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.
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 25 th 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. SilvernailChairman 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.
- 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.
- 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.
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 $198 million has been included in the fourth quarter and full-year operating results reported herein based on preliminary valuation results. Pending the completion of these valuations and the associated deferred tax asset impact, the charge will be finalized and updated, if necessary, in the filing of the Company’s Form 10-K for the period ended December 31, 2012. The non-cash accounting charge will not affect our liquidity, operations or ongoing financial performance. EBITDA and Free Cash Flow EBITDA means earnings before interest, income taxes, depreciation and amortization, while free cash flow means cash flow from operating activities less capital expenditures plus the excess tax benefit from stock-based compensation. Management uses these non-GAAP financial measures as internal operating metrics and for enterprise valuation purposes. Management believes these measures are useful as analytical indicators of leverage capacity and debt servicing ability, and uses them to measure financial performance as well as for planning purposes. However, they should not be considered as alternatives to net income, cash flow from operating activities or any other items calculated in accordance with U.S. GAAP, or as an indicator of operating performance. The definitions of EBITDA and free cash flow used here may differ from those used by other companies.
|EBITDA and Free Cash Flow bridge||For the Quarter Ended||For the Year Ended|
|December 31,||September 30,||December 31,|
|Income (Loss) before Taxes||$||(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|
|CVI Fair Value Inventory||-||-||-||-||-||-||15.8||(100||)|
|Cash Flow from Operating Activities||$||85.7||$||41.6||n/m||%||$||101.0||(15||)||%||$||326.1||$||217.2||50||%|
|Excess Tax Benefit from Stock-Based Compensation||1.2||0.4||n/m||0.8||41||4.5||5.3||(16||)|
|Free Cash Flow||79.2||34.8||n/m||92.4||(14||)||294.8||187.3||57|
|Adjusted Free Cash Flow||$||79.2||$||73.5||8||$||92.4||(14||)||$||294.8||$||226.0||30|
About IDEXIDEX 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)
|Condensed Statements of Consolidated Operations|
|(in thousands except per share amounts)|
|Three Months Ended||Twelve Months Ended|
|December 31,||December 31,|
|Cost of sales||287,980||287,081||1,150,558||1,099,778|
|Selling, general and administrative expenses||112,059||108,218||444,490||421,703|
|Operating income (loss)||(125,589||)||76,001||128,218||304,656|
|Other expense (income) - net||(217||)||442||(236||)||1,443|
|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|
|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|
|December 31,||December 31,|
|Cash and cash equivalents||$||318,864||$||230,259|
|Receivables - net||256,095||252,845|
|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|
|Liabilities and shareholders' equity|
|Trade accounts payable||$||117,341||$||110,977|
|Total current liabilities||291,427||258,278|
|Other noncurrent liabilities||249,724||258,328|
|Total liabilities and shareholders' equity||$||2,785,390||$||2,836,107|
|Company and Business Group Financial Information|
|(dollars in thousands)|
|Three Months Ended||Twelve Months Ended|
|December 31, (b)||December 31, (b)|
|2012||2011 (c)||2012||2011 (c)|
|Fluid & Metering Technologies|
|Operating income (d)||44,455||42,879||180,630||167,679|
|Depreciation and amortization||$||7,445||$||7,527||$||29,637||$||32,368|
|Health & Science Technologies|
|Operating income (d) (e)||32,214||32,086||122,708||123,967|
|Depreciation and amortization||$||10,687||$||9,369||$||39,981||$||30,055|
|Fire & Safety/Diversified Products (c)|
|Operating income (d)||26,296||22,156||104,461||91,128|
|Depreciation and amortization||$||1,881||$||1,955||$||7,107||$||8,516|
|Operating income (d)||90,799||85,384||359,210||332,770|
|Depreciation and amortization (f)||$||20,374||$||19,270||$||78,312||$||72,386|
|(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 $15.8 million for the twelve months ending December 31, 2011 related to a non-cash acquisition fair value inventory charge.|
|(f)||Depreciation and amortization excludes amortization of debt issuance expenses.|
|Reconciliation of GAAP to Non-GAAP Financial Measures|
|(in thousands, except per share amounts)|
|Three Months ended December 31, 2012|
|GAAP As||Restructuring||Impairment||Adjusted (ex|
|Cost of sales||287,980||287,980|
|Operating income (loss)||(125,589||)||17,869||198,519||90,799|
|Other expense (income) - net||(217||)||(217||)|
|Income (loss) before income taxes||(135,888||)||17,869||198,519||80,500|
|Provision (benefit) for taxes||(16,869||)||5,182||35,008||23,321|
|Net income (loss)||$||(119,019||)||$||12,687||$||163,511||$||57,179|
|Earnings (loss) per common share||$||(1.45||)||$||0.15||$||1.99||$||0.69|
|Twelve Months ended December 31, 2012|
|GAAP As||Restructuring||Impairment||Adjusted (ex|
|Cost of sales||1,150,558||1,150,558|
|Other expense (income) - net||(236||)||(236||)|
|Income before income taxes||86,204||32,473||198,519||317,196|
|Provision for taxes||48,574||9,547||35,008||93,129|
|Earnings per common share||$||0.45||$||0.27||$||1.95||$||2.68|