IDEX (IEX) Q4 2002 earnings summary

Executive summary

• 2002 sales rose 2% to $742.0M; base-business sales fell 2%, offset by acquisitions and currency. Net income was $54.1M, up 65% reported and 23% excluding 2001 goodwill and trademark amortization.

• Operational improvements lifted gross margin 1.6 percentage points and drove record free cash flow of $89.1M, up 6% YoY.

Financial highlights

• Operating income rose 37% to $100.4M and operating margin reached 13.5% vs. 10.1%; the comparison reflects no goodwill amortization in 2002 and a 2001 restructuring charge.

• Gross profit increased to $281.4M from $263.7M; gross margin was 37.9% vs. 36.3%, supported by sourcing, productivity initiatives and facility consolidation.

• Diluted EPS was $1.67 vs. $1.05; 2001 adjusted to exclude goodwill and trademark amortization was $1.42 per diluted share.

• Operating cash flow was $108.4M; capital expenditures were $19.3M and free cash flow was $89.1M.

Outlook and guidance

• 2003 markets were expected to remain sluggish with limited visibility; the short-cycle business plan did not depend on an economic recovery.

• Expected further gross and operating margin expansion and greater savings flow-through to earnings in 2003, supported by operational excellence and lower costs.

• Global sourcing savings were expected to exceed 2002’s $11.8M as company-wide sourcing and supplier qualification efforts expanded.

• Organic-growth initiatives were expected to become standard across operations in 2003; acquisition activity and integration efforts were also expected to continue.