IDEX Reports Third Quarter Results

NORTHBROOK, Ill.--()--IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended September 30, 2020.

Third Quarter 2020 Highlights

  • Cash from operations of $153.7 million led to quarterly free cash flow of $135.3 million
  • Operating margin of 22.6%; adjusted operating margin of 23.1%
  • EPS of $1.37; adjusted EPS of $1.40
  • Adjusted EBITDA margin of 26.9%

Third Quarter 2020

Orders of $570.3 million were down 3 percent compared with the prior year period (-5 percent organic, +1 percent acquisitions and +1 percent foreign currency translation).

Sales of $581.1 million were down 7 percent compared with the prior year period (-12 percent organic, +4 percent acquisitions and +1 percent foreign currency translation).

Gross margin of 43.3 percent was down 190 basis points compared with the prior year period as a result of lower volume and business mix, partially offset by price capture.

Operating income of $131.2 million resulted in an operating margin of 22.6 percent which was down 10 basis points compared with the prior year period as a result of lower volume and business mix, partially offset by price capture and cost savings in the current year as well as the asset impairment and fair value inventory step-up charges in the prior year period. Excluding $2.9 million of restructuring expenses, adjusted operating income was $134.1 million with an adjusted operating margin of 23.1 percent, down 210 basis points compared with the adjusted prior year period.

Provision for income taxes of $17.4 million in the third quarter of 2020 resulted in an effective tax rate (ETR) of 14.4 percent, which was lower than the prior year period ETR of 18.6 percent primarily due to benefits associated with the finalization of the Global Intangible Low-Tax Income regulations in the third quarter of 2020.

Net income was $103.8 million which resulted in EPS of $1.37. Excluding restructuring expenses, adjusted EPS was $1.40, a decrease of 12 cents, or 8 percent, from the adjusted prior year period EPS. EBITDA of $153.3 million was 26 percent of sales and covered interest expense by over 14 times. Adjusted EBITDA of $156.2 million was 27 percent of sales and covered interest expense by almost 15 times.

Cash from operations of $153.7 million was down 2 percent from the prior year period due to lower earnings in the third quarter of 2019. Cash from operations led to free cash flow of $135.3 million, which was down 7 percent from the prior year period and was 128 percent of adjusted net income due to higher capital expenditures in the third quarter of 2020.

“Our team continued to execute well in a challenging operating environment during the quarter, delivering essential products safely to our customers and producing better than expected financial results. Business conditions improved in the quarter, with September organic orders posting our first monthly year over year increase since February 2020. The improved commercial performance through the third quarter resulted in organic orders and sales being down 5 percent and 12 percent, respectively. Sales of $581 million in the third quarter drove adjusted operating margin of 23.1 percent and adjusted EPS of $1.40. Adjusted operating margin improved 200 basis points sequentially, primarily due to higher volume and additional cost actions we took in the second quarter.

 

 

Our team aggressively managed working capital, driving free cash flow of $135 million. Despite the global pandemic, the financial durability of our businesses has generated nearly $300 million of free cash flow over the past two quarters. We ended the quarter with record cash of $878 million and nearly $800 million available under our revolving credit facility. Our strong balance sheet and liquidity position are key strengths to leverage as we continue pivoting to offense. In the third quarter, we increased our year over year capital spending by two-thirds as we invest to support our organic growth.

 

 

Some of that investment is targeted at opportunities supporting the COVID-19 battle, including disinfection, testing and vaccines. One of the applications under development is associated with a rapid testing solution that will support the millions of tests needed as the world navigates COVID-19.

 

In the past I have discussed the four different phases of the COVID-19 pandemic. We have entered the third phase, which is living with the virus. While the macro environment remains fluid, I'm encouraged to see our business and the overall economy recover. Against that backdrop, we expect fourth quarter organic sales to continue to improve sequentially and be down approximately 3 to 5 percent versus prior year."

 

Andrew K. Silvernail

Chairman and Chief Executive Officer

Third Quarter 2020 Segment Highlights

Fluid & Metering Technologies

  • Sales of $220.7 million reflected an 8 percent decrease compared to the third quarter of 2019 (-17 percent organic, +8 percent acquisition and +1 percent foreign currency translation).
  • Operating income of $58.4 million resulted in an operating margin of 26.5 percent which was down 570 basis points compared with the prior year period primarily due to lower volume and higher restructuring expenses, partially offset by price capture and cost savings. Excluding $0.6 million of restructuring expenses, adjusted operating income was $59.0 million with an adjusted operating margin of 26.7 percent, a 550 basis point decrease compared to the adjusted prior year period.
  • EBITDA of $66.3 million resulted in an EBITDA margin of 30.0 percent. Excluding $0.6 million of restructuring expenses, adjusted EBITDA of $66.9 million resulted in an adjusted EBITDA margin of 30.3 percent, a 400 basis point decrease compared to the adjusted prior year period primarily due to lower volume.

Health & Science Technologies

  • Sales of $220.4 million reflected a 4 percent decrease compared to the third quarter of 2019 (-6 percent organic, +1 percent acquisition and +1 percent foreign currency translation).
  • Operating income of $49.9 million resulted in an operating margin of 22.6 percent which was up 510 basis points compared with the prior year period primarily due to price capture and cost savings in the current year period and the asset impairment and fair value inventory step-up charges in the prior year period, partially offset by lower volume and the impact on margins from the Velcora acquisition. Excluding $1.0 million of restructuring expenses, adjusted operating income was $50.9 million with an adjusted operating margin of 23.1 percent, an 70 basis point decrease compared to the adjusted prior year period.
  • EBITDA of $60.2 million resulted in an EBITDA margin of 27.3 percent. Excluding the $1.0 million of restructuring expenses, adjusted EBITDA of $61.2 million resulted in an adjusted EBITDA margin of 27.7 percent, a 10 basis point decrease compared to the adjusted prior year period primarily due to lower volume.

Fire & Safety/Diversified Products

  • Sales of $140.9 million reflected a 9 percent decrease compared to the third quarter of 2019 (-10 percent organic and +1 percent foreign currency translation).
  • Operating income of $37.1 million resulted in an operating margin of 26.3 percent which was down 90 basis points compared with the prior year period as a result of lower volume and higher restructuring expenses, partially offset by price capture and cost savings. Excluding $1.2 million of restructuring expenses, adjusted operating income was $38.3 million with an adjusted operating margin of 27.2 percent, which was flat compared to the adjusted prior year period.
  • EBITDA of $40.6 million resulted in an EBITDA margin of 28.8 percent. Excluding the $1.2 million of restructuring expenses, adjusted EBITDA of $41.8 million resulted in an adjusted EBITDA margin of 29.7 percent, a 10 basis point increase compared to the prior year period primarily due to price capture and lower variable costs.

For the third quarter of 2020, Fluid & Metering Technologies contributed 38 percent of sales, 40 percent of operating income and 40 percent of EBITDA; Health & Science Technologies accounted for 38 percent of sales, 34 percent of operating income and 36 percent of EBITDA; and Fire & Safety/Diversified Products represented 24 percent of sales, 26 percent of operating income and 24 percent of EBITDA.

Corporate Costs

Corporate costs decreased to $14.1 million in the third quarter of 2020 from $17.2 million in the third quarter of 2019 primarily as a result of tightly controlling discretionary spending, restructuring savings and lower variable costs in 2020.

COVID-19 Impact

The Company has adapted to help in the fight against COVID-19 with several of our businesses pivoting to support many products that are being used in the fight against COVID-19. We have placed safety atop our list of priorities, implementing protocols at all of our facilities, including temperature taking, social distancing, enhanced cleaning and face coverings. These measures have enabled successful business continuity, allowing our facilities to remain in operation with only temporary shutdowns at the initial onset of the COVID-19 pandemic. Although we have remained in operation throughout the pandemic, satisfying customer needs in part through our focus on the development and manufacturing of products used in the fight against COVID-19, the pandemic and the enacted containment measures have adversely affected our business and results of operations. The businesses of our customers have been harmed by the economic conditions caused by COVID-19 and as a result, our customers are purchasing less product than they have historically purchased outside of these conditions. Based on currently available information and management's current expectations, the Company anticipates that organic sales will be down approximately 3 to 5 percent in the fourth quarter of 2020 but we believe our strong balance sheet, with over $1.6 billion of liquidity and gross leverage of 1.7 times, will provide IDEX the necessary capital to navigate the COVID-19 pandemic for the foreseeable future. Additionally, IDEX implemented cost reduction actions, including employee reductions, and continues to maintain a tight cost control environment. Despite our expectations and the actions taken to reduce costs, we can provide no assurances that access to our invested cash, cash equivalents or short-term investments will not be impacted by adverse conditions in the financial markets, including, without limitation, as a result of the impact of the COVID-19 pandemic and we cannot predict how long the COVID-19 pandemic will continue. Moreover, COVID-19 and related measures to contain its impact have caused material disruptions in both national and global financial markets and economies. The continuing impact of COVID-19 and the enacted containment measures cannot be predicted and may continue to adversely affect, perhaps materially, our business, results of operations, financial condition and liquidity.

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. Management believes these non-U.S. GAAP financial performance metrics provide investors with greater insight, transparency and a more comprehensive understanding of the financial information used by management in its financial and operational decision making because certain of these adjusted metrics exclude items not reflective of ongoing operations, such as restructuring expenses, fair value inventory step-up charges and the loss on early debt redemption. 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 fair value inventory step-up charges.
  • Adjusted gross margin is calculated as adjusted gross profit divided by net sales.
  • Adjusted operating income is calculated as operating income plus fair value inventory step-up charges 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 fair value inventory step-up charges plus restructuring expenses plus the loss on early debt redemption, net of the statutory tax expense or benefit.
  • Adjusted EPS is calculated as adjusted net income divided by the diluted weighted average shares outstanding.
  • EBITDA is calculated as net income plus interest expense plus provision for income taxes plus depreciation and amortization. We reconcile 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 fair value inventory step-up charges plus restructuring expenses plus the loss on early debt redemption.
  • 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

 

Three Months Ended September 30, 2020

 

Nine Months Ended September 30, 2020

 

FMT

 

HST

 

FSDP

 

IDEX

 

FMT

 

HST

 

FSDP

 

IDEX

Change in net sales

(8)

%

 

(4)

%

 

(9)

%

 

(7)

%

 

(9)

%

 

(4)

%

 

(13)

%

 

(8)

%

- Net impact from acquisitions

8

%

 

1

%

 

%

 

4

%

 

6

%

 

3

%

 

%

 

3

%

- Impact from FX

1

%

 

1

%

 

1

%

 

1

%

 

%

 

%

 

%

 

%

Change in organic net sales

(17)

%

 

(6)

%

 

(10)

%

 

(12)

%

 

(15)

%

 

(7)

%

 

(13)

%

 

(11)

%

 

Table 2: Reconciliations of Reported-to-Adjusted Gross Profit and Margin (dollars in thousands)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Gross profit

$

251,500

 

 

$

281,978

 

 

$

758,256

 

 

$

858,149

 

+ Fair value inventory step-up charge

 

 

3,340

 

 

4,107

 

 

3,340

 

Adjusted gross profit

$

251,500

 

 

$

285,318

 

 

$

762,363

 

 

$

861,489

 

 

 

 

 

 

 

 

 

Net sales

$

581,113

 

 

$

624,246

 

 

$

1,736,824

 

 

$

1,888,576

 

 

 

 

 

 

 

 

 

Gross margin

43.3

%

 

45.2

%

 

43.7

%

 

45.4

%

Adjusted gross margin

43.3

%

 

45.7

%

 

43.9

%

 

45.6

%

 

Table 3: Reconciliations of Reported-to-Adjusted Operating Income and Margin (dollars in thousands)

 

Three Months Ended September 30,

 

2020

 

2019

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

Reported operating income (loss)

$

58,402

 

 

$

49,912

 

 

$

37,103

 

 

$

(14,204)

 

 

$

131,213

 

 

$

77,481

 

 

$

40,170

 

 

$

41,967

 

 

$

(17,853)

 

 

$

141,765

 

+ Restructuring expenses

585

 

 

978

 

 

1,249

 

 

105

 

 

2,917

 

 

 

 

11,196

 

 

104

 

 

656

 

 

11,956

 

+ Fair value inventory step-up charge

 

 

 

 

 

 

 

 

 

 

 

 

3,340

 

 

 

 

 

 

3,340

 

Adjusted operating income (loss)

$

58,987

 

 

$

50,890

 

 

$

38,352

 

 

$

(14,099)

 

 

$

134,130

 

 

$

77,481

 

 

$

54,706

 

 

$

42,071

 

 

$

(17,197)

 

 

$

157,061

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales (eliminations)

$

220,747

 

 

$

220,378

 

 

$

140,896

 

 

$

(908)

 

 

$

581,113

 

 

$

240,861

 

 

$

229,610

 

 

$

154,543

 

 

$

(768)

 

 

$

624,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported operating margin

26.5

%

 

22.6

%

 

26.3

%

 

n/m

 

22.6

%

 

32.2

%

 

17.5

%

 

27.2

%

 

n/m

 

22.7

%

Adjusted operating margin

26.7

%

 

23.1

%

 

27.2

%

 

n/m

 

23.1

%

 

32.2

%

 

23.8

%

 

27.2

%

 

n/m

 

25.2

%

 

Nine Months Ended September 30,

 

2020

 

2019

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

Reported operating income (loss)

$

176,111

 

 

$

150,562

 

 

$

103,977

 

 

$

(48,902)

 

 

$

381,748

 

 

$

223,493

 

 

$

151,087

 

 

$

125,909

 

 

$

(55,659)

 

 

$

444,830

 

+ Restructuring expenses

2,433

 

 

2,162

 

 

1,890

 

 

273

 

 

6,758

 

 

930

 

 

11,526

 

 

923

 

 

703

 

 

14,082

 

+ Fair value inventory step-up charge

4,107

 

 

 

 

 

 

 

 

4,107

 

 

 

 

3,340

 

 

 

 

 

 

3,340

 

Adjusted operating income (loss)

$

182,651

 

 

$

152,724

 

 

$

105,867

 

 

$

(48,629)

 

 

$

392,613

 

 

$

224,423

 

 

$

165,953

 

 

$

126,832

 

 

$

(54,956)

 

 

$

462,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales (eliminations)

$

666,720

 

 

$

660,105

 

 

$

412,296

 

 

$

(2,297)

 

 

$

1,736,824

 

 

$

729,572

 

 

$

687,153

 

 

$

474,745

 

 

$

(2,894)

 

 

$

1,888,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported operating margin

26.4

%

 

22.8

%

 

25.2

%

 

n/m

 

22.0

%

 

30.6

%

 

22.0

%

 

26.5

%

 

n/m

 

23.6

%

Adjusted operating margin

27.4

%

 

23.1

%

 

25.7

%

 

n/m

 

22.6

%

 

30.8

%

 

24.2

%

 

26.7

%

 

n/m

 

24.5

%

 

Table 4: Reconciliations of Reported-to-Adjusted Net Income and EPS (in thousands, except EPS)

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Reported net income

$

103,848

 

 

$

105,194

 

 

$

276,710

 

 

$

328,671

 

+ Restructuring expenses

2,917

 

 

11,956

 

 

6,758

 

 

14,082

 

+ Tax impact on restructuring expenses

(703)

 

 

(2,776)

 

 

(1,540)

 

 

(3,336)

 

+ Fair value inventory step-up charge

 

 

3,340

 

 

4,107

 

 

3,340

 

+ Tax impact on fair value inventory step-up charge

 

 

(735)

 

 

(932)

 

 

(735)

 

+ Loss on early debt redemption

 

 

 

 

8,421

 

 

 

+ Tax impact on loss on early debt redemption

 

 

 

 

(1,912)

 

 

 

Adjusted net income

$

106,062

 

 

$

116,979

 

 

$

291,612

 

 

$

342,022

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Reported diluted EPS

$

1.37

 

 

$

1.37

 

 

$

3.64

 

 

$

4.30

 

+ Restructuring expenses

0.04

 

 

0.16

 

 

0.09

 

 

0.18

 

+ Tax impact on restructuring expenses

(0.01)

 

 

(0.04)

 

 

(0.02)

 

 

(0.04)

 

+ Fair value inventory step-up charge

 

 

0.04

 

 

0.05

 

 

0.04

 

+ Tax impact on fair value inventory step-up charge

 

 

(0.01)

 

 

(0.01)

 

 

(0.01)

 

+ Loss on early debt redemption

 

 

 

 

0.11

 

 

 

+ Tax impact on loss on early debt redemption

 

 

 

 

(0.02)

 

 

 

Adjusted diluted EPS

$

1.40

 

 

$

1.52

 

 

$

3.84

 

 

$

4.47

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

75,960

 

 

76,577

 

 

76,119

 

 

76,415

 

 

Table 5: Reconciliations of EBITDA to Net Income (dollars in thousands)

 

Three Months Ended September 30,

 

2020

 

2019

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

Reported operating income (loss)

$

58,402

 

 

$

49,912

 

 

$

37,103

 

 

$

(14,204)

 

 

$

131,213

 

 

$

77,481

 

 

$

40,170

 

 

$

41,967

 

 

$

(17,853)

 

 

$

141,765

 

- Other (income) expense - net

(719)

 

 

(32)

 

 

340

 

 

(293)

 

 

(704)

 

 

295

 

 

1,272

 

 

(92)

 

 

(256)

 

 

1,219

 

+ Depreciation and amortization

7,163

 

 

10,230

 

 

3,854

 

 

104

 

 

21,351

 

 

5,507

 

 

10,296

 

 

3,566

 

 

154

 

 

19,523

 

EBITDA

66,284

 

 

60,174

 

 

40,617

 

 

(13,807)

 

 

153,268

 

 

82,693

 

 

49,194

 

 

45,625

 

 

(17,443)

 

 

160,069

 

- Interest expense

 

 

 

 

 

 

 

 

10,642

 

 

 

 

 

 

 

 

 

 

11,330

 

- Provision for income taxes

 

 

 

 

 

 

 

 

17,427

 

 

 

 

 

 

 

 

 

 

24,022

 

- Depreciation and amortization

 

 

 

 

 

 

 

 

21,351

 

 

 

 

 

 

 

 

 

 

19,523

 

Reported net income

 

 

 

 

 

 

 

 

$

103,848

 

 

 

 

 

 

 

 

 

 

$

105,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales (eliminations)

$

220,747

 

 

$

220,378

 

 

$

140,896

 

 

$

(908)

 

 

$

581,113

 

 

$

240,861

 

 

$

229,610

 

 

$

154,543

 

 

$

(768)

 

 

$

624,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported operating margin

26.5

%

 

22.6

%

 

26.3

%

 

n/m

 

22.6

%

 

32.2

%

 

17.5

%

 

27.2

%

 

n/m

 

22.7

%

EBITDA margin

30.0

%

 

27.3

%

 

28.8

%

 

n/m

 

26.4

%

 

34.3

%

 

21.4

%

 

29.5

%

 

n/m

 

25.6

%

 

Nine Months Ended September 30,

 

2020

 

2019

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

Reported operating income (loss)

$

176,111

 

 

$

150,562

 

 

$

103,977

 

 

$

(48,902)

 

 

$

381,748

 

 

$

223,493

 

 

$

151,087

 

 

$

125,909

 

 

$

(55,659)

 

 

$

444,830

 

- Other (income) expense - net

(35)

 

 

(91)

 

 

148

 

 

7,299

 

 

7,321

 

 

612

 

 

1,636

 

 

273

 

 

(1,820)

 

 

701

 

+ Depreciation and amortization

19,370

 

 

30,806

 

 

11,409

 

 

389

 

 

61,974

 

 

16,653

 

 

29,438

 

 

10,745

 

 

510

 

 

57,346

 

EBITDA

195,516

 

 

181,459

 

 

115,238

 

 

(55,812)

 

 

436,401

 

 

239,534

 

 

178,889

 

 

136,381

 

 

(53,329)

 

 

501,475

 

- Interest expense

 

 

 

 

 

 

 

 

33,958

 

 

 

 

 

 

 

 

 

 

33,262

 

- Provision for income taxes

 

 

 

 

 

 

 

 

63,759

 

 

 

 

 

 

 

 

 

 

82,196

 

- Depreciation and amortization

 

 

 

 

 

 

 

 

61,974

 

 

 

 

 

 

 

 

 

 

57,346

 

Reported net income

 

 

 

 

 

 

 

 

$

276,710

 

 

 

 

 

 

 

 

 

 

$

328,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales (eliminations)

$

666,720

 

 

$

660,105

 

 

$

412,296

 

 

$

(2,297)

 

 

$

1,736,824

 

 

$

729,572

 

 

$

687,153

 

 

$

474,745

 

 

$

(2,894)

 

 

$

1,888,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported operating margin

26.4

%

 

22.8

%

 

25.2

%

 

n/m

 

22.0

%

 

30.6

%

 

22.0

%

 

26.5

%

 

n/m

 

23.6

%

EBITDA margin

29.3

%

 

27.5

%

 

28.0

%

 

n/m

 

25.1

%

 

32.8

%

 

26.0

%

 

28.7

%

 

n/m

 

26.6

%

 

Table 6 : Reconciliations of EBITDA to Adjusted EBITDA (dollars in thousands)

 

Three Months Ended September 30,

 

2020

 

2019

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

EBITDA(1)

$

66,284

 

 

$

60,174

 

 

$

40,617

 

 

$

(13,807)

 

 

$

153,268

 

 

$

82,693

 

 

$

49,194

 

 

$

45,625

 

 

$

(17,443)

 

 

$

160,069

 

+ Restructuring expenses

585

 

 

978

 

 

1,249

 

 

105

 

 

2,917

 

 

 

 

11,196

 

 

104

 

 

656

 

 

11,956

 

+ Fair value inventory step-up charge

 

 

 

 

 

 

 

 

 

 

 

 

3,340

 

 

 

 

 

 

3,340

 

Adjusted EBITDA

$

66,869

 

 

$

61,152

 

 

$

41,866

 

 

$

(13,702)

 

 

$

156,185

 

 

$

82,693

 

 

$

63,730

 

 

$

45,729

 

 

$

(16,787)

 

 

$

175,365

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

30.3

%

 

27.7

%

 

29.7

%

 

n/m

 

26.9

%

 

34.3

%

 

27.8

%

 

29.6

%

 

n/m

 

28.1

%

 

Nine Months Ended September 30,

 

2020

 

2019

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

 

FMT

 

HST

 

FSDP

 

Corporate

 

IDEX

EBITDA(1)

$

195,516

 

 

$

181,459

 

 

$

115,238

 

 

$

(55,812)

 

 

$

436,401

 

 

$

239,534

 

 

$

178,889

 

 

$

136,381

 

 

$

(53,329)

 

 

$

501,475

 

+ Restructuring expenses

2,433

 

 

2,162

 

 

1,890

 

 

273

 

 

6,758

 

 

930

 

 

11,526

 

 

923

 

 

703

 

 

14,082

 

+ Fair value inventory step-up charge

4,107

 

 

 

 

 

 

 

 

4,107

 

 

 

 

3,340

 

 

 

 

 

 

3,340

 

+ Loss on early debt redemption

 

 

 

 

 

 

8,421

 

 

8,421

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

202,056

 

 

$

183,621

 

 

$

117,128

 

 

$

(47,118)

 

 

$

455,687

 

 

$

240,464

 

 

$

193,755

 

 

$

137,304

 

 

$

(52,626)

 

 

$

518,897

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA margin

30.3

%

 

27.8

%

 

28.4

%

 

n/m

 

26.2

%

 

33.0

%

 

28.2

%

 

28.9

%

 

n/m

 

27.5

%

(1) EBITDA, a non-GAAP financial measure, is reconciled to net income, its most directly comparable GAAP financial measure, immediately above in Table 5.

Table 7: Reconciliations of Cash Flows from Operating Activities to Free Cash Flow (in thousands)

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

June 30,

 

September 30,

 

 

2020

 

2019

 

2020

 

2020

 

2019

 

Cash flows from operating activities

$

153,686

 

 

$

157,064

 

 

$

169,453

 

 

$

407,899

 

 

$

376,902

 

 

- Capital expenditures

18,353

 

 

11,031

 

 

8,323

 

 

39,438

 

 

36,773

 

 

Free cash flow

$

135,333

 

 

$

146,033

 

 

$

161,130

 

 

$

368,461

 

 

$

340,129

 

 

 

Conference Call to be Broadcast over the Internet

IDEX will broadcast its third quarter earnings conference call over the Internet on Wednesday, October 28, 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 #13694806.

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, the anticipated continuing effects of the coronavirus pandemic, including with respect to the Company's sales, facility closures, supply chains and access to capital, 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: the duration of the coronavirus pandemic and the continuing effects of the coronavirus on our ability to operate our business and facilities, on our customers, on supply chains and on the U.S. and global economy generally; 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 and the Company's subsequent quarterly reports filed with the SEC as well as 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 per share amounts)

(unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2020

 

2019

 

2020

 

2019

Net sales

$

581,113

 

 

$

624,246

 

 

$

1,736,824

 

 

$

1,888,576

 

Cost of sales

329,613

 

 

342,268

 

 

978,568

 

 

1,030,427

 

Gross profit

251,500

 

 

281,978

 

 

758,256

 

 

858,149

 

Selling, general and administrative expenses

117,370

 

 

128,257

 

 

369,750

 

 

399,237

 

Restructuring expenses

2,917

 

 

11,956

 

 

6,758

 

 

14,082

 

Operating income

131,213

 

 

141,765

 

 

381,748

 

 

444,830

 

Other (income) expense - net

(704)

 

 

1,219

 

 

7,321

 

 

701

 

Interest expense

10,642

 

 

11,330

 

 

33,958

 

 

33,262

 

Income before income taxes

121,275

 

 

129,216

 

 

340,469

 

 

410,867

 

Provision for income taxes

17,427

 

 

24,022

 

 

63,759

 

 

82,196

 

Net income

$

103,848

 

 

$

105,194

 

 

$

276,710

 

 

$

328,671

 

 

 

 

 

 

 

 

 

Earnings per Common Share:

 

 

 

 

 

 

 

Basic earnings per common share

$

1.38

 

 

$

1.39

 

 

$

3.66

 

 

$

4.34

 

Diluted earnings per common share

$

1.37

 

 

$

1.37

 

 

$

3.64

 

 

$

4.30

 

 

 

 

 

 

 

 

 

Share Data:

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

75,352

 

 

75,698

 

 

75,423

 

 

75,532

 

Diluted weighted average common shares outstanding

75,960

 

 

76,577

 

 

76,119

 

 

76,415

 

 

IDEX CORPORATION

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

September 30, 2020

 

December 31, 2019

Assets

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

877,758

 

 

$

632,581

 

Receivables - net

275,432

 

 

298,186

 

Inventories

302,410

 

 

293,467

 

Other current assets

65,152

 

 

37,211

 

Total current assets

1,520,752

 

 

1,261,445

 

Property, plant and equipment - net

293,304

 

 

280,316

 

Goodwill and intangible assets - net

2,280,657

 

 

2,167,776

 

Other noncurrent assets

130,882

 

 

104,375

 

Total assets

$

4,225,595

 

 

$

3,813,912

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

Current liabilities

 

 

 

Trade accounts payable

$

134,782

 

 

$

138,463

 

Accrued expenses

236,937

 

 

180,290

 

Short-term borrowings

150

 

 

388

 

Dividends payable

37,830

 

 

38,736

 

Total current liabilities

409,699

 

 

357,877

 

Long-term borrowings

1,044,112

 

 

848,864

 

Other noncurrent liabilities

375,255

 

 

343,942

 

Total liabilities

1,829,066

 

 

1,550,683

 

Total shareholders' equity

2,396,529

 

 

2,263,229

 

Total liabilities and shareholders' equity

$

4,225,595

 

 

$

3,813,912

 

 

IDEX CORPORATION

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Nine Months Ended September 30,

 

2020

 

2019

Cash flows from operating activities

 

 

 

Net income

$

276,710

 

 

$

328,671

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Asset impairments

85

 

 

9,680

 

Depreciation and amortization

30,851

 

 

29,599

 

Amortization of intangible assets

31,123

 

 

27,747

 

Amortization of debt issuance expenses

1,351

 

 

1,013

 

Share-based compensation expense

21,155

 

 

20,620

 

Deferred income taxes

1,323

 

 

11,528

 

Non-cash interest expense associated with forward starting swaps

5,153

 

 

4,737

 

Changes in (net of the effect from acquisitions):

 

 

 

Receivables

33,291

 

 

(2,071)

 

Inventories

17,920

 

 

(16,987)

 

Other current assets

(27,655)

 

 

(19,186)

 

Trade accounts payable

(11,496)

 

 

2,807

 

Accrued expenses

24,333

 

 

(23,222)

 

Other - net

3,755

 

 

1,966

 

Net cash flows provided by operating activities

407,899

 

 

376,902

 

Cash flows from investing activities

 

 

 

Purchases of property, plant and equipment

(39,438)

 

 

(36,773)

 

Acquisition of businesses, net of cash acquired

(118,159)

 

 

(87,180)

 

Proceeds from disposal of fixed assets

2,230

 

 

957

 

Other - net

(238)

 

 

407

 

Net cash flows used in investing activities

(155,605)

 

 

(122,589)

 

Cash flows from financing activities

 

 

 

Borrowings under revolving credit facilities

150,000

 

 

 

Proceeds from issuance of 3.0% Senior Notes

499,100

 

 

 

Payment of 4.5% Senior Notes

(300,000)

 

 

 

Payments under revolving credit facilities

(150,000)

 

 

 

Payments under other long-term borrowings

(352)

 

 

(49,923)

 

Payment of make-whole redemption premium

(6,756)

 

 

 

Debt issuance costs

(4,741)

 

 

 

Dividends paid

(114,248)

 

 

(109,227)

 

Proceeds from stock option exercises

28,729

 

 

35,595

 

Repurchases of common stock

(110,342)

 

 

(54,668)

 

Shares surrendered for tax withholding

(12,198)

 

 

(12,583)

 

Other - net

 

 

(1,865)

 

Net cash flows used in financing activities

(20,808)

 

 

(192,671)

 

Effect of exchange rate changes on cash and cash equivalents

13,691

 

 

(12,064)

 

Net increase in cash

245,177

 

 

49,578

 

Cash and cash equivalents at beginning of year

632,581

 

 

466,407

 

Cash and cash equivalents at end of period

$

877,758

 

 

$

515,985

 

 

IDEX CORPORATION

Company and Segment Financial Information - Reported

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended
September 30, (a)

 

Nine Months Ended
September 30, (a)

 

 

2020

 

2019

 

2020

 

2019

Fluid & Metering Technologies

 

 

 

 

 

 

 

 

Net sales

$

220,747

 

 

$

240,861

 

 

$

666,720

 

 

$

729,572

 

 

Operating income (b)

58,402

 

 

77,481

 

 

176,111

 

 

223,493

 

 

Operating margin

26.5

%

 

32.2

%

 

26.4

%

 

30.6

%

 

EBITDA(c)

$

66,284

 

 

$

82,693

 

 

$

195,516

 

 

$

239,534

 

 

EBITDA margin(c)

30.0

%

 

34.3

%

 

29.3

%

 

32.8

%

 

Depreciation and amortization

$

7,163

 

 

$

5,507

 

 

$

19,370

 

 

$

16,653

 

 

Capital expenditures

2,452

 

 

3,627

 

 

8,774

 

 

10,207

 

 

 

 

 

 

 

 

 

 

Health & Science Technologies

 

 

 

 

 

 

 

 

Net sales

$

220,378

 

 

$

229,610

 

 

$

660,105

 

 

$

687,153

 

 

Operating income (b)

49,912

 

 

40,170

 

 

150,562

 

 

151,087

 

 

Operating margin

22.6

%

 

17.5

%

 

22.8

%

 

22.0

%

 

EBITDA(c)

$

60,174

 

 

$

49,194

 

 

$

181,459

 

 

$

178,889

 

 

EBITDA margin(c)

27.3

%

 

21.4

%

 

27.5

%

 

26.0

%

 

Depreciation and amortization

$

10,230

 

 

$

10,296

 

 

$

30,806

 

 

$

29,438

 

 

Capital expenditures

10,558

 

 

4,984

 

 

20,842

 

 

16,201

 

 

 

 

 

 

 

 

 

 

Fire & Safety/Diversified Products

 

 

 

 

 

 

 

 

Net sales

$

140,896

 

 

$

154,543

 

 

$

412,296

 

 

$

474,745

 

 

Operating income (b)

37,103

 

 

41,967

 

 

103,977

 

 

125,909

 

 

Operating margin

26.3

%

 

27.2

%

 

25.2

%

 

26.5

%

 

EBITDA(c)

$

40,617

 

 

$

45,625

 

 

$

115,238

 

 

$

136,381

 

 

EBITDA margin(c)

28.8

%

 

29.5

%

 

28.0

%

 

28.7

%

 

Depreciation and amortization

$

3,854

 

 

$

3,566

 

 

$

11,409

 

 

$

10,745

 

 

Capital expenditures

2,340

 

 

2,257

 

 

6,534

 

 

8,744

 

 

 

 

 

 

 

 

 

 

Corporate Office and Eliminations

 

 

 

 

 

 

 

 

Intersegment sales eliminations

$

(908)

 

 

$

(768)

 

 

$

(2,297)

 

 

$

(2,894)

 

 

Operating income (b)

(14,204)

 

 

(17,853)

 

 

(48,902)

 

 

(55,659)

 

 

EBITDA(c)

(13,807)

 

 

(17,443)

 

 

(55,812)

 

 

(53,329)

 

 

Depreciation and amortization (d)

104

 

 

154

 

 

389

 

 

510

 

 

Capital expenditures

3,003

 

 

163

 

 

3,288

 

 

1,621

 

 

 

 

 

 

 

 

 

 

Company

 

 

 

 

 

 

 

 

Net sales

$

581,113

 

 

$

624,246

 

 

$

1,736,824

 

 

$

1,888,576

 

 

Operating income

131,213

 

 

141,765

 

 

381,748

 

 

444,830

 

 

Operating margin

22.6

%

 

22.7

%

 

22.0

%

 

23.6

%

 

EBITDA(c)

$

153,268

 

 

$

160,069

 

 

$

436,401

 

 

$

501,475

 

 

EBITDA margin(c)

26.4

%

 

25.6

%

 

25.1

%

 

26.6

%

 

Depreciation and amortization (d)

$

21,351

 

 

$

19,523

 

 

$

61,974

 

 

$

57,346

 

 

Capital expenditures

18,353

 

 

11,031

 

 

39,438

 

 

36,773

 

 

 

 

 

 

 

 

 

 

IDEX CORPORATION

Company and Segment Financial Information - Adjusted (Non-GAAP)

(dollars in thousands)

(unaudited)

 

 

 

Three Months Ended

September 30, (a)

 

Nine Months Ended

September 30, (a)

 

 

2020

 

2019

 

2020

 

2019

Fluid & Metering Technologies

 

 

 

 

 

 

 

 

Net sales

$

220,747

 

 

$

240,861

 

 

$

666,720

 

 

$

729,572

 

 

Adjusted operating income (b)(c)

58,987

 

 

77,481

 

 

182,651

 

 

224,423

 

 

Adjusted operating margin(c)

26.7

%

 

32.2

%

 

27.4

%

 

30.8

%

 

Adjusted EBITDA(c)

$

66,869

 

 

$

82,693

 

 

$

202,056

 

 

$

240,464

 

 

Adjusted EBITDA margin(c)

30.3

%

 

34.3

%

 

30.3

%

 

33.0

%

 

Depreciation and amortization

$

7,163

 

 

$

5,507

 

 

$

19,370

 

 

$

16,653

 

 

Capital expenditures

2,452

 

 

3,627

 

 

8,774

 

 

10,207

 

 

 

 

 

 

 

 

 

 

Health & Science Technologies

 

 

 

 

 

 

 

 

Net sales

$

220,378

 

 

$

229,610

 

 

$

660,105

 

 

$

687,153

 

 

Adjusted operating income (b)(c)

50,890

 

 

54,706

 

 

152,724

 

 

165,953

 

 

Adjusted operating margin(c)

23.1

%

 

23.8

%

 

23.1

%

 

24.2

%

 

Adjusted EBITDA(c)

$

61,152

 

 

$

63,730

 

 

$

183,621

 

 

$

193,755

 

 

Adjusted EBITDA margin(c)

27.7

%

 

27.8

%

 

27.8

%

 

28.2

%

 

Depreciation and amortization

$

10,230

 

 

$

10,296

 

 

$

30,806

 

 

$

29,438

 

 

Capital expenditures

10,558

 

 

4,984

 

 

20,842

 

 

16,201

 

 

 

 

 

 

 

 

 

 

Fire & Safety/Diversified Products

 

 

 

 

 

 

 

 

Net sales

$

140,896

 

 

$

154,543

 

 

$

412,296

 

 

$

474,745

 

 

Adjusted operating income (b)(c)

38,352

 

 

42,071

 

 

105,867

 

 

126,832

 

 

Adjusted operating margin(c)

27.2

%

 

27.2

%

 

25.7

%

 

26.7

%

 

Adjusted EBITDA(c)

$

41,866

 

 

$

45,729

 

 

$

117,128

 

 

$

137,304

 

 

Adjusted EBITDA margin(c)

29.7

%

 

29.6

%

 

28.4

%

 

28.9

%

 

Depreciation and amortization

$

3,854

 

 

$

3,566

 

 

$

11,409

 

 

$

10,745

 

 

Capital expenditures

2,340

 

 

2,257

 

 

6,534

 

 

8,744

 

 

 

 

 

 

 

 

 

 

Corporate Office and Eliminations

 

 

 

 

 

 

 

 

Intersegment sales eliminations

$

(908)

 

 

$

(768)

 

 

$

(2,297)

 

 

$

(2,894)

 

 

Adjusted operating income (b)(c)

(14,099)

 

 

(17,197)

 

 

(48,629)

 

 

(54,956)

 

 

Adjusted EBITDA(c)

(13,702)

 

 

(16,787)

 

 

(47,118)

 

 

(52,626)

 

 

Depreciation and amortization(d)

104

 

 

154

 

 

389

 

 

510

 

 

Capital expenditures

3,003

 

 

163

 

 

3,288

 

 

1,621

 

 

 

 

 

 

 

 

 

 

Company

 

 

 

 

 

 

 

 

Net sales

$

581,113

 

 

$

624,246

 

 

$

1,736,824

 

 

$

1,888,576

 

 

Adjusted operating income(c)

134,130

 

 

157,061

 

 

392,613

 

 

462,252

 

 

Adjusted operating margin(c)

23.1

%

 

25.2

%

 

22.6

%

 

24.5

%

 

Adjusted EBITDA(c)

$

156,185

 

 

$

175,365

 

 

$

455,687

 

 

$

518,897

 

 

Adjusted EBITDA margin(c)

26.9

%

 

28.1

%

 

26.2

%

 

27.5

%

 

Depreciation and amortization (d)

$

21,351

 

 

$

19,523

 

 

$

61,974

 

 

$

57,346

 

 

Capital expenditures

18,353

 

 

11,031

 

 

39,438

 

 

36,773

 

(a)

Three and nine month data includes the results of the Velcora acquisition (July 2019) in the Health & Science Technologies segment and the Flow MD acquisition (February 2020) in the Fluid & Metering Technologies segment.

(b)

Segment operating income excludes unallocated corporate operating expenses which are included in Corporate Office and Eliminations.

(c)

These are non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures to their most comparable measure calculated and presented in accordance with GAAP, see the reconciliation tables above.

(d)

Depreciation and amortization excludes amortization of debt issuance costs.

 

Contacts

Investor Contact:
William K. Grogan
Senior Vice President and Chief Financial Officer
(847) 498-7070

Contacts

Investor Contact:
William K. Grogan
Senior Vice President and Chief Financial Officer
(847) 498-7070