IDEX Reports Double Digit Growth in Sales and Earnings for 2005; Fourth Quarter Organic Growth of 10% and 27% Increase in Net Income
NORTHBROOK, Ill.--(BUSINESS WIRE)--Jan. 26, 2006--IDEX Corporation (NYSE:IEX) today announced its financial results for the three- and twelve-month periods ended December 31, 2005. Orders in the fourth quarter were up 9 percent, sales increased 8 percent and net income rose 27 percent to $28.7 million. Diluted earnings per share were 54 cents versus 43 cents in the year-ago quarter. For the full year 2005, orders and sales both increased 12 percent and diluted earnings per share were $2.09, up 24 percent versus 2004.
2005 Highlights -- Orders for 2005 were $1.057 billion, 12 percent higher than a year ago; excluding foreign currency translation and acquisitions, organic growth was 10 percent. -- Full year sales of $1.043 billion rose 12 percent; excluding foreign currency translation and acquisitions, organic sales growth was 10 percent. -- Operating margins at 17.5 percent were 140 basis points higher than a year ago. -- Net income increased 27 percent to $109.8 million. -- Diluted EPS at $2.09 was 41 cents ahead of last year. -- EBITDA of $213.3 million was 20.4 percent of sales and covered interest expense by nearly 15 times. -- Free cash flow was strong at $121.2 million and 1.1 times net income. -- Operational excellence initiatives continue to fuel product innovation to drive growth.
"We are delighted with our results for the fourth quarter and full year 2005. For the year, our business units again delivered -- with double digit increases in orders, sales, and net income as well as strong cash flow. All three business segments generated organic sales growth and continued operating margin expansion as a result of our operational excellence and new product and market initiatives. The organic sales growth during the fourth quarter was led by Engineered Products at 15 percent. Organic sales growth in Pump Products was 10 percent, while growth in Dispensing Equipment was 2 percent. Within Dispensing, demand remained strong in North America, partially offset by the impact of continued unfavorable market conditions in Europe. Moving into 2006, we remain focused on driving continuous process improvement, new product innovation, and stretch thinking to better respond to our customers and deliver sustained, profitable growth."
Lawrence D. Kingsley President and Chief Executive Officer
2005 Financial Highlights
-------------------------
(In millions, except per share amounts and percentages)
Year Ended December 31
2005 2004 Change
--------- --------- ---------
Orders Written $1,057.0 $942.4 12%
Sales 1,043.3 928.3 12
Operating Income 182.8 149.4 22
Operating Margin 17.5% 16.1% 140 bp
Net Income $109.8 $86.4 27%
Diluted EPS 2.09 1.68 24
Other Data
Income before Taxes $168.9 $133.9 26%
Depreciation and Amortization 30.0 30.9 (3)
Interest 14.4 14.8 (2)
EBITDA 213.3 179.6 19
Cash Flow from Operating Activities 144.2 142.3 1
Capital Expenditures 23.0 21.1 9
Free Cash Flow 121.2 121.2 --
2005 Orders, Sales, Net Income and EPS Ahead of Last Year
New orders for the year totaled $1.057 billion, 12 percent higher than last year. Excluding the impact of foreign currency translation and acquisitions, orders were 10 percent higher in 2005 than in 2004.
Sales for 2005 increased 12 percent to $1.043 billion. Excluding the impact of foreign currency translation and acquisitions, organic growth was 10 percent. Organic growth was 12 percent domestically and 7 percent internationally. Sales to international customers represented approximately 43 percent of total sales for 2005 versus 44 percent last year.
For the year, operating margins were 17.5 percent, 140 basis points higher than the 16.1 percent reported in the prior year. This improvement reflects a 60 basis point improvement in gross margin to 40.6 percent, resulting mainly from volume leverage and the company's global sourcing and operational excellence initiatives. Selling, general and administrative (SG&A) expenses as a percent of sales of 23.1 percent decreased by 80 basis points from 2004. Higher total SG&A expenses reflect acquisitions, volume-related expenses, and reinvestment in the business to drive organic growth.
Net income of $109.8 million increased 27 percent compared to 2004. Diluted earnings per share of $2.09 rose 41 cents, or 24 percent, from the $1.68 per share recorded in 2004.
Fourth Quarter Financial Highlights
-----------------------------------
(In millions, except per share amounts and percentages)
For the Quarter Ended
December 31 September 30
2005 2004 Change 2005 Change
------- ------- ------ ------- ------
Orders Written $259.5 $238.8 9% $258.9 -- %
Sales 261.5 242.6 8 257.9 1
Operating Income 47.3 38.3 23 46.6 1
Operating Margin 18.1% 15.8% 230 bp 18.1% -- bp
Net Income $28.7 $22.7 27% $28.5 1%
Diluted EPS 0.54 0.43 26 0.54 --
Other Data
Income before Taxes $44.2 $34.3 29% $43.2 2%
Depreciation and
Amortization 7.1 7.6 (7) 7.2 (1)
Interest 3.2 3.9 (17) 3.5 (10)
EBITDA 54.5 45.8 19 53.9 1
Cash Flow from Operating
Activities 42.2 48.1 (12) 48.7 (13)
Capital Expenditures 5.8 6.3 (7) 5.3 10
Free Cash Flow 36.4 41.8 (13) 43.4 (16)
Q4 Orders, Sales, Net Income and EPS Up Year-over-Year
New orders in the quarter totaled $259.5 million, 9 percent higher than the same period in 2004. Excluding the impact of foreign currency translation, orders were up 11 percent as foreign currency rates had a negative impact of 2 percent. As of December 31, 2005, the company had an unfilled order backlog of just over one month's sales.
Sales in the fourth quarter of $261.5 million rose 8 percent from the prior year period. Excluding the impact of foreign currency translation, organic growth was 10 percent. Organic growth was 13 percent domestically and 6 percent internationally during the quarter. Sales to international customers represented 42 percent of total sales for the fourth quarter of 2005 versus 43 percent in the year-ago quarter.
Fourth quarter 2005 operating margin of 18.1 percent of sales was 230 basis points higher than the fourth quarter of 2004. Fourth quarter 2005 gross margin of 40.6 percent of sales was 100 basis points higher than last year's fourth quarter. This improvement reflects volume leverage and savings realized from the company's operational excellence and global sourcing initiatives. SG&A expenses as a percent of sales decreased 130 basis points from the fourth quarter of 2004 to 22.5 percent. Total SG&A expenses increased due primarily to higher volume.
Net income of $28.7 million increased 27 percent over the fourth quarter of 2004. Diluted earnings per share of 54 cents improved 11 cents from the fourth quarter of 2004.
Q4 Segment Results
Pump Products sales in the fourth quarter of $157.5 million reflected 10 percent organic growth. Operating margin of 19.5 percent represented a 220 basis point improvement compared with the fourth quarter of 2004.
Dispensing Equipment sales of $42.4 million in the fourth quarter reflected 2 percent organic growth. Operating margin of 19.1 percent represented a 290 basis point improvement compared with the fourth quarter of 2004.
Sales of Other Engineered Products during the fourth quarter of $62.8 million reflected 15 percent organic growth. Operating margin of 25.7 percent represented a 240 basis point improvement compared with the fourth quarter of 2004.
For the full year, the Pump Products Group contributed 59 percent of sales and 54 percent of operating income; the Dispensing Equipment Group accounted for 18 percent of sales and 19 percent of operating income; and Other Engineered Products represented 23 percent of sales and 27 percent of operating income.
Strong Financial Position
IDEX ended the year with total assets of $1.244 billion and working capital of $194.2 million. Total debt was $158.4 million at December 31, 2005. Free cash flow (cash flow from operating activities less capital expenditures) for 2005 was $121.2 million. EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $213.3 million (20.4 percent of sales) and covered interest expense by nearly 15 times.
Acquisition of Airshore International
In a strategic expansion of our Hale Products business, on January 12, 2006, IDEX acquired the assets used to conduct the Airshore International business of Direct Equipment West, Ltd. Revenue in 2005 for Airshore was approximately $5 million. Based in British Columbia, Canada, the Airshore business provides stabilization struts for collapsed buildings and vehicles, high and low pressure lifting bags and forcible entry tools for the fire and rescue markets. Commenting on the acquisition, Kingsley said, "Airshore brings expanded capability to our global fire and rescue platform, at a time when both natural and manmade disasters are increasing the need for shoring solutions worldwide."
Progress Continues on Operational Excellence and Innovation Initiatives
"We're driving operational excellence and innovation to better serve the needs of our increasingly global and exacting customer base," Kingsley said. "Our more holistic approach to operational management, particularly the use of our new mixed model manufacturing and business process tools, will enable us to reduce lead times and cost, improve efficiency and leverage our plant investment.
"We're pleased with our progress applying these more advanced tools," Kingsley continued. "Our margin expansion is evidence that our operational excellence strategy is working. Fourth quarter operating margin improved to 18.1 percent, 230 basis points ahead of last year's fourth quarter. Full year savings from our operational excellence tools of Lean and Six Sigma were $10.2 million, while the net savings from our global sourcing initiatives totaled $12.9 million, an improvement of 25 percent over prior sources.
"At the same time," Kingsley said, "as an engineered products company, we continue to use the leverage from our operational excellence discipline to fuel innovation and organic growth opportunities. Our businesses are doing a good job of bringing new products to our existing markets and, increasingly, delivering breakthrough innovations that will enable us to dramatically expand our served markets and create new markets."
2006 Outlook
"We are encouraged 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 the most advanced mixed model manufacturing tools, will continue to enhance our ability to drive operating performance. As we move forward in 2006, we remain well positioned to meet our customers' emerging needs for applied engineering solutions anywhere in the world."
Adoption of FAS 123R
Effective January 1, 2006, the company is adopting the provisions of Financial Accounting Standard 123R, "Shared-Based Payment," which requires the expensing of equity-based compensation programs. While the calculation of the anticipated impact is still under review, we expect an annual pre-tax expense of approximately $8.0 million, or 10 cents per diluted share on a net income basis.
Conference Call to be Broadcast Over the Internet
IDEX will broadcast its fourth quarter earnings conference call over the Internet on Thursday, January 26, 2006 at 1:30 p.m. CT. President and Chief Executive Officer Larry Kingsley and Vice President and Chief Financial Officer Dominic Romeo 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 presentation, which will be carried live on its Web site at www.idexcorp.com. Those who wish to listen 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, or download the correct application at no charge. Investors also will be able to hear a replay of the call by dialing 800.642.1687 or 706.645.9291 using conference ID #3969023.
A Note on 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. Management uses these non-GAAP financial measures as internal operating metrics. 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.
Forward-Looking Statements
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 here.
About IDEX
IDEX Corporation is the world leader in fluid-handling technologies for positive displacement pumps and metering products, dispensing equipment for color formulation, and other highly engineered products including fire suppression equipment, rescue tools and engineered band clamping systems. 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 Web site at www.idexcorp.com.
(Tables follow)
IDEX CORPORATION
Condensed Statements of Consolidated Operations
(in thousands except per share amounts)
Fourth Quarter Ended Twelve Months Ended
December 31, (a) December 31, (a)
2005 2004 2005 2004
----------------------------------------------------------------------
Net sales $261,529 $242,550 $1,043,275 $928,297
Cost of sales 155,335 146,397 619,431 557,502
----------------------------------------------------------------------
Gross profit 106,194 96,153 423,844 370,795
Selling, general and
administrative
expenses 58,883 57,830 241,057 221,411
----------------------------------------------------------------------
Operating income 47,311 38,323 182,787 149,384
Other income (expense)
- net 48 (135) 564 (743)
Interest expense 3,190 3,853 14,423 14,764
----------------------------------------------------------------------
Income before income
taxes 44,169 34,335 168,928 133,877
Provision for income
taxes 15,459 11,674 59,125 47,471
----------------------------------------------------------------------
Net income $28,710 $22,661 $109,803 $86,406
======================================================================
Earnings per Common
Share:
Basic earnings per
common share $.55 $.45 $2.14 $1.73
Diluted earnings per
common share $.54 $.43 $2.09 $1.68
======================================================================
Share Data:
Basic weighted average
common shares
outstanding 52,306 50,462 51,392 50,073
Diluted weighted
average common shares
outstanding 53,492 52,099 52,576 51,348
======================================================================
Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2005 (a) 2004 (a)
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $77,290 $7,274
Receivables - net 132,544 119,567
Inventories 126,576 126,978
Other current assets 11,091 7,419
----------------------------------------------------------------------
Total current assets 347,501 261,238
Property, plant and
equipment - net 145,485 155,602
Goodwill 691,869 713,619
Intangible assets - net 28,615 29,545
Other noncurrent assets 30,710 26,288
----------------------------------------------------------------------
Total assets $1,244,180 $1,186,292
======================================================================
Liabilities and shareholders' equity
Trade accounts payable $69,953 $71,405
Dividends payable 6,321 6,105
Accrued expenses 74,358 70,745
Short-term obligations 2,664 -
----------------------------------------------------------------------
Total current liabilities 153,296 148,255
Long-term debt 155,771 225,317
Other noncurrent liabilities 112,103 99,115
----------------------------------------------------------------------
Total liabilities 421,170 472,687
Shareholders' equity 823,010 713,605
----------------------------------------------------------------------
Total liabilities and
shareholders' equity $1,244,180 $1,186,292
======================================================================
See following page for notes to condensed financial statements.
IDEX CORPORATION
Company and Business Group Financial Information
(dollars in thousands)
Fourth Quarter Ended Twelve Months Ended
December 31, (a) December 31, (a)
2005 2004 2005 2004
----------------------------------------------------------------------
Pump Products
Net sales $157,454 $144,797 $620,673 $542,336
Operating income (b) 30,765 25,122 114,404 93,356
Operating margin 19.5 % 17.3 % 18.4 % 17.2 %
Depreciation and
amortization $3,719 $3,997 $15,797 $16,464
Capital
expenditures 2,967 4,133 13,758 13,968
Dispensing Equipment
Net sales $42,434 $42,652 $187,814 $170,198
Operating income (b) 8,095 6,899 40,785 33,489
Operating margin 19.1 % 16.2 % 21.7 % 19.7 %
Depreciation and
amortization $1,357 $1,398 $5,210 $5,616
Capital
expenditures 958 808 3,824 2,769
Other Engineered
Products
Net sales $62,833 $56,117 $238,992 $219,006
Operating income (b) 16,161 13,068 56,682 47,120
Operating margin 25.7 % 23.3 % 23.7 % 21.5 %
Depreciation and
amortization $1,348 $1,363 $5,696 $6,012
Capital
expenditures 1,717 742 4,357 3,204
Company
Net sales $261,529 $242,550 $1,043,275 $928,297
Operating income 47,311 38,323 182,787 149,384
Operating margin 18.1 % 15.8 % 17.5 % 16.1 %
Depreciation and
amortization (c) $7,110 $7,614 $29,965 $30,949
Capital
expenditures 5,840 6,292 22,994 21,097
----------------------------------------------------------------------
(a) Twelve month data includes acquisition of Systec (April 2004) and
Scivex (May 2004) in the Pump Products Group and Dinglee (July
2004) in the Other Engineered Products Group from the dates of
acquisition.
(b) Group operating income excludes unallocated corporate operating
expenses.
(c) Excludes amortization of debt issuance expenses.
CONTACT: IDEX Corporation Susan H. Fisher, 847-498-7070 SOURCE: IDEX Corporation