IDEX Reports Record Second Quarter Results - EPS of 76 Cents and Free Cash Flow of $103 Million
IDEX Reports Record Second Quarter Results - EPS of 76 Cents and Free Cash Flow of $103 Million
LAKE FOREST, Ill.--(BUSINESS WIRE)-- IDEX Corporation
Orders in the quarter totaled $506 million, up 9 percent from the prior year period. Sales in the quarter totaled $518 million, 5 percent higher than the prior year period. For the quarter, on an organic basis, orders were 6 percent higher and sales were 2 percent higher than the prior year period.
Second quarter 2013 operating income was $100 million. This resulted in an operating margin of 19.2 percent, up 70 basis points from the prior year adjusted operating margin, primarily due to productivity and benefits from our structural cost actions taken in the prior year.
Second quarter earnings per share were 76 cents, an increase of 9 cents, or 13 percent, from the adjusted prior year.
Free cash flow was $103 million for the quarter, a 46 percent increase from prior year second quarter due to higher earnings and improved operating working capital.
Second Quarter Highlights
- Orders of $506 million increased 9 percent compared to the prior year (+6 percent organic and +3 percent acquisition).
- Sales of $518 million increased 5 percent compared to the prior year (+2 percent organic and +3 percent acquisition).
- Gross margin of 43.0 percent was up 190 basis points from the prior year.
- Operating margin of 19.2 percent was up 70 basis points from the adjusted prior year.
- Net income of $63 million represents an increase of 11 percent compared to the prior year adjusted net income of $56 million.
- EPS of 76 cents was 9 cents, or 13 percent, higher than the prior year adjusted EPS of 67 cents.
- EBITDA of $119 million, which represents an 11 percent increase from the prior year, was 23 percent of sales and covered interest expense by 11 times.
- Free cash flow of $103 million, which represents a 46 percent increase from the prior year, was over 165 percent of net income.
- The Company completed the repurchase of 956 thousand shares of common stock for $51 million in the second quarter of 2013. Year-to-date, the Company has repurchased over 1.6 million shares of common stock for $85 million.
"We delivered strong performance in our second quarter margins, EPS and free cash flow. Consistent with our message from earlier in the year and given global economic conditions, organic growth continues to be a challenge. We planned for this difficult organic environment and through disciplined execution we delivered 190 basis points of gross margin expansion, 70 basis points of operating margin improvement and 13 percent EPS growth.
Our capital deployment strategy is driven by our ability to generate outstanding cash flow. In the second quarter, free cash flow was a record $103 million, bringing our free cash flow for the first half of 2013 to $170 million. Our capital deployment strategy continues to focus on the combination of funding organic growth, strategic acquisitions, shareholder dividends and share repurchases. New organic growth opportunities remain our highest priority, and we expect strong returns in the coming years from continued 2013 investments in new product development, product line management and commercial resources in emerging markets.
We expect the macroeconomic environment to remain volatile. Regardless, our goal is to deliver strong margins, earnings and cash flows. We project third quarter 2013 EPS to be in the range of 72 to 74 cents. We are increasing full year 2013 EPS guidance to $2.93 to $2.98 based on approximately 3 percent expected full year organic revenue growth."
Andrew K. Silvernail
Chairman and Chief Executive Officer
Second Quarter 2013 Business Highlights (Operating margin excludes restructuring charges in 2012)
Fluid & Metering Technologies
- Sales in the second quarter of $225 million reflected a 7 percent increase compared to the second quarter of 2012 (all organic).
- Operating margin of 24.9 percent represented a 280 basis point improvement compared with the second quarter of 2012 primarily due to higher volume and productivity initiatives.
Health & Science Technologies
- Sales in the second quarter of $181 million reflected a 6 percent increase compared to the second quarter of 2012 (-2 percent organic, +9 percent acquisitions and -1 percent foreign currency translation).
- Operating margin of 19.1 percent represented a 250 basis point increase compared with the second quarter of 2012 primarily due to productivity and cost reduction initiatives.
Fire & Safety/Diversified Products
- Sales in the second quarter of $114 million reflected a 1 percent decrease compared to the second quarter of 2012 (all organic).
- Operating margin of 20.7 percent represented a 270 basis point decrease compared with the second quarter of 2012 primarily due to unfavorable product mix across the segment and a charge associated with a facility disposal.
For the second quarter of 2013, Fluid & Metering Technologies contributed 43 percent of sales and 49 percent of operating income; Health & Science Technologies accounted for 35 percent of sales and 30 percent of operating income; and Fire & Safety/Diversified Products represented 22 percent of sales and 21 percent of operating income.
EBITDA and Free Cash Flow
EBITDA means earnings before interest, income taxes, depreciation and amortization, while free cash flow means cash flow from operating activities less capital expenditures plus the excess tax benefit from stock-based compensation. Management uses these non-GAAP financial measures as internal operating metrics and for enterprise valuation purposes. Management believes these measures are useful as analytical indicators of leverage capacity and debt servicing ability, and uses them to measure financial performance as well as for planning purposes. However, they should not be considered as alternatives to net income, cash flow from operating activities or any other items calculated in accordance with U.S. GAAP, or as an indicator of operating performance. The definitions of EBITDA and free cash flow used here may differ from those used by other companies.
EBITDA and Free Cash Flow Bridge (dollars in millions)
|For the Quarter Ended|
|June 30,||March 31,|
|Income before Taxes||$||88.4||$||77.9||13||%||$||85.4||4||%|
|Depreciation and Amortization||20.1||19.2||5||%||19.8||2||%|
|Cash Flow from Operating Activities||$||109.3||$||80.7||35||%||$||72.2||51||%|
|Excess Tax Benefit from Stock-Based Compensation||2.3||0.3||n/m||2.4||(4||%)|
|Free Cash Flow||$||103.4||$||70.8||46||%||$||67.0||54||%|
Conference Call to be Broadcast over the Internet
IDEX will broadcast its second quarter earnings conference call over the Internet on Tuesday, July 23, 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 # 26074056.
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.
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 atwww.idexcorp.com.
|Condensed Statements of Consolidated Operations|
|(in thousands except per share amounts)|
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|Cost of sales||295,596||291,031||578,047||577,559|
|Selling, general and administrative expenses||123,290||111,882||240,575||225,264|
|Other (income) expense - net||573||230||(706||)||113|
|Income before income taxes||88,389||77,884||173,823||151,908|
|Provision for income taxes||25,828||23,533||49,962||45,386|
|Earnings per Common Share:|
|Basic earnings per common share(a)||$||0.76||$||0.65||$||1.50||$||1.28|
|Diluted earnings per common share(a)||$||0.76||$||0.65||$||1.49||$||1.27|
|Basic weighted average common shares outstanding||81,829||83,180||82,013||82,987|
|Diluted weighted average common shares outstanding||82,734||84,090||82,943||83,991|
|Condensed Consolidated Balance Sheets|
|June 30,||December 31,|
|Cash and cash equivalents||$||374,489||$||318,864|
|Receivables - net||268,035||256,095|
|Other current assets||62,072||71,956|
|Total current assets||936,100||881,865|
|Property, plant and equipment - net||213,384||219,161|
|Goodwill and intangible assets||1,658,827||1,663,099|
|Other noncurrent assets||19,341||21,265|
|Liabilities and shareholders' equity|
|Trade accounts payable||$||127,292||$||117,341|
|Total current liabilities||294,683||291,427|
|Other noncurrent liabilities||243,624||249,724|
|Total liabilities and shareholders' equity|