IDEX Corporation (NYSE: IEX) today announced its financial results
for the three- and twelve- month periods ended December 31, 2012.
Full Year 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
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
"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. SilvernailChairman and Chief Executive Officer
Fourth Quarter 2012 Business Highlights (Operating
margin excludes non-cash impairment and restructuring charges)
Fluid & Metering Technologies
Health & Science Technologies
Fire & Safety/Diversified Products
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.
For the Quarter Ended
For the Year Ended
Income (Loss) before Taxes
Depreciation and Amortization
CVI Fair Value Inventory
Cash Flow from Operating Activities
Excess Tax Benefit from Stock-Based Compensation
Free Cash Flow
Adjusted Free Cash Flow
Conference Call to be Broadcast over the
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.
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
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.
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