IDEX Corporation Reports Record Results for 2006; Continued Strong Organic Growth, Margin Expansion and Cash Flow
NORTHBROOK, Ill.--(BUSINESS WIRE)--Jan. 30, 2007--IDEX Corporation (NYSE:IEX) today announced its financial results for the three- and twelve-month periods ended December 31, 2006. From continuing operations, orders in the fourth quarter were up 25 percent, sales increased 19 percent, and income rose 28 percent to $36.2 million. Diluted earnings per share from continuing operations were 67 cents versus 53 cents in the year-ago quarter. Fourth quarter 2006 results include stock option expense of $1.5 million. From continuing operations, full year 2006 orders increased 16 percent, sales rose 14 percent and diluted earnings per share were $2.48 versus $2.06 in 2005.
Full Year 2006 Highlights (from Continuing Operations)
- Orders for 2006 were $1.18 billion, 16 percent higher than a year ago; excluding foreign currency translation and acquisitions, organic orders growth was 10 percent.
- Full year sales of $1.15 billion rose 14 percent; excluding foreign currency translation and acquisitions, organic sales growth was 9 percent.
- Operating margins at 18.8 percent were 90 basis points higher than a year ago.
- Stock option expense of $7.6 million had a 70 basis point impact on operating margin during the year.
- Income increased 23 percent to $133.7 million.
- Diluted EPS at $2.48 was 42 cents or 20 percent ahead of last year.
- EBITDA of $248.3 million was 21 percent of sales and covered interest expense by 15 times.
- Free cash flow was strong at $144.5 million and 1.1 times income.
- Five strategic acquisitions were completed during the year, including the most recent acquisition, as previously announced, of Toptech Systems on December 1, 2006.
- Operational and commercial excellence initiatives continue to fuel product innovation to drive growth.
Lawrence D. Kingsley Chairman and Chief Executive Officer
2006 Financial Highlights
(Dollars in millions, except per share amounts and percentages)
----------------------------------------------------------------------
Year Ended December 31
2006 2005 Change
---------- ---------- ----------
Orders Written $1,184.5 $1,024.7 16 %
Sales 1,154.9 1,011.3 14
Operating Income 217.2 181.0 20
Operating Margin 18.8 % 17.9 % 90 bp
Income from Continuing Operations $133.7 $108.6 23 %
Net Income 146.7 109.8 34
Diluted EPS:
Income from Continuing
Operations 2.48 2.06 20
Net Income 2.72 2.08 31
Other Data
-- Income before Taxes $201.9 $167.2 21 %
-- Depreciation and
Amortization 30.0 26.3 14
-- Interest 16.4 14.4 14
-- EBITDA 248.3 207.9 19
-- Cash Flow from Operating
Activities 159.9 142.9 12
-- Capital Expenditures 21.2 22.5 (6)
-- Excess Tax Benefit from
Stock-Based Compensation 5.8 - -
-- Free Cash Flow 144.5 120.4 20
2006 Orders, Sales, Income, and EPS from Continuing Operations Well Ahead of Last Year
New orders for full year 2006 totaled $1.18 billion, 16 percent higher than 2005. Excluding the impact of acquisitions and foreign currency translation, orders in 2006 were 10 percent higher than in 2005.
Sales for 2006 increased 14 percent to $1.15 billion from $1.01 billion a year earlier. Excluding the impact of acquisitions and foreign currency translation, organic growth was 9 percent. Sales to international customers represented approximately 45 percent of total sales for both 2006 and 2005.
Full year 2006 operating margin was 18.8 percent, 90 basis points higher than the 17.9 percent reported in the prior year. This improvement reflects volume leverage, along with a 40 basis point improvement in gross margin to 41.3 percent, resulting mainly from strategic sourcing and other operational excellence initiatives. Selling, general and administrative expenses as a percent of sales improved 50 basis points from 2005. Higher total SG&A expenses reflect acquisitions, volume-related expenses, stock option expense and reinvestment in the business to drive organic growth. Stock option expense impacted operating margins by 70 basis points in 2006.
Income from continuing operations of $133.7 million increased 23 percent in 2006 compared to 2005. Diluted earnings per share from continuing operations of $2.48 rose 42 cents, or 20 percent, from the $2.06 recorded for 2005.
Fourth Quarter Financial Results
(Dollars in millions, except per share amounts and percentages)
----------------------------------------------------------------------
For the Quarter Ended
December 31 September 30
------------------ -----------------
2006 2005 Change 2006 Change
--------- -------- -------- -------- --------
Orders Written $314.9 $251.1 25 % $285.6 10 %
Sales 302.1 252.9 19 289.8 4
Operating Income 59.0 46.8 26 54.4 8
Operating Margin 19.5 % 18.5 % 100 bp 18.8 % 70 bp
Income from Continuing
Operations $36.2 $28.3 28 % $33.3 9 %
Net Income 35.6 28.7 24 46.0 (23)
Diluted EPS:
Income from
Continuing
Operations .67 .53 26 .62 8
Net Income .66 .54 22 .85 (22)
Other Data
-- Income before
Taxes $53.3 $43.7 22 % $51.5 3 %
-- Depreciation
and Amortization 9.3 6.2 49 6.6 41
-- Interest 6.0 3.2 88 3.4 78
-- EBITDA 68.6 53.1 29 61.5 11
-- Cash Flow from
Operating
Activities 50.3 42.6 18 40.8 23
-- Capital
Expenditures 5.2 5.7 (9) 6.3 (17)
-- Excess Tax
Benefit from
Stock-Based
Compensation 0.9 - - 0.3 -
-- Free Cash Flow 46.0 36.9 25 34.8 32
Q4 Orders, Sales, Income and EPS from Continuing Operations Up Year-over-Year
New orders in the quarter totaled $314.9 million, 25 percent higher than the same period in 2005. Excluding the impact of acquisitions and foreign currency translation, orders were up 12 percent.
Sales in the fourth quarter of $302.1 million increased 19 percent from the prior-year period. Excluding the impact of acquisitions and foreign currency translation, organic growth was 7 percent, led by Fluid & Metering Technologies at 10 percent. Sales to international customers represented approximately 45 percent of total sales for the fourth quarter of 2006 versus 44 percent in the same period of 2005.
Fourth quarter operating margin was 19.5 percent, 100 basis points higher than the 18.5 percent reported in the prior-year period. Gross margin of 41.6 percent was 70 basis points higher than the fourth quarter of 2005. Strategic sourcing and other operational excellence initiatives drove the gross margin improvement. Selling, general and administrative expenses as a percent of sales improved 30 basis points to 22.1 percent in the fourth quarter of 2006. Higher total SG&A expenses reflect acquisitions, volume-related expenses, stock option expense and reinvestment in the business to drive organic growth. Stock option expense impacted operating margins by 50 basis points in the fourth quarter of 2006.
Income from continuing operations of $36.2 million increased 28 percent over the fourth quarter of 2005. Diluted earnings per share from continuing operations of 67 cents improved 14 cents, or 26 percent, from the fourth quarter of 2005. The effective tax rate in the fourth quarter of 2006 was favorably impacted by the December renewal of the U.S. Federal Research and Development Tax Credit.
Segment Results
Fluid & Metering Technologies orders in the fourth quarter of $124.1 million reflected 14 percent organic growth, while sales in the fourth quarter of $119.5 million reflected 10 percent organic growth. Operating margin of 21.4 percent represented a 160 basis point improvement compared with the fourth quarter of 2005.
Health & Science Technologies orders in the fourth quarter of $78.5 million reflected 10 percent organic growth, while sales in the fourth quarter of $79.3 million reflected 7 percent organic growth. Operating margin of 21.4 percent represented a 150 basis point improvement compared with the fourth quarter of 2005.
Dispensing Equipment orders in the fourth quarter of $39.8 million reflected 5 percent organic growth. Sales of $36.0 million in the fourth quarter reflected flat year-over-year organic growth due primarily to the timing of deliveries related to project-based orders in North America. Operating margin of 21.0 percent represented a 30 basis point improvement compared with the fourth quarter of 2005.
Fire & Safety/Diversified Products orders in the fourth quarter of $74.3 million reflected 16 percent organic growth, while sales of $69.1 million in the fourth quarter reflected 6 percent organic growth. Operating margin of 24.5 percent represented a 120 basis point decline compared with the fourth quarter of 2005, due in part to start up costs in the company's new China production facility.
For the full year 2006, Fluid & Metering Technologies contributed 38 percent of sales and 36 percent operating income; Health & Science Technologies accounted for 26 percent of sales and 24 percent of operating income; Dispensing Equipment accounted for 14 percent of sales and 15 percent of operating income; and Fire & Safety/Diversified Products represented 22 percent of sales and 25 percent of operating income.
Discontinued Operations
During the fourth quarter, the company recognized a $0.5 million loss from discontinued operations resulting primarily from the company's decision to sell its Halox product line.
Strong Financial Position
IDEX ended the year with total assets of $1.67 billion and working capital of $239 million. Total borrowings were $362 million at December 31, 2006. Free cash flow (cash flow from operating activities less capital expenditures plus the excess tax benefit from stock-based compensation) for 2006 was $144 million. Full year 2006 EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $248 million (21 percent of sales) and covered interest expense by more than 15 times. Debt-to-total capitalization at year-end was 27 percent.
Progress Continues on Growth Initiatives: Operational and Commercial Excellence
"IDEX's broad-based growth stems from our ability to expand our served application base through operational and commercial excellence," Kingsley said. "We continue to reinvest in product innovation, incorporating stretch thinking to completely understand our customers' application and the final use and requirements of their products, as well as goal deployment to ensure we execute. Our focus on fluidics solutions and other carefully targeted engineered product segments is enabling organic growth opportunities in all four business segments. Our businesses are doing a terrific job of bringing new products to market, faster, to enable us to effectively serve new industry applications.
"Our operating mindset, which centers on Mixed Model Lean, similarly enables us to flexibly respond to new market and new customer product requirements, as well as changing customer needs," Kingsley continued. "We continue to reduce plant cycle times and total lead times, so that our customers remain competitive. Our other operational excellence and strategic 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 an expanded operational and commercial excellence toolset," Kingsley continued. "Our customer metrics and margin expansion are evidence that our strategy is working. The fourth quarter operating margin improved to 19.5 percent, 100 basis points ahead of the year-ago quarter. Excluding the impact of stock option expense, the improvement was 150 basis points."
Acquisition of Toptech Systems
As previously announced, on December 1, 2006, IDEX completed the acquisition of Toptech Systems, Inc., a leading provider of terminal automation systems used in the custody transfer and control of high-value fluids and gases. Based in Longwood, Florida, with revenues of approximately $22 million, Toptech's products include terminal automation hardware and software used by customers in the oil, gas and refined fuels markets to control and manage inventories, as well as transactional data and invoicing. Toptech is now operated as part of the company's Liquid Controls business within its Fluid & Metering Technologies segment.
"Toptech's expertise in terminal automation and management is highly complementary to our precision metering capability and growth within the oil, gas and alternative fuels markets," Kingsley said. "With the addition of Toptech, IDEX now offers a robust platform of controls complementing our market-leading products which enable our customers to move, measure, and dispense high-value fluids anywhere in the world."
2007 Outlook
"This continues to be an exciting time for IDEX," Kingsley concluded. "As we enter 2007, our business fundamentals are very strong. We are as focused as ever on generating organic growth and reinvesting in new products, markets and acquisitions that complement our existing businesses. Our health and science segment now represents 26 percent of our total revenue base and continues to expand rapidly. Our fluid and metering business is meeting both existing and emerging industrial infrastructure needs which are growing worldwide. We continue to enjoy an excellent market position and strong cash generation within our dispensing, fire and safety, and engineered band clamping businesses. Across the company, we are using operational and commercial excellence to better serve our customers, leverage our growth and further enable the success of our niche market strategy."
Conference Call to be Broadcast over the Internet
IDEX will broadcast its fourth quarter earnings conference call over the Internet on Tuesday, January 30, 2007 at 1:30 p.m. CST. Chairman 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 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 also will be able to hear a replay of the call by dialing 800.642.1687 or 706.645.9291 and using conference ID #5707350.
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 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.
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 an applied solutions company specializing in fluid and metering technologies, health and science technologies, dispensing equipment, 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 Web site at www.idexcorp.com.
(Tables follow)
IDEX CORPORATION
Condensed Statements of Consolidated Operations
(in thousands except per share amounts)
Fourth Quarter Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
----------------------------------------------------------------------
Net sales $302,131 $252,866 $1,154,940 $1,011,253
Cost of sales 176,543 149,338 677,533 597,286
----------------------------------------------------------------------
Gross profit 125,588 103,528 477,407 413,967
Selling, general and
administrative
expenses 66,557 56,760 260,201 232,935
----------------------------------------------------------------------
Operating income 59,031 46,768 217,206 181,032
Other income - net 270 78 1,040 557
Interest expense 5,985 3,176 16,353 14,370
----------------------------------------------------------------------
Income from continuing
operations before
income taxes 53,316 43,670 201,893 167,219
Provision for income
taxes 17,127 15,343 68,171 58,644
----------------------------------------------------------------------
Income from continuing
operations 36,189 28,327 133,722 108,575
Income (loss) from
discontinued
operations, net of tax (234) 383 294 1,228
Net gain (loss) on sale
of discontinued
operations, net of tax (314) - 12,655 -
----------------------------------------------------------------------
Income (loss) from
discontinued
operations, net of tax (548) 383 12,949 1,228
----------------------------------------------------------------------
Net income $35,641 $28,710 $146,671 $109,803
======================================================================
Basic Earnings per Common Share:
Continuing operations $0.68 $0.54 $2.52 $2.11
Discontinued operations (0.01) 0.01 0.25 0.03
----------------------------------------------------------------------
Net income $0.67 $0.55 $2.77 $2.14
======================================================================
Diluted Earnings per Common Share:
Continuing operations $0.67 $0.53 $2.48 $2.06
Discontinued operations (0.01) 0.01 0.24 0.02
----------------------------------------------------------------------
Net income $0.66 $0.54 $2.72 $2.08
======================================================================
Share Data:
Basic weighted average
common shares
outstanding 53,293 52,306 53,018 51,392
Diluted weighted
average common shares
outstanding 54,186 53,492 53,984 52,720
======================================================================
Condensed Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2006 2005
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $77,941 $77,201
Receivables - net 166,485 129,428
Inventories 160,687 123,281
Assets held for sale 829 10,099
Other current assets 15,292 10,962
----------------------------------------------------------------------
Total current assets 421,234 350,971
Property, plant and equipment - net 165,949 142,485
Goodwill and intangible assets 1,083,963 720,014
Other noncurrent assets 2,625 30,710
----------------------------------------------------------------------
Total assets $1,673,771 $1,244,180
======================================================================
Liabilities and shareholders' equity
Current liabilities
Trade accounts payable $75,444 $66,859
Accrued expenses 90,328 72,180
Short-term borrowings 8,210 3,144
Liabilities held for sale 373 4,792
Dividends payable 8,055 6,321
----------------------------------------------------------------------
Total current liabilities 182,410 153,296
Long-term borrowings 353,770 156,899
Other noncurrent liabilities 158,319 110,975
----------------------------------------------------------------------
Total liabilities 694,499 421,170
Shareholders' equity 979,272 823,010
----------------------------------------------------------------------
Total liabilities and shareholders'
equity $1,673,771 $1,244,180
======================================================================
IDEX CORPORATION
Company and Business Group Financial Information
(dollars in thousands)
Fourth Quarter Ended Year Ended
December 31, December 31,
2006 (a) 2005 2006 (a) 2005
----------------------------------------------------------------------
Fluid & Metering
Technologies
Net sales $119,522 $94,475 $435,532 $383,163
Operating income
(b) 25,538 18,684 89,899 72,596
Operating margin 21.4 % 19.8 % 20.6 % 18.9 %
Depreciation and
amortization $3,642 $2,274 $10,524 $9,824
Capital
expenditures 1,972 1,742 5,487 8,204
Health & Science
Technologies
Net sales $79,320 $62,520 $304,892 $235,499
Operating income
(b) 16,948 12,440 58,229 43,133
Operating margin 21.4 % 19.9 % 19.1 % 18.3 %
Depreciation and
amortization $2,740 $1,432 $9,043 $5,917
Capital
expenditures 1,318 1,230 4,726 5,525
Dispensing
Equipment
Net sales $36,015 $34,309 $159,794 $158,111
Operating income
(b) 7,577 7,102 38,021 37,772
Operating margin 21.0 % 20.7 % 23.8 % 23.9 %
Depreciation and
amortization $1,252 $1,151 $3,861 $4,376
Capital
expenditures 378 853 2,362 3,383
Fire &
Safety/Diversified
Products
Net sales $69,079 $62,833 $260,080 $238,992
Operating income
(b) 16,898 16,143 62,664 56,593
Operating margin 24.5 % 25.7 % 24.1 % 23.7 %
Depreciation and
amortization $1,583 $1,352 $6,086 $5,712
Capital
expenditures 962 1,719 6,060 4,365
Company
Net sales $302,131 $252,866 $1,154,940 $1,011,253
Operating income 59,031 46,768 217,206 181,032
Operating margin 19.5 % 18.5 % 18.8 % 17.9 %
Depreciation and
amortization (c) $9,269 $6,226 $29,956 $26,254
Capital
expenditures 5,213 5,742 21,198 22,532
----------------------------------------------------------------------
(a)Fourth quarter and twelve month data includes acquisition of Banjo
(October 2006) and Toptech (December 2006) in the Fluid & Metering
Technologies Group, while twelve month data also includes JUN-AIR
(February 2006) and EPI (May 2006) in the Health & Science
Technologies Group and Airshore (January 2006) in the Fire &
Safety/Diversified Products Group from the dates of acquisition.
(b)Group operating income excludes unallocated corporate operating
expenses.
(c)Excludes amortization of debt issuance expenses and unearned
compensation.
CONTACT: IDEX Corporation
Susan H. Fisher, 847-498-7070
SOURCE: IDEX Corporation