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: April 23, 2020
(Date of earliest event reported)
(Exact name of registrant as specified in its charter)
(State or other jurisdiction | (Commission File Number) | (IRS Employer | ||
of incorporation) | Identification No.) | |||
(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)) | |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company | ||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | ||||||||
Item 2.02 – Results of Operations and Financial Condition.
On April 23, 2020, IDEX Corporation (the “Company”) issued a press release announcing financial results for the period ended March 31, 2020.
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.
Q1 2020 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, the anticipated effects of the coronavirus pandemic, including with respect to the Company's sales, facility closures, supply chains and access to capital, 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: the duration of the coronavirus pandemic and the effects of the coronavirus on our ability to operate our business and facilities, on our customers, on supply chains and on the U.S. and global economy generally; 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 and the Company's subsequent quarterly reports filed with the Securities and Exchange Commission (SEC) as well as 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 April 23, 2020 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 | ||
April 24, 2020 | ||
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
THURSDAY, APRIL 23, 2020
IDEX REPORTS FIRST QUARTER RESULTS
LAKE FOREST, IL, APRIL 23 - IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended March 31, 2020.
First Quarter 2020 Highlights
• | Gross margin was 45.7 percent, up 10 bps |
• | Increased backlog by $50 million |
• | Completed the acquisition of Flow Management Devices, LLC on February 28, 2020 |
First Quarter 2020
Orders of $644.9 million were down 2 percent compared with the prior year period (-2 percent organic, +1 percent acquisitions and -1 percent foreign currency translation).
Sales of $594.5 million were down 4 percent compared with the prior year period (-5 percent organic, +2 percent acquisitions and -1 percent foreign currency translation).
Gross margin of 45.7 percent was up 10 basis points compared with the prior year period primarily due to price, productivity initiatives and an overall tight cost control environment, partially offset by reduced volume.
Operating income of $139.9 million resulted in an operating margin of 23.5 percent, down 30 basis points compared with the prior year period primarily due to the dilutive impact of the acquisition of Velcora Holding AB and lower volume leverage, partially offset by gross margin expansion as well as an overall reduction in variable expenses.
Provision for income taxes of $25.5 million in the first quarter of 2020 resulted in an effective tax rate (ETR) of 20.0 percent, which was higher than the prior year period ETR of 19.5 percent primarily due to a decrease in the excess tax benefits related to share-based compensation.
Net income was $102.0 million which resulted in EPS of $1.33, a decrease of 11 cents, or 8 percent, from the prior year period EPS. EBITDA of $158.4 million was 26.6 percent of sales and covered interest expense by almost 15 times.
Cash from operations of $84.8 million led to free cash flow of $72.0 million, which was down 5 percent from the prior year period and was 71 percent of net income compared to 69 percent of net income in the prior year period. The decrease in free cash flow was primarily due to lower earnings, partially offset by a favorable change in accrued expenses in the first quarter of 2020.
The Company repurchased 867 thousand shares of common stock for $108.9 million in the first quarter of 2020 at an average price of $125.64.
“In the first quarter, our teams maintained strong focus and execution in the face of an increasingly challenging macro environment. First quarter organic orders decreased two percent and organic sales decreased five percent. We increased backlog by $50 million, expanded gross margins and delivered an operating margin of 23.5 percent and earnings per share of $1.33. | |
The coronavirus is creating an economic impact the world has not seen before, but we believe IDEX is well positioned to survive and thrive through the crisis. We have the people, the quality of businesses, and the financial wherewithal to endure. | |
IDEX is a diverse company both in the end markets we serve and the locations of our businesses. We expect this diversity will help us navigate through these unprecedented times. We are focused on the safety of our employees, our business continuity, and our liquidity to ensure that all stakeholders are properly prioritized. We also have an eye on the future. We believe our strong balance sheet, with over $1.2 billion of liquidity and gross leverage of 1.5 times, will allow us to capitalize on opportunities as the world emerges from this crisis. | |
As we enter the second quarter, we do see material commercial headwinds and are planning for sales to be down 15 to 25 percent in the second quarter of 2020. This will have a significant impact on earnings, but our teams are focused on cash management and taking action to deliver strong relative operational cash flow. We believe we have ample liquidity to fund operations, make targeted investments and pay our dividend. | |
Due to the uncertain scope and duration of the COVID-19 pandemic, and uncertain timing of a global recovery and economic normalization, we are unable to estimate the overall impacts on our operations and financial results as we move forward. As a result, we are withdrawing all prior financial guidance, which was provided on January 30, 2020, and suspending all future financial guidance for the balance of the year.” | |
Andrew K. Silvernail | |
Chairman and Chief Executive Officer | |
First Quarter 2020 Segment Highlights
Fluid & Metering Technologies
• | Sales of $226.9 million reflected a 6 percent decrease compared to the first quarter of 2019 (-5 percent organic and -1 percent foreign currency translation). |
• | Operating income of $66.8 million resulted in an operating margin of 29.4 percent, a 20 basis point decrease compared to the prior year period primarily due to lower volume, partially offset by price and productivity initiatives. |
• | EBITDA of $71.4 million resulted in an EBITDA margin of 31.5 percent, a 40 basis point decrease compared to the prior year period. |
Health & Science Technologies
• | Sales of $224.1 million reflected a 1 percent decrease compared to the first quarter of 2019 (-4 percent organic, +4 percent acquisition and -1 percent foreign currency translation). |
• | Operating income of $52.6 million resulted in an operating margin of 23.5 percent, a 50 basis point decrease compared to the prior year period primarily due to the impact of the Velcora acquisition amortization and lower volume, partially offset by price and productivity initiatives. |
• | EBITDA of $63.8 million resulted in an EBITDA margin of 28.5 percent, a 40 basis point increase compared to the prior year period primarily due to the Velcora acquisition. |
Fire & Safety/Diversified Products
• | Sales of $144.3 million reflected an 8 percent decrease compared to the first quarter of 2019 (-7 percent organic and -1 percent foreign currency translation). |
• | Operating income of $38.0 million resulted in an operating margin of 26.4 percent, a 60 basis point increase compared to the prior year period primarily due to business mix, price and productivity initiatives, partially offset by reduced volume. |
• | EBITDA of $42.1 million resulted in an EBITDA margin of 29.2 percent, a 150 basis point increase compared to the prior year period. |
For the first quarter of 2020, Fluid & Metering Technologies contributed 38 percent of sales, 42 percent of operating income and 40 percent of EBITDA; Health & Science Technologies accounted for 38 percent of sales, 34 percent of operating income and 36 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 $17.5 million in the first quarter of 2020 from $18.6 million in the first quarter of 2019 primarily as a result of tightly controlling discretionary spending and lower variable compensation costs in 2020.
Acquisition
On February 28, 2020, the Company completed the acquisition of Flow Management Devices, LLC (“Flow MD”), a privately held provider of flow measurement systems that ensure custody transfer accuracy in the oil and gas industry. Flow MD engineers and manufactures small volume provers. Headquartered in Phoenix, AZ, with operations in Houston, TX and Pittsburgh, PA, Flow MD operates in our Energy group within the Fluid & Metering Technologies segment. Flow MD was acquired for cash consideration of $120.8 million. The entire purchase price was funded with cash on hand.
COVID-19 Impact
The Company continues to help in the fight against COVID-19 with several of our businesses playing critical roles in keeping essential societal functions going. For example, IDEX China is manufacturing hospital grade air compressors for portable ventilators, Vetter is building triage tents for hospitals around the world, Gast is producing thousands of compressors used in mobile sanitizing spray carts, Warren Rupp is selling pumps used in the production of hand sanitizers and IDEX Health and Science designs and manufactures components and sub-systems being used in instruments that have sequenced the RNA of COVID-19 to test for and track the spread of the disease, identify potential treatments and ultimately develop a vaccine.
We are focused on making sure our employees are safe and our operations have the ability to deliver the products needed to support the COVID-19 battle. Most of our sites have been deemed vital operations and remain open, however, the virus has caused a few of our sites to shut down on a temporary basis due to government mandates globally. This has primarily occurred in China, Italy and India with most coming back on line with varying levels of capacity. The Company expects the weeks and months ahead will be especially challenging as this global pandemic continues to progress and, based on currently available information and management's current expectations, the Company anticipates that sales will be down 15 to 25 percent in the second quarter of 2020. Based on management's current expectations, we believe our strong balance sheet, with over $1.2 billion of liquidity and gross leverage of 1.5 times, will provide IDEX the necessary capital to navigate the COVID-19 pandemic for a significant period of time.
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. |
• | 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 the Change in Net Sales to Organic Net Sales
Three Months Ended March 31, 2020 | |||||||||||
FMT | HST | FSDP | IDEX | ||||||||
Change in net sales | (6 | )% | (1 | )% | (8 | )% | (4 | )% | |||
- Net impact from acquisitions | — | % | 4 | % | — | % | 2 | % | |||
- Impact from FX | (1 | )% | (1 | )% | (1 | )% | (1 | )% | |||
Change in organic net sales | (5 | )% | (4 | )% | (7 | )% | (5 | )% | |||
Table 2: Reconciliations of EBITDA to Net Income (dollars in thousands)
Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | |||||||||||||||||||||||||||||||||
Reported operating income (loss) | $ | 66,771 | $ | 52,643 | $ | 38,037 | $ | (17,510 | ) | $ | 139,941 | $ | 71,866 | $ | 54,154 | $ | 40,328 | $ | (18,566 | ) | $ | 147,782 | ||||||||||||||||||||
- Other (income) expense - net | 766 | (531 | ) | (315 | ) | 1,645 | 1,565 | 78 | 284 | 505 | (1,007 | ) | (140 | ) | ||||||||||||||||||||||||||||
+ Depreciation and amortization | 5,398 | 10,659 | 3,759 | 181 | 19,997 | 5,506 | 9,507 | 3,462 | 184 | 18,659 | ||||||||||||||||||||||||||||||||
EBITDA | 71,403 | 63,833 | 1,000 | 42,111 | 2,000 | (18,974 | ) | 3,000 | 158,373 | 77,294 | 63,377 | 43,285 | (17,375 | ) | 166,581 | |||||||||||||||||||||||||||
- Interest expense | 10,877 | 10,921 | ||||||||||||||||||||||||||||||||||||||||
- Provision for income taxes | 25,501 | 26,733 | ||||||||||||||||||||||||||||||||||||||||
- Depreciation and amortization | 19,997 | 18,659 | ||||||||||||||||||||||||||||||||||||||||
Reported net income | $ | 101,998 | $ | 110,268 | ||||||||||||||||||||||||||||||||||||||
Net sales (eliminations) | $ | 226,861 | $ | 224,059 | $ | 144,324 | $ | (782 | ) | $ | 594,462 | $ | 242,522 | $ | 225,290 | $ | 156,159 | $ | (1,740 | ) | $ | 622,231 | ||||||||||||||||||||
Reported operating margin | 29.4 | % | 23.5 | % | 26.4 | % | n/m | 23.5 | % | 29.6 | % | 24.0 | % | 25.8 | % | n/m | 23.8 | % | ||||||||||||||||||||||||
EBITDA margin | 31.5 | % | 28.5 | % | 29.2 | % | n/m | 26.6 | % | 31.9 | % | 28.1 | % | 27.7 | % | n/m | 26.8 | % | ||||||||||||||||||||||||
Table 3: Reconciliations of Cash Flows from Operating Activities to Free Cash Flow (in thousands)
Three Months Ended | |||||||||||
March 31, | December 31, | ||||||||||
2020 | 2019 | 2019 | |||||||||
Cash flows from operating activities | $ | 84,760 | $ | 88,663 | $ | 151,160 | |||||
- Capital expenditures | 12,762 | 12,875 | 14,139 | ||||||||
Free cash flow | $ | 71,998 | $ | 75,788 | $ | 137,021 | |||||
Conference Call to be Broadcast over the Internet
IDEX will broadcast its first quarter earnings conference call over the Internet on Friday, April 24, 2020 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 #13694804.
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, the anticipated effects of the coronavirus pandemic, including with respect to the Company's sales, facility closures, supply chains and access to capital, 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: the duration of the coronavirus pandemic and the effects of the coronavirus on our ability to operate our business and facilities, on our customers, on supply chains and on the U.S. and global economy generally; 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 and the Company's subsequent quarterly reports filed with the SEC as well as 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 (NYSE: IEX) is a company that has undoubtedly touched your life in some way. In fact, IDEX businesses make thousands of products that are mission-critical components in everyday activities. Chances are the car you’re driving has a BAND-IT® clamp holding your side airbag safely in place. If you were ever in a car accident, a Hurst Jaws of Life® rescue tool may have saved your life. If you or a family member is battling cancer, your doctor may have tested your DNA in a quest to find the best targeted medicine for you. It’s likely your DNA test was run on equipment that contains components made by our growing IDEX Health & Science team. Founded in 1988 with three small, entrepreneurial manufacturing companies, we’re proud to say that we now call 40 diverse businesses around the world part of the IDEX family. With 7,000 employees and manufacturing operations in more than 20 countries, IDEX is a high-performing, global $2+ billion company committed to making trusted solutions that improve lives. IDEX shares are traded on the New York Stock Exchange under the symbol “IEX”.
For further information on IDEX Corporation and its business units, visit the company’s website at www.idexcorp.com.
(Financial reports follow)
IDEX CORPORATION
Condensed Consolidated Statements of Operations
(in thousands except per share amounts)
(unaudited)
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Net sales | $ | 594,462 | $ | 622,231 | ||||
Cost of sales | 322,506 | 338,397 | ||||||
Gross profit | 271,956 | 283,834 | ||||||
Selling, general and administrative expenses | 132,015 | 136,052 | ||||||
Operating income | 139,941 | 147,782 | ||||||
Other (income) expense - net | 1,565 | (140 | ) | |||||
Interest expense | 10,877 | 10,921 | ||||||
Income before income taxes | 127,499 | 137,001 | ||||||
Provision for income taxes | 25,501 | 26,733 | ||||||
Net income | $ | 101,998 | $ | 110,268 | ||||
Earnings per Common Share: | ||||||||
Basic earnings per common share | $ | 1.35 | $ | 1.46 | ||||
Diluted earnings per common share | $ | 1.33 | $ | 1.44 | ||||
Share Data: | ||||||||
Basic weighted average common shares outstanding | 75,740 | 75,442 | ||||||
Diluted weighted average common shares outstanding | 76,452 | 76,284 | ||||||
IDEX CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
March 31, 2020 | December 31, 2019 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 569,219 | $ | 632,581 | |||
Receivables - net | 327,835 | 298,186 | |||||
Inventories | 340,581 | 293,467 | |||||
Other current assets | 51,437 | 37,211 | |||||
Total current assets | 1,289,072 | 1,261,445 | |||||
Property, plant and equipment - net | 283,276 | 280,316 | |||||
Goodwill and intangible assets - net | 2,258,178 | 2,167,776 | |||||
Other noncurrent assets | 113,151 | 104,375 | |||||
Total assets | $ | 3,943,677 | $ | 3,813,912 | |||
Liabilities and shareholders' equity | |||||||
Current liabilities | |||||||
Trade accounts payable | $ | 157,724 | $ | 138,463 | |||
Accrued expenses | 208,847 | 180,290 | |||||
Short-term borrowings | 319 | 388 | |||||
Dividends payable | — | 38,736 | |||||
Total current liabilities | 366,890 | 357,877 | |||||
Long-term borrowings | 999,020 | 848,864 | |||||
Other noncurrent liabilities | 347,980 | 343,942 | |||||
Total liabilities | 1,713,890 | 1,550,683 | |||||
Total shareholders' equity | 2,229,787 | 2,263,229 | |||||
Total liabilities and shareholders' equity | $ | 3,943,677 | $ | 3,813,912 | |||
IDEX CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 101,998 | $ | 110,268 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 10,453 | 9,660 | |||||
Amortization of intangible assets | 9,544 | 8,999 | |||||
Amortization of debt issuance expenses | 343 | 335 | |||||
Share-based compensation expense | 6,730 | 7,560 | |||||
Deferred income taxes | 2,012 | 3,027 | |||||
Non-cash interest expense associated with forward starting swaps | 1,545 | 1,588 | |||||
Changes in (net of the effect from acquisitions): | |||||||
Receivables | (24,190 | ) | (21,402 | ) | |||
Inventories | (23,717 | ) | (18,548 | ) | |||
Other current assets | (14,267 | ) | (7,119 | ) | |||
Trade accounts payable | 14,146 | 17,488 | |||||
Accrued expenses | 2,060 | (24,606 | ) | ||||
Other - net | (1,897 | ) | 1,413 | ||||
Net cash flows provided by operating activities | 84,760 | 88,663 | |||||
Cash flows from investing activities | |||||||
Purchases of property, plant and equipment | (12,762 | ) | (12,875 | ) | |||
Acquisition of businesses, net of cash acquired | (120,839 | ) | — | ||||
Proceeds from disposal of fixed assets | 41 | 629 | |||||
Other - net | (160 | ) | (195 | ) | |||
Net cash flows used in investing activities | (133,720 | ) | (12,441 | ) | |||
Cash flows from financing activities | |||||||
Borrowings under revolving credit facilities | 150,000 | — | |||||
Dividends paid | (38,736 | ) | (33,446 | ) | |||
Proceeds from stock option exercises | 2,089 | 8,870 | |||||
Repurchases of common stock | (108,907 | ) | (50,797 | ) | |||
Shares surrendered for tax withholding | (12,119 | ) | (11,479 | ) | |||
Other - net | (129 | ) | (129 | ) | |||
Net cash flows used in financing activities | (7,802 | ) | (86,981 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (6,600 | ) | 482 | ||||
Net decrease in cash | (63,362 | ) | (10,277 | ) | |||
Cash and cash equivalents at beginning of year | 632,581 | 466,407 | |||||
Cash and cash equivalents at end of period | $ | 569,219 | $ | 456,130 | |||
IDEX CORPORATION
Company and Segment Financial Information - Reported
(dollars in thousands)
(unaudited)
Three Months Ended March 31, (a) | |||||||||
2020 | 2019 | ||||||||
Fluid & Metering Technologies | |||||||||
Net sales | $ | 226,861 | $ | 242,522 | |||||
Operating income (b) | 66,771 | 71,866 | |||||||
Operating margin | 29.4 | % | 29.6 | % | |||||
EBITDA | $ | 71,403 | $ | 77,294 | |||||
EBITDA margin | 31.5 | % | 31.9 | % | |||||
Depreciation and amortization | $ | 5,398 | $ | 5,506 | |||||
Capital expenditures | 4,528 | 3,230 | |||||||
Health & Science Technologies | |||||||||
Net sales | $ | 224,059 | $ | 225,290 | |||||
Operating income (b) | 52,643 | 54,154 | |||||||
Operating margin | 23.5 | % | 24.0 | % | |||||
EBITDA | $ | 63,833 | $ | 63,377 | |||||
EBITDA margin | 28.5 | % | 28.1 | % | |||||
Depreciation and amortization | $ | 10,659 | $ | 9,507 | |||||
Capital expenditures | 5,329 | 5,304 | |||||||
Fire & Safety/Diversified Products | |||||||||
Net sales | $ | 144,324 | $ | 156,159 | |||||
Operating income (b) | 38,037 | 40,328 | |||||||
Operating margin | 26.4 | % | 25.8 | % | |||||
EBITDA | $ | 42,111 | $ | 43,285 | |||||
EBITDA margin | 29.2 | % | 27.7 | % | |||||
Depreciation and amortization | $ | 3,759 | $ | 3,462 | |||||
Capital expenditures | 2,884 | 2,953 | |||||||
Corporate Office and Eliminations | |||||||||
Intersegment sales eliminations | $ | (782 | ) | $ | (1,740 | ) | |||
Operating income (b) | (17,510 | ) | (18,566 | ) | |||||
EBITDA | (18,974 | ) | (17,375 | ) | |||||
Depreciation and amortization (c) | 181 | 184 | |||||||
Capital expenditures | 21 | 1,388 | |||||||
Company | |||||||||
Net sales | $ | 594,462 | $ | 622,231 | |||||
Operating income | 139,941 | 147,782 | |||||||
Operating margin | 23.5 | % | 23.8 | % | |||||
EBITDA | $ | 158,373 | $ | 166,581 | |||||
EBITDA margin | 26.6 | % | 26.8 | % | |||||
Depreciation and amortization (c) | $ | 19,997 | $ | 18,659 | |||||
Capital expenditures | 12,762 | 12,875 | |||||||
(a) | Three month data includes the results of the Velcora acquisition in the Health & Science Technologies segment from the date of acquisition (July 2019). | ||||||||
(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. | ||||||||
First Quarter 2020 Earnings April 24, 2020
Agenda IDEX Performance Drivers COVID 19 Financials • Q1 Performance • Liquidity • Break Even Analysis Q2 Summary Q&A 2 IDEX Proprietary & Confidential
Replay Information • Dial toll–free: 877.660.6853 • International: 201.612.7415 • Conference ID: #13694804 • Log on to: www.idexcorp.com 3 IDEX Proprietary & Confidential
Cautionary Statement Cautionary Statement Under the Private Securities Litigation Reform Act; Non-GAAP Measures 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 presentation and discussion 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, the anticipated effects of the coronavirus pandemic, including with respect to the Company's sales, facility closures, supply chains and access to capital, 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: the duration of the coronavirus pandemic and the effects of the coronavirus on our ability to operate our business and facilities, on our customers, on supply chains and on the U.S. and global economy generally; 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 and the Company's subsequent quarterly reports filed with the Securities and Exchange Commission (SEC) as well as 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 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 herein. 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 March 31, 2020, which is available on our website. 4 IDEX Proprietary & Confidential
Business Update IDEX Proprietary & Confidential
IDEX Performance Drivers Great Businesses Distinctive Culture Capital Deployment 6 IDEX Proprietary & Confidential
Samples of How “We’re In This Fight” DNA Sequencing Components to Components for Lab Diagnostics to Analyze COVID-19 RNA, Helping Direct Test for COVID-19 and Antibodies COVID-19 Test Cells Drug and Vaccine Development Mobile Hospital Tents Compressor for Mobile Portable Hospital-Grade Ventilator Air 7 IDEX Proprietary & Confidential Disinfecting Cart
Thanks to our Great Teams! IDEX Proprietary & Confidential
COVID 19 Our View ▪ Four Phases ▪ Acute (Nearing the End) ▪ Ongoing Uncertainty (Next 3-6 months) ▪ Living with the Virus (Fall 2020 into 2021) ▪ The “New Normal” (Early 2021 and Beyond) ▪ Unprecedented economic impact ▪ The pandemic will yield new applications 9 IDEX Proprietary & Confidential
COVID 19 Response Focus on our people around the world and actions taken to Safety keep people physically, emotionally, and financially safe Prepared to manage our businesses in a volatile environment; Business how we handle supply chain, internal operations and customer Continuity disruptions Managing cash flow, strong liquidity position, and our staying Liquidity power Playing Adapting to help with the COVID-19 fight and what we are Offense doing to position ourselves for the recovery 10 IDEX Proprietary & Confidential
Financials IDEX Proprietary & Confidential
IDEX Q1 Financial Performance (Dollars in millions, excl. EPS) Sales Earnings Per Share Organic: 5% decrease 8% decrease $1.44 $1.33 $622 $594 Q1 Q1 2019 2020 2019 2020 Operating Margin Free Cash Flow 30 bps decrease 5% decrease $76 23.8% $72 23.5% Q1 Q1 2019 2020 2019 2020 Q1 guidance achieved in challenging market environment 12 IDEX Proprietary & Confidential
Liquidity (Dollars in millions) FREE CASH FLOW(1) ADJUSTED LEVERAGE(1) 2.5x $600 200% $477 $473 1.9x $500 $423 180% 2.0x 1.7x $362 $389 $400 $322 160% 1.5x 1.5x 1.3x $300 133% 140% 1.3x 114% 115% 112% 113% $200 103% 120% 1.0x $100 100% $- 80% 0.5x 2015 2016 2017 2018 2019 LTM 0.0x Free Cash Flow FCF / Net Income 2015 2016 2017 2018 2019 LTM 900 Cash on Hand and Term Debt Maturities 642 800 700 600 569 500 400 350 300 300 200 150 100 100 100 0 Cash & 2020 2021 2022 2023 2024 2025 Cash Equivalents Capital discipline and conservative leverage with liquidity focus Note: LTM period ending Q1 2020 13 IDEX Proprietary & Confidential (1) Adjusted Leverage = Total Debt / Adjusted EBITDA
Breakeven Cash Flow Current Cost With Discretionary With Structural Structure Cost Controls Actions Inlcuding Breakeven Revenue $1.8B $1.6B $1.5B Dividend % Change vs 2019 (30%) (35%) (40%) Excluding Breakeven Revenue $1.5B $1.3B $1.2B Dividend % Change vs 2019 (40%) (48%) (50%) Break Even Revenue (30%) - (50%) down vs. 2019 14 IDEX Proprietary & Confidential
Q2 Summary ▪ Revenue expected to be down 15% - 25% ▪ Significant discretionary cost reductions, top line flow through ~50% ▪ Balancing additional restructuring actions with optimizing ability to respond to the recovery ▪ Expect to generate positive cash flows including funding our dividend and critical capital needs 15 IDEX Proprietary & Confidential
Appendix IDEX Proprietary & Confidential
Fluid & Metering Technologies (Dollars in millions) Orders Sales Operating Margin Organic: 7% decrease Organic: 5% decrease 20 bps decrease $256 $243 29.6% $236 $227 29.4% Q1 Q1 Q1 2019 2020 2019 2020 2019 2020 Q1 Sales Mix: Organic -5% Q1 Highlights: ❑ Industrials markets challenged as the slow down anticipated at the start of the year FX -1% has been compounded by COVID ❑ Agriculture orders showed resiliency in the quarter Reported Sales -6% ❑ Energy markets challenged by low fuel prices, continuing to hamper capital investment ❑ Chemical market and targeted initiatives drove positive sales in the quarter Cost control and productivity initiatives held margins in challenging market 17 IDEX Proprietary & Confidential
Health & Science Technologies (Dollars in millions) Orders Sales Operating Margin Organic: 6% increase Organic: 4% decrease 50 bps decrease $261 24.0% $225 $224 23.5% $240 Q1 Q1 Q1 2019 2020 2019 2020 2019 2020 Q1 Sales Mix: Organic -4% Q1 Highlights: Acquisition 4% ❑ Life Sciences businesses continue to perform well driven by DNA Sequencing and Microfluidics. Large OEM orders driving the organic increase for the segment FX -1% ❑ Industrial markets across the segment remained challenged in Q1 ❑ MPT performing well on execution of their backlog and strength within the Pharma Reported Sales -1% market ❑ Sealing Solutions saw strengthening in the Semicon market, offset by weakening Automotive and Oil & Gas markets Order strength in Life Sciences, Pharma and Semicon markets 18 IDEX Proprietary & Confidential
Fire & Safety / Diversified Products (Dollars in millions) Orders Sales Operating Margin Organic: 7% decrease Organic: 7% decrease 60 bps increase $156 $162 26.4% $149 $144 25.8% Q1 Q1 Q1 2019 2020 2019 2020 2019 2020 Q1 Sales Mix: Organic -7% Q1 Highlights: ❑ Fire continues to show solid demand with large OEM backlogs FX -1% ❑ Global tenders for Rescue projects are down ❑ Band-IT negatively impacted by declines in Automotive and Aerospace and Reported Sales -8% further erosion in the Oil and Gas markets ❑ Dispensing sales in Europe and Asia declined, offsetting a rebound in North America Challenging market for Band-IT and Dispensing offset by strong demand in Fire 19 IDEX Proprietary & Confidential