IDEX Corporation Reports Third Quarter 2009 Results; Adjusted Earnings Per Share of 39 Cents; Record Free Cash Flow of $78 Million

October 19, 2009 5:28 PM EDT

NORTHBROOK, Ill.--(BUSINESS WIRE)-- IDEX Corporation (NYSE: IEX) today announced third quarter 2009 results.

New orders in the quarter totaled $339 million, down 4 percent compared to the prior-year period. Sales in the quarter totaled $323 million, 12 percent lower than the prior-year period.

Third quarter 2009 operating income, adjusted for restructuring related charges of $2.8 million, was $49 million and resulted in adjusted operating margin of 15.2 percent, down 290 basis points from prior year (excluding prior year restructuring related charges of $5.3 million and goodwill impairment charges of $30 million). On an as-reported basis, third quarter operating income of $47 million was 51 percent higher than the prior-year period.

Excluding the impact of restructuring related charges, third quarter 2009 adjusted diluted earnings per share was 39 cents, a decrease of 13 cents, or 25 percent, from the third quarter of the previous year (excluding prior year unfavorable impact of restructuring related charges and goodwill impairment charges). On an as-reported basis, diluted earnings per share of 37 cents increased 13 cents, or 54 percent, from the third quarter of the previous year.

Third Quarter 2009 Results

    --  Orders declined 4 percent compared to the prior year (+7 percent
        acquisitions, -9 percent organic and -2 percent foreign currency
        translation).
    --  Sales declined 12 percent compared to the prior year (+7 percent
        acquisitions, -17 percent organic and -2 percent foreign currency
        translation).
    --  Reported net income was $30 million, or 50 percent higher than the prior
        year. Adjusted net income of $32 million was $12 million, or 27 percent,
        lower than the prior year (excluding prior year restructuring and
        goodwill impairment charges).
    --  Diluted EPS of 37 cents was 13 cents, or 54 percent, higher than the
        prior year. Adjusted diluted EPS of 39 cents was 13 cents, or 25
        percent, lower than the prior year (excluding prior year impact of
        restructuring and goodwill impairment charges).
    --  EBITDA of $62 million was 19 percent of sales and covered interest
        expense by more than 15 times.
    --  Free cash flow of $78 million, 15 percent higher than prior year, was an
        all-time high.

"We achieved solid profit performance and excellent cash flow in the third quarter. Our operating model and flexible cost structure once again illustrates that we can limit the unfavorable margin impact in a down sales environment while continuing to focus on growing market share, demonstrating outstanding responsiveness to changing order patterns and new business opportunities. We continue to generate very strong cash flow, converting 175 percent of net income to free cash thus far in our year-to-date results.

As we look to the fourth quarter, we expect that energy, water, and select health and science end markets will reflect sequential improvement; while the industrial process, retail paint dispensing, and fire suppression end markets will be slightly down sequentially.

Based on current conditions, our projected fourth quarter EPS is in the range of 35 to 37 cents on a fully diluted basis. For the full year, we expect organic revenue to decline approximately 15 percent resulting in adjusted diluted EPS of $1.44 to $1.46."

Lawrence D. Kingsley

Chairman and Chief Executive Officer

Business Highlights (excluding restructuring related charges)

Fluid & Metering Technologies

    --  Sales in the third quarter of $157 million reflected an 8 percent
        decline compared to the third quarter of 2008 (+12 percent acquisitions,
        -19 percent organic and -1 percent foreign currency translation).
    --  Operating margin of 16.8 percent represented a 390 basis point decline
        compared with the third quarter of 2008. Excluding the impact of
        acquisitions, operating margin was 18.4 percent, a 230 basis point
        decline compared with the prior-year period due to lower sales.

Health & Science Technologies

    --  Sales in the third quarter of $76 million reflected an 8 percent decline
        compared to the third quarter of 2008 (+6 percent acquisitions, -13
        percent organic and -1 percent foreign currency translation). The
        organic decline was primarily due to continued market softness in the
        non-core HST businesses.
    --  Operating margin of 20.1 percent reflected a 120 basis point decline
        compared with the third quarter of 2008. Excluding the impact of the
        Semrock acquisition, operating margin was 19.7 percent, a 160 basis
        point decline compared with the prior-year period due to lower sales.

Dispensing Equipment

    --  Sales of $26 million in the third quarter reflected a 19 percent decline
        compared with the third quarter of 2008 (-15 percent organic and -4
        percent foreign currency translation), as a result of continued
        deterioration in capital spending for both the North American and
        European markets.
    --  Operating margin of 1.2 percent reflected a 180 basis point decline
        compared with the third quarter of 2008 due to lower volumes in North
        America and Europe (excluding prior year goodwill impairment charge).

Fire & Safety/Diversified Products

    --  Sales in the third quarter of $66 million reflected a 19 percent decline
        compared with the third quarter of 2008 (-16 percent organic and -3
        percent foreign currency translation).
    --  Operating margin of 24.4 percent represented a 90 basis point decline
        compared with the third quarter of 2008 on lower volumes and unfavorable
        product mix within the segment.

For the third quarter of 2009, Fluid & Metering Technologies contributed 48 percent of sales and 46 percent of operating income; Health & Science Technologies accounted for 24 percent of sales and 25 percent of operating income; Dispensing Equipment accounted for 8 percent of sales and 1 percent of operating income; and Fire & Safety/Diversified Products represented 20 percent of sales and 28 percent of operating income.

Conference Call to be Broadcast over the Internet

IDEX will broadcast its third quarter earnings conference call over the Internet on Tuesday, October 20, 2009 at 9:30 a.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 website 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 will also be able to hear a replay of the call by dialing 888.203.1112 (or 719.457.0820 for international participants) using the ID # 2354138.

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 plus the excess tax benefit from stock-based compensation. Management uses these non-GAAP financial measures as internal operating metrics and for enterprise valuation purposes. 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.

EBITDA and Free Cash Flow bridge  For the Quarter Ended

                                  September 30,              June 30,

                                  2009     2008     Change   2009      Change

- Income before Taxes             $43.9    $29.7    48     % $41.9     5      %

- Depreciation and Amortization   14.1     10.9     30       14.2      -

- Interest                        4.0      3.9      2        4.4       (11 )

- EBITDA                          $62.0    $44.5    40       $60.5     3

- Cash Flow from Operating        $84.8    $72.8    16     % $55.3     53     %
Activities

- Capital Expenditures            (7.4  )  (5.9  )  25       (6.1  )   21

- Excess Tax Benefit from         0.3      0.6      (52 )    0.6       (58 )
Stock-Based Compensation

- Free Cash Flow                  $77.7    $67.5    15       $49.8     56

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

IDEX CORPORATION

Condensed Statements of Consolidated Operations

(in thousands except per share amounts)

                                   Three Months Ended    Nine Months Ended

                                   September 30,         September 30,

                                   2009       2008(a)    2009         2008(a)

Net sales                          $ 323,249  $ 365,193  $ 986,317    $1,134,165

Cost of sales                      194,191    217,409    602,964      672,391

Gross profit                       129,058    147,784    383,353      461,774

Selling, general and               79,789     81,614     242,687      258,082
administrative expenses

Goodwill impairment                -          30,090     -            30,090

Restructuring expenses             2,752      5,276      8,253        5,276

Operating income                   46,517     30,804     132,413      168,326

Other income - net                 1,382      2,723      806          3,885

Interest expense                   3,951      3,861      13,212       13,619

Income before income               43,948     29,666     120,007      158,592
taxes

Provision for income               14,171     9,783      39,703       54,046
taxes

Net income                         $ 29,777   $ 19,883   $ 80,304     $ 104,546

Earnings per Common
Share:

Basic earnings per                 $ 0.37     $ 0.24     $ 1.00       $ 1.27
common share(b)

Diluted earnings per               $ 0.37     $ 0.24     $ 0.99       $ 1.26
common share(b)

Share Data:

Basic weighted average common      79,740     81,572     79,642       81,320
shares outstanding

Diluted weighted average common    80,879     82,957     80,535       82,663
shares outstanding

Condensed Consolidated Balance Sheets

(in thousands)

                                                         September    December
                                                         30,          31,

                                                         2009         2008(a)

Assets

Current assets

Cash and cash                                            $ 74,429     $ 61,353
equivalents

Receivables - net                                        189,417      205,269

Inventories                                              162,384      181,200

Other current assets                                     32,363       32,866

Total current assets                                     458,593      480,688

Property, plant and                                      181,006      186,283
equipment - net

Goodwill and                                             1,474,552    1,470,289
intangible assets

Other noncurrent                                         10,056       14,540
assets

Total assets                                             $ 2,124,207  $2,151,800

Liabilities and
shareholders' equity

Current liabilities

Trade accounts payable                                   $ 76,321     $ 87,304

Accrued expenses                                         114,676      117,186

Short-term borrowings                                    6,307        5,856

Dividends payable                                        9,554        9,523

Total current                                            206,858      219,869
liabilities

Long-term borrowings                                     440,832      548,144

Other noncurrent                                         240,141      239,004
liabilities

Total liabilities                                        887,831      1,007,017

Shareholders' equity                                     1,236,376    1,144,783

Total liabilities and                                    $ 2,124,207  $2,151,800
shareholders' equity

IDEX CORPORATION

IDEX CORPORATION

Company and Business Group Financial Information

(dollars in thousands)

                          Three Months Ended        Nine Months Ended

                          September 30,             September 30,

                          2009(c)      2008(a)      2009(c)      2008(a)

    Fluid & Metering
    Technologies

    Net sales             $ 156,939    $ 170,258    $ 470,957    $ 518,546

    Operating income(d)   26,412       35,164       73,773       99,735

    Operating margin      16.8      %  20.7      %  15.7      %  19.2        %

    Depreciation and      $ 8,061      $ 5,842      $ 24,396     $ 18,605
    amortization

    Capital expenditures  3,810        2,519        9,682        7,695

    Health & Science
    Technologies

    Net sales             $ 76,138     $ 82,889     $ 224,142    $ 253,778

    Operating income(d)   15,312       17,623       37,422       48,507

    Operating margin      20.1      %  21.3      %  16.7      %  19.1        %

    Depreciation and      $ 3,866      $ 2,573      $ 10,579     $ 8,411
    amortization

    Capital expenditures  1,879        1,294        3,793        3,894

    Dispensing Equipment

    Net sales             $ 25,580     $ 31,543     $ 104,111    $ 138,152

    Operating income(d)   319          931          14,319       26,431

    Operating margin      1.2       %  3.0       %  13.8      %  19.1        %

    Depreciation and      $ 670        $ 946        $ 2,340      $ 3,215
    amortization

    Capital expenditures  292          652          850          2,236

    Fire &
    Safety/Diversified
    Products

    Net sales             $ 65,524     $ 81,189     $ 192,633    $ 227,099

    Operating income(d)   15,956       20,514       43,265       57,072

    Operating margin      24.4      %  25.3      %  22.5      %  25.1        %

    Depreciation and      $ 1,287      $ 1,206      $ 3,815      $ 3,950
    amortization

    Capital expenditures  853          789          2,569        3,929

    Company

    Net sales             $ 323,249    $ 365,193    $ 986,317    $ 1,134,165

    Operating income      49,269       66,170       140,666      203,692

    Operating margin      15.2      %  18.1      %  14.3      %  18.0        %

    Depreciation and      $ 14,135     $ 10,879     $ 41,893     $ 35,092
    amortization(e)

    Capital expenditures  7,081        5,851        18,303       19,164

(a) Certain prior year amounts have been restated to reflect the LIFO to FIFO
    inventory costing change.

    Adjusted to reflect the accounting guidance provided in FSP EITF 03-6-1,
(b) "Determining Whether Instruments Granted in Share-Based Payment
    Transactions are Participating Securities."

    Three and nine month data includes acquisition of IETG (October 2008),
(c) iPEK (October 2008) and Richter (October 2008) in the Fluid & Metering
    Technologies Group and Semrock (October 2008) in the Health & Science
    Technologies Group from the date of acquisition.

    Group operating income excludes unallocated corporate operating expenses,
(d) restructuring-related charges and the 2008 goodwill impairment charge
    within the Dispensing Equipment group.

(e) Excludes amortization of debt issuance expenses.

    Source: IDEX Corporation

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