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8-K - 8-K - IDEX CORP /DE/d477374d8k.htm

EXHIBIT 99.1

IDEX REPORTS ADJUSTED EPS OF $2.68 FOR THE YEAR AND $0.69 FOR Q4 WITH RECORD 2012 FREE CASH FLOW

LAKE FOREST, IL, February 4 – IDEX Corporation (NYSE: IEX) today announced its financial results for the three-and twelve-month periods ended December 31, 2012.

Full Year 2012

 

 

Orders increased 7 percent compared to the prior year (+3 percent organic, +5 percent acquisition and -1 percent foreign currency translation).

 

 

Sales increased 6 percent compared to the prior year (+3 percent organic, +5 percent acquisition and -2 percent foreign currency translation).

 

 

Adjusted operating margin of 18.4 percent was up 30 basis points from the prior year.

 

 

Adjusted net income of $224 million, which excludes a preliminary non-cash pre-tax impairment charge of $198 million and pre-tax restructuring charges of $32 million, represents an increase of 5 percent compared to the prior year adjusted net income of $214 million.

 

 

Reported net income of $38 million, which reflects the previously mentioned charges, represents a decrease of 81 percent compared to the prior year reported net income of $194 million.

 

 

Adjusted EPS of $2.68 was 12 cents, or 5 percent, higher than the prior year adjusted EPS of $2.56.

 

 

Reported EPS of 45 cents, which reflects the previously mentioned charges, represents a decrease of 81 percent compared to the prior year reported EPS of $2.32.

 

 

Adjusted EBITDA of $438 million, which represents a record and an 8 percent increase from the prior year, was 22 percent of sales and covered interest expense over 10 times.

 

 

Record free cash flow of $295 million, which represents a 30 percent increase from the adjusted prior year, was over 132 percent of adjusted net income.

 

 

The Company completed the repurchase of 2.2 million shares of common stock for $90 million in 2012.

Fourth Quarter 2012

New orders in the quarter totaled $482 million, up 8 percent from the prior year period. Sales in the quarter totaled $491 million, 2 percent higher than the prior year period. For the quarter, on an organic basis, orders were 5 percent higher and sales were flat compared with the prior year period.

In the fourth quarter, the Company recorded a preliminary non-cash goodwill and intangible asset impairment charge of $198 million in its Optics & Photonics and Water platforms. Excluding the impact of the impairment charge and restructuring charges of $18 million, fourth quarter 2012 operating income was $91 million. This resulted in an adjusted operating margin of 18.5 percent, up 70 basis points from the prior year adjusted operating margin, primarily due to productivity and benefits from structural cost actions.

Excluding the impact of the above-mentioned charges, fourth quarter adjusted earnings per share was 69 cents, an increase of 4 cents, or 6 percent, from the prior year.

Free cash flow was $79 million for the quarter, an 8 percent increase from the adjusted prior year fourth quarter due to improved operating working capital.

“IDEX is proud to announce in 2012, our 25th anniversary year, we once again achieved record orders, sales and free cash flow. Our flexible operating model drove productivity improvements which, together with structural cost reductions, increased operating margins to 18.4 percent for 2012. I’m pleased with our profit flow-thru of greater than 50 percent on organic revenue growth in 2012.

In the face of uncertain market conditions throughout 2012, our team executed well. We delivered record free cash flow of $295 million, up $69 million over last year, resulting in cash conversion of 132 percent. Operationally, we reduced inventory by over $20 million from the prior year. Our strong balance sheet and ability to convert cash allows us to execute our capital deployment strategy.

In the fourth quarter we finalized our restructuring activities. No further restructuring is currently planned. We will continue to drive productivity through our proven operational excellence capabilities. Our focus on cost reduction has allowed us to make growth-focused investments while still netting a $12 million, or 10 cents of EPS, benefit in 2013.

Difficult end market conditions resulted in impairment charges in our Optics & Photonics and Water platforms. Throughout the year, we have aggressively restructured both platforms and are well positioned to take advantage of long-term growth opportunities.

As we enter 2013, our team is focused on executing our strategic priorities. With over one billion dollars of capital availability, we will continue to fund organic growth, while remaining committed to our capital deployment objectives of strategic acquisitions, shareholder dividends and share repurchases. Looking ahead, we see low- to mid-single digit organic growth in 2013, with escalating growth in the second half of the year.

On a regional basis, North America remains steady, the Asian markets are improving, and we see stabilization in Europe. Based on this outlook, for 2013 we are forecasting EPS of $2.85 to $2.95, up 6 to 10 percent over 2012 adjusted EPS of $2.68. Our projected first quarter EPS is in the range of 70 to 72 cents, up 6 to 9 percent.

Andrew K. Silvernail

Chairman and Chief Executive Officer


Fourth Quarter 2012 Business Highlights (Operating margin excludes non-cash impairment, restructuring and non-cash fair value inventory charges)

Fluid & Metering Technologies

 

   

Sales in the fourth quarter of $212 million reflected a 2 percent decrease compared to the fourth quarter of 2011 (-1 percent organic and -1 percent foreign currency translation).

 

   

Operating margin of 21.0 percent represented a 120 basis point improvement compared with the fourth quarter of 2011 primarily due to productivity and cost reduction initiatives.

Health & Science Technologies

 

   

Sales in the fourth quarter of $175 million reflected a 6 percent increase compared to the fourth quarter of 2011 (-3 percent organic and +9 percent acquisitions).

 

   

Operating margin of 18.4 percent represented a 100 basis point decrease compared with the fourth quarter of 2011 primarily due to lower margins from recently acquired businesses. Sequentially, operating margin improved 110 basis points.

Fire & Safety/Diversified Products

 

   

Sales in the fourth quarter of $109 million reflected a 9 percent increase compared to the fourth quarter of 2011 (+10 percent organic and -1 percent foreign currency translation).

 

   

Operating margin of 24.2 percent represented a 200 basis point increase compared with the fourth quarter of 2011 primarily due to higher volume and improved productivity.

For the fourth quarter of 2012, Fluid & Metering Technologies contributed 43 percent of sales and 43 percent of operating income; Health & Science Technologies accounted for 35 percent of sales and 31 percent of operating income; and Fire & Safety/Diversified Products represented 22 percent of sales and 26 percent of operating income.

Non-Cash Impairment Charge

Under U.S. GAAP, companies are required to conduct an annual impairment test for each business, or more frequently if an event occurs or circumstances change. An impairment charge is required when the fair value is less than the carrying value of a business.

On February 1, 2013, the Company concluded that a significant non-cash impairment charge was required in the fourth quarter of 2012 to reduce the carrying value of goodwill and intangible assets within the Optics & Photonics platform and goodwill and long-lived assets within the Water platform. The goodwill at Optics & Photonics primarily originated from the 2011 acquisition of CVI Melles Griot and the goodwill in the Water platform primarily originated from the 2008 acquisitions of IETG and ADS. As a result of our annual test, an impairment charge was required within Optics & Photonics due to continued softness in the Optics & Photonics end markets. In addition, we were required to perform an interim impairment test in the Water platform due to the reorganization of certain FMT businesses in the fourth quarter. This reorganization, combined with continued softness in municipal end markets, contributed to the impairment charge.

The Company currently estimates the pre-tax charge associated with this impairment to be in the range of $198 to $238 million. An estimated charge of $198 million has been included in the fourth quarter and full-year operating results reported herein based on preliminary valuation results. Pending the completion of these valuations and the associated deferred tax asset impact, the charge will be finalized and updated, if necessary, in the filing of the Company’s Form 10-K for the period ended December 31, 2012.

The non-cash accounting charge will not affect our liquidity, operations or ongoing financial performance.

EBITDA and Free Cash Flow

EBITDA means earnings before interest, income taxes, depreciation and amortization, while free cash flow means cash flow from operating activities less capital expenditures plus the excess tax benefit from stock-based compensation. Management uses these non-GAAP financial measures as internal operating metrics and for enterprise valuation purposes. Management believes these measures are useful as analytical indicators of leverage capacity and debt servicing ability, and uses them to measure financial performance as well as for planning purposes. However, they should not be considered as alternatives to net income, cash flow from operating activities or any other items calculated in accordance with U.S. GAAP, or as an indicator of operating performance. The definitions of EBITDA and free cash flow used here may differ from those used by other companies.


EBITDA and Free Cash Flow bridge

 

     For the Quarter Ended     For the Year Ended  
     December 31,     September 30,     December 31,  
     2012     2011     Change     2012     Change     2012     2011     Change  

g Income (Loss) before Taxes

   $ (135.9   $ 67.2        n/m   $ 70.2        n/m   $ 86.2      $ 273.9        (69 )% 

g Depreciation and Amortization

     20.4        19.3        6        19.5        4        78.3        72.4        8   

g Interest

     10.5        8.4        25        10.5        —          42.3        29.3        44   
  

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

g EBITDA

     (105.0     94.9        n/m        100.2        n/m        206.8        375.6        (45
                

g CVI Fair Value Inventory

     —          —          —          —          —          —          15.8        (100

g Restructuring charge

     17.9        9.4        90        7.1        n/m        32.5        12.3        n/m   

g Impairment charge

     198.5        —          100        —          100        198.5        —          100   
  

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

g Adjusted EBITDA

   $ 111.4      $ 104.3        7      $ 107.3        4      $ 437.8      $ 403.7        8   
  

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

g Cash Flow from Operating Activities

   $ 85.7      $ 41.6        n/m   $ 101.0        (15 )%    $ 326.1      $ 217.2        50

g Capital Expenditures

     (7.7     (7.2     7        (9.4     (18     (35.8     (35.2     2   

g Excess Tax Benefit from Stock-Based Compensation

     1.2        0.4        n/m        0.8        41        4.5        5.3        (16
  

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

g Free Cash Flow

     79.2        34.8        n/m        92.4        (14     294.8        187.3        57   

g Forward Swap

     —          38.7        (100     —          —          —          38.7        (100
  

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

g Adjusted Free Cash Flow

   $ 79.2      $ 73.5        8      $ 92.4        (14   $ 294.8      $ 226.0        30   
  

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

Conference Call to be Broadcast over the Internet

IDEX will broadcast its fourth quarter earnings conference call over the Internet on Tuesday, February 5, 2013 at 9:30 a.m. CT. Chairman and Chief Executive Officer Andy Silvernail and Vice President and Chief Financial Officer Heath Mitts 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 855.859.2056 (or 404.537.3406 for international participants) using the ID # 86510532.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. These statements may relate to, among other things, capital expenditures, cost reductions, cash flow, and operating improvements and are indicated by words or phrases such as “anticipate,” “estimate,” “plans,” “expects,” “projects,” “should,” “will,” “management believes,” “the company believes,” “the company intends,” and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this news release. The risks and uncertainties include, but are not limited to, the following: economic and political consequences resulting from terrorist attacks and wars; levels of industrial activity and economic conditions in the U.S. and other countries around the world; pricing pressures and other competitive factors, and levels of capital spending in certain industries – all of which could have a material impact on order rates and IDEX’s results, particularly in light of the low levels of order backlogs it typically maintains; its ability to make acquisitions and to integrate and operate acquired businesses on a profitable basis; the relationship of the U.S. dollar to other currencies and its impact on pricing and cost competitiveness; political and economic conditions in foreign countries in which the company operates; interest rates; capacity utilization and the effect this has on costs; labor markets; market conditions and material costs; and developments with respect to contingencies, such as litigation and environmental matters. 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. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented here.

About IDEX

IDEX Corporation is an applied solutions company specializing in fluid and metering technologies, health and science technologies, and fire, safety and other diversified products built to its customers’ exacting specifications. Its products are sold in niche markets to a wide range of industries throughout the world. IDEX shares are traded on the New York Stock Exchange and Chicago Stock Exchange under the symbol “IEX”.

For further information on IDEX Corporation and its business units, visit the company’s website at www.idexcorp.com.

(Tables follow)


IDEX CORPORATION

Condensed Statements of Consolidated Operations

(in thousands except per share amounts)

(unaudited)

 

     Three Months Ended      Twelve Months Ended  
     December 31,      December 31,  
     2012     2011      2012     2011  

Net sales

   $ 490,838      $ 480,683       $ 1,954,258      $ 1,838,451   

Cost of sales

     287,980        287,081         1,150,558        1,099,778   
  

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     202,858        193,602         803,700        738,673   

Selling, general and administrative expenses

     112,059        108,218         444,490        421,703   

Impairment

     198,519        —          198,519        —     

Restructuring expenses

     17,869        9,383         32,473        12,314   
  

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (loss)

     (125,589     76,001         128,218        304,656   

Other expense (income) - net

     (217     442         (236     1,443   

Interest expense

     10,516        8,395         42,250        29,332   
  

 

 

   

 

 

    

 

 

   

 

 

 

Income (loss) before income taxes

     (135,888     67,164         86,204        273,881   

Provision for income taxes

     (16,869     19,776         48,574        80,024   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

   $ (119,019   $ 47,388       $ 37,630      $ 193,857   
  

 

 

   

 

 

    

 

 

   

 

 

 

Earnings per Common Share:

         

Basic earnings (loss) per common share (a)

   $ (1.45   $ 0.57       $ 0.45      $ 2.34   

Diluted earnings (loss) per common share (a)

   $ (1.45   $ 0.57       $ 0.45      $ 2.32   

Share Data:

         

Basic weighted average common shares outstanding

     82,296        82,596         82,689        82,145   

Diluted weighted average common shares outstanding

     82,296        83,573         83,641        83,543   

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

     December 31,      December 31,  
     2012      2011  

Assets

     

Current assets

     

Cash and cash equivalents

   $ 318,864       $ 230,259   

Receivables - net

     256,095         252,845   

Inventories

     234,950         254,258   

Other current assets

     71,956         51,799   
  

 

 

    

 

 

 

Total current assets

     881,865         789,161   

Property, plant and equipment - net

     219,161         213,717   

Goodwill and intangible assets

     1,663,099         1,813,588   

Other noncurrent assets

     21,265         19,641   
  

 

 

    

 

 

 

Total assets

   $ 2,785,390       $ 2,836,107   
  

 

 

    

 

 

 
     

Liabilities and shareholders’ equity

     

Current liabilities

     

Trade accounts payable

   $ 117,341       $ 110,977   

Accrued expenses

     150,176         130,696   

Short-term borrowings

     7,335         2,444   

Dividends payable

     16,575         14,161   
  

 

 

    

 

 

 

Total current liabilities

     291,427         258,278   

Long-term borrowings

     779,241         806,366   

Other noncurrent liabilities

     249,724         258,328   
  

 

 

    

 

 

 

Total liabilities

     1,320,392         1,322,972   

Shareholders’ equity

     1,464,998         1,513,135   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 2,785,390       $ 2,836,107   
  

 

 

    

 

 

 

 

-more-


IDEX CORPORATION

Company and Business Group Financial Information

(dollars in thousands)

(unaudited)

 

     Three Months Ended
December 31, (b)
    Twelve Months Ended
December 31, (b)
 
     2012     2011 (c)     2012     2011 (c)  

Fluid & Metering Technologies

        

Net sales

   $ 211,855      $ 216,920      $ 833,288      $ 831,287   

Operating income (d)

     44,455        42,879        180,630        167,679   

Operating margin

     21.0     19.8     21.7     20.2

Depreciation and amortization

   $ 7,445      $ 7,527      $ 29,637      $ 32,368   

Capital expenditures

     3,784        2,723        13,535        12,543   

Health & Science Technologies

        

Net sales

   $ 174,661      $ 165,281      $ 695,235      $ 607,900   

Operating income (d) (e)

     32,214        32,086        122,708        123,967   

Operating margin

     18.4     19.4     17.6     20.4

Depreciation and amortization

   $ 10,687      $ 9,369      $ 39,981      $ 30,055   

Capital expenditures

     2,704        3,020        13,140        12,938   

Fire & Safety/Diversified Products (c)

        

Net sales

   $ 108,880      $ 99,611      $ 437,053      $ 402,425   

Operating income (d)

     26,296        22,156        104,461        91,128   

Operating margin

     24.2     22.2     23.9     22.6

Depreciation and amortization

   $ 1,881      $ 1,955      $ 7,107      $ 8,516   

Capital expenditures

     1,471        1,059        6,654        5,644   

Company

        

Net sales

   $ 490,838      $ 480,683      $ 1,954,258      $ 1,838,451   

Operating income (d)

     90,799        85,384        359,210        332,770   

Operating margin

     18.5     17.8     18.4     18.1

Depreciation and amortization (f)

   $ 20,374      $ 19,270      $ 78,312      $ 72,386   

Capital expenditures

     8,254        7,412        35,520        34,548   

 

(a) Calculated by applying the two-class method of allocating earnings to common stock and participating securities as required by ASC 260, Earnings Per Share.
(b) Three and twelve month data includes acquisitions of Matcon (July 2012), ERC (April 2012), CVI Melles Griot (June 2011), Microfluidics (March 2011) and Advanced Thin Films (January 2011) in the Health & Science Technologies segment from the date of acquisition.
(c) Financial data for 2011 has been revised to reflect the transfer of our Trebor business unit from the Health & Science Technologies segment to the Fluid & Metering Technologies segment as well as the movement of the Dispensing Equipment segment into the Fire & Safety/Diversified Products segment.
(d) Group operating income excludes unallocated corporate operating expenses while both Group and Company operating income excludes the impairment charge in 2012 (for the Fluid & Metering Technologies and Health & Science Technologies segments) and restructuring related charges for 2012 and 2011.
(e) Operating income excludes $15.8 million for the twelve months ending December 31, 2011 related to a non-cash acquisition fair value inventory charge.
(f) Depreciation and amortization excludes amortization of debt issuance expenses.


Investor Supplement

IDEX Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures

(in thousands, except per share amounts)

(unaudited)

Three Months ended December 31, 2012

 

 

     GAAP As
Reported
    Restructuring
Expense
    Impairment
Charge
    Non-GAAP
Adjusted (ex
charges)
 

Net sales

   $ 490,838          $ 490,838   

Cost of sales

     287,980            287,980   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     202,858            202,858   

SG&A

     112,059            112,059   

Impairment

     198,519          (198,519     —     

Restructuring expenses

     17,869        (17,869       —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (125,589     17,869        198,519        90,799   

Other expense (income) - net

     (217         (217

Interest expense

     10,516            10,516   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (135,888     17,869        198,519        80,500   

Provision (benefit) for taxes

     (16,869     5,182        35,008        23,321   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (119,019   $ 12,687      $ 163,511      $ 57,179   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per common share

   $ (1.45   $ 0.15      $ 1.99      $ 0.69   
  

 

 

   

 

 

   

 

 

   

 

 

 

Twelve Months ended December 31, 2012

 

 

     GAAP As
Reported
    Restructuring
Expense
    Impairment
Charge
    Non-GAAP
Adjusted (ex
charges)
 

Net sales

   $ 1,954,258          $ 1,954,258   

Cost of sales

     1,150,558            1,150,558   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     803,700            803,700   

SG&A

     444,490            444,490   

Impairment

     198,519          (198,519     —     

Restructuring expenses

     32,473        (32,473       —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     128,218        32,473        198,519        359,210   

Other expense (income) - net

     (236         (236

Interest expense

     42,250            42,250   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     86,204        32,473        198,519        317,196   

Provision for taxes

     48,574        9,547        35,008        93,129   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 37,630      $ 22,926      $ 163,511      $ 224,067   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share

   $ 0.45      $ 0.27      $ 1.95      $ 2.68