IDEX Reports Record Second Quarter Sales and 12 Percent Growth as Operating Margin and Net Income Also Reach Historic Highs
NORTHBROOK, Ill.--(BUSINESS WIRE)--July 20, 2006--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)
-- 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.
-- 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.
-- Operating margin at 19.0 percent was 100 basis points higher
than a year ago.
-- Stock option expense of $2.3 million had a 70 basis point
effect on operating margin during the second quarter.
-- Income increased 20 percent to $34.4 million.
-- Diluted EPS at 64 cents was 10 cents ahead of the second
quarter of 2005.
-- EBITDA of $63.1 million was 21 percent of sales.
-- Free cash flow was $39.4 million, an increase of 31 percent
from a year ago.
-- Announcement of the sale of Lubriquip, Inc. on July 11, 2006.
-- Completion of previously announced acquisition of Eastern
Plastics (EPI) in a strategic expansion of health & science
technologies business.
-- 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)
For the Quarter Ended
June 30 March 31
2006 2005 Change 2006 Change
------- ------- -------- ------ --------
Orders Written $290.5 $264.9 10% $294.5 (1)%
Sales 297.2 264.9 12 266.9 11
Operating Income 56.3 47.6 18 47.3 19
Operating Margin 19.0% 18.0% 100bp 17.7% 130bp
Income from Continuing
Operations $34.4 $28.6 20% $29.3 18%
Net Income 35.0 28.9 21 30.1 16
Diluted EPS:
Income from Continuing
Operations .64 .54 19 .54 19
Net Income .65 .55 18 .56 16
Other Data
-- Income before Taxes $51.8 $44.0 18% $44.3 17%
-- Depreciation and
Amortization 7.2 6.8 6 6.3 14
-- Interest 4.1 3.8 7 3.0 38
-- EBITDA 63.1 54.6 15 53.6 18
-- Cash Flow from Operating
Activities 44.8 36.2 24 23.8 88
-- Capital Expenditures 5.4 6.1 (12) 4.0 34
-- Free Cash Flow 39.4 30.1 31 19.8 99
Q2 Orders, Sales, Income and EPS from Continuing Operations Up Year-over-Year
New orders in the quarter totaled $290.5 million, 10 percent higher than the same period in 2005. Excluding the impact of acquisitions and foreign currency translation, orders were up 5 percent. The second quarter orders growth rate was impacted by blanket orders received in the first quarter of 2006. First quarter 2006 organic orders growth was 16 percent.
Sales in the second quarter of $297.2 million rose 12 percent from the prior-year period. Excluding the impact of acquisitions and foreign currency translation, organic growth was 7 percent. Sales to international customers represented 46 percent of total sales for the second quarter of 2006 versus 45 percent in the year-ago quarter.
Second quarter operating margin was 19.0 percent, 100 basis points higher than the 18.0 percent reported in the prior-year period. Gross margin of 41.4 percent was equal to the second quarter of 2005. Volume leverage, coupled with the company's strategic sourcing and other operational excellence initiatives, was offset by product mix and the impact of acquisitions. Selling, general and administrative expenses as a percent of sales decreased by 100 basis points from the second quarter of 2005. Higher total SG&A expenses reflect acquisitions, volume-related expenses, stock option expense and reinvestment in the business to drive organic growth.
Income from continuing operations of $34.4 million increased 20 percent over the second quarter of 2005. Diluted earnings per share from continuing operations of 64 cents improved 10 cents from the second quarter of 2005.
Year-to-Date Financial Results
------------------------------
(Dollars in millions, except per share amounts)
Six Months Ended June 30
2006 2005 Change
------- ------- --------
Orders Written $585.1 $524.1 12%
Sales 564.0 510.1 11
Operating Income 103.6 87.7 18
Operating Margin 18.4% 17.2% 120bp
Income from Continuing Operations $63.6 $51.8 23%
Net Income 65.0 52.6 24
Diluted EPS:
Income from Continuing Operations 1.18 .99 19
Net Income 1.20 1.00 20
Other Data
-- Income before Taxes $96.1 $80.3 20%
-- Depreciation and Amortization 13.5 13.7 (2)
-- Interest 7.0 7.7 (9)
-- EBITDA 116.6 101.7 15
-- Cash Flow from Operating Activities 68.6 51.7 33
-- Capital Expenditures 9.4 11.7 (20)
-- Free Cash Flow 59.2 40.0 48
First Half Orders, Sales, Income and EPS from Continuing Operations Ahead of Last Year
New orders for the first six months of 2006 totaled $585.1 million, 12 percent higher than the first six months of last year. Excluding the impact of acquisitions and foreign currency translation, orders in the first six months of 2006 were 10 percent higher than in 2005.
Sales for the first six months of 2006 increased 11 percent to $564.0 million from $510.1 million a year earlier. Excluding the impact of acquisitions and foreign currency translation, organic growth was 9 percent. Sales to international customers from base businesses represented approximately 45 percent of total sales for the first six months of both 2006 and 2005.
First half operating margin was 18.4 percent, 120 basis points higher than the 17.2 percent reported in the prior-year period. This improvement reflects volume leverage, along with a 20 basis point improvement in gross margin to 41.3 percent, resulting mainly from the company's strategic sourcing and other operational excellence initiatives. Selling, general and administrative expenses as a percent of sales decreased by 100 basis points from the first half of 2005. Higher total SG&A expenses reflect acquisitions, volume-related expenses, stock option expense and reinvestment in the business to drive organic growth.
Year-to-date income from continuing operations of $63.6 million increased 23 percent compared to 2005. Diluted earnings per share from continuing operations of $1.18 rose 19 cents, or 19 percent, from the 99 cents recorded for the first half of 2005.
Segment Results
Fluid & Metering Technologies sales in the second quarter of $108.4 million reflected 9 percent organic growth. Operating margin of 20.3 percent represented a 180 basis point improvement compared with the second quarter of 2005.
Health & Science Technologies sales in the second quarter of $81.3 million reflected 14 percent organic growth. Operating margin of 17.9 percent represented a 90 basis point improvement compared with the second quarter of 2005.
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".
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)
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
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.
CONTACT:
IDEX Corporation
Susan H. Fisher, 847-498-7070
SOURCE:
IDEX Corporation