IDEX Reports Q1 2006
IDEX announced its financial results for the quarter ended March 31, 2006. Orders in the first quarter were up 14 percent, sales increased 9 percent and net income rose 27 percent to $30.1 million. Diluted earnings per share were 56 cents versus ...
... 45 cents in the year-ago quarter. First quarter 2006 results include stock-based compensation expense of $1.7 million due to the adoption of SFAS 123(R). In addition, the company announced the acquisition of JUN-AIR International A/S, a leading global provider of low decibel, ultra-quiet compressor technology.
Q1 2006 Highlights
- Orders for the first quarter of 2006 were $303.3 million, 14 percent higher than a year ago; excluding foreign currency translation, organic order growth was 16 percent.
- First quarter sales of $275.1 million rose 9 percent; excluding foreign currency translation, organic sales growth was 11 percent.
- Operating margins at 17.6 percent were 150 basis points higher than a year ago.
- The adoption of SFAS 123(R) in the first quarter of 2006 resulted in a $1.7 million expense and a 60 basis point effect on operating margin.
- Net income increased 27 percent to $30.1 million.
- Diluted EPS at 56 cents was 11 cents ahead of last year.
- EBITDA of $55.1 million was 20 percent of sales.
- Free cash flow was $20.4 million, an increase of more than 93 percent from a year ago.
- As previously announced, quarterly cash dividend was raised 25 percent to $0.15 per share.
- Completed two strategic acquisitions, Airshore (as previously announced) and JUN-AIR.
Q1 Orders, Sales, Net Income, and EPS Up Year-over-Year
New orders in the quarter totaled $303.3 million, 14 percent higher than the same period in 2005. Excluding the impact of foreign currency translation, orders were up 16 percent as foreign currency rates had a negative impact of 2 percent.
Sales in the first quarter of $275.1 million rose 9 percent from the prior year period. Excluding the impact of foreign currency translation, organic growth was 11 percent. Organic growth was 14 percent domestically and 8 percent internationally during the quarter. Sales to international customers represented 44 percent of total sales for the first quarter of 2006 versus 45 percent in the year-ago quarter.
First quarter 2006 gross margin of 41.1 percent of sales was 70 basis points higher than last year's first quarter. This improvement reflects volume leverage and savings realized from the company's operational excellence initiatives. SG&A expenses as a percent of sales decreased 80 basis points from the first quarter of 2005 to 23.5 percent. Total SG&A expenses increased due primarily to higher volume and the implementation of SFAS 123(R). The adoption of SFAS 123(R) in the first quarter of 2006 resulted in a $1.7 million expense. First quarter 2006 operating margin of 17.6 percent of sales, which included a 60 basis point effect from the adoption of SFAS 123(R), was 150 basis points higher than the first quarter of 2005.
Net income of $30.1 million increased 27 percent over the first quarter of 2005. Diluted earnings per share of 56 cents improved 11 cents from the first quarter of 2005.
Pump Products sales in the first quarter of $165.3 million reflected 14 percent organic growth. Operating margin of 19.1 percent represented a 250 basis point improvement compared with the first quarter of 2005.
Dispensing Equipment sales of $49.6 million in the first quarter were flat on an organic basis. Operating margin of 23.0 percent represented a 40 basis point improvement compared with the first quarter of 2005.
Sales of Other Engineered Products during the first quarter of $61.2 million reflected 14 percent organic growth. Operating margin of 22.3 percent represented a 150 basis point improvement compared with the first quarter of 2005.
During the quarter, the Pump Products Group contributed 60 percent of sales and 56 percent of operating income; the Dispensing Equipment Group accounted for 18 percent of sales and 20 percent of operating income; and Other Engineered Products represented 22 percent of sales and 24 percent of operating income.
Strong Financial Position
IDEX ended the quarter with total assets of $1.3 billion and working capital of $219.6 million. Total debt was $167.0 million at March 31, 2006. Free cash flow (cash flow from operating activities less capital expenditures) was $20.4 million. EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $55.1 million (20 percent of sales) and covered interest expense by nearly 19 times.
Progress Continues on Growth Initiatives
"IDEX's broad-based growth stems from a consistent focus on improving our performance to existing customers, while at the same time expanding the served application base," Kingsley said. "Our mixed model lean expertise continues to enable us to reduce plant cycle times and total lead times, so that our customers can anticipate and respond more quickly to their own business environments. Our mixed model and global sourcing initiatives continue to improve our total operating efficiency and allow us to further leverage our plant investment.
"We're also pleased with our progress toward applying our integrated operating management system," Kingsley continued. "Our customer metrics and margin expansion are evidence that our operational excellence strategy is working. The first quarter operating margin improved to 17.6 percent, 150 basis points ahead of the year-ago quarter.
"At the same time," Kingsley said, "as an engineered products company, we continue to focus on product innovation that enhances the value that we deliver to our targeted process industry and selected OEM segments. The company's focus on fluidic solutions and other carefully targeted engineered product segments is enabling organic growth opportunities in all three business segments. Our businesses are doing a terrific job of bringing new products to market, faster, to meet our increasingly global customers' needs."
Strategic Acquisitions: Airshore and JUN-AIR
As previously announced, on January 12, 2006, IDEX acquired the assets of Airshore International. In addition, on February 28, 2006, the company acquired JUN-AIR International A/S. Terms for these transactions were not disclosed.
"Both Airshore and Jun-Air strengthen our existing businesses and are consistent with our discipline of using high quality acquisitions to complement organic growth," Kingsley said. "Airshore, which has revenues of approximately $5 million, is a strategic expansion of our Hale Products business. Airshore serves the first responder/homeland security market with stabilization struts for collapsed buildings and vehicles, as well as forcible entry tools.
"JUN-AIR is a leading, global provider of low decibel, ultra quiet vacuum compressors suitable to medical, dental and laboratory applications," Kingsley continued. "Based in Norresundby, Denmark, with annual revenues of approximately $22 million, JUN-AIR builds on our deep experience in air-moving products and significantly strengthens IDEX's position in the global medical equipment market.
"We are pleased by our recent performance and remain focused on delivering consistent, sustainable sales and earnings growth," Kingsley said. "Our emphasis on new product innovation and continuous process improvement is clearly delivering top- and bottom-line growth. Our growth capability, coupled with our developing know-how for applying more advanced mixed model lean tools, will continue to enhance our ability to drive operating performance. As we move forward, we are increasingly well positioned to meet our customers' emerging needs for applied engineered solutions anywhere in the world."
Source: IDEX Corporation