IDEX (IEX) Q4 2006 earnings summary

Executive summary

• 2006 sales rose 14% to $1.155B, with 9% organic growth; operating margin expanded 90 bps to 18.8% and diluted continuing-operations EPS rose 20% to $2.48.

• Growth was led by Health & Science and Fluid & Metering; five acquisitions broadened the portfolio, while Mixed Model Lean supported productivity and margin gains.

Financial highlights

• Orders increased 16% to $1.185B; base orders, excluding acquisitions and FX, rose 10%. Sales grew 14%, including 9% base growth and 5% from acquisitions.

• Gross profit was $477.4M, up 15%; gross margin increased 40 bps to 41.3%. Operating income rose 20% to $217.2M.

• Continuing-operations income rose 23% to $133.7M; net income increased 34% to $146.7M. Diluted EPS was $2.48 from continuing operations and $2.72 including discontinued operations.

• Operating cash flow from continuing operations was $160.1M; free cash flow was $145M, or 1.1x income, and exceeded income for the 18th consecutive year.

• Lubriquip sale generated a $16.7M after-tax gain; Halox incurred a $4.1M after-tax write-down. Both businesses were presented as discontinued operations.

Outlook and guidance

• Management expected favorable economic conditions, continued process improvement, earnings growth, innovation investment and strategic acquisitions; it entered 2007 positioned for continued growth.

• Short-cycle operations and limited visibility make results dependent on the pace of incoming orders; lower costs, new products, applications and global markets were identified as earnings-expansion supports.

• Health & Science exceeded 26% of revenue and was expanding rapidly; Fluid & Metering targeted worldwide infrastructure demand, while Dispensing, Fire & Safety and band clamping had strong market positions and cash generation.