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IDEX Reports First Quarter Results; Delivers Q1 Operating Margin of 23.8 Percent and Record EPS of $1.44; Raises Full Year EPS Guidance

LAKE FOREST, Ill.--(BUSINESS WIRE)--

IDEX Corporation (IEX) today announced its financial results for the three month period ended March 31, 2019.

First Quarter 2019 Highlights

  • Orders were up 4 percent overall and 6 percent organically
  • Sales were up 2 percent overall and 4 percent organically
  • Operating margin was 23.8 percent, up 120 bps
  • EPS was $1.44, up 12 percent

First Quarter 2019

Orders of $655.5 million were up 4 percent compared with the prior year period (+6 percent organic, +1 percent acquisition and -3 percent foreign currency translation).

Sales of $622.2 million were up 2 percent compared with the prior year period (+4 percent organic and -2 percent foreign currency translation).

Gross margin of 45.6 percent was up 40 basis points compared with the prior year period primarily due to price, productivity initiatives and volume leverage, partially offset by higher engineering investments across all three segments.

Operating income of $147.8 million resulted in an operating margin of 23.8 percent, up 120 basis points compared with the adjusted prior year period primarily due to gross margin expansion as well as lower amortization and variable compensation costs in 2019. Operating income drove EBITDA of $166.6 million which was 27 percent of sales and covered interest expense by 15 times.

Provision for income taxes of $26.7 million in the first quarter of 2019 resulted in an effective tax rate (ETR) of 19.5 percent, which was lower than the prior year period ETR of 24.0 percent primarily due to an increase in foreign tax credits, additional discrete tax expense in 2018 and the mix of global pre-tax income among jurisdictions.

Net income was $110.3 million which resulted in EPS of $1.44, an increase of 15 cents, or 12 percent, from adjusted prior year period EPS.

Cash from operations of $88.7 million led to free cash flow of $75.8 million, which was up 23 percent from the prior year period and 69 percent of net income. The increase in free cash flow was primarily due to increased earnings and favorable working capital partially offset by higher capital expenditures in the first quarter of 2019.

The Company repurchased 370 thousand shares of common stock for $51.7 million in the first quarter of 2019, at an average price of $139.82.

 
“Strong execution drove a solid start to the year for IDEX. First quarter organic orders and sales grew 6 and 4 percent, respectively. We generated $33 million of backlog during the quarter led by strong organic order growth of 10 percent in FMT and 9 percent in FSDP. Sales within most of our end markets remain strong, led by our industrial businesses. However, we continue to see softness in our agriculture and semiconductor markets, along with some volatility in our dispensing and MPT project-related businesses. Operating margin continues to be a great story, increasing 120 basis points with expansion across all three segments in the quarter. Overall, we delivered record first quarter EPS of $1.44, which was approximately 7 cents above the midpoint of our previous guidance, 2 cents of which was operational over achievement, with the remaining 5 cents due to a lower effective tax rate compared to our previous estimate.
 
We continue to invest in resources for our best organic growth opportunities. These investments are paying dividends as evidenced by 11 consecutive quarters of organic order expansion and 9 consecutive quarters of organic sales growth. M&A remains a key priority for the Company and our balance sheet is in a very good position to support the right opportunities. In the meantime, we keep deploying capital in line with our framework, with $33 million returned to shareholders through dividends, and we repurchased 370 thousand shares of our stock for approximately $52 million.
 
Taking into consideration our solid start to the year and favorability from tax, while keeping a cautious eye on the global economy, we are raising full year EPS guidance while maintaining our organic revenue projection. We now expect full year 2019 EPS of $5.70 to $5.85, with projected second quarter EPS of $1.47 to $1.50. Organic revenue growth expectation for both the second quarter and full year is 4 to 5 percent.”
 
Andrew K. Silvernail
Chairman and Chief Executive Officer
 

First Quarter 2019 Segment Highlights

Fluid & Metering Technologies

  • Sales of $242.5 million reflected a 4 percent increase compared to the first quarter of 2018 (+6 percent organic and -2 percent foreign currency translation).
  • Operating income of $71.9 million resulted in an operating margin of 29.6 percent, a 110 basis point increase compared to the adjusted prior year period primarily due to higher volume and productivity initiatives.
  • EBITDA of $77.3 million resulted in an EBITDA margin of 31.9 percent, a 100 basis point increase compared to the adjusted prior year period.

Health & Science Technologies

  • Sales of $225.3 million reflected a 2 percent increase compared to the first quarter of 2018 (+3 percent organic, +1 percent acquisition and -2 percent foreign currency translation).
  • Operating income of $54.2 million resulted in an operating margin of 24.0 percent, a 10 basis point increase compared to the adjusted prior year period primarily due to lower amortization, partially offset by higher engineering investments.
  • EBITDA of $63.4 million resulted in an EBITDA margin of 28.1 percent, a 120 basis point decrease compared to the adjusted prior year period primarily due to business mix and a negative impact from foreign currency.

Fire & Safety/Diversified Products

  • Sales of $156.2 million reflected a 2 percent decrease compared to the first quarter of 2018 (+1 percent organic and -3 percent foreign currency translation).
  • Operating income of $40.3 million resulted in an operating margin of 25.8 percent, a 90 basis point increase compared to the adjusted prior year period primarily due to productivity initiatives.
  • EBITDA of $43.3 million resulted in an EBITDA margin of 27.7 percent, a 190 basis point decrease compared to the adjusted prior year period primarily due to transaction gains included in Other (income) expense in the prior year period.

For the first quarter of 2019, Fluid & Metering Technologies contributed 39 percent of sales, 43 percent of operating income and 42 percent of EBITDA; Health & Science Technologies accounted for 36 percent of sales, 33 percent of operating income and 34 percent of EBITDA; and Fire & Safety/Diversified Products represented 25 percent of sales, 24 percent of operating income and 24 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
March 31, 2019
FMT     HST     FSDP     IDEX
Change in net sales 4 % 2 % (2 )% 2 %
- Net impact from acquisitions % 1 % % %
- Impact from FX (2 )% (2 )% (3 )% (2 )%
Change in organic net sales 6 % 3 % 1 % 4 %
 

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

 
    Three Months Ended March 31,
2019     2018
FMT   HST   FSDP   Corporate   IDEX FMT   HST   FSDP   Corporate   IDEX
Reported operating income (loss) $ 71,866 $ 54,154 $ 40,328 $ (18,566 ) $ 147,782 $ 66,166 $ 51,806 $ 39,554 $ (20,843 ) $ 136,683
+ Restructuring expenses           143   1,059   100   340   1,642  
Adjusted operating income (loss) $ 71,866   $ 54,154   $ 40,328   $ (18,566 ) $ 147,782   $ 66,309   $ 52,865   $ 39,654   $ (20,503 ) $ 138,325  
 
Net sales (eliminations) $ 242,522 $ 225,290 $ 156,159 $ (1,740 ) $ 622,231 $ 232,333 $ 221,075 $ 159,173 $ (257 ) $ 612,324
 
Reported operating margin 29.6 % 24.0 % 25.8 % n/m 23.8 % 28.5 % 23.4 % 24.8 % n/m 22.3 %
Adjusted operating margin 29.6 % 24.0 % 25.8 % n/m 23.8 % 28.5 % 23.9 % 24.9 % n/m 22.6 %
 

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

 
    Three Months Ended
March 31,
2019     2018
Reported net income $ 110,268 $ 98,958
+ Restructuring expenses 1,642
+ Tax impact on restructuring expenses   (379 )
Adjusted net income $ 110,268   $ 100,221  
 
Three Months Ended
March 31,
2019 2018
Reported diluted EPS $ 1.44 $ 1.27
+ Restructuring expenses 0.02
+ Tax impact on restructuring expenses    
Adjusted diluted EPS $ 1.44   $ 1.29  
 
Diluted weighted average shares outstanding 76,284 77,739
 

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

 
    Three Months Ended March 31,

2019

    2018
FMT   HST   FSDP   Corporate   IDEX FMT   HST   FSDP   Corporate   IDEX
Reported operating income (loss) $ 71,866 $ 54,154 $ 40,328 $ (18,566 ) $ 147,782 $ 66,166 $ 51,806 $ 39,554 $ (20,843 ) $ 136,683
- Other (income) expense - net 78 284 505 (1,007 ) (140 ) 134 (597 ) (3,621 ) (365 ) (4,449 )
+ Depreciation and amortization 5,506   9,507   3,462   184   18,659   5,694   11,389   3,774   197   21,054  
EBITDA 77,294 63,377 43,285 (17,375 ) 166,581 71,726 63,792 46,949 (20,281 ) 162,186
- Interest expense 10,921 11,000
- Provision for income taxes 26,733 31,174
- Depreciation and amortization 18,659   21,054  
Reported net income $ 110,268   $ 98,958  
 
Net sales (eliminations) $ 242,522 $ 225,290 $ 156,159 $ (1,740 ) $ 622,231 $ 232,333 $ 221,075 $ 159,173 $ (257 ) $ 612,324
 
Reported operating margin 29.6 % 24.0 % 25.8 % n/m 23.8 % 28.5 % 23.4 % 24.8 % n/m 22.3 %
EBITDA margin 31.9 % 28.1 % 27.7 % n/m 26.8 % 30.9 % 28.9 % 29.5 % n/m 26.5 %
 

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

 
    Three Months Ended March 31,
2019     2018
FMT   HST   FSDP   Corporate   IDEX FMT   HST   FSDP   Corporate   IDEX
EBITDA $ 77,294 $ 63,377 $ 43,285 $ (17,375 ) $ 166,581 $ 71,726 $ 63,792 $ 46,949 $ (20,281 ) $ 162,186
+ Restructuring expenses           143   1,059   100   340   1,642  
Adjusted EBITDA $ 77,294   $ 63,377   $ 43,285   $ (17,375 ) $ 166,581   $ 71,869   $ 64,851   $ 47,049   $ (19,941 ) $ 163,828  
 
Adjusted EBITDA margin 31.9 % 28.1 % 27.7 % n/m 26.8 % 30.9 % 29.3 % 29.6 % n/m 26.8 %
 

Table 6: Reconciliations of Cash Flows from Operating Activities to Free Cash Flow (in thousands)

 
    Three Months Ended
March 31,     December 31,
2019     2018 2018
Cash flows from operating activities $ 88,663 $ 71,729 $ 153,592
- Capital expenditures 12,875   10,009   16,233
Free cash flow $ 75,788   $ 61,720   $ 137,359
 

Conference Call to be Broadcast over the Internet

IDEX will broadcast its first quarter earnings conference call over the Internet on Friday, April 26, 2019 at 9:30 a.m. CT. Chairman and Chief Executive Officer Andy Silvernail and Senior Vice President and Chief Financial Officer William Grogan will discuss the Company’s recent financial performance and respond to questions from the financial analyst community. IDEX invites interested investors to listen to the call and view the accompanying slide presentation, which will be carried live on its website at www.idexcorp.com. Those who wish to participate should log on several minutes before the discussion begins. After clicking on the presentation icon, investors should follow the instructions to ensure their systems are set up to hear the event and view the presentation slides, or download the correct applications at no charge. Investors will also be able to hear a replay of the call by dialing 877.660.6853 (or 201.612.7415 for international participants) using the ID #13684162.

Forward-Looking Statements

This news release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements may relate to, among other things, capital expenditures, acquisitions, cost reductions, cash flow, revenues, earnings, market conditions, global economies and operating improvements, and are indicated by words or phrases such as “anticipates,” “estimates,” “plans,” “expects,” “projects,” “forecasts,” “should,” “could,” “will,” “management believes,” “the Company believes,” “the Company intends,” and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this news release. The risks and uncertainties include, but are not limited to, the following: economic and political consequences resulting from terrorist attacks and wars; levels of industrial activity and economic conditions in the U.S. and other countries around the world; pricing pressures and other competitive factors and levels of capital spending in certain industries, all of which could have a material impact on order rates and the Company's results, particularly in light of the low levels of order backlogs it typically maintains; the Company's ability to make acquisitions and to integrate and operate acquired businesses on a profitable basis; the relationship of the U.S. dollar to other currencies and its impact on pricing and cost competitiveness; political and economic conditions in foreign countries in which the Company operates; developments with respect to trade policy and tariffs; interest rates; capacity utilization and the effect this has on costs; labor markets; market conditions and material costs; and developments with respect to contingencies, such as litigation and environmental matters. Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” section included in the Company’s most recent annual report on Form 10-K filed with the SEC and the other risks discussed in the Company’s filings with the SEC. The forward-looking statements included here are only made as of the date of this news release, and management undertakes no obligation to publicly update them to reflect subsequent events or circumstances, except as may be required by law. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented here.

About IDEX

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

(Financial reports follow)

 
IDEX CORPORATION

Condensed Consolidated Statements of Operations

(in thousands except per share amounts)

(unaudited)

 
    Three Months Ended
March 31,
2019     2018
Net sales $ 622,231 $ 612,324
Cost of sales     338,397       335,672  
Gross profit 283,834 276,652
Selling, general and administrative expenses 136,052 138,327
Restructuring expenses           1,642  
Operating income 147,782 136,683
Other (income) expense - net (140 ) (4,449 )
Interest expense     10,921       11,000  
Income before income taxes 137,001 130,132
Provision for income taxes     26,733       31,174  
Net income     $ 110,268       $ 98,958  
 
Earnings per Common Share:
Basic earnings per common share $ 1.46 $ 1.29
Diluted earnings per common share $ 1.44 $ 1.27
 
Share Data:
Basic weighted average common shares outstanding 75,442 76,419
Diluted weighted average common shares outstanding 76,284 77,739
 

IDEX CORPORATION

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 
    March 31, 2019     December 31, 2018
Assets
Current assets
Cash and cash equivalents $ 456,130 $ 466,407
Receivables - net 333,782 312,192
Inventories 298,327 279,995
Other current assets     40,989       33,938
Total current assets 1,129,228 1,092,532
Property, plant and equipment - net 271,920 281,220
Goodwill and intangible assets 2,067,148 2,081,282
Other noncurrent assets     83,164       18,823
Total assets     $ 3,551,460       $ 3,473,857
 
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable $ 160,594 $ 143,196
Accrued expenses 178,198 187,536
Short-term borrowings 455 483
Dividends payable           33,446
Total current liabilities 339,247 364,661
Long-term borrowings 848,437 848,335
Other noncurrent liabilities     308,544       266,221
Total liabilities 1,496,228 1,479,217
Shareholders' equity     2,055,232       1,994,640
Total liabilities and shareholders' equity     $ 3,551,460       $ 3,473,857
 
IDEX CORPORATION

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 
    Three Months Ended March 31,
2019     2018
Cash flows from operating activities
Net income $ 110,268 $ 98,958
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 9,660 10,183
Amortization of intangible assets 8,999 10,871
Amortization of debt issuance expenses 335 332
Share-based compensation expense 7,560 7,652
Deferred income taxes 3,027 (2,041 )
Non-cash interest expense associated with forward starting swaps 1,588 1,632
Changes in (net of the effect from acquisitions):
Receivables (21,402 ) (30,816 )
Inventories (18,548 ) (21,116 )
Other current assets (7,119 ) 16,881
Trade accounts payable 17,488 8,215
Accrued expenses (24,606 ) (27,273 )
Other - net     1,413       (1,749 )
Net cash flows provided by operating activities 88,663 71,729
Cash flows from investing activities
Purchases of property, plant and equipment (12,875 ) (10,009 )
Proceeds from disposal of fixed assets 629
Other - net     (195 )     (184 )
Net cash flows used in investing activities (12,441 ) (10,193 )
Cash flows from financing activities
Dividends paid (33,446 ) (28,945 )
Proceeds from stock option exercises 8,870 6,590
Purchases of common stock (50,797 )
Shares surrendered for tax withholding (11,479 ) (10,750 )
Settlement of foreign exchange contracts 6,618
Other     (129 )      
Net cash flows used in financing activities (86,981 ) (26,487 )
Effect of exchange rate changes on cash and cash equivalents     482       1,974  
Net increase (decrease) in cash (10,277 ) 37,023
Cash and cash equivalents at beginning of year     466,407       375,950  
Cash and cash equivalents at end of period     $ 456,130       $ 412,973  
 
IDEX CORPORATION

Company and Segment Financial Information - Reported

(dollars in thousands)

(unaudited)

 
    Three Months Ended

March 31, (a)

2019     2018
Fluid & Metering Technologies
Net sales $ 242,522 $ 232,333
Operating income (b) 71,866 66,166
Operating margin 29.6 % 28.5 %
EBITDA $ 77,294 $ 71,726
EBITDA margin 31.9 % 30.9 %
Depreciation and amortization $ 5,506 $ 5,694
Capital expenditures 3,230 4,674
 
Health & Science Technologies
Net sales $ 225,290 $ 221,075
Operating income (b) 54,154 51,806
Operating margin 24.0 % 23.4 %
EBITDA $ 63,377 $ 63,792
EBITDA margin 28.1 % 28.9 %
Depreciation and amortization $ 9,507 $ 11,389
Capital expenditures 5,304 3,331
 
Fire & Safety/Diversified Products
Net sales $ 156,159 $ 159,173
Operating income (b) 40,328 39,554
Operating margin 25.8 % 24.8 %
EBITDA $ 43,285 $ 46,949
EBITDA margin 27.7 % 29.5 %
Depreciation and amortization $ 3,462 $ 3,774
Capital expenditures 2,953 1,818
 
Corporate Office and Eliminations
Intersegment sales eliminations $ (1,740 ) $ (257 )
Operating income (b) (18,566 ) (20,843 )
EBITDA (17,375 ) (20,281 )
Depreciation and amortization 184 197
Capital expenditures 1,388 186
 
Company
Net sales $ 622,231 $ 612,324
Operating income 147,782 136,683
Operating margin 23.8 % 22.3 %
EBITDA $ 166,581 $ 162,186
EBITDA margin 26.8 % 26.5 %
Depreciation and amortization (c) $ 18,659 $ 21,054
Capital expenditures 12,875 10,009
 

IDEX CORPORATION

Company and Segment Financial Information - Adjusted

(dollars in thousands)

(unaudited)

 
      Three Months Ended

March 31, (a)

2019     2018
Fluid & Metering Technologies
Net sales $ 242,522 $ 232,333
Adjusted operating income (b) 71,866 66,309
Adjusted operating margin 29.6 % 28.5 %
Adjusted EBITDA $ 77,294 $ 71,869
Adjusted EBITDA margin 31.9 % 30.9 %
Depreciation and amortization $ 5,506 $ 5,694
Capital expenditures 3,230 4,674
 
Health & Science Technologies
Net sales $ 225,290 $ 221,075
Adjusted operating income (b) 54,154 52,865
Adjusted operating margin 24.0 % 23.9 %
Adjusted EBITDA $ 63,377 $ 64,851
Adjusted EBITDA margin 28.1 % 29.3 %
Depreciation and amortization $ 9,507 $ 11,389
Capital expenditures 5,304 3,331
 
Fire & Safety/Diversified Products
Net sales $ 156,159 $ 159,173
Adjusted operating income (b) 40,328 39,654
Adjusted operating margin 25.8 % 24.9 %
Adjusted EBITDA $ 43,285 $ 47,049
Adjusted EBITDA margin 27.7 % 29.6 %
Depreciation and amortization $ 3,462 $ 3,774
Capital expenditures 2,953 1,818
 
Corporate Office and Eliminations
Intersegment sales eliminations $ (1,740 ) $ (257 )
Adjusted operating income (b) (18,566 ) (20,503 )
Adjusted EBITDA (17,375 ) (19,941 )
Depreciation and amortization 184 197
Capital expenditures 1,388 186
 
Company
Net sales $ 622,231 $ 612,324
Adjusted operating income 147,782 138,325
Adjusted operating margin 23.8 % 22.6 %
Adjusted EBITDA $ 166,581 $ 163,828
Adjusted EBITDA margin 26.8 % 26.8 %
Depreciation and amortization (c) $ 18,659 $ 21,054
Capital expenditures 12,875 10,009
 
(a) Three month data includes the results of Finger Lakes Instrumentation (July 2018) in the Health & Science Technologies segment from the date of acquisition.
(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.

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