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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report: JANUARY 26, 2006
(Date of earliest event reported)
IDEX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-10235 36-3555336
(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
630 DUNDEE ROAD
NORTHBROOK, ILLINOIS 60062
(Address of principal executive offices, including zip code)
(847) 498-7070
(Registrant's telephone number, including area code)
Check the appropriate box if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 2.02 - Results of Operations and Financial Condition.
The information in this Item is furnished to, but not filed with, the Securities
and Exchange Commission solely under Item 2.02 of Form 8-K, "Results of
Operations and Financial Condition."
On January 26, 2006, IDEX Corporation issued a press release announcing
financial results for the quarter and year ended December 31, 2005. A copy of
the press release is furnished as Exhibit 99.1 to this Current Report on Form
8-K and is incorporated herein by reference.
Item 9.01 - Financial Statements and Exhibits.
(c) Exhibits
99.1 Press release dated January 26, 2006
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IDEX CORPORATION
By: /s/ Dominic A. Romeo
------------------------------------
Dominic A. Romeo
Vice President and Chief Financial
Officer
January 26, 2006
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
99.1 Fourth quarter 2005 earnings release dated January 26, 2006
EXHIBIT 99.1
IDEX REPORTS DOUBLE DIGIT GROWTH IN SALES AND EARNINGS FOR 2005;
FOURTH QUARTER ORGANIC GROWTH OF 10% AND 27% INCREASE IN NET INCOME
NORTHBROOK, IL, JANUARY 26-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% 140bp
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% 230bp 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".
IDEX CORPORATION
ADD -6-
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.
-more-
IDEX CORPORATION
ADD -7-
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.
