IDEX Corporation Reports First Quarter Results
NORTHBROOK - IDEX Corporation (NYSE: IEX) reported that orders, sales, net income, and earnings per share improved from the fourth quarter and the first quarter of last year.
First Quarter Highlights
- Orders written of $206.1 million were up 12 percent from last year.
- Sales improved 12 percent from last year to $195.5 million, reflecting 4 percent growth from acquisitions, favorable foreign currency translation of 5 percent and a 3 percent increase in base business activity.
- Gross margins improved 0.6 of a percentage point to 38.0 percent.
- Operating margins at 12.0 percent were below the prior year's 12.9 percent.
- Net income at $12.7 million increased 10 percent.
- Diluted EPS at 39 cents was 2 cents ahead of last year's first and fourth quarters.
- Debt to total capitalization was 31 percent.
- Progress continues on corporate initiatives.
- 2003 performance will depend on pace of new orders and speed of economic recovery.
Financial Highlights (in millions, except per share amounts and percentages)
|For the Quarter Ended|
|March 31,||March 31,||December 31,|
|Income Before Taxes||$19.7||$18.0||9%||$18.9||4%|
|Depreciation and Amortization||7.9||7.7||3||6.7||18|
|Cash Flow from Operating Activities||16.9||23.8||(29)||25.9||(35)|
|Free Cash Flow||13.1||19.4||(32)||19.7||(34)|
Orders, Sales, Net Income and EPS Exceed Last Year's Fourth Quarter and First Quarter Results
Sales in the latest quarter increased 12 percent, to $195.5 million, from the comparable prior-year quarter, and were 4 percent higher than last year's fourth quarter.
Compared with last year's first quarter, acquisitions accounted for a 4 percent sales improvement, foreign currency translation provided a 5 percent increase, and base business shipments were up 3 percent. Domestic sales in the quarter were unchanged while international sales - net of foreign currency translation - were 7 percent higher. Sales to international customers were 45 percent of the total, up from 40 percent last year. Compared with the 2002 fourth quarter, base business sales improved 2 percent and foreign currency translation provided a 2 percent increase.
First quarter 2003 operating margins were 12.0 percent of sales, which was 0.9 percentage points lower than last year's first quarter and virtually unchanged from the fourth quarter. The decline from last year's first quarter resulted from an unfavorable mix of sales (away from higher margin pump businesses), and an increase in selling, general and administrative expenses (SGA), which were partially offset by an improvement in gross margins.
Approximately a quarter of the $8.0 million increase in SGA was attributable to costs associated with the sale of a non-material product line, final resolution of the previously mentioned patent infringement litigation, and higher than normal adjustments to estimates and accruals for one of IDEX's foreign subsidiaries. The other portion of the SGA increase reflected the cumulative impact of acquisitions made in 2002, deliberate reinvestment in the businesses to drive organic growth, and cost inflation including pension and insurance expenses. Some of these increases are higher than normally would be expected and, excluding these items, SGA as a percent of sales in the first quarter would have been below the fourth quarter rate. Management anticipates savings from operational excellence activities will keep full year 2003 SGA as a percent of sales at a level similar to 2002.
Net income at $12.7 million increased 10 percent over last year's first quarter, and was up 4 percent sequentially from the fourth quarter. Diluted earnings per share at 39 cents increased 2 cents from both the first and fourth quarters of last year.
New orders in the current quarter totaled $206.1 million, 12 percent higher than the same 2002 quarter and 9 percent above the fourth quarter. Excluding the impact of foreign currency translation and the three acquisitions made since the beginning of 2002 - Halox (April 2002), Rheodyne (July 2002), and Wrightech (October 2002) - orders were 3 percent higher than in the first quarter of 2002. Sequentially, base business orders were up 4 percent excluding foreign currency translation. At the end of the current quarter, the company had a typical unfilled order backlog of slightly over one month's sales.
For the latest three months, the Pump Products Group contributed 57 percent of both sales and operating income, the Dispensing Equipment Group accounted for 20 percent of sales and 17 percent of operating income, and the Other Engineered Products Group represented 23 percent of sales and 26 percent of operating income.
Strong Financial Position
IDEX ended the quarter with total assets of $939.4 million and working capital of $128.8 million. Total debt decreased $2.9 million during the period. Free cash flow (cash flow from operating activities less capital expenditures) for the first quarter was $13.1 million. The decline from the comparable prior-year and sequential prior-year quarters primarily was attributable to improvement in first quarter sales activity and the related increase in accounts receivable and inventory to support the higher business volume. Compared with a year ago, both days' sales in receivables and inventory turns showed improvement. Free cash flow for the last 12 months totaled $82.7 million and was 1.5 times net income. Trailing 12-month EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $130.7 million and covered interest expense by more than 8 times. Debt to total capitalization at the end of the first quarter was 31 percent.
Progress Continues on Corporate Initiatives
"We continue to use our long-term initiatives to create top- and bottom- line growth at IDEX," Williams said. "Our drive for operational excellence is improving the gross margin. First quarter savings from Six Sigma, Kaizen and Lean Manufacturing more than doubled our comparable 2002 period savings, as the business units are making the transition from just using the tools to truly running the business differently. Global sourcing saved us $4.0 million in the first quarter versus $1.9 million at this time in 2002, which represented a savings of 27 percent versus our prior sources. This process has continued to improve, and we have shortened the time to qualify global suppliers. We also continue to invest in products and markets to increase our organic growth rate."
2003 Financial Performance Depends on Speed of Economic Recovery
Looking ahead, Williams said, "We are encouraged by the orders, sales and earnings improvements achieved in the first quarter versus both the preceding and year-ago quarters. It is important to note that this quarter represented the second consecutive period our base businesses showed year-over-year quarterly sales growth. The last time this occurred was in the third quarter of 2000.
"As a short-cycle business, our financial performance depends on the current pace of incoming orders, and we have very limited visibility of future business conditions. However, we believe IDEX is well positioned for earnings improvements as the economy strengthens. This is based on our lower cost structures resulting from restructuring actions; our operational excellence initiatives of Kaizen and Lean Manufacturing, Six Sigma, global sourcing and eBusiness; and using our strong cash flow to cut debt and interest expense. In addition, we continue to pursue acquisitions to drive the company's longer term profitable growth," Williams concluded.
Conference Call to be Broadcast Over the Internet. For more information visit IDEX Corporation website.
Source: IDEX Corporation