IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended March 31, 2018.

First Quarter 2018 Highlights

• Orders and sales were both up 11 percent overall and 7 percent organically
• Reported operating margin was 22.3 percent with adjusted operating margin of 22.6 percent, up 80 bps
• Reported EPS was $1.27 with adjusted EPS of $1.29, up 25 percent
• Full year adjusted EPS guidance raised to $5.05 to $5.20

First Quarter 2018

Orders of $632.2 million were up 11 percent compared with the prior year period (+7 percent organic and +4 percent foreign currency translation).

Sales of $612.3 million were up 11 percent compared with the prior year period (+7 percent organic and +4 percent foreign currency translation).

Gross margin of 45.2 percent was down 10 basis points compared with the prior year period primarily due to continued engineering investments, but up 70 basis points sequentially as the operational challenges within HST noted in the second half of 2017 have subsided.

Operating income of $136.7 million resulted in an operating margin of 22.3 percent. Excluding $1.6 million of restructuring expenses, adjusted operating income was $138.3 million with an adjusted operating margin of 22.6 percent, up 80 basis points from the prior year period adjusted operating margin. Adjusted operating income drove adjusted EBITDA of $163.8 million which was 27 percent of sales and covered interest expense by 15 times.

Provision for income taxes in the first quarter of 2018 of $31.2 million resulted in an effective tax rate (ETR) of 24.0 percent, which was lower than the prior year period ETR of 27.3 percent primarily due to the enactment of the 2017 tax reform. The first quarter 2018 ETR of 24.0 percent was higher than our previously guided ETR of 22.5 percent principally due to recent IRS interpretations of the Tax Cuts and Jobs Act.

Net income was $99.0 million which resulted in EPS of $1.27. Excluding restructuring expenses, adjusted EPS of $1.29 increased 26 cents, or 25 percent, from prior year period adjusted EPS.

Cash from operations of $71.7 million led to free cash flow of $61.7 million, which was down 18 percent from the prior year period and 62 percent of adjusted net income. The decrease in free cash flow was primarily due to higher operating working capital, specifically receivables and inventory associated with timing of sales in the quarter and stronger than expected demand.

First Quarter 2018 Segment Highlights

Fluid & Metering Technologies

• Sales of $232.3 million reflected a 7 percent increase compared to the first quarter of 2017 (+5 organic, -1 percent divestiture and +3 percent foreign currency translation).
• Operating income of $66.2 million resulted in an operating margin of 28.5 percent. Excluding $0.1 million of restructuring expenses, adjusted operating income was $66.3 million with an adjusted operating margin of 28.5 percent, a 110 basis point increase compared to the prior year period primarily due to higher volume and productivity initiatives.
• EBITDA of $71.7 million resulted in an EBITDA margin of 30.9 percent. Excluding $0.1 million of restructuring expenses, adjusted EBITDA of $71.8 million resulted in an adjusted EBITDA margin of 30.9 percent, a 90 basis point increase compared to the prior year period.

Health & Science Technologies

• Sales of $221.1 million reflected an 11 percent increase compared to the first quarter of 2017 (+6 percent organic, +1 percent acquisition and +4 percent foreign currency translation).
• Operating income of $51.8 million resulted in an operating margin of 23.4 percent. Excluding $1.1 million of restructuring expenses, adjusted operating income was $52.9 million with an adjusted operating margin of 23.9 percent, a 120 basis point increase compared to the prior year period primarily due to higher volume and productivity initiatives, and up 160 basis points sequentially as operational challenges have subsided.
• EBITDA of $63.8 million resulted in an EBITDA margin of 28.9 percent. Excluding $1.1 million of restructuring expenses, adjusted EBITDA of $64.9 million resulted in an adjusted EBITDA margin of 29.3 percent, a 110 basis point increase compared to the prior year period.

Fire & Safety/Diversified Products

• Sales of $159.2 million reflected a 16 percent increase compared to the first quarter of 2017 (+9 percent organic and +7 percent foreign currency translation).
• Operating income of $39.6 million resulted in an operating margin of 24.8 percent. Excluding $0.1 million of restructuring expenses, adjusted operating income was $39.7 million with an adjusted operating margin of 24.9 percent, a 110 basis point increase compared to the prior year period primarily due to higher volume and productivity initiatives.
• EBITDA of $46.9 million resulted in an EBITDA margin of 29.5 percent. Excluding $0.1 million of restructuring expenses, adjusted EBITDA of $47.0 million resulted in an adjusted EBITDA margin of 29.6 percent, a 320 basis point increase compared to the prior year period primarily due to transaction gains included within Other (income) expense.

For the first quarter of 2018, Fluid & Metering Technologies contributed 38 percent of sales, 42 percent of operating income and 39 percent of EBITDA; Health & Science Technologies accounted for 36 percent of sales, 33 percent of operating income and 35 percent of EBITDA; and Fire & Safety/Diversified Products represented 26 percent of sales, 25 percent of operating income and 26 percent of EBITDA.

Corporate Costs

Corporate costs, excluding restructuring expenses, increased to $20.5 million in the first quarter of 2018 from $16.9 million in the first quarter of 2017 as a result of higher stock compensation, pension expense and outside consulting costs related to M&A and income taxes. Higher corporate costs in 2018 were the reason consolidated adjusted operating margins were only up 80 basis points even though each of the three segment adjusted operating margins expanded over 100 basis points.

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 in order to provide investors with better insight and increased transparency while also allowing for a more comprehensive understanding of the financial information used by management in its decision making. 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 operating income is calculated as operating income 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 restructuring expenses, net of the statutory tax expense or benefit.
• EBITDA is calculated as net income plus interest expense plus provision for income taxes plus depreciation and amortization. We reconciled 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 restructuring expenses.
• Free cash flow is calculated as cash flow from operating activities less capital expenditures.

Table 1: Reconciliation of the Change in Net Sales to Organic Net Sales

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

Table 3: Reconciliations of Reported-to-Adjusted Net Income and EPS(in thousands, except EPS)

Table 4: Reconciliations of EBITDA to Net Income (dollars in thousands)

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

Table 6: Reconciliations of Cash Flows from Operating Activities to Free Cash Flow (in thousands)

Conference Call to be Broadcast over the Internet

IDEX will broadcast its first quarter earnings conference call over the Internet on Monday, April 30, 2018 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 #13675419.

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, 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: 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. 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 filed with the SEC and 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 is a global fluidics leader serving high growth specialized markets. We are best known for our expertise in highly engineered fluidics systems and components, as well as for our expertise in fire and safety products including the Jaws of Life® family of rescue and recovery tools. Our products touch lives every day. Whether it’s a life-saving rescue operation, dispensing fresh juice to a first grader or fueling aircraft, IDEX is a leader in creating enabling technology used in many of the most common everyday activities. For more information, please visit www.idexcorp.com. IDEX shares are traded on the New York Stock Exchange under the symbol “IEX”.

(Financial reports follow)

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