IDEX Results for 2006

Diluted earnings per share from continuing operations were 67 cents versus 53 cents in the year-ago quarter. Fourth quarter 2006 results include stock option expense of $1.5 million. From continuing operations, full year 2006 orders increased 16 percent, sales rose 14 percent and diluted earnings per share were $2.48 versus $2.06 in 2005.

2006 Orders, Sales, Income, and EPS from Continuing Operations Well Ahead of Last Year

New orders for full year 2006 totaled $1.18 billion, 16 percent higher than 2005. Excluding the impact of acquisitions and foreign currency translation, orders in 2006 were 10 percent higher than in 2005.

Sales for 2006 increased 14 percent to $1.15 billion from $1.01 billion a year earlier. Excluding the impact of acquisitions and foreign currency translation, organic growth was 9 percent. Sales to international customers represented approximately 45 percent of total sales for both 2006 and 2005.

Full year 2006 operating margin was 18.8 percent, 90 basis points higher than the 17.9 percent reported in the prior year. This improvement reflects volume leverage, along with a 40 basis point improvement in gross margin to 41.3 percent, resulting mainly from strategic sourcing and other operational excellence initiatives. Selling, general and administrative expenses as a percent of sales improved 50 basis points from 2005. Higher total SG&A expenses reflect acquisitions, volume-related expenses, stock option expense and reinvestment in the business to drive organic growth. Stock option expense impacted operating margins by 70 basis points in 2006.

Income from continuing operations of $133.7 million increased 23 percent in 2006 compared to 2005. Diluted earnings per share from continuing operations of $2.48 rose 42 cents, or 20 percent, from the $2.06 recorded for 2005.

Q4 Orders, Sales, Income and EPS from Continuing Operations Up Year-over-Year

New orders in the quarter totaled $314.9 million, 25 percent higher than the same period in 2005. Excluding the impact of acquisitions and foreign currency translation, orders were up 12 percent.

Sales in the fourth quarter of $302.1 million increased 19 percent from the prior-year period. Excluding the impact of acquisitions and foreign currency translation, organic growth was 7 percent, led by Fluid & Metering Technologies at 10 percent. Sales to international customers represented approximately 45 percent of total sales for the fourth quarter of 2006 versus 44 percent in the same period of 2005.

Fourth quarter operating margin was 19.5 percent, 100 basis points higher than the 18.5 percent reported in the prior-year period. Gross margin of 41.6 percent was 70 basis points higher than the fourth quarter of 2005. Strategic sourcing and other operational excellence initiatives drove the gross margin improvement. Selling, general and administrative expenses as a percent of sales improved 30 basis points to 22.1 percent in the fourth quarter of 2006. Higher total SG&A expenses reflect acquisitions, volume-related expenses, stock option expense and reinvestment in the business to drive organic growth. Stock option expense impacted operating margins by 50 basis points in the fourth quarter of 2006.

Income from continuing operations of $36.2 million increased 28 percent over the fourth quarter of 2005. Diluted earnings per share from continuing operations of 67 cents improved 14 cents, or 26 percent, from the fourth quarter of 2005. The effective tax rate in the fourth quarter of 2006 was favorably impacted by the December renewal of the U.S. Federal Research and Development Tax Credit.

Segment Results

Fluid & Metering Technologies orders in the fourth quarter of $124.1 million reflected 14 percent organic growth, while sales in the fourth quarter of $119.5 million reflected 10 percent organic growth. Operating margin of 21.4 percent represented a 160 basis point improvement compared with the fourth quarter of 2005.

Health & Science Technologies orders in the fourth quarter of $78.5 million reflected 10 percent organic growth, while sales in the fourth quarter of $79.3 million reflected 7 percent organic growth. Operating margin of 21.4 percent represented a 150 basis point improvement compared with the fourth quarter of 2005.

Dispensing Equipment orders in the fourth quarter of $39.8 million reflected 5 percent organic growth. Sales of $36.0 million in the fourth quarter reflected flat year-over-year organic growth due primarily to the timing of deliveries related to project-based orders in North America. Operating margin of 21.0 percent represented a 30 basis point improvement compared with the fourth quarter of 2005.

Fire & Safety/Diversified Products orders in the fourth quarter of $74.3 million reflected 16 percent organic growth, while sales of $69.1 million in the fourth quarter reflected 6 percent organic growth. Operating margin of 24.5 percent represented a 120 basis point decline compared with the fourth quarter of 2005, due in part to start up costs in the company's new China production facility.

For the full year 2006, Fluid & Metering Technologies contributed 38 percent of sales and 36 percent operating income; Health & Science Technologies accounted for 26 percent of sales and 24 percent of operating income; Dispensing Equipment accounted for 14 percent of sales and 15 percent of operating income; and Fire & Safety/Diversified Products represented 22 percent of sales and 25 percent of operating income.

Discontinued Operations

During the fourth quarter, the company recognized a $0.5 million loss from discontinued operations resulting primarily from the company's decision to sell its Halox product line.

Strong Financial Position

IDEX ended the year with total assets of $1.67 billion and working capital of $239 million. Total borrowings were $362 million at December 31, 2006. Free cash flow (cash flow from operating activities less capital expenditures plus the excess tax benefit from stock-based compensation) for 2006 was $144 million. Full year 2006 EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $248 million (21 percent of sales) and covered interest expense by more than 15 times. Debt-to-total capitalization at year-end was 27 percent.

Progress Continues on Growth Initiatives: Operational and Commercial Excellence

"IDEX's broad-based growth stems from our ability to expand our served application base through operational and commercial excellence," Kingsley said. "We continue to reinvest in product innovation, incorporating stretch thinking to completely understand our customers' application and the final use and requirements of their products, as well as goal deployment to ensure we execute. Our focus on fluidics 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.

"Our operating mindset, which centers on Mixed Model Lean, similarly enables us to flexibly respond to new market and new customer product requirements, as well as changing customer needs," Kingsley continued. "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 an expanded operational and commercial excellence toolset," Kingsley continued. "Our customer metrics and margin expansion are evidence that our strategy is working. The fourth quarter operating margin improved to 19.5 percent, 100 basis points ahead of the year-ago quarter. Excluding the impact of stock option expense, the improvement was 150 basis points."

Acquisition of Toptech Systems

As previously announced, on December 1, 2006, IDEX completed the acquisition of Toptech Systems, Inc., a leading provider of terminal automation systems used in the custody transfer and control of high-value fluids and gases. Based in Longwood, Florida, with revenues of approximately $22 million, Toptech's products include terminal automation hardware and software used by customers in the oil, gas and refined fuels markets to control and manage inventories, as well as transactional data and invoicing. Toptech is now operated as part of the company's Liquid Controls business within its Fluid & Metering Technologies segment.

"Toptech's expertise in terminal automation and management is highly complementary to our precision metering capability and growth within the oil, gas and alternative fuels markets," Kingsley said. "With the addition of Toptech, IDEX now offers a robust platform of controls complementing our market-leading products which enable our customers to move, measure, and dispense high-value fluids anywhere in the world."

2007 Outlook

"This continues to be an exciting time for IDEX," Kingsley concluded. "As we enter 2007, our business fundamentals are very strong. We are as focused as ever on generating organic growth and reinvesting in new products, markets and acquisitions that complement our existing businesses. Our health and science segment now represents 26 percent of our total revenue base and continues to expand rapidly. Our fluid and metering business is meeting both existing and emerging industrial infrastructure needs which are growing worldwide. We continue to enjoy an excellent market position and strong cash generation within our dispensing, fire and safety, and engineered band clamping businesses. Across the company, we are using operational and commercial excellence to better serve our customers, leverage our growth and further enable the success of our niche market strategy."