================================================================================ 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: JULY 20, 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)) ================================================================================
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 July 20, 2006, IDEX Corporation issued a press release announcing financial results for the quarter and six months ended June 30, 2006. 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 July 20, 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 July 20, 2006
EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 99.1 Second quarter 2006 earnings release dated July 20, 2006
EXHIBIT 99.1 IDEX REPORTS RECORD SECOND QUARTER SALES AND 12 PERCENT GROWTH AS OPERATING MARGIN AND NET INCOME ALSO REACH HISTORIC HIGHS NORTHBROOK, IL, JULY 20--IDEX CORPORATION (NYSE: IEX) today announced its financial results for the quarter ended June 30, 2006. Net income of $35.0 million rose 21 percent and reached an historic high, while earnings per share increased 18 percent to 65 cents, which included one cent from discontinued operations. From continuing operations, orders in the second quarter were up 10 percent, sales increased 12 percent and income rose 20 percent to $34.4 million. Diluted earnings per share from continuing operations were 64 cents versus 54 cents in the year-ago quarter. Second quarter 2006 results include stock option expense of $2.3 million. Q2 2006 HIGHLIGHTS (FROM CONTINUING OPERATIONS) o Orders for the second quarter of 2006 were $290.5 million, 10 percent higher than a year ago; excluding the impact of acquisitions and foreign currency translation, organic orders growth was 5 percent. Year to date, organic orders growth was 10 percent. o Second quarter sales of $297.2 million rose 12 percent; excluding the impact of acquisitions and foreign currency translation, organic sales growth was 7 percent. Year to date, organic sales growth was 9 percent. o Operating margin at 19.0 percent was 100 basis points higher than a year ago. o Stock option expense of $2.3 million had a 70 basis point effect on operating margin during the second quarter. o Income increased 20 percent to $34.4 million. o Diluted EPS at 64 cents was 10 cents ahead of the second quarter of 2005. o EBITDA of $63.1 million was 21 percent of sales. o Free cash flow was $39.4 million, an increase of 31 percent from a year ago. o Announcement of the sale of Lubriquip, Inc. on July 11, 2006. o Completion of previously announced acquisition of Eastern Plastics (EPI) in a strategic expansion of health & science technologies business. o Expansion of number of reporting segments from three to four segments, reflecting a more focused market-driven strategy. - -------------------------------------------------------------------------------- "We are pleased with our recent performance and consistent ability to generate organic growth and expand our operating margin. During the quarter, our businesses delivered record operating income and net income, as well as strong cash flows. Organic sales growth through the first half of 2006 was 9 percent, reflecting particular strength in Health & Science Technologies at 17 percent, Fluid & Metering Technologies at 10 percent and Fire & Safety/ Diversified Products at 9 percent. Within Dispensing Equipment, we continue to experience strong demand in North America and less-than-favorable market conditions in Europe. As we move forward, our businesses are well positioned in attractive product segments driven by strong underlying industry segment fundamentals and, even more importantly, our ability to effectively serve expanding niche applications. Current order rates, coupled with our strong backlog, reinforce our confidence as we enter the second half of 2006. We believe our business model and operating strategy are very well suited to win in this dynamic environment." Lawrence D. Kingsley Chairman and Chief Executive Officer - --------------------------------------------------------------------------------
SECOND QUARTER FINANCIAL HIGHLIGHTS - ----------------------------------- (Dollars in millions, except per share amounts)
YEAR-TO-DATE FINANCIAL RESULTS - ------------------------------ (Dollars in millions, except per share amounts)
Dispensing Equipment sales of $44.4 million in the second quarter were down 4 percent on an organic basis. Operating margin of 26.3 percent represented a 150 basis point decline compared with the second quarter of 2005, due primarily to volume and product mix. Sales of Fire & Safety/Diversified Products during the second quarter of $64.6 million reflected 5 percent organic growth. Operating margin of 25.2 percent represented a 240 basis point improvement compared with the second quarter of 2005. During the quarter, Fluid & Metering Technologies contributed 36 percent of sales and 34 percent of operating income; Health & Science Technologies accounted for 27 percent of sales and 23 percent of operating income; Dispensing Equipment accounted for 15 percent of sales and 18 percent of operating income; and Fire & Safety/Diversified Products represented 22 percent of sales and 25 percent of operating income. STRONG FINANCIAL POSITION IDEX ended the quarter with total assets of $1.4 billion and working capital of $179 million. Total debt was $199 million at June 30, 2006. Free cash flow (cash flow from operating activities less capital expenditures) for the first half of 2006 was $59.2 million. Year-to-date, EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $116.6 million (21 percent of sales) and covered interest expense by more than 16 times. PROGRESS CONTINUES ON GROWTH INITIATIVES "IDEX's broad-based growth stems from our ability to expand our served application base," Kingsley said. "Our Mixed Model Lean expertise enables us to flexibly respond to new market and new customer product requirements, as well as changing customer needs. 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 our integrated operating management system," Kingsley continued. "Our customer metrics and margin expansion are evidence that our operational excellence strategy is working. The second quarter operating margin improved to 19 percent, 100 basis points ahead of the year-ago quarter. Excluding the impact of stock option expense, the improvement was 170 basis points. "At the same time," Kingsley said, "as an engineered products company, we continue to focus on product innovation which 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 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." ACQUISITION OF EPI As previously announced, IDEX acquired the assets of Eastern Plastics, Inc. (EPI) on May 2, 2006. EPI is a global leader in high-precision integrated fluidics and associated engineered plastics solutions. Based in Bristol, Connecticut, with revenues of approximately $30 million, EPI's products are used in a broad set of end markets including medical diagnostics, analytical instrumentation and laboratory automation. "EPI strengthens our existing health and sciences businesses with experience that is highly complementary to our current precision fluidics capability," Kingsley said. "We are particularly excited about EPI's capability in increasingly close-tolerance fluidics solutions as applied to a variety of instrumentation products. EPI is also a great addition to our growing expertise in medical implantables and surgical devices."
SALE OF LUBRIQUIP As previously announced on July 11, 2006, IDEX completed the sale of Lubriquip, its lubricant dispensing business, to Graco Inc. The sale of this business reflects a strategic divestiture as IDEX aligns its business portfolio within Dispensing Equipment to focus on core strengths. The results of Lubriquip are reported as discontinued operations effective with the company's second quarter 2006 financial results. IDEX expects to report an after-tax gain on the sale of the business in the third quarter of 2006 of approximately $16 to $17 million, or $0.29 to $0.31 per diluted share. This gain will be partially offset by the discontinuation of earnings from the business in 2006. For informational purposes, full year 2005 revenues and earnings per share for Lubriquip were approximately $30 million and $0.05 per share, respectively. 2006 OUTLOOK "As we move into the second half of 2006, we remain focused on delivering consistent, sustainable sales and earnings growth," Kingsley said. "Our steady emphasis on new product innovation and continuous process improvement continues to deliver top and bottom-line growth. Our global position, niche market focus, high mix operations profile and developing know-how in Mixed Model Lean position us well to meet our customers' emerging needs for applied engineered solutions anywhere in the world." CONFERENCE CALL TO BE BROADCAST OVER THE INTERNET IDEX will broadcast its second quarter earnings conference call over the Internet on Thursday, July 20, 2006 at 1:30 p.m. CT. 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 Web site 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 using conference ID #4089519. 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 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".
IDEX CORPORATION ADD -6- IDEX CORPORATION CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) SECOND QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2006 2005 2006 2005 - --------------------------------------------------------------------------------------------------------------------- NET SALES $297,169 $264,949 $564,036 $510,087 COST OF SALES 174,110 155,370 330,850 300,687 - --------------------------------------------------------------------------------------------------------------------- GROSS PROFIT 123,059 109,579 233,186 209,400 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 66,739 61,989 129,603 121,715 - --------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 56,320 47,590 103,583 87,685 OTHER INCOME (EXPENSE) - NET (452) 245 (445) 337 INTEREST EXPENSE 4,074 3,806 7,028 7,685 - --------------------------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 51,794 44,029 96,110 80,337 PROVISION FOR INCOME TAXES 17,409 15,451 32,469 28,547 - --------------------------------------------------------------------------------------------------------------------- INCOME FROM CONTINUING OPERATIONS 34,385 28,578 63,641 51,790 INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX 571 355 1,392 788 - --------------------------------------------------------------------------------------------------------------------- NET INCOME $ 34,956 $ 28,933 $ 65,033 $ 52,578 ===================================================================================================================== BASIC EARNINGS PER COMMON SHARE: CONTINUING OPERATIONS $ 0.65 $ 0.56 $ 1.20 $ 1.02 DISCONTINUED OPERATIONS 0.01 0.01 0.03 0.01 - --------------------------------------------------------------------------------------------------------------------- NET INCOME $ 0.66 $ 0.57 $ 1.23 $ 1.03 ===================================================================================================================== DILUTED EARNINGS PER COMMON SHARE: CONTINUING OPERATIONS $ 0.64 $ 0.54 $ 1.18 $ 0.99 DISCONTINUED OPERATIONS 0.01 0.01 0.02 0.01 - --------------------------------------------------------------------------------------------------------------------- NET INCOME $ 0.65 $ 0.55 $ 1.20 $ 1.00 ===================================================================================================================== SHARE DATA: BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 53,014 50,963 52,825 50,821 DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 54,029 52,641 53,995 52,484 ===================================================================================================================== CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) JUNE 30, DECEMBER 31, 2006 2005 - --------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 51,052 $ 77,202 RECEIVABLES - NET 154,588 129,816 INVENTORIES 138,204 123,631 ASSETS HELD FOR SALE 9,109 9,138 OTHER CURRENT ASSETS 15,189 11,006 - --------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 368,142 350,793 PROPERTY, PLANT AND EQUIPMENT - NET 154,675 142,663 GOODWILL 778,744 691,399 INTANGIBLE ASSETS - NET 54,639 28,615 OTHER NONCURRENT ASSETS 30,314 30,710 - --------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $ 1,386,514 $ 1,244,180 ===================================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES TRADE ACCOUNTS PAYABLE $ 78,848 $ 67,047 ACCRUED EXPENSES 91,455 72,481 SHORT-TERM BORROWINGS 7,773 3,144 LIABILITIES HELD FOR SALE 3,465 4,303 DIVIDENDS PAYABLE 7,999 6,321 - --------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 189,540 153,296 LONG-TERM BORROWINGS 190,998 156,899 OTHER NONCURRENT LIABILITIES 93,231 110,975 - --------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 473,769 421,170 SHAREHOLDERS' EQUITY 912,745 823,010 - --------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,386,514 $ 1,244,180 =====================================================================================================================
IDEX CORPORATION ADD -7- IDEX CORPORATION COMPANY AND BUSINESS GROUP FINANCIAL INFORMATION (DOLLARS IN THOUSANDS) SECOND QUARTER ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2006 (a) 2005 2006 (a) 2005 - ----------------------------------------------------------------------------------------------------------------- FLUID & METERING TECHNOLOGIES NET SALES $108,437 $ 98,793 $210,836 $192,264 OPERATING INCOME (b) 21,982 18,244 41,226 33,522 OPERATING MARGIN 20.3% 18.5% 19.6% 17.4% DEPRECIATION AND AMORTIZATION $ 2,530 $ 2,551 $ 4,786 $ 5,163 CAPITAL EXPENDITURES 1,103 2,542 2,235 5,046 HEALTH & SCIENCE TECHNOLOGIES NET SALES $ 81,299 $ 59,541 $144,320 $112,462 OPERATING INCOME (b) 14,513 10,115 26,793 19,117 OPERATING MARGIN 17.9% 17.0% 18.6% 17.0% DEPRECIATION AND AMORTIZATION $ 1,829 $ 1,513 $ 3,228 $ 3,033 CAPITAL EXPENDITURES 1,190 1,571 2,067 2,657 DISPENSING EQUIPMENT NET SALES $ 44,415 $ 46,308 $ 85,823 $ 90,715 OPERATING INCOME (b) 11,689 12,870 22,019 23,943 OPERATING MARGIN 26.3% 27.8% 25.7% 26.4% DEPRECIATION AND AMORTIZATION $ 1,052 $ 1,088 $ 2,065 $ 2,178 CAPITAL EXPENDITURES 531 835 1,190 1,672 FIRE & SAFETY/DIVERSIFIED PRODUCTS NET SALES $ 64,551 $ 61,199 $125,767 $116,771 OPERATING INCOME (b) 16,266 13,964 29,921 25,502 OPERATING MARGIN 25.2% 22.8% 23.8% 21.8% DEPRECIATION AND AMORTIZATION $ 1,540 $ 1,489 $ 3,078 $ 3,057 CAPITAL EXPENDITURES 1,628 997 2,766 1,790 COMPANY NET SALES $297,169 $264,949 $564,036 $510,087 OPERATING INCOME 56,320 47,590 103,583 87,685 OPERATING MARGIN 19.0% 18.0% 18.4% 17.2% DEPRECIATION AND AMORTIZATION (c) $ 7,210 $ 6,792 $ 13,526 $ 13,734 CAPITAL EXPENDITURES 5,372 6,100 9,387 11,702 - ----------------------------------------------------------------------------------------------------------------- (a) SECOND QUARTER AND SIX MONTH DATA INCLUDES ACQUISITION OF 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.