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In many cases, the end of the year gives you time to step back and take stock of the last 12 months. This is when many of us take a hard look at what worked and what did not, complete performance reviews, and formulate plans for the coming year. For me, it is all of those things plus a time when I u...
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 and restructuring 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
Income (Loss) before Taxes
$
(135.9
)
$
67.2
n/m
%
$
70.2
n/m
%
$
86.2
$
273.9
(69
)
%
Depreciation and Amortization
20.4
19.3
6
19.5
4
78.3
72.4
8
Interest
10.5
8.4
25
10.5
-
42.3
29.3
44
EBITDA
(105.0
)
94.9
n/m
100.2
n/m
206.8
375.6
(45
)
CVI Fair Value Inventory
-
-
-
-
-
-
15.8
(100
)
Restructuring charge
17.9
9.4
90
7.1
n/m
32.5
12.3
n/m
Impairment charge
198.5
-
100
-
100
198.5
-
100
Adjusted EBITDA
$
111.4
$
104.3
7
$
107.3
4
$
437.8
$
403.7
8
Cash Flow from Operating Activities
$
85.7
$
41.6
n/m
%
$
101.0
(15
)
%
$
326.1
$
217.2
50
%
Capital Expenditures
(7.7
)
(7.2
)
7
(9.4
)
(18
)
(35.8
)
(35.2
)
2
Excess Tax Benefit from Stock-Based Compensation
1.2
0.4
n/m
0.8
41
4.5
5.3
(16
)
Free Cash Flow
79.2
34.8
n/m
92.4
(14
)
294.8
187.3
57
Forward Swap
-
38.7
(100
)
-
-
-
38.7
(100
)
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
IDEX CORPORATION
Company and Business Group Financial Information
(dollars in thousands)
(unaudited)
Three Months Ended
Twelve Months Ended
December 31, (b)
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.
IDEX Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
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