EPS Forecast
Revenue Forecast
EX-99.1
2
iex-20200129xex991.htm
EXHIBIT 99.1
Exhibit
For further information: TRADED: NYSE (IEX) EX99.1
Investor Contact:
William K. Grogan
Senior Vice President and Chief Financial Officer
(847) 498-7070
WEDNESDAY, JANUARY 29, 2020
IDEX REPORTS FOURTH QUARTER AND RECORD FULL YEAR 2019 RESULTS
LAKE FOREST, IL, JANUARY 29 - IDEX Corporation (NYSE: IEX) today announced its financial results for the three- and twelve- month periods ended December 31, 2019.
Full Year 2019 Highlights
• | Reported operating margin was 23.2 percent with adjusted operating margin of 24.2 percent, up 80 bps |
• | Reported EPS was $5.56 with adjusted EPS of $5.80, up 7 percent |
• | Free cash flow was a record of $477.2 million, up 13 percent |
• | Acquired the stock of Velcora Holding AB and its operating subsidiaries, Roplan and Steridose in July 2019 |
Full Year 2019
Orders of $2.5 billion were flat compared with the prior year (flat organic, +1 percent acquisition and -1 percent foreign currency translation).
Sales of $2.5 billion were flat compared with the prior year (+1 percent organic, +1 percent acquisition and -2 percent foreign currency translation).
Gross margin of 45.1 percent was up 10 basis points compared with the prior year primarily due to price capture and productivity initiatives, partially offset by inflation and higher engineering costs. Excluding a $3.3 million pre-tax fair value inventory step-up charge related to the Velcora acquisition, adjusted gross margin of 45.2 percent was up 20 basis points.
Operating income of $579.0 million resulted in an operating margin of 23.2 percent. Excluding the $3.3 million fair value inventory step-up charge and $21.0 million of restructuring expenses, adjusted operating income was $603.3 million with an adjusted operating margin of 24.2 percent, up 80 basis points from the prior year mainly due to price, productivity initiatives and lower variable compensation expenses. Adjusted operating income drove adjusted EBITDA of $678.5 million which was 27 percent of sales and covered interest expense by more than 15 times.
Provision for income taxes of $107.4 million resulted in an effective tax rate (ETR) of 20.2 percent, which was lower than the prior year ETR of 22.4 percent primarily due to excess tax benefits and other discrete tax benefits in 2019 and certain one-time charges related to Tax Reform incurred in 2018.
Net income was $425.5 million which resulted in EPS of $5.56. Excluding the fair value inventory step-up charge and restructuring expenses, adjusted EPS of $5.80 increased 39 cents, or 7 percent, from the prior year adjusted EPS.
Cash from operations of $528.1 million was up 10 percent from the prior year and led to free cash flow of $477.2 million, which was up 13 percent from the prior year and 107 percent of adjusted net income. The increase in free cash flow was primarily due to working capital improvements and lower capital expenditures.
The Company repurchased 389 thousand shares of common stock for $54.7 million in 2019.
Fourth Quarter 2019
Orders of $616.6 million were up 1 percent compared with the prior year period (flat organic, +2 percent acquisition and -1 percent foreign currency translation).
Sales of $606.0 million were down 1 percent compared with the prior year period (-2 percent organic, +2 percent acquisition and -1 percent foreign currency translation).
Gross margin of 44.0 percent was down 60 basis points compared with the prior year period primarily due to lower volume leverage, partially offset by price and productivity initiatives.
Operating income of $134.2 million resulted in an operating margin of 22.1 percent. Excluding $7.0 million of restructuring expenses, adjusted operating income was $141.2 million with an adjusted operating margin of 23.3 percent, which was flat compared to the prior year period due to lower variable compensation costs. Adjusted operating income drove adjusted EBITDA of $159.6 million which was 26 percent of sales and covered interest expense by over 14 times.
Provision for income taxes of $25.2 million resulted in an ETR of 20.6 percent, which was lower than the prior year period ETR of 23.8 percent primarily due to excess tax benefits and other discrete tax benefits in 2019 and certain one-time charges related to Tax Reform incurred in the fourth quarter of 2018.
Net income was $96.9 million which resulted in EPS of $1.26. Excluding restructuring expenses, adjusted EPS of $1.33 increased 2 cents, or 2 percent, from the prior year period adjusted EPS.
Cash from operations of $151.2 million was down 2 percent from the prior year period and led to free cash flow of $137.0 million, which was flat compared to the prior year period and 134 percent of adjusted net income.
“IDEX’s full year organic sales increased for the third year in a row and led to record operating results including operating income, EPS, EBITDA and free cash flow. The team captured price and delivered productivity which led to margin expansion. In 2019 adjusted gross margin and adjusted operating margin improved by 20 and 80 basis points, respectively. The team also drove significant improvements in working capital, achieving record free cash flow for the year of $477 million. However, in the fourth quarter of the year global demand for industrial products continued to weaken, with U.S. manufacturing activity in December posting the lowest results in a decade according to the ISM index. This softness in our short cycle industrial facing businesses led to a 2 percent organic sales decline and our adjusted EPS to the low end of our guidance of $1.33. Recognizing these challenging market conditions, we executed a restructuring plan in the fourth quarter which will provide $15 million of savings in 2020. These restructuring actions will help mitigate the impact from the market softness on our financials while allowing us to retain our key investments for future growth. | |
Our strong balance sheet and our ability to generate solid free cash flow even in a slowing demand environment gives us the ability to continue to deploy capital towards our organic growth initiatives and our other capital deployment objectives. M&A remains a key priority and earlier today we announced a definitive agreement to acquire Flow Management Devices LLC (Flow MD), a leading provider of small volume provers used to ensure flow accuracy in critical applications in the oil and gas industry. We are excited for them to be joining the IDEX family of businesses by the end of the first quarter. | |
Looking forward to 2020, our expectation is that the industrial markets will remain challenged through the first half of the year and as a result we are projecting flat to 2 percent organic sales decline for the year, with a 4 to 5 percent organic sales decline in the first quarter. Full year 2020 EPS is projected to be $5.55 to $5.85, with first quarter EPS of $1.30 to $1.34.” | |
Andrew K. Silvernail | |
Chairman and Chief Executive Officer | |
Fourth Quarter 2019 Segment Highlights
Fluid & Metering Technologies
• | Sales of $227.5 million reflected a 4 percent decrease compared to the fourth quarter of 2018 (-3 percent organic and -1 percent foreign currency translation). |
• | Operating income of $61.8 million resulted in an operating margin of 27.2 percent. Excluding $1.9 million of restructuring expenses, adjusted operating income was $63.7 million with an adjusted operating margin of 28.0 percent, a 110 basis point decrease compared to the prior year period primarily due to lower volume. |
• | EBITDA of $67.4 million resulted in an EBITDA margin of 29.6 percent. Excluding $1.9 million of restructuring expenses, adjusted EBITDA of $69.3 million resulted in an adjusted EBITDA margin of 30.5 percent, a 80 basis point decrease compared to the prior year period. |
Health & Science Technologies
• | Sales of $227.3 million reflected a 1 percent increase compared to the fourth quarter of 2018 (-3 percent organic and +4 percent acquisition). |
• | Operating income of $49.1 million resulted in an operating margin of 21.6 percent. Excluding $2.7 million of restructuring expenses, adjusted operating income was $51.8 million with an adjusted operating margin of 22.8 percent, a 60 basis point decrease compared to the prior year period primarily due to higher engineering costs. |
• | EBITDA of $58.6 million resulted in an EBITDA margin of 25.8 percent. Excluding $2.7 million of restructuring expenses, adjusted EBITDA of $61.3 million resulted in an adjusted EBITDA margin of 27.0 percent, a 80 basis point decrease compared to the prior year period. |
Fire & Safety/Diversified Products
• | Sales of $152.0 million were flat compared to the fourth quarter of 2018 (+1 percent organic and -1 percent foreign currency translation). |
• | Operating income of $39.3 million resulted in an operating margin of 25.9 percent. Excluding $0.4 million of restructuring expenses, adjusted operating income was $39.7 million with an adjusted operating margin of 26.2 percent, a 30 basis point decrease compared to the prior year period primarily due to sales mix. |
• | EBITDA of $42.4 million resulted in an EBITDA margin of 27.9 percent. Excluding $0.4 million of restructuring expenses, adjusted EBITDA of $42.8 million resulted in an adjusted EBITDA margin of 28.2 percent, a 70 basis point decrease compared to the prior year period. |
For the fourth quarter of 2019, Fluid & Metering Technologies contributed 38 percent of sales, 41 percent of operating income and 40 percent of EBITDA; Health & Science Technologies accounted for 37 percent of sales, 33 percent of operating income and 35 percent of EBITDA; and Fire & Safety/Diversified Products represented 25 percent of sales, 26 percent of operating income and 25 percent of EBITDA.
Corporate Costs
Corporate costs decreased to $14.2 million in the fourth quarter of 2019 from $18.7 million in the fourth quarter of 2018 primarily as a result of lower variable compensation costs in 2019 compared to prior year period.
Corporate costs decreased to $69.2 million in 2019 compared to $78.7 million in 2018 as a result of lower variable compensation costs in 2019 compared to prior year.
Acquisition
On January 29, 2020, the Company entered into a definitive agreement to acquire Flow Management Devices LLC (Flow MD) for cash consideration of $125 million. Flow MD is based in Phoenix, Arizona and is a leading provider of small volume provers used in the oil and gas industry. Flow MD has annual revenues of $60 million and will be part of our Energy business within the Fluid and Metering Technologies segment. We expect to close the transaction by the end of the first quarter 2020 subject to regulatory approval and customary closing conditions.
Restructuring Actions
The Company recorded $7.0 million and $21.0 million of restructuring expenses in the fourth quarter and full year 2019, respectively, to facilitate long-term, sustainable growth through cost reduction actions, primarily consisting of employee reductions, facility rationalization and impairment charges. The full year 2019 restructuring actions included a $9.7 million impairment charge recorded in the third quarter related to the winding down of a business within the Health & Science Technologies segment.
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 gross profit is calculated as gross profit plus the fair value inventory step-up charge. |
• | Adjusted gross profit margin is calculated as adjusted gross profit divided by net sales. |
• | Adjusted operating income is calculated as operating income plus the fair value inventory step-up charge 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 the fair value inventory step-up charge plus restructuring expenses, net of the statutory tax expense or benefit. |
• | Adjusted EPS is calculated as adjusted net income divided by diluted weighted average shares. |
• | 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 the fair value inventory step-up charge plus restructuring expenses. |
• | Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by net sales. |
• | 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
For the Quarter Ended December 31, 2019 | For the Year Ended December 31, 2019 | ||||||||||||||||||||||
FMT | HST | FSDP | IDEX | FMT | HST | FSDP | IDEX | ||||||||||||||||
Change in net sales | (4 | )% | 1 | % | — | % | (1 | )% | 1 | % | 2 | % | (2 | )% | — | % | |||||||
- Net impact from acquisitions | — | % | 4 | % | — | % | 2 | % | — | % | 2 | % | — | % | 1 | % | |||||||
- Impact from FX | (1 | )% | — | % | (1 | )% | (1 | )% | (1 | )% | (1 | )% | (2 | )% | (2 | )% | |||||||
Change in organic net sales | (3 | )% | (3 | )% | 1 | % | (2 | )% | 2 | % | 1 | % | — | % | 1 | % | |||||||
Table 2: Reconciliations of Reported-to-Adjusted Gross Profit and Margin (dollars in thousands)
For the Quarter Ended December 31, | For the Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Gross profit | $ | 266,885 | $ | 273,643 | $ | 1,125,034 | $ | 1,117,895 | |||||||
+ Fair value inventory step-up charge | — | — | 3,340 | — | |||||||||||
Adjusted gross profit | $ | 266,885 | $ | 273,643 | $ | 1,128,374 | $ | 1,117,895 | |||||||
Net sales | $ | 605,997 | $ | 614,094 | $ | 2,494,573 | $ | 2,483,666 | |||||||
Gross margin | 44.0 | % | 44.6 | % | 45.1 | % | 45.0 | % | |||||||
Adjusted gross margin | 44.0 | % | 44.6 | % | 45.2 | % | 45.0 | % | |||||||
Table 3: Reconciliations of Reported-to-Adjusted Operating Income and Margin (dollars in thousands)
For the Quarter Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
Reported operating income (loss) | $ | 61,763 | $ | 49,113 | $ | 39,349 | $ | (16,052 | ) | $134,173 | $ | 67,911 | $ | 52,160 | $ | 38,439 | $ | (19,069 | ) | $139,441 | |||||||||||||||||||
+ Restructuring expenses | 1,949 | 2,723 | 441 | 1,849 | 6,962 | 1,145 | 606 | 1,757 | 324 | 3,832 | |||||||||||||||||||||||||||||
Adjusted operating income (loss) | $ | 63,712 | $ | 51,836 | $ | 39,790 | $ | (14,203 | ) | $ | 141,135 | $ | 69,056 | $ | 52,766 | $ | 40,196 | $ | (18,745 | ) | $ | 143,273 | |||||||||||||||||
Net sales (eliminations) | $ | 227,456 | $ | 227,293 | $ | 152,025 | $ | (777 | ) | $ | 605,997 | $ | 237,206 | $ | 225,515 | $ | 151,723 | $ | (350 | ) | $ | 614,094 | |||||||||||||||||
Reported operating margin | 27.2 | % | 21.6 | % | 25.9 | % | n/m | 22.1 | % | 28.6 | % | 23.1 | % | 25.3 | % | n/m | 22.7 | % | |||||||||||||||||||||
Adjusted operating margin | 28.0 | % | 22.8 | % | 26.2 | % | n/m | 23.3 | % | 29.1 | % | 23.4 | % | 26.5 | % | n/m | 23.3 | % | |||||||||||||||||||||
For the Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
Reported operating income (loss) | $ | 285,256 | $ | 200,200 | $ | 165,258 | $ | (71,711 | ) | $579,003 | $ | 275,060 | $ | 205,679 | $ | 168,601 | $ | (80,252 | ) | $569,088 | |||||||||||||||||||
+ Restructuring expenses | 2,879 | 14,249 | 1,364 | 2,552 | 21,044 | 2,458 | 5,904 | 2,184 | 1,537 | 12,083 | |||||||||||||||||||||||||||||
+ Fair value inventory step-up charge | — | 3,340 | — | — | 3,340 | — | — | — | — | — | |||||||||||||||||||||||||||||
Adjusted operating income (loss) | $ | 288,135 | $ | 217,789 | $ | 166,622 | $ | (69,159 | ) | $ | 603,387 | $ | 277,518 | $ | 211,583 | $ | 170,785 | $ | (78,715 | ) | $ | 581,171 | |||||||||||||||||
Net sales (eliminations) | $ | 957,028 | $ | 914,446 | $ | 626,770 | $ | (3,671 | ) | $ | 2,494,573 | $ | 951,552 | $ | 896,419 | $ | 637,028 | $ | (1,333 | ) | $ | 2,483,666 | |||||||||||||||||
Reported operating margin | 29.8 | % | 21.9 | % | 26.4 | % | n/m | 23.2 | % | 28.9 | % | 22.9 | % | 26.5 | % | n/m | 22.9 | % | |||||||||||||||||||||
Adjusted operating margin | 30.1 | % | 23.8 | % | 26.6 | % | n/m | 24.2 | % | 29.2 | % | 23.6 | % | 26.8 | % | n/m | 23.4 | % | |||||||||||||||||||||
Table 4: Reconciliations of Reported-to-Adjusted Net Income and EPS (in thousands, except EPS)
For the Quarter Ended December 31, | For the Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Reported net income | $ | 96,850 | $ | 98,137 | $ | 425,521 | $ | 410,573 | |||||||
+ Restructuring expenses | 6,962 | 3,832 | 21,044 | 12,083 | |||||||||||
+ Tax impact on restructuring expenses | (1,630 | ) | (1,029 | ) | (4,966 | ) | (3,032 | ) | |||||||
+ Fair value inventory step-up charge | — | — | 3,340 | — | |||||||||||
+ Tax impact on fair value inventory step-up charge | — | — | (735 | ) | — | ||||||||||
Adjusted net income | $ | 102,182 | $ | 100,940 | $ | 444,204 | $ | 419,624 | |||||||
For the Quarter Ended December 31, | For the Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Reported EPS | $ | 1.26 | $ | 1.27 | $ | 5.56 | $ | 5.29 | |||||||
+ Restructuring expenses | 0.09 | 0.05 | 0.28 | 0.16 | |||||||||||
+ Tax impact on restructuring expenses | (0.02 | ) | (0.01 | ) | (0.07 | ) | (0.04 | ) | |||||||
+ Fair value inventory step-up charge | — | — | 0.04 | — | |||||||||||
+ Tax impact on fair value inventory step-up charge | — | — | (0.01 | ) | — | ||||||||||
Adjusted EPS | $ | 1.33 | $ | 1.31 | $ | 5.80 | $ | 5.41 | |||||||
Diluted weighted average shares | 76,570 | 77,100 | 76,454 | 77,563 | |||||||||||
Table 5: Reconciliations of EBITDA to Net Income (dollars in thousands)
For the Quarter Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
Reported operating income (loss) | $ | 61,763 | $ | 49,113 | $ | 39,349 | $ | (16,052 | ) | $ | 134,173 | $ | 67,911 | $ | 52,160 | $ | 38,439 | $ | (19,069 | ) | $ | 139,441 | |||||||||||||||||
- Other (income) expense - net | (137 | ) | 805 | 498 | (108 | ) | 1,058 | 295 | (912 | ) | (120 | ) | 317 | (420 | ) | ||||||||||||||||||||||||
+ Depreciation and amortization | 5,499 | 10,283 | 3,588 | 160 | 19,530 | 5,469 | 9,079 | 3,581 | 185 | 18,314 | |||||||||||||||||||||||||||||
EBITDA | 67,399 | 58,591 | 42,439 | (15,784 | ) | 152,645 | 73,085 | 62,151 | 42,140 | (19,201 | ) | 158,175 | |||||||||||||||||||||||||||
- Interest expense | 11,079 | 11,036 | |||||||||||||||||||||||||||||||||||||
- Provision for income taxes | 25,186 | 30,688 | |||||||||||||||||||||||||||||||||||||
- Depreciation and amortization | 19,530 | 18,314 | |||||||||||||||||||||||||||||||||||||
Reported net income | $ | 96,850 | $ | 98,137 | |||||||||||||||||||||||||||||||||||
Net sales (eliminations) | $ | 227,456 | $ | 227,293 | $ | 152,025 | $ | (777 | ) | $ | 605,997 | $ | 237,206 | $ | 225,515 | $ | 151,723 | $ | (350 | ) | $ | 614,094 | |||||||||||||||||
Reported operating margin | 27.2 | % | 21.6 | % | 25.9 | % | n/m | 22.1 | % | 28.6 | % | 23.1 | % | 25.3 | % | n/m | 22.7 | % | |||||||||||||||||||||
EBITDA margin | 29.6 | % | 25.8 | % | 27.9 | % | n/m | 25.2 | % | 30.8 | % | 27.6 | % | 27.8 | % | n/m | 25.8 | % | |||||||||||||||||||||
For the Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
Reported operating income (loss) | $ | 285,256 | $ | 200,200 | $ | 165,258 | $ | (71,711 | ) | $ | 579,003 | $ | 275,060 | $ | 205,679 | $ | 168,601 | $ | (80,252 | ) | $ | 569,088 | |||||||||||||||||
- Other (income) expense - net | 475 | 2,441 | 771 | (1,928 | ) | 1,759 | 1,351 | (1,192 | ) | (3,444 | ) | (700 | ) | (3,985 | ) | ||||||||||||||||||||||||
+ Depreciation and amortization | 22,152 | 39,721 | 14,333 | 670 | 76,876 | 22,370 | 39,939 | 14,493 | 742 | 77,544 | |||||||||||||||||||||||||||||
EBITDA | 306,933 | 237,480 | 178,820 | (69,113 | ) | 654,120 | 296,079 | 246,810 | 186,538 | (78,810 | ) | 650,617 | |||||||||||||||||||||||||||
- Interest expense | 44,341 | 44,134 | |||||||||||||||||||||||||||||||||||||
- Provision for income taxes | 107,382 | 118,366 | |||||||||||||||||||||||||||||||||||||
- Depreciation and amortization | 76,876 | 77,544 | |||||||||||||||||||||||||||||||||||||
Reported net income | $425,521 | $410,573 | |||||||||||||||||||||||||||||||||||||
Net sales (eliminations) | $ | 957,028 | $ | 914,446 | $ | 626,770 | $ | (3,671 | ) | $ | 2,494,573 | $ | 951,552 | $ | 896,419 | $ | 637,028 | $ | (1,333 | ) | $ | 2,483,666 | |||||||||||||||||
Reported operating margin | 29.8 | % | 21.9 | % | 26.4 | % | n/m | 23.2 | % | 28.9 | % | 22.9 | % | 26.5 | % | n/m | 22.9 | % | |||||||||||||||||||||
EBITDA margin | 32.1 | % | 26.0 | % | 28.5 | % | n/m | 26.2 | % | 31.1 | % | 27.5 | % | 29.3 | % | n/m | 26.2 | % | |||||||||||||||||||||
Table 6: Reconciliations of EBITDA to Adjusted EBITDA (dollars in thousands)
For the Quarter Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
EBITDA | $ | 67,399 | $ | 58,591 | $ | 42,439 | $ | (15,784 | ) | $ | 152,645 | $ | 73,085 | $ | 62,151 | $ | 42,140 | $ | (19,201 | ) | $ | 158,175 | |||||||||||||||||
+ Restructuring expenses | 1,949 | 2,723 | 441 | 1,849 | 6,962 | 1,145 | 606 | 1,757 | 324 | 3,832 | |||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 69,348 | $ | 61,314 | $ | 42,880 | $ | (13,935 | ) | $ | 159,607 | $ | 74,230 | $ | 62,757 | $ | 43,897 | $ | (18,877 | ) | $ | 162,007 | |||||||||||||||||
Adjusted EBITDA margin | 30.5 | % | 27.0 | % | 28.2 | % | n/m | 26.3 | % | 31.3 | % | 27.8 | % | 28.9 | % | n/m | 26.4 | % | |||||||||||||||||||||
For the Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||||||||||||||||||||
FMT | HST | FSDP | Corporate | IDEX | FMT | HST | FSDP | Corporate | IDEX | ||||||||||||||||||||||||||||||
EBITDA | $ | 306,933 | $ | 237,480 | $ | 178,820 | $ | (69,113 | ) | $ | 654,120 | $ | 296,079 | $ | 246,810 | $ | 186,538 | $ | (78,810 | ) | $ | 650,617 | |||||||||||||||||
+ Restructuring expenses | 2,879 | 14,249 | 1,364 | 2,552 | 21,044 | 2,458 | 5,904 | 2,184 | 1,537 | 12,083 | |||||||||||||||||||||||||||||
+ Fair value inventory step-up charge | — | 3,340 | — | — | 3,340 | — | — | — | — | — | |||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 309,812 | $ | 255,069 | $ | 180,184 | $ | (66,561 | ) | $ | 678,504 | $ | 298,537 | $ | 252,714 | $ | 188,722 | $ | (77,273 | ) | $ | 662,700 | |||||||||||||||||
Adjusted EBITDA margin | 32.4 | % | 27.9 | % | 28.7 | % | n/m | 27.2 | % | 31.4 | % | 28.2 | % | 29.6 | % | n/m | 26.7 | % | |||||||||||||||||||||
Table 7: Reconciliations of Free Cash Flow (in thousands)
For the Quarter Ended | For the Year Ended December 31, | ||||||||||||||||||
December 31, | September 30, | ||||||||||||||||||
2019 | 2018 | 2019 | 2019 | 2018 | |||||||||||||||
Cash flow from operating activities | $ | 151,160 | $ | 153,592 | $ | 157,064 | $ | 528,062 | $ | 479,345 | |||||||||
- Capital expenditures | 14,139 | 16,233 | 11,031 | 50,912 | 56,089 | ||||||||||||||
Free cash flow | $ | 137,021 | $ | 137,359 | $ | 146,033 | $ | 477,150 | $ | 423,256 | |||||||||
Conference Call to be Broadcast over the Internet
IDEX will broadcast its fourth quarter earnings conference call over the Internet on Thursday, January 30, 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 #13694803.
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 (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 for per share amounts)
(unaudited)
For the Quarter Ended December 31, | For the Year Ended December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net sales | $ | 605,997 | $ | 614,094 | $ | 2,494,573 | $ | 2,483,666 | |||||||
Cost of sales | 339,112 | 340,451 | 1,369,539 | 1,365,771 | |||||||||||
Gross profit | 266,885 | 273,643 | 1,125,034 | 1,117,895 | |||||||||||
Selling, general and administrative expenses | 125,750 | 130,370 | 524,987 | 536,724 | |||||||||||
Restructuring expenses | 6,962 | 3,832 | 21,044 | 12,083 | |||||||||||
Operating income | 134,173 | 139,441 | 579,003 | 569,088 | |||||||||||
Other (income) expense - net | 1,058 | (420 | ) | 1,759 | (3,985 | ) | |||||||||
Interest expense | 11,079 | 11,036 | 44,341 | 44,134 | |||||||||||
Income before income taxes | 122,036 | 128,825 | 532,903 | 528,939 | |||||||||||
Provision for income taxes | 25,186 | 30,688 | 107,382 | 118,366 | |||||||||||
Net income | $ | 96,850 | $ | 98,137 | $ | 425,521 | $ | 410,573 | |||||||
Earnings per Common Share: | |||||||||||||||
Basic earnings per common share | $ | 1.28 | $ | 1.29 | $ | 5.62 | $ | 5.36 | |||||||
Diluted earnings per common share | $ | 1.26 | $ | 1.27 | $ | 5.56 | $ | 5.29 | |||||||
Share Data: | |||||||||||||||
Basic weighted average common shares outstanding | 75,779 | 76,128 | 75,594 | 76,412 | |||||||||||
Diluted weighted average common shares outstanding | 76,570 | 77,100 | 76,454 | 77,563 | |||||||||||
IDEX CORPORATION
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 632,581 | $ | 466,407 | |||
Receivables - net | 298,186 | 312,192 | |||||
Inventories | 293,467 | 279,995 | |||||
Other current assets | 37,211 | 33,938 | |||||
Total current assets | 1,261,445 | 1,092,532 | |||||
Property, plant and equipment - net | 280,316 | 281,220 | |||||
Goodwill and intangible assets | 2,167,776 | 2,081,282 | |||||
Other noncurrent assets | 104,375 | 18,823 | |||||
Total assets | $ | 3,813,912 | $ | 3,473,857 | |||
Liabilities and shareholders' equity | |||||||
Current liabilities | |||||||
Trade accounts payable | $ | 138,463 | $ | 143,196 | |||
Accrued expenses | 180,290 | 187,536 | |||||
Short-term borrowings | 388 | 483 | |||||
Dividends payable | 38,736 | 33,446 | |||||
Total current liabilities | 357,877 | 364,661 | |||||
Long-term borrowings | 848,864 | 848,335 | |||||
Other noncurrent liabilities | 343,942 | 266,221 | |||||
Total liabilities | 1,550,683 | 1,479,217 | |||||
Shareholders' equity | 2,263,229 | 1,994,640 | |||||
Total liabilities and shareholders' equity | $ | 3,813,912 | $ | 3,473,857 | |||
IDEX CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
For the Year Ended December 31, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 425,521 | $ | 410,573 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Loss on sale of fixed assets - net | 156 | 946 | |||||
Asset impairments | 10,155 | — | |||||
Depreciation and amortization | 39,543 | 39,049 | |||||
Amortization of intangible assets | 37,333 | 38,495 | |||||
Amortization of debt issuance expenses | 1,355 | 1,332 | |||||
Share-based compensation expense | 27,669 | 24,754 | |||||
Deferred income taxes | 6,625 | (4,345 | ) | ||||
Non-cash interest expense associated with forward starting swaps | 6,327 | 6,475 | |||||
Changes in (net of the effect from acquisitions): | |||||||
Receivables | 22,338 | (23,419 | ) | ||||
Inventories | (3,322 | ) | (23,031 | ) | |||
Other current assets | (2,361 | ) | 25,162 | ||||
Trade accounts payable | (9,115 | ) | (1,220 | ) | |||
Accrued expenses | (37,086 | ) | 4,148 | ||||
Other - net | 2,924 | (19,574 | ) | ||||
Net cash flows provided by operating activities | 528,062 | 479,345 | |||||
Cash flows from investing activities | |||||||
Purchases of property, plant and equipment | (50,912 | ) | (56,089 | ) | |||
Purchase of intellectual property | — | (4,000 | ) | ||||
Acquisition of businesses, net of cash acquired | (87,180 | ) | (20,205 | ) | |||
Proceeds from disposal of fixed assets | 962 | 363 | |||||
Other - net | 115 | (1,500 | ) | ||||
Net cash flows used in investing activities | (137,015 | ) | (81,431 | ) | |||
Cash flows from financing activities | |||||||
Payments under revolving credit facilities | — | (11,284 | ) | ||||
Payments under other long term borrowings | (50,057 | ) | — | ||||
Dividends paid | (147,208 | ) | (127,478 | ) | |||
Proceeds from stock option exercises | 38,809 | 27,639 | |||||
Purchases of common stock | (54,668 | ) | (173,926 | ) | |||
Shares surrendered for tax withholding | (12,596 | ) | (11,555 | ) | |||
Settlement of foreign exchange contracts | — | 6,593 | |||||
Other | (1,865 | ) | — | ||||
Net cash flows used in financing activities | (227,585 | ) | (290,011 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | 2,712 | (17,446 | ) | ||||
Net increase in cash | 166,174 | 90,457 | |||||
Cash and cash equivalents at beginning of year | 466,407 | 375,950 | |||||
Cash and cash equivalents at end of period | $ | 632,581 | $ | 466,407 | |||
IDEX CORPORATION
Company and Segment Financial Information - Reported
(dollars in thousands)
(unaudited)
For the Quarter Ended December 31, (a) | For the Year Ended December 31, (a) | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Fluid & Metering Technologies | ||||||||||||||||
Net sales | $ | 227,456 | $ | 237,206 | $ | 957,028 | $ | 951,552 | ||||||||
Operating income (b) | 61,763 | 67,911 | 285,256 | 275,060 | ||||||||||||
Operating margin | 27.2 | % | 28.6 | % | 29.8 | % | 28.9 | % | ||||||||
EBITDA | $ | 67,399 | $ | 73,085 | $ | 306,933 | $ | 296,079 | ||||||||
EBITDA margin | 29.6 | % | 30.8 | % | 32.1 | % | 31.1 | % | ||||||||
Depreciation and amortization | $ | 5,499 | $ | 5,469 | $ | 22,152 | $ | 22,370 | ||||||||
Capital expenditures | 7,078 | 4,399 | 17,285 | 19,541 | ||||||||||||
Health & Science Technologies | ||||||||||||||||
Net sales | $ | 227,293 | $ | 225,515 | $ | 914,446 | $ | 896,419 | ||||||||
Operating income (b) | 49,113 | 52,160 | 200,200 | 205,679 | ||||||||||||
Operating margin | 21.6 | % | 23.1 | % | 21.9 | % | 22.9 | % | ||||||||
EBITDA | $ | 58,591 | $ | 62,151 | $ | 237,480 | $ | 246,810 | ||||||||
EBITDA margin | 25.8 | % | 27.6 | % | 26.0 | % | 27.5 | % | ||||||||
Depreciation and amortization | $ | 10,283 | $ | 9,079 | $ | 39,721 | $ | 39,939 | ||||||||
Capital expenditures | 5,800 | 8,743 | 22,001 | 26,039 | ||||||||||||
Fire & Safety/Diversified Products | ||||||||||||||||
Net sales | $ | 152,025 | $ | 151,723 | $ | 626,770 | $ | 637,028 | ||||||||
Operating income (b) | 39,349 | 38,439 | 165,258 | 168,601 | ||||||||||||
Operating margin | 25.9 | % | 25.3 | % | 26.4 | % | 26.5 | % | ||||||||
EBITDA | $ | 42,439 | $ | 42,140 | $ | 178,820 | $ | 186,538 | ||||||||
EBITDA margin | 27.9 | % | 27.8 | % | 28.5 | % | 29.3 | % | ||||||||
Depreciation and amortization | $ | 3,588 | $ | 3,581 | $ | 14,333 | $ | 14,493 | ||||||||
Capital expenditures | 1,067 | 3,086 | 9,811 | 10,318 | ||||||||||||
Corporate Office and Eliminations | ||||||||||||||||
Intersegment sales eliminations | $ | (777 | ) | $ | (350 | ) | $ | (3,671 | ) | $ | (1,333 | ) | ||||
Operating income (b) | (16,052 | ) | (19,069 | ) | (71,711 | ) | (80,252 | ) | ||||||||
EBITDA | (15,784 | ) | (19,201 | ) | (69,113 | ) | (78,810 | ) | ||||||||
Depreciation and amortization | 160 | 185 | 670 | 742 | ||||||||||||
Capital expenditures | 194 | 5 | 1,815 | 191 | ||||||||||||
Company | ||||||||||||||||
Net sales | $ | 605,997 | $ | 614,094 | $ | 2,494,573 | $ | 2,483,666 | ||||||||
Operating income | 134,173 | 139,441 | 579,003 | 569,088 | ||||||||||||
Operating margin | 22.1 | % | 22.7 | % | 23.2 | % | 22.9 | % | ||||||||
EBITDA | $ | 152,645 | $ | 158,175 | $ | 654,120 | $ | 650,617 | ||||||||
EBITDA margin | 25.2 | % | 25.8 | % | 26.2 | % | 26.2 | % | ||||||||
Depreciation and amortization (c) | $ | 19,530 | $ | 18,314 | $ | 76,876 | $ | 77,544 | ||||||||
Capital expenditures | 14,139 | 16,233 | 50,912 | 56,089 | ||||||||||||
IDEX CORPORATION
Company and Segment Financial Information - Adjusted
(dollars in thousands)
(unaudited)
For the Quarter Ended December 31, (a) | For the Year Ended December 31, (a) | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Fluid & Metering Technologies | ||||||||||||||||
Net sales | $ | 227,456 | $ | 237,206 | $ | 957,028 | $ | 951,552 | ||||||||
Adjusted operating income (b) | 63,712 | 69,056 | 288,135 | 277,518 | ||||||||||||
Adjusted operating margin | 28.0 | % | 29.1 | % | 30.1 | % | 29.2 | % | ||||||||
Adjusted EBITDA | $ | 69,348 | $ | 74,230 | $ | 309,812 | $ | 298,537 | ||||||||
Adjusted EBITDA margin | 30.5 | % | 31.3 | % | 32.4 | % | 31.4 | % | ||||||||
Depreciation and amortization | $ | 5,499 | $ | 5,469 | $ | 22,152 | $ | 22,370 | ||||||||
Capital expenditures | 7,078 | 4,399 | 17,285 | 19,541 | ||||||||||||
Health & Science Technologies | ||||||||||||||||
Net sales | $ | 227,293 | $ | 225,515 | $ | 914,446 | $ | 896,419 | ||||||||
Adjusted operating income (b) | 51,836 | 52,766 | 217,789 | 211,583 | ||||||||||||
Adjusted operating margin | 22.8 | % | 23.4 | % | 23.8 | % | 23.6 | % | ||||||||
Adjusted EBITDA | $ | 61,314 | $ | 62,757 | $ | 255,069 | $ | 252,714 | ||||||||
Adjusted EBITDA margin | 27.0 | % | 27.8 | % | 27.9 | % | 28.2 | % | ||||||||
Depreciation and amortization | $ | 10,283 | $ | 9,079 | $ | 39,721 | $ | 39,939 | ||||||||
Capital expenditures | 5,800 | 8,743 | 22,001 | 26,039 | ||||||||||||
Fire & Safety/Diversified Products | ||||||||||||||||
Net sales | $ | 152,025 | $ | 151,723 | $ | 626,770 | $ | 637,028 | ||||||||
Adjusted operating income (b) | 39,790 | 40,196 | 166,622 | 170,785 | ||||||||||||
Adjusted operating margin | 26.2 | % | 26.5 | % | 26.6 | % | 26.8 | % | ||||||||
Adjusted EBITDA | $ | 42,880 | $ | 43,897 | $ | 180,184 | $ | 188,722 | ||||||||
Adjusted EBITDA margin | 28.2 | % | 28.9 | % | 28.7 | % | 29.6 | % | ||||||||
Depreciation and amortization | $ | 3,588 | $ | 3,581 | $ | 14,333 | $ | 14,493 | ||||||||
Capital expenditures | 1,067 | 3,086 | 9,811 | 10,318 | ||||||||||||
Corporate Office and Eliminations | ||||||||||||||||
Intersegment sales eliminations | $ | (777 | ) | $ | (350 | ) | $ | (3,671 | ) | $ | (1,333 | ) | ||||
Adjusted operating income (b) | (14,203 | ) | (18,745 | ) | (69,159 | ) | (78,715 | ) | ||||||||
Adjusted EBITDA | (13,935 | ) | (18,877 | ) | (66,561 | ) | (77,273 | ) | ||||||||
Depreciation and amortization | 160 | 185 | 670 | 742 | ||||||||||||
Capital expenditures | 194 | 5 | 1,815 | 191 | ||||||||||||
Company | ||||||||||||||||
Net sales | $ | 605,997 | $ | 614,094 | $ | 2,494,573 | $ | 2,483,666 | ||||||||
Adjusted operating income | 141,135 | 143,273 | 603,387 | 581,171 | ||||||||||||
Adjusted operating margin | 23.3 | % | 23.3 | % | 24.2 | % | 23.4 | % | ||||||||
Adjusted EBITDA | $ | 159,607 | $ | 162,007 | $ | 678,504 | $ | 662,700 | ||||||||
Adjusted EBITDA margin | 26.3 | % | 26.4 | % | 27.2 | % | 26.7 | % | ||||||||
Depreciation and amortization (c) | $ | 19,530 | $ | 18,314 | $ | 76,876 | $ | 77,544 | ||||||||
Capital expenditures | 14,139 | 16,233 | 50,912 | 56,089 | ||||||||||||
(a) | Three and twelve months data include the results of Velcora Holding AB (July 2019) and 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. | |||||||||||||||