 million resulted in an EBITDA margin of 31.3 percent. Excluding $0.8 million of restructuring expenses, adjusted EBITDA of $75.6 million resulted in an adjusted EBITDA margin of 31.6 percent, an 80 basis point increase compared to the prior year period. |
Health & Science Technologies
• | Sales of $222.4 million reflected a 7 percent increase compared to the third quarter of 2017 (+6 percent organic, +2 percent acquisition and -1 percent foreign currency translation). |
• | Operating income of $49.1 million resulted in an operating margin of 22.1 percent. Excluding $3.1 million of restructuring expenses, adjusted operating income was $52.2 million with an adjusted operating margin of 23.5 percent, a 130 basis point increase compared to the prior year period primarily due to higher volume and productivity initiatives. |
• | EBITDA of $57.7 million resulted in an EBITDA margin of 26.0 percent. Excluding $3.1 million of restructuring expenses, adjusted EBITDA of $60.8 million resulted in an adjusted EBITDA margin of 27.4 percent, a 70 basis point decrease compared to the prior year period. |
Fire & Safety/Diversified Products
• | Sales of $161.8 million reflected a 10 percent increase compared to the third quarter of 2017 (+11 percent organic and -1 percent foreign currency translation). |
• | Operating income of $44.7 million resulted in an operating margin of 27.6 percent. Excluding $0.1 million of restructuring expenses, adjusted operating income was $44.8 million with an adjusted operating margin of 27.7 percent, a 300 basis point increase compared to the prior year period primarily due to higher volume and productivity initiatives. |
• | EBITDA of $47.9 million resulted in an EBITDA margin of 29.6 percent. Excluding $0.1 million of restructuring expenses, adjusted EBITDA of $48.0 million resulted in an adjusted EBITDA margin of 29.7 percent, a 320 basis point increase compared to the prior year period. |
For the third quarter of 2018, Fluid & Metering Technologies contributed 38 percent of sales, 43 percent of operating income and 41 percent of EBITDA; Health & Science Technologies accounted for 36 percent of sales, 30 percent of operating income and 32 percent of EBITDA; and Fire & Safety/Diversified Products represented 26 percent of sales, 27 percent of operating income and 27 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 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 Organic Net Sales
Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2018 | ||||||||||||||||||||||
FMT | HST | FSDP | IDEX | FMT | HST | FSDP | IDEX | ||||||||||||||||
Change in net sales | 8 | % | 7 | % | 10 | % | 8 | % | 8 | % | 10 | % | 12 | % | 10 | % | |||||||
- Net impact from acquisitions/divestitures | (3 | )% | 2 | % | — | % | — | % | (2 | )% | 1 | % | — | % | — | % | |||||||
- Impact from FX | (1 | )% | (1 | )% | (1 | )% | (1 | )% | 1 | % | 2 | % | 3 | % | 2 | % | |||||||
Change in organic net sales | 12 | % | 6 | % | 11 | % | 9 | % | 9 | % | 7 | % | 9 | % | 8 | % | |||||||
Table 2: Reconciliations of Reported-to-Adjusted Operating Income and Margin (dollars in thousands)
Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
Reported operating income (loss) | $ | 69,755 | $ | 49,144 | $ | 44,726 | $ | (18,492 | ) | $145,133 | $ | 61,988 | $ | 46,073 | $ | 36,199 | $ | (17,756 | ) | $126,504 | |||||||||||||||||||
+ Restructuring expenses | 827 | 3,116 | 60 | 618 | 4,621 | — | — | — | — | — | |||||||||||||||||||||||||||||
Adjusted operating income (loss) | $ | 70,582 | $ | 52,260 | $ | 44,786 | $ | (17,874 | ) | $ | 149,754 | $ | 61,988 | $ | 46,073 | $ | 36,199 | $ | (17,756 | ) | $ | 126,504 | |||||||||||||||||
Net sales (eliminations) | $ | 239,213 | $ | 222,426 | $ | 161,832 | $ | (583 | ) | $ | 622,888 | $ | 220,953 | $ | 207,127 | $ | 146,599 | $ | (189 | ) | $ | 574,490 | |||||||||||||||||
Reported operating margin | 29.2 | % | 22.1 | % | 27.6 | % | n/m | 23.3 | % | 28.1 | % | 22.2 | % | 24.7 | % | n/m | 22.0 | % | |||||||||||||||||||||
Adjusted operating margin | 29.5 | % | 23.5 | % | 27.7 | % | n/m | 24.0 | % | 28.1 | % | 22.2 | % | 24.7 | % | n/m | 22.0 | % | |||||||||||||||||||||
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
Reported operating income (loss) | $ | 207,149 | $ | 153,519 | $ | 130,162 | $ | (61,183 | ) | $ | 429,647 | $ | 179,830 | $ | 134,605 | $ | 106,022 | $ | (53,149 | ) | $ | 367,308 | |||||||||||||||||
+ Restructuring expenses | 1,313 | 5,298 | 427 | 1,213 | 8,251 | 1,566 | 3,028 | 73 | 130 | 4,797 | |||||||||||||||||||||||||||||
Adjusted operating income (loss) | $ | 208,462 | $ | 158,817 | $ | 130,589 | $ | (59,970 | ) | $ | 437,898 | $ | 181,396 | $ | 137,633 | $ | 106,095 | $ | (53,019 | ) | $ | 372,105 | |||||||||||||||||
Net sales (eliminations) | $ | 714,346 | $ | 670,904 | $ | 485,305 | $ | (983 | ) | $ | 1,869,572 | $ | 658,905 | $ | 611,215 | $ | 432,029 | $ | (741 | ) | $ | 1,701,408 | |||||||||||||||||
Reported operating margin | 29.0 | % | 22.9 | % | 26.8 | % | n/m | 23.0 | % | 27.3 | % | 22.0 | % | 24.5 | % | n/m | 21.6 | % | |||||||||||||||||||||
Adjusted operating margin | 29.2 | % | 23.7 | % | 26.9 | % | n/m | 23.4 | % | 27.5 | % | 22.5 | % | 24.6 | % | n/m | 21.9 | % | |||||||||||||||||||||
Table 3: Reconciliations of Reported-to-Adjusted Net Income and EPS (in thousands, except EPS)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Reported net income | $ | 106,352 | $ | 83,768 | $ | 312,436 | $ | 243,511 | |||||||
+ Restructuring expenses | 4,621 | — | 8,251 | 4,797 | |||||||||||
+ Tax impact on restructuring expenses | (1,130 | ) | — | (2,003 | ) | (1,529 | ) | ||||||||
Adjusted net income | $ | 109,843 | $ | 83,768 | $ | 318,684 | $ | 246,779 | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Reported diluted EPS | $ | 1.37 | $ | 1.08 | $ | 4.02 | $ | 3.15 | |||||||
+ Restructuring expenses | 0.06 | — | 0.11 | 0.06 | |||||||||||
+ Tax impact on restructuring expenses | (0.02 | ) | — | (0.03 | ) | (0.02 | ) | ||||||||
Adjusted diluted EPS | $ | 1.41 | $ | 1.08 | $ | 4.10 | $ | 3.19 | |||||||
Diluted weighted average shares | 77,709 | 77,523 | 77,717 | 77,246 | |||||||||||
Table 4: Reconciliations of EBITDA to Net Income (dollars in thousands)
Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
Reported operating income (loss) | $ | 69,755 | $ | 49,144 | $ | 44,726 | $ | (18,492 | ) | $ | 145,133 | $ | 61,988 | $ | 46,073 | $ | 36,199 | $ | (17,756 | ) | $ | 126,504 | |||||||||||||||||
- Other (income) expense - net | 411 | 780 | 342 | (599 | ) | 934 | 230 | (970 | ) | 1,044 | 1,349 | 1,653 | |||||||||||||||||||||||||||
+ Depreciation and amortization | 5,500 | 9,381 | 3,541 | 184 | 18,606 | 6,192 | 11,189 | 3,709 | 190 | 21,280 | |||||||||||||||||||||||||||||
EBITDA | 74,844 | 57,745 | 47,925 | (17,709 | ) | 162,805 | 67,950 | 58,232 | 38,864 | (18,915 | ) | 146,131 | |||||||||||||||||||||||||||
- Interest expense | 10,958 | 11,064 | |||||||||||||||||||||||||||||||||||||
- Provision for income taxes | 26,889 | 30,019 | |||||||||||||||||||||||||||||||||||||
- Depreciation and amortization | 18,606 | 21,280 | |||||||||||||||||||||||||||||||||||||
Reported net income | $ | 106,352 | $ | 83,768 | |||||||||||||||||||||||||||||||||||
Net sales (eliminations) | $ | 239,213 | $ | 222,426 | $ | 161,832 | $ | (583 | ) | $ | 622,888 | $ | 220,953 | $ | 207,127 | $ | 146,599 | $ | (189 | ) | $ | 574,490 | |||||||||||||||||
Reported operating margin | 29.2 | % | 22.1 | % | 27.6 | % | n/m | 23.3 | % | 28.1 | % | 22.2 | % | 24.7 | % | n/m | 22.0 | % | |||||||||||||||||||||
EBITDA margin | 31.3 | % | 26.0 | % | 29.6 | % | n/m | 26.1 | % | 30.8 | % | 28.1 | % | 26.5 | % | n/m | 25.4 | % | |||||||||||||||||||||
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
Reported operating income (loss) | $ | 207,149 | $ | 153,519 | $ | 130,162 | $ | (61,183 | ) | $ | 429,647 | $ | 179,830 | $ | 134,605 | $ | 106,022 | $ | (53,149 | ) | $ | 367,308 | |||||||||||||||||
- Other (income) expense - net | 1,056 | (280 | ) | (3,324 | ) | (1,017 | ) | (3,565 | ) | 707 | 97 | 1,663 | (750 | ) | 1,717 | ||||||||||||||||||||||||
+ Depreciation and amortization | 16,901 | 30,860 | 10,912 | 557 | 59,230 | 17,823 | 34,447 | 10,938 | 598 | 63,806 | |||||||||||||||||||||||||||||
EBITDA | 222,994 | 184,659 | 144,398 | (59,609 | ) | 492,442 | 196,946 | 168,955 | 115,297 | (51,801 | ) | 429,397 | |||||||||||||||||||||||||||
- Interest expense | 33,098 | 33,920 | |||||||||||||||||||||||||||||||||||||
- Provision for income taxes | 87,678 | 88,160 | |||||||||||||||||||||||||||||||||||||
- Depreciation and amortization | 59,230 | 63,806 | |||||||||||||||||||||||||||||||||||||
Reported net income | $ | 312,436 | $ | 243,511 | |||||||||||||||||||||||||||||||||||
Net sales (eliminations) | $ | 714,346 | $ | 670,904 | $ | 485,305 | $ | (983 | ) | $ | 1,869,572 | $ | 658,905 | $ | 611,215 | $ | 432,029 | $ | (741 | ) | $ | 1,701,408 | |||||||||||||||||
Reported operating margin | 29.0 | % | 22.9 | % | 26.8 | % | n/m | 23.0 | % | 27.3 | % | 22.0 | % | 24.5 | % | n/m | 21.6 | % | |||||||||||||||||||||
EBITDA margin | 31.2 | % | 27.5 | % | 29.8 | % | n/m | 26.3 | % | 29.9 | % | 27.6 | % | 26.7 | % | n/m | 25.2 | % | |||||||||||||||||||||
Table 5: Reconciliations of EBITDA to Adjusted EBITDA (dollars in thousands)
Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
EBITDA | $ | 74,844 | $ | 57,745 | $ | 47,925 | $ | (17,709 | ) | $ | 162,805 | $ | 67,950 | $ | 58,232 | $ | 38,864 | $ | (18,915 | ) | $ | 146,131 | |||||||||||||||||
+ Restructuring expenses | 827 | 3,116 | 60 | 618 | 4,621 | — | — | — | — | — | |||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 75,671 | $ | 60,861 | $ | 47,985 | $ | (17,091 | ) | $ | 167,426 | $ | 67,950 | $ | 58,232 | $ | 38,864 | $ | (18,915 | ) | $ | 146,131 | |||||||||||||||||
Adjusted EBITDA margin | 31.6 | % | 27.4 | % | 29.7 | % | n/m | 26.9 | % | 30.8 | % | 28.1 | % | 26.5 | % | n/m | 25.4 | % | |||||||||||||||||||||
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
EBITDA | $ | 222,994 | $ | 184,659 | $ | 144,398 | $ | (59,609 | ) | $ | 492,442 | $ | 196,946 | $ | 168,955 | $ | 115,297 | $ | (51,801 | ) | $ | 429,397 | |||||||||||||||||
+ Restructuring expenses | 1,313 | 5,298 | 427 | 1,213 | 8,251 | 1,566 | 3,028 | 73 | 130 | 4,797 | |||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 224,307 | $ | 189,957 | $ | 144,825 | $ | (58,396 | ) | $ | 500,693 | $ | 198,512 | $ | 171,983 | $ | 115,370 | $ | (51,671 | ) | $ | 434,194 | |||||||||||||||||
Adjusted EBITDA margin | 31.4 | % | 28.3 | % | 29.8 | % | n/m | 26.8 | % | 30.1 | % | 28.1 | % | 26.7 | % | n/m | 25.5 | % | |||||||||||||||||||||
Table 6: Reconciliations of Cash Flows from Operating Activities to Free Cash Flow (in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||||||
September 30, | June 30, | September 30, | |||||||||||||||||
2018 | 2017 | 2018 | 2018 | 2017 | |||||||||||||||
Cash flows from operating activities | $ | 133,327 | $ | 124,000 | $ | 120,697 | 325,753 | $ | 296,580 | ||||||||||
- Capital expenditures | 18,888 | 8,515 | 10,959 | 39,856 | 28,054 | ||||||||||||||
Free cash flow | $ | 114,439 | $ | 115,485 | $ | 109,738 | $ | 285,897 | $ | 268,526 | |||||||||
Conference Call to be Broadcast over the Internet
IDEX will broadcast its third quarter earnings conference call over the Internet on Wednesday, October 24, 2018 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 #13675421.
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, 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)
IDEX CORPORATION
Condensed Consolidated Statements of Operations
(in thousands except per share amounts)
(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 622,888 | $ | 574,490 | $ | 1,869,572 | $ | 1,701,408 | |||||||
Cost of sales | 342,655 | 316,560 | 1,025,320 | 935,612 | |||||||||||
Gross profit | 280,233 | 257,930 | 844,252 | 765,796 | |||||||||||
Selling, general and administrative expenses | 130,479 | 131,426 | 406,354 | 393,691 | |||||||||||
Restructuring expenses | 4,621 | — | 8,251 | 4,797 | |||||||||||
Operating income | 145,133 | 126,504 | 429,647 | 367,308 | |||||||||||
Other (income) expense - net | 934 | 1,653 | (3,565 | ) | 1,717 | ||||||||||
Interest expense | 10,958 | 11,064 | 33,098 | 33,920 | |||||||||||
Income before income taxes | 133,241 | 113,787 | 400,114 | 331,671 | |||||||||||
Provision for income taxes | 26,889 | 30,019 | 87,678 | 88,160 | |||||||||||
Net income | $ | 106,352 | $ | 83,768 | $ | 312,436 | $ | 243,511 | |||||||
Earnings per Common Share: | |||||||||||||||
Basic earnings per common share | $ | 1.39 | $ | 1.09 | $ | 4.07 | $ | 3.19 | |||||||
Diluted earnings per common share | $ | 1.37 | $ | 1.08 | $ | 4.02 | $ | 3.15 | |||||||
Share Data: | |||||||||||||||
Basic weighted average common shares outstanding | 76,562 | 76,309 | 76,507 | 76,215 | |||||||||||
Diluted weighted average common shares outstanding | 77,709 | 77,523 | 77,717 | 77,246 | |||||||||||
IDEX CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 491,767 | $ | 375,950 | |||
Receivables - net | 324,895 | 294,166 | |||||
Inventories | 287,126 | 259,724 | |||||
Other current assets | 51,451 | 74,203 | |||||
Total current assets | 1,155,239 | 1,004,043 | |||||
Property, plant and equipment - net | 276,821 | 258,350 | |||||
Goodwill and intangible assets | 2,104,280 | 2,118,904 | |||||
Other noncurrent assets | 18,467 | 18,331 | |||||
Total assets | $ | 3,554,807 | $ | 3,399,628 | |||
Liabilities and shareholders' equity | |||||||
Current liabilities | |||||||
Trade accounts payable | $ | 141,178 | $ | 147,067 | |||
Accrued expenses | 185,453 | 184,705 | |||||
Short-term borrowings | 536 | 258 | |||||
Dividends payable | 33,046 | 28,945 | |||||
Total current liabilities | 360,213 | 360,975 | |||||
Long-term borrowings | 848,246 | 858,788 | |||||
Other noncurrent liabilities | 285,774 | 293,323 | |||||
Total liabilities | 1,494,233 | 1,513,086 | |||||
Shareholders' equity | 2,060,574 | 1,886,542 | |||||
Total liabilities and shareholders' equity | $ | 3,554,807 | $ | 3,399,628 | |||
IDEX CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 312,436 | $ | 243,511 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 29,725 | 28,425 | |||||
Amortization of intangible assets | 29,505 | 35,381 | |||||
Amortization of debt issuance expenses | 998 | 989 | |||||
Share-based compensation expense | 19,814 | 18,143 | |||||
Deferred income taxes | (1,480 | ) | 1,888 | ||||
Non-cash interest expense associated with forward starting swaps | 4,869 | 5,004 | |||||
Changes in (net of the effect from acquisitions): | |||||||
Receivables | (34,057 | ) | (28,407 | ) | |||
Inventories | (27,903 | ) | (4,869 | ) | |||
Other current assets | 7,635 | (15,113 | ) | ||||
Trade accounts payable | (4,420 | ) | 3,681 | ||||
Accrued expenses | 33 | 9,912 | |||||
Other - net | (11,402 | ) | (1,965 | ) | |||
Net cash flows provided by operating activities | 325,753 | 296,580 | |||||
Cash flows from investing activities | |||||||
Purchases of property, plant and equipment | (39,856 | ) | (28,054 | ) | |||
Purchase of intellectual property | (4,000 | ) | — | ||||
Acquisition of businesses, net of cash acquired | (20,205 | ) | — | ||||
Proceeds from disposal of fixed assets | 211 | 5,159 | |||||
Other - net | (1,180 | ) | (337 | ) | |||
Net cash flows used in investing activities | (65,030 | ) | (23,232 | ) | |||
Cash flows from financing activities | |||||||
Borrowings under revolving credit facilities | — | 33,000 | |||||
Payments under revolving credit facilities | (11,128 | ) | (181,692 | ) | |||
Dividends paid | (94,913 | ) | (82,869 | ) | |||
Proceeds from stock option exercises | 26,793 | 18,980 | |||||
Purchases of common stock | (50,654 | ) | (22,650 | ) | |||
Shares surrendered for tax withholding | (11,260 | ) | (5,903 | ) | |||
Settlement of foreign exchange contracts | 6,593 | 4,406 | |||||
Net cash flows used in financing activities | (134,569 | ) | (236,728 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (10,337 | ) | 30,707 | ||||
Net increase (decrease) in cash | 115,817 | 67,327 | |||||
Cash and cash equivalents at beginning of year | 375,950 | 235,964 | |||||
Cash and cash equivalents at end of period | $ | 491,767 | $ | 303,291 | |||
IDEX CORPORATION
Company and Segment Financial Information - Reported
(dollars in thousands)
(unaudited)
Three Months Ended September 30, (a) | Nine Months Ended September 30, (a) | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Fluid & Metering Technologies | ||||||||||||||||
Net sales | $ | 239,213 | $ | 220,953 | $ | 714,346 | $ | 658,905 | ||||||||
Operating income (b) | 69,755 | 61,988 | 207,149 | 179,830 | ||||||||||||
Operating margin | 29.2 | % | 28.1 | % | 29.0 | % | 27.3 | % | ||||||||
EBITDA | $ | 74,844 | $ | 67,950 | $ | 222,994 | $ | 196,946 | ||||||||
EBITDA margin | 31.3 | % | 30.8 | % | 31.2 | % | 29.9 | % | ||||||||
Depreciation and amortization | $ | 5,500 | $ | 6,192 | $ | 16,901 | $ | 17,823 | ||||||||
Capital expenditures | 6,487 | 3,944 | 15,142 | 12,159 | ||||||||||||
Health & Science Technologies | ||||||||||||||||
Net sales | $ | 222,426 | $ | 207,127 | $ | 670,904 | $ | 611,215 | ||||||||
Operating income (b) | 49,144 | 46,073 | 153,519 | 134,605 | ||||||||||||
Operating margin | 22.1 | % | 22.2 | % | 22.9 | % | 22.0 | % | ||||||||
EBITDA | $ | 57,745 | $ | 58,232 | $ | 184,659 | $ | 168,955 | ||||||||
EBITDA margin | 26.0 | % | 28.1 | % | 27.5 | % | 27.6 | % | ||||||||
Depreciation and amortization | $ | 9,381 | $ | 11,189 | $ | 30,860 | $ | 34,447 | ||||||||
Capital expenditures | 8,614 | 3,015 | 17,296 | 11,489 | ||||||||||||
Fire & Safety/Diversified Products | ||||||||||||||||
Net sales | $ | 161,832 | $ | 146,599 | $ | 485,305 | $ | 432,029 | ||||||||
Operating income (b) | 44,726 | 36,199 | 130,162 | 106,022 | ||||||||||||
Operating margin | 27.6 | % | 24.7 | % | 26.8 | % | 24.5 | % | ||||||||
EBITDA | $ | 47,925 | $ | 38,864 | $ | 144,398 | $ | 115,297 | ||||||||
EBITDA margin | 29.6 | % | 26.5 | % | 29.8 | % | 26.7 | % | ||||||||
Depreciation and amortization | $ | 3,541 | $ | 3,709 | $ | 10,912 | $ | 10,938 | ||||||||
Capital expenditures | 3,787 | 1,506 | 7,232 | 4,178 | ||||||||||||
Corporate Office and Eliminations | ||||||||||||||||
Intersegment sales eliminations | $ | (583 | ) | $ | (189 | ) | $ | (983 | ) | $ | (741 | ) | ||||
Operating income (b) | (18,492 | ) | (17,756 | ) | (61,183 | ) | (53,149 | ) | ||||||||
EBITDA | (17,709 | ) | (18,915 | ) | (59,609 | ) | (51,801 | ) | ||||||||
Depreciation and amortization | 184 | 190 | 557 | 598 | ||||||||||||
Capital expenditures | — | 50 | 186 | 228 | ||||||||||||
Company | ||||||||||||||||
Net sales | $ | 622,888 | $ | 574,490 | $ | 1,869,572 | $ | 1,701,408 | ||||||||
Operating income | 145,133 | 126,504 | 429,647 | 367,308 | ||||||||||||
Operating margin | 23.3 | % | 22.0 | % | 23.0 | % | 21.6 | % | ||||||||
EBITDA | $ | 162,805 | $ | 146,131 | $ | 492,442 | $ | 429,397 | ||||||||
EBITDA margin | 26.1 | % | 25.4 | % | 26.3 | % | 25.2 | % | ||||||||
Depreciation and amortization (c) | $ | 18,606 | $ | 21,280 | $ | 59,230 | $ | 63,806 | ||||||||
Capital expenditures | 18,888 | 8,515 | 39,856 | 28,054 | ||||||||||||
IDEX CORPORATION
Company and Segment Financial Information - Adjusted
(dollars in thousands)
(unaudited)
Three Months Ended September 30, (a) | Nine Months Ended September 30, (a) | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Fluid & Metering Technologies | ||||||||||||||||
Net sales | $ | 239,213 | $ | 220,953 | $ | 714,346 | $ | 658,905 | ||||||||
Adjusted operating income (b) | 70,582 | 61,988 | 208,462 | 181,396 | ||||||||||||
Adjusted operating margin | 29.5 | % | 28.1 | % | 29.2 | % | 27.5 | % | ||||||||
Adjusted EBITDA | $ | 75,671 | $ | 67,950 | $ | 224,307 | $ | 198,512 | ||||||||
Adjusted EBITDA margin | 31.6 | % | 30.8 | % | 31.4 | % | 30.1 | % | ||||||||
Depreciation and amortization | $ | 5,500 | $ | 6,192 | $ | 16,901 | $ | 17,823 | ||||||||
Capital expenditures | 6,487 | 3,944 | 15,142 | 12,159 | ||||||||||||
Health & Science Technologies | ||||||||||||||||
Net sales | $ | 222,426 | $ | 207,127 | $ | 670,904 | $ | 611,215 | ||||||||
Adjusted operating income (b) | 52,260 | 46,073 | 158,817 | 137,633 | ||||||||||||
Adjusted operating margin | 23.5 | % | 22.2 | % | 23.7 | % | 22.5 | % | ||||||||
Adjusted EBITDA | $ | 60,861 | $ | 58,232 | $ | 189,957 | $ | 171,983 | ||||||||
Adjusted EBITDA margin | 27.4 | % | 28.1 | % | 28.3 | % | 28.1 | % | ||||||||
Depreciation and amortization | $ | 9,381 | $ | 11,189 | $ | 30,860 | $ | 34,447 | ||||||||
Capital expenditures | 8,614 | 3,015 | 17,296 | 11,489 | ||||||||||||
Fire & Safety/Diversified Products | ||||||||||||||||
Net sales | $ | 161,832 | $ | 146,599 | $ | 485,305 | $ | 432,029 | ||||||||
Adjusted operating income (b) | 44,786 | 36,199 | 130,589 | 106,095 | ||||||||||||
Adjusted operating margin | 27.7 | % | 24.7 | % | 26.9 | % | 24.6 | % | ||||||||
Adjusted EBITDA | $ | 47,985 | $ | 38,864 | $ | 144,825 | $ | 115,370 | ||||||||
Adjusted EBITDA margin | 29.7 | % | 26.5 | % | 29.8 | % | 26.7 | % | ||||||||
Depreciation and amortization | $ | 3,541 | $ | 3,709 | $ | 10,912 | $ | 10,938 | ||||||||
Capital expenditures | 3,787 | 1,506 | 7,232 | 4,178 | ||||||||||||
Corporate Office and Eliminations | ||||||||||||||||
Intersegment sales eliminations | $ | (583 | ) | $ | (189 | ) | $ | (983 | ) | $ | (741 | ) | ||||
Adjusted operating income (b) | (17,874 | ) | (17,756 | ) | (59,970 | ) | (53,019 | ) | ||||||||
Adjusted EBITDA | (17,091 | ) | (18,915 | ) | (58,396 | ) | (51,671 | ) | ||||||||
Depreciation and amortization | 184 | 190 | 557 | 598 | ||||||||||||
Capital expenditures | — | 50 | 186 | 228 | ||||||||||||
Company | ||||||||||||||||
Net sales | $ | 622,888 | $ | 574,490 | $ | 1,869,572 | $ | 1,701,408 | ||||||||
Adjusted operating income | 149,754 | 126,504 | 437,898 | 372,105 | ||||||||||||
Adjusted operating margin | 24.0 | % | 22.0 | % | 23.4 | % | 21.9 | % | ||||||||
Adjusted EBITDA | $ | 167,426 | $ | 146,131 | $ | 500,693 | $ | 434,194 | ||||||||
Adjusted EBITDA margin | 26.9 | % | 25.4 | % | 26.8 | % | 25.5 | % | ||||||||
Depreciation and amortization (c) | $ | 18,606 | $ | 21,280 | $ | 59,230 | $ | 63,806 | ||||||||
Capital expenditures | 18,888 | 8,515 | 39,856 | 28,054 | ||||||||||||
(a) | Three and nine months data include the results of Finger Lakes Instrumentation (July 2018) and thinXXS (December 2017) in the Health & Science Technologies segment from the date of acquisition and the results of Faure Herman (October 2017) in the Fluid & Metering Technologies segment through the date of disposition. | |||||||||||||||
(b) | Segment operating income excludes unallocated corporate operating expenses which are included in Corporate Office and Eliminations. | |||||||||||||||
(c) | Depreciation and amortization excludes amortization of debt issuance costs. | |||||||||||||||