IDEX Reports Third Quarter Adjusted EPS of 66 Cent IDEX Reports Third Quarter Adjusted EPS of 66 Cents, Record Free Cash Flow and an Additional $200 Million Share Repurchase Authorization
LAKE FOREST, Ill.--(BUSINESS WIRE)--Oct. 22, 2012-- IDEX Corporation (NYSE: IEX) today announced its financial results for the three-month period ended September 30, 2012.
New orders in the quarter totaled $464 million, down 3 percent from the prior year period. Sales in the quarter totaled $480 million, 1 percent higher than the prior year period. For the quarter, on an organic basis, orders were 4 percent lower and sales were 1 percent higher than the prior year period.
Third quarter 2012 operating income, adjusted for $7.1 million of restructuring related charges, was $87.7 million, resulting in an adjusted operating margin of 18.3 percent, equal to the prior year adjusted operating margin.
Excluding the impact of restructuring related charges in both years and the acquisition fair value inventory charge in the prior year, third quarter adjusted earnings per share were 66 cents, a decrease of 5 cents, or 7 percent. The unfavorable year-over-year variance is primarily the result of two one-off items – a prior year benefit from CEO forfeited equity compensation and a true-up of the 2011 year-to-date tax rate.
Free cash flow was $92 million for the quarter, a 7 percent increase from the third quarter of the prior year due to higher operating income and improved working capital.
Additionally, the Company’s Board of Directors has increased the authorized level for repurchases of common stock by $200 million. The increased authorization will be added to the approximately $50 million that remains available from the existing authorization approved by the Board of Directors in December 2011. Repurchases under the program will be funded with future cash flow generation.
Third Quarter Highlights
• Orders decreased 3 percent compared to the prior year (-4 percent organic, +3 percent acquisition and -2 percent foreign currency translation).
• Sales increased 1 percent compared to the prior year (+1 percent organic, +2 percent acquisition and -2 percent foreign currency translation).
• Reported net income of $50 million was $2 million, or 4 percent, higher than the prior year. Excluding restructuring related charges, adjusted net income was $55 million or 7 percent lower than prior year adjusted net income.
• Reported EPS of 60 cents was 2 cents, or 3 percent, higher than the prior year EPS. Adjusted EPS of 66 cents was 5 cents, or 7 percent, lower than the prior year adjusted EPS.
• EBITDA of $100 million was 21 percent of sales and covered interest expense by nearly 10 times.
• Free cash flow was $92 million, representing a record and over 180 percent of net income. Year-to-date free cash flow continues to be strong – up 41 percent from the prior year.
• During the quarter, the Company completed another strategic acquisition, Matcon, a global leader in material processing solutions in the Pharmaceuticals, Food, Plastics and Fine Chemicals industries.
• The Company completed the repurchase of 1 million shares of common stock for $39 million in the third quarter. Over two percent of the outstanding shares of common stock, or 1.9 million shares, have been purchased by the Company in 2012.
“We achieved solid profit performance and excellent cash generation in the third quarter in a difficult global environment. Third quarter adjusted EPS of 66 cents exceeded our expectations, primarily as a result of our continued focus on improved productivity and structural cost reductions. Our operating model and team have proven their ability to excel in this environment, which is evident by the 18.3 percent operating margins and record free cash flow generation of $92 million.
Our strong balance sheet and cash generation provide us ample opportunity to deploy capital and remain focused on delivering robust and consistent shareholder returns. In addition to our longstanding investment priorities of organic growth and strategic acquisitions, our Board of Directors has increased the authorization level for the repurchase of our shares by $200 million, providing us with approximately $250 million of total availability. Annually, we intend to repurchase a minimum of one to two percent of the Company’s outstanding shares of common stock, with the flexibility to opportunistically increase the purchases when the stock is trading at a discount to the Company’s intrinsic value. We believe the repurchase of our shares in conjunction with consistent shareholder dividends and strategic acquisitions is a prudent use of our cash flow to maximize our shareholders’ total return.
We expect market conditions to remain challenging, specifically outside the US, resulting in expected fourth quarter flat organic revenue. Despite this market volatility, our disciplined execution allows us to maintain our prior full year 2012 adjusted EPS guidance of $2.65 - $2.70.”
Andrew K. Silvernail
Chairman and Chief Executive Officer
Third Quarter 2012 Business Highlights (Operating margin excludes restructuring related and non-cash fair value inventory charges)
Fluid & Metering Technologies
• Sales in the third quarter of $198 million reflected a 4 percent decrease compared to the third quarter of 2011 (-1 percent organic and -3 percent foreign currency translation).
• Operating margin of 21.4 percent represented a 130 basis point improvement compared with the third quarter of 2011 primarily due to productivity and cost reduction initiatives.
Health & Science Technologies
• Sales in the third quarter of $176 million reflected a 2 percent increase compared to the third quarter of 2011 (-4 percent organic, +7 percent acquisitions and -1 percent foreign currency translation).
• Operating margin of 17.3 percent represented a 150 basis point decrease compared with the third quarter 2011 primarily due to lower margins from recently acquired businesses.
Fire & Safety/Diversified Products
• Sales in the third quarter of $108 million reflected a 10 percent increase compared to the third quarter of 2011 (+13 percent organic and -3 percent foreign currency translation).
• Operating margin of 24.8 percent represented a 360 basis point increase compared with the third quarter of 2011 primarily due to improved productivity and cost reduction initiatives.
For the third quarter of 2012, Fluid & Metering Technologies contributed 41 percent of sales and 42 percent of operating income; Health & Science Technologies accounted for 37 percent of sales and 31 percent of operating income; and Fire & Safety/Diversified Products represented 22 percent of sales and 27 percent of operating income.
Share Repurchase Authorization
The Company’s Board of Directors authorized the repurchase of an additional $200 million of common stock. These repurchases will be made from time to time in either open market transactions or in privately negotiated transactions. Repurchases may also be made under 10b5-1 plans, which would permit shares to be repurchased through pre-determined criteria when the Company would otherwise be prohibited from doing so under insider trading laws. The timing, volume and nature of share repurchases will be at the discretion of management, dependent on market conditions, other priorities of cash investment, applicable securities laws and other factors. This share repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be suspended or discontinued at any time.
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