藝達思 (IEX) 2007 Q1 法說會逐字稿

Good afternoon. My name is Lynn, and I'll be your conference operator today. At this time, I would like to welcome everyone to the IDEX Corp. first quarter '07 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. [OPERATOR INSTRUCTIONS] Thank you.

I would now like to turn the conference over to Ms. Susan Fisher, Director of Investor Relations. Please go ahead, ma'am.

Good afternoon, and thank you, everyone, for joining us for our discussion today of the IDEX first quarter '07 financial results. Earlier today, we issued a press release outlining IDEX's financial and operating performance for the three-month period ending March 31st '07. That press release, along with presentation slides to be used during today's Webcast can be accessed on our Company homepage at idexcorp.com.

Joining me today from IDEX management are Larry Kingsley, Chairman and Chief Executive Officer and Dom Romeo, Vice President and Chief Financial Officer. The format for our call today is as follows: First, Larry will update you on our progress during the first quarter across the Company and our four business segments. Dom will then take you through our financial results for the quarter. Following our prepare remarks we'll then open the call for your questions.

If you should need to exit this call for any reason, you may access a complete replay which will begin approximately two hours after the call concludes by dialing the toll free number 800-642-1687 and entering ID number 5707718 or simply log on to our homepage for the Webcast replay. As we begin, a brief reminder this call may contain forward-looking statements that are subject to the Safe Harbor language in today's press release and in our Company 's filings with the SEC.

With that I'll now turn the call over to our CEO Larry Kingsley. Larry?

Thanks, Susan. We executed very well for the quarter. We delivered record orders and sales, excellent productivity and operating leverage, very strong earnings growth. The IDEX Board recently approved a 20% increase in our Company's quarterly dividend and a three for two stock split. In the quarter we completed the acquisition of Faure Herman as part of our strategic plan to service the infrastructure markets within fluid metering. This broadens our capability and energy, particularly downstream oil, as well as other metering applications, and I'll provide more detail on the acquisition in just a moment.

A quick summary of our operating performance for the quarter. Orders were up 23%. Sales were up 25%, and that's on a 10% organic growth rate, operating margin was up 60 basis points and that's 90 basis points when you exclude the severance cost within dispensing , EPS is up 24% to $0.68. We're pleased with our execution for the quarter beyond performing well, we're laying the ground work for future growth. Our business model and strategy of niche market applied products continues to yield just great results. As you know we're targeting the same business profile in the acquisitions that we're making, and those acquisitions continue to enable us to further buildout our strategic offering on a product on a target market segment not a geographic expansion base.

I'll run through each of the four segments and I'm on slide 7 if you're of following along. Our Fluid Metering business operates within a large available market. We move, measure and control fluids and processes which tend to entail either high accuracy and/or severe duty. We serve a broad market but our focus segments are the markets of refined fuels and gases, alternative energy, chemical processing, water treatment, and other specific processes, pharmaceutical and food applications.

The international market for fluid metering are very strong, and the global end market drivers continue to bode well for sustained fluid metering growth. Those drivers continue to be the high cost of energy, coupled with the capital investment that's now required to debottleneck the processing and the supply of refined fuels, the development of the fossil fuel alternatives, the need to address the water and the wastewater infrastructure issues, the continued investment and high performance process control for chemical production, growth and power generation and mining exploration, and increasingly stringent standards for food safety and security.

Our Fluid Metering Asian sales grew in the mid 20% range for the quarter. The European business grew in the mid-teens. Beyond core fluid metering markets, we continue to build our presence with the agricultural OEM's. The ag implant processes, and the agricultural aftermarkets as a result of our acquired Banjo presence. As an example, we just introduced a new magnetic flow meter that meets the needs of the Banjo traditional markets but the product also serves applications in our broader fluid metering industrial markets. Within the chemical, oil, and gas markets, we continue to gain share through our expanded capability and product line of corrosion resistant pump and metering technologies.

We've already begun to expand and leverage our Top Tech product offering. We just introduced a new generation, single meter control product that can function either as an independent low rack control and refine fuels distribution applications or it can be used in conjunction with a supervisor it Top Tech Controller to construct a distributed control architecture for complete terminal automation. The new metering device is aimed at ease-of-use, particularly for applications that we would traditionally serve with our Liquid Controls group of products.

Beyond refined fuels distribution the product also further enhances our ability to reach and fully penetrate other applications from aviation and fleet refueling to chemical loading to truck and barge loading, but not just refined fuels but also other high value liquids and gases. And Dom's going to review the segment performance in quite a bit of detail, but in summary, Fluid Metering grew 34% in Q1 of which 12% was organic. Operating leverage was outstanding with an operating margin at just under 22%. We continue to find and execute attractive acquisitions, which in turn deliver great organic growth opportunities when coupled with our other products and with our global reach.

The slide 8 is the most recent example of our fluid metering acquisition strategy at work. Faure Harman is the provider of leading technology flow meters used in the oil and gas industry. They're based in La Fert-Bernard France, that's just outside of Lemont. Faure Herman's ultrasonic flow metering technology and their product experience are all industry leading. They have the ability to accurately measure flow rate in a variety of oil and gas applications where traditional technologies are functionally limited. Beyond their superior ultrasonic technology, they also bring new turbine flow meter technologies to our offering. Faure Herman currently has sales of approximately $22 million. We intend to quickly expand Faure Herman's global reach and expand their certain markets to include other high value fluid processing applications.

So this acquisition stems from the same strategy that the Top Tech acquisition did. Faure Herman capabilities dove tail perfectly with our new terminal automation and controls and our pump offering. In addition, Faure Herman expands our European presence to better serve both the Western and Eastern Europe refined fuels and gas markets. It's important to note that Faure Herman is not just a portfolio addition, it is a critical part of our energy markets buildout plan within the Fluid Metering group.

I'll turn now to health and science. We're on slide 9. As you know, we serve a large addressable market here as well. We target small scale, high accurate pumps, valves, fittings and medical devices as well as subsystems for fluid and gas handling. The primary market segments are analytical instrumentation, clinical diagnostics, medical technology products. The underlying market drivers are all of the end market drivers that you typically find for drug discovery and product developments as well as the healthcare applications. And in addition to healthcare, the business also applies similar technology to selected other applications that require small, accurate, fluidic solutions.

Beyond the western world market opportunity, developing countries are moving towards more progressive healthcare systems which increases the need for clinical test equipment to diagnose infectious disease, common in developing regions. Drug discovery instrumentation and clinical test equipment suppliers look to IDEX to design and supply their fluidic systems, sub assemblies and the key enabling components.

We continue to see solid market performance within the health and science segment. For the quarter revenues increased 28%. Operating margin was down versus last year driven by the impact of the '06 acquisitions and due to continued growth focused investment in the business. We also want to point out that in Q1, for the next two or three quarters in health and science, we'll see some relatively minor organic growth impact associated with two specific OEM's. Both of these were assumed in our internal plan, one relates to the customers natural product life and the other is essentially a timing issue. We have very high expectations for health and science for '07 and beyond. This segment should lead our long term growth performance and deliver IDEX-like margins. Market outlook is positive and we continue to focus on acquiring and building out differentiated technologies to address the attractive niches.

In Dispensing, we're the global leader, as you know, in automated dispensing and mixing equipment used primarily today in the paints and coatings market. Our focus in dispensing continues to be in developing the right applied solution for our customer, encompassing complex color formulation, increasingly precise, reliable custom dispensing technology and the ability to gather valuable transactional data supported by 24-7 customer service and support. Our leading product position enables us to support the continued U.S. retail expansion as well as to respond to changing regulations. Through our expanding range of automated dispense offerings, we're also in an excellent position to support the paint manufacturers and the hardware cooperatives, who are increasingly moving to automation as the tool to increase volumes. We continue to see strong demand in North America, both on a specific new equipment project basis and via the replenishment cycle. Western Europe is stable, and while Eastern Europe is actually growing very nicely.

In Q1, we achieved organic growth of 10%. We reduced costs for our international operations within Dispensing in the quarter which resulted in about $1 million in severance related costs. Excluding those expenses, the operating margin within Dispensing improved by 160 basis points versus a year ago. Our ability to reduce fixed expenses is as a result of our increasingly global product foot print, the newer products are enabling us to build a common platform wherever in the world we are cost advantaged, but still regionally configure the machine to meet the needs of the local market.

I'll move now to Fire and Safety. As you know, we provide highly engineered pumps, valves, control devices used in fire trucks and on emergency vehicles, as well as the rescue tools used by First Responders. This segment also includes our engineered band clamping business. The Fire and Safety segment is making terrific progress, both the fire and rescue elements as well as the band clamping business delivered excellent performance for the quarter. Within fire suppression, our compressed air foam systems and pump modules continue to be specified and gain acceptance worldwide.

Not only do we see broad base of new orders that will serve domestic municipalities, we are growing throughout the developing world. We are already supplying compressed air foam systems, in mid-sized cities in China. In fact our [Cavs] technology is becoming a key differentiator for us to pull through pumps and pump modules. Our Asian business development is tracking right to plan, and we're very pleased with the markets response to our product offering.

Within rescue tools, it's much the same story. We continue to drive international market expansion. We won multiple new orders in both Asia and the Middle East during the quarter. In addition, our strategy to modify rescue tools for the industrial market is going very well. We're selling product that stabilize and support mining operations. We've also developed, and very successfully, sold a tool that's being utilized as a back up breaking device for wind energy emergency situations.

Our band clamping business introduced a new system for installation application for the industrial process environment. Better installation and manufacturing processes is required to improve process control for product quality assurance and to decrease energy utilization. The system entails a power application tool and a color coated set of clamping devices which enables easier identification of what as inside the installation. As process plants upgrade, or replace installation, we see an excellent sales opportunity to displace the traditional installation binding methodologies. So again, Fire and Safety performed well for the quarter, with organic growth of 9% and operating income in excess of 22%.

Dom's going to now review the financial results for the quarter including more detail with regard to our segment operating performance, so with that I'll turn it

Thanks, Larry and good afternoon, everyone. I'm on Page 12, Orders and Sales. Orders of 363 million increased 23% from last year and 9% organically. Monthly orders were 125 million in January, 112 million in February, and 126 million in March, so very consistent throughout the quarter. By segment, the Q1 organic orders growth rate was as follows : First with Fluid Metering Technologies after a fourth quarter at 14%, which as we mentioned, did include a modest level of blanket orders, FMT posted just under 11% in the first quarter, so solid momentum. Health and Science was up 4% impacted by the timing of two OEM programs that will impact the growth in the next few quarters within this segment by approximately 2%.

Dispensing, and again, due to the benefit from both strong project demand in North America and stable conditions in Europe was up 21%. And lastly, Fire Safety and Diversified products, after a fourth quarter at 16%, that again included orders for the second half of '07, FSD was up 5% in Q1, but when we look at our backlog and also our pipeline, FSD is also very well positioned for growth. Sales of 333 million was an all-time high and increased 25% in total and organic growth was 10%. As Larry mentioned we had organic growth in all four segments led by Fluid Metering and also Dispensing and will provide more details on sales when I review each of the segments performance.

Turning next to operating margin, Page 13. Operating margin at 18.5% increased 60 basis points from last year. As mentioned in Q1, we had an impact for about $1 million of severance related expenses within the Dispensing segment, thus on an adjusted basis operating margin increased by 90 basis points. In addition, on a consolidated basis, we did achieve 30% plus flow through on organic growth for the quarter, and let me walk you through that calculation.

Sales in total increased 67 million versus last year. Within that, acquisitions provided 34 million of revenue at just over 18% operating margin. Currency added 7 million to revenue with an estimated flow through in the low to mid-teens, thus organic revenue was about 26 million and the associated operating income was 8 million or flow through of just over 30%.

Turning next to income, Page 14. Income from continuing operations was up 25% and EPS of $0.68 is 24% higher than last year. The effective tax rate was 34% in Q1. For the year, we estimate the ETR of 34 to 35% range, and as I've mentioned in the past, the biggest driver in terms of impact on the ETR will be our geographic mix of income. Additionally the severance cost in Dispensing had about $0.01 of impact to EPS, so all in from an EPS perspective, very strong performance of 24%.

Turning next to Page 15, balance sheet highlights, debt-to-capitalization continues to be 27% and our balance sheet is strong. As we have mentioned in the past, the first quarter of free cash flow is typically our lowest due to timing of payment of incentive compensation and the funding of our deferred contribution plans. From a working capital perspective, sequential revenue increased about 30 million or 10% from Q4 of last year. Inventory performance showed improved turns as inventory -- the inventory increased at about 5% was versus the 10% sequential revenue increase. The accounts receivable increase is due to increase in sales coupled with the timing of revenue within the quarter.

Lets turn to Page 16, Fluid and Metering Technologies. Orders were up 33% in the quarter, again, just under 11% on an organic basis. Sales increased 34%, 21% from recent acquisitions and 12% on an organic basis. A bit more detail on growth. Growth rates in the U.S. continue to be strong at just under 10%. We continue to make great progress on a global basis, as Larry mentioned. For FMT, Asia increased 27% in the quarter, additionally Europe was up double digits.

On the acquisition side, sales, as I mentioned, increased 21% from the combination of Banjo, Top Tech, and Faure Herman. From an operating margin perspective, acquisitions were essentially equal to that of the segment and from a volume perspective performed well. Banjo compared to a year ago grew at almost 15%. Operating income of just under 30 million was up 51% increase from last year, up 240 basis points from last year.

Page 17, Health and Science technologies. For the quarter, orders were up 20% and sales increased 28%. Organic growth was 7%. Operating income increased 13%. Operating margin of 17.2% was down versus last year. And as Larry referenced, we have two OEM contracts, one on the science side and another within our medical product lines, that for Q1, and for the next two or three quarters, will impact segment growth by approximately $2 million or 2 to 3%. This was built into our planning assumptions and has obviously a much lower impact to organic growth rates when we look at the total Company; however this will impact our reported organic growth for HST.

On operating margin, acquisitions diluted our 2006 reported margin of 19.5% by just under 200 basis points, half of which relates to the amortization of intangibles. To a lesser extent, our continued investment in medical products also impacted operating margins.

Turning to Dispensing, Page 18, orders in the quarter were up 26%, again, 21% on an organic basis. Sales increased 16% and we achieved double digit organic growth at just over 10%. Organic growth was 18% in North North America and 4% in Europe, as we mentioned in the release, we continue to benefit from strong project orders in North America and Europe has stabilized. On margin, the 24.4% included about 1 million of severance related cost, so adjusting for that comparable operating margin increased by 160 basis points.

Turning to Fire, Safety, and Diversified Products, for the quarter, orders were up 9%. Sales increased 13%, and organic growth was 9%. And as Larry mentioned, growth for this segment is driven by global market expansion, combined with new product introductions. Operating income grew 13% versus last year and margin at just over 22% was essentially flat with last year.

With that I'll turn it back to Larry for a wrap up.

Thanks, Dom. So in summary we're off to a terrific start in '07 with very strong orders and sales growth at 23% and 25% respectively and continued organic growth across all business segments. Our end markets are very strong. Our international business is out pacing the U.S. But it's strong across the globe. We continue to drive margin and leveraged earnings expansion. We're reinvesting for the future, both by way of the organic initiatives and the strategic acquisitions that we can subsequently buildout. Faure Herman is a great addition to the Company and a good example of the strategy at work. Commercial and operational excellence continued to develop and yield outstanding results. And in summary, we look forward to more of the same for the full year. That is good organic performance, strategic acquisitions to further enable our growth capability, solid and consistent operational execution and excellent income potential.

And with that, we'll be happy to take your questions.

[OPERATOR INSTRUCTIONS] We'll pause for just a moment to compile the q&a roster. Your first question comes from Michael Schneider with Robert W. Baird.

Good afternoon.

Hi, Mike.

Maybe first if we could spend a minute on Dispensing. North American projects seem to be driving that number, I think you had said orders were up 21% organically. Can can you give us some color as to what's ramping? Because I think this has got to be more than just the couple roll-ons we had talked about in past quarters.

Well, Mike, We've talked about the fact that Dispensing is a project based business and it is lumpy sequentially, it is even lumpy if you look at it on a year-over-year basis. The solid growth that we're seeing in Dispensing right now is out of the same retail channel expansion dynamic that we've been talking about for quite a few quarters now, and essentially what we saw was good performance out of the DIY 's, very good performance out of the hardware cooperatives, and a continued, on schedule rollout of the multi-year Wal-Mart program that you're familiar with. So we frankly see some pretty strong investment indicators right now for that equipment, even given the residential construction market environment and for that matter even some of the paint company performance.

Okay, and then switching just to margins, probably the one margin that seems still light to me, just even due to the acquisitions is Health and Science. Can you walk us through the math as to what's weighing most on that segment margin in terms of acquisitions? Are there step up costs in there, new product rollout costs? What's behind the 190 basis point hit?

Sure. Mike, basically is the two acquisitions in '06, if you were to exclude those two acquisitions and just look at normalized operating performance, for that matter you can pull out a little bit of the medical reinvestment that we've been pushing hard on, you'd see operating margins increase on a year-over-year basis. In terms of the acquisition specific impact and the step up associated, it's really not step up per say.

No, Mike if you looked at the year on year, acquisitions diluted us by about 200 basis points. About half of that is amortization of goodwill, and so the balance of the operating margin declined plus what you'd expect as normal flow through is the investment we're making in the current organic growth in the product lines that exist today.

But Dom, why didn't we see this in the fourth quarter? Operating margins were actually up 150 basis points in Q4 and this quarter, they're down 230. It's a pretty big swing for acquisitions that were done in early and mid '06.

Right. To some extent you saw lesser investment in the medical product lines in Q4. That's ramped up somewhat in the first quarter, Mike, as well as the amortization of intangibles to a lesser extent, and then mix does play a part here within these multiple product lines on a sequential basis.

So were there additional amortization expenses and investment expenses that hit Q1 versus Q4 to explain that?

More additional investment expense, Mike, versus amortization, sequentially.

Okay, can you give us some sense as to where the money is being spent in those? I presume it's at Junair and EPI?

Well the medical investment, Mike, is actually for the medical technologies within Health and Science and sales, front end and marketing front end resources to drive long term growth for the Medical Device business. Some of that is front end capability to support EPI. Some of that's to support our Cybex business which as you know we acquired in '04.

Right.

'03, actually.

So that's the investment, so then I guess I'm still a little confused. Maybe if acquisitions hit you 190, 200 basis points this quarter do you know what the Q4 hit was? It must have been substantially lower.

It was substantially lower, Mike. As I mentioned, the sequential margin is primarily impacted by investment. Year-over-year it's the 200 basis points which is the dilution of the acquisitions plus the amortization of intangibles.

Okay, thank you again and great quarter.

Thank you, Mike.

Your next question comes from Jim Lucas with Janney.

Hi, Jim.

Thanks, good afternoon. A couple of questions. Could you just housekeeping, international as a percent of sales today?

44%.

Okay, and looking at two businesses in particular, Dispensing on the Europe side, are there any upcoming regulatory changes in the pipeline?

Not within the European union.

Okay.

We do think there will be regulatory impact as it applies to some of the Eastern European markets. And for that matter, the Eastern European dynamic that I talked a bit about, Jim, is more just a wide open market that hasn't automated its paint dispensing to any degree and we're seeing pretty nice new opportunities there for that channel.

All right. And within the Fluid business, the internet -- if you look at the international drivers, I mean, clearly there's a lot of positive backdrop across the entire portfolio, but if you look at Americas versus Europe versus Asia, are there different drivers by geography or is it pretty broad based?

I would tell you, Jim, that it's basically just different magnitude of drivers relative to the regional impact, but the global segment drivers are pretty consistent with what we've been talking about for the last year or better, so, if you look at it by market segment, downstream oil and the investment there is strong in North America. It's even stronger in some parts of Europe right now, and some of the custody transfer applications in Asia on a growth rate basis are substantially stronger than anywhere else in the world. If you look at water, the water infrastructure investment is strongest in Asia, probably right now followed by Europe and then North America, maybe somewhat counterintuitively relative to the last two, and chemical I'd say is pretty globally consistent across the three regions. Pharma and food is also I'd say more globally consistent across the three regions.

Okay.

Does that answer your question, Jim?

Yes, it does. And finally, just from a balance sheet standpoint, clearly you're in a very good shape here and could you just give any update, any color you could provide from what you're seeing on the acquisition side, in particular from a valuation standpoint?

Specifically to the valuation standpoint, we're seeing prices tic back up a little bit. We saw things somewhat plateauing between the third and fourth quarter last year. Obviously there's a lot of capital out there and we're seeing things now I'd say tic back up a touch. For most of the space that we're targeting, the smaller size bolt-on acquisitions, for now anyway, the pricing is still reasonable from the standpoint of we can get a great return on those properties. The larger size acquisitions, unfortunately, are just too pricey in many cases, and so our strategy remains pretty consistent. We're after those that we can make good organic growers out of, and for the short-term we'll probably see more of the $20 million in annual sales to $50 million in annual sales sized acquisitions.

And how would you characterize your pipeline? Is it as full as its been?

Pipeline's good. Pipeline's good. The team is cultivating all the time and we're fortunate that, not always, but typically we've got multiple acquisitions to choose from, and as you know, we're focused more so on the proprietary deals versus the auctions if we can make those happen.

Okay, great. Thank you.

Yes.

Your next question comes from Scott Graham with Bear Stearns.

Yes, good afternoon.

Hi, Scott.

I really have no income statement questions because there's really I don't think much to question there. But what I wanted to ask you about Larry and Dom was, now that we're about 18 months into the implementation of mixed model lean, I guess I'm expecting at some point to start to see some more meaningful improvements in working capital turnover ratios. Could you talk us through that inventory and even accounts receivable, where I know, Larry, that's kind of a stickly point with you, but inventory turnover, obviously dilutive some from the recent acquisitions, it's hard from the outside looking in to understand that ratio, per se, in the core business, but could you talk through inventory turnovers or where you expect that number to go, and maybe what you're doing more specifically to that end as well as to AR turns?

Sure. And just for the record, accounts receivable issues are also a stickling point for Dom as well.

They are now, I know that. [laughter]

They always have been, Scott.

We're doing very well in terms of inventory improvement, certainly a lot of that driven by a mixed model. As you saw we improved quite a bit sequentially Q4 to Q1. And you're right, you answered a good chunk of the question yourself in terms of the acquisitions having a dilutive operating performance impact to our inventory metrics, but that's somewhat good news because as you know, you get a nice cash kicker out of the fact that you can improve that inventory performance over time with those acquisitions. The businesses are all measuring their flow through their shops and they're measuring inventory turns as a primary metric to determine whether or not we're getting the right results, the appropriately sized results out of the work that's going on to transform the various value streams in the plants, and some plants are doing better than others, but I'd say we're making progress just about everywhere.

Relative to receivables, I think Dom mentioned it in his prepared remarks, and I'll let him further comment, but bottom line is that the biggest impact that we're seeing here, well two, I guess it's the growth, quarter to quarter and then it's the timing sequentially for the months within the quarter. But Dom may want to add to that.

Sure, and, Scott, maybe to give you a little bit more granularity on the inventory side. If you look at year-end, we had just under 161 million of inventory, and that increased about 4 million from the acquisition of Faure Herman, so when we look at sequential growth in the quarter, we actually made some very nice projects, process improvement in Q1 with inventory on a 165 basis on an organic basis, so, nominally a 10% increase in revenue and a 4% increase in sequential inventory. On receivables, it's as simple as saying the revenue within the quarter, the profile was much different than it was in the fourth quarter. We look at the quality of our receivables, the past dues and our average terms and there's really no deterioration there, other than to speak of the timing of the revenue in the quarter, so we expect to have a terrific second quarter. We've actually already seen a nice April in terms of free cash flow relative to collections.

Okay. That obviously is very difficult to see from just looking at the financials themselves. Here is maybe two specific questions, if I may, because I'm hoping for a little bit more on this. Could you maybe talk through a couple of your larger business units, what they're doing in inventory be it gas, viking, a couple of the others? And also, from the standpoint of accounts receivable and accounts payable, I mean, again, including acquisitions, DSO's are up year-over-year and accounts payable float is down year-over-year, so I guess I would have thought that maybe the business units would be better matching that up, so, I guess I'm looking for a little bit more granularity, Pulsa Feeder, Viking, whatever you can tell us by business unit what they're doing?

I'll start with inventories, Scott, and just to give you some examples of kind of core inventory reduction from some of our big units in the quarter, and I think perhaps the one to highlight would be for example, Viking. Viking had phenomenal order input growth, and also organic growth and essentially held inventory flat sequentially. So without going into all the detailed projects, when we look at some of our larger units relative to those early comments it is coming from the fluid and metering side in terms of inventory improvement performance. If you look at receivables, and I don't have the detail of the DSO by unit in front of me, but acquisitions do drive a piece of this companies like Banjo, to some extent Faure Herman and to a lesser extent Top Tec,h but Banjo had, it's not great DSO performance yet and their inventory performance was okay in the quarter.

On payables we've been basically kind of in the 50 day range for quite some time so you're not going to see a huge, huge move there sequentially. When we do look at the acquisitions there is an opportunity there as well, but again, it depends on how you calculate DSO. If you look at the profile of revenue, as simple as revenue by month in the quarter, you're going to see that December versus March revenue was the entire increase primarily in our receivable balance when I look at my organic growth relative to the existing units ex-acquisition. So, we didn't really have a deterioration in DSO when you look at it on a quarterly basis. Year-over-year you're absolutely right.

All right good enough. Well thank you.

Thank you, Scott.

Your next question comes from Ned Armstrong with FBR Company.

Thank you, good afternoon.

Hi, Ned.

I wanted to go back to some of the investments that you alluded to particularly in the Health and Sciences area. Can you just talk a little bit about what pipe they are, new product versus expansion of distribution and so fourth?

The main investment, Ned, is people. It's people that drive sales growth, well, short and long term, but it's not so much specific product programs, although we have continued to invest in development in the business. It's more sales and marketing to drive global opportunities for health and science.

And are you getting those people from within the industry or are you just getting people that are good marketing and salespeople that may be from outside the business and are coming into, so to speak, kind of put their touch on things with what they've learned elsewhere?

The answer is yes. We've brought most of the people in from the industry, so, their industry applications experts in a number of different fields, and you need that kind of talent when you're driving a new product into basically what our newly created market opportunities every step of the way, so you need to go get the technical talent. Most of these folks are multi-degreed. They are very savvy and they're sales professionals, so they are obviously fairly expensive folks and they generate great opportunities for us.

Okay. And then the second question had to do with divestitures. I mean, I know you've talked a lot about acquisitions have been fairly active there. On the divesting front, how are you thinking about things relative to your overall portfolio?

We're pretty pleased with the portfolio right now, Ned.

Okay, good. Thank you.

You bet.

Your next question comes from Charlie Brady of BMO Capital Markets.

Hi, thanks. Good afternoon, guys. Just on some of your earlier comments on the Dispensing segment. I think you said you really weren't feeling, I guess, the effects from residential, but given commentary coming out of Sherwin Williams this morning and what Home Depot said, I understand maybe [inaudible], are you hearing from your customer base or getting indications down the road that you may at some point get a little bit of whiff of that over the next two or three quarters?

That's a great question, Charlie. We've asked the question, obviously, about two dozen times, but even though, as you know, the correlation for our performance for Dispensing has a lot more to do with enabling. It's a capability to go ahead and allow the store to dispense what is a relatively profitable product, and if you look at what all the paint companies are releasing in the way of their results, their sales aren't stellar, principally driven by the fact that res construction is soft, but their margins are actually still pretty good, and we hear the same, frankly, out of the retail channel, so whether it's a DIY or a paint company owned store, or one of the newer channel entities, they are all relatively pleased with margins in paint versus some of the other product lines.

So the capital equipment investment for them to buy or to buy up in the case of IDEX Dispensing equipment is a really relatively small investment to enable them to go dispense a fairly high margin product. So we frankly think that the dynamic right now in the channel in North America and in other places will remain quite strong, and that again will just be a project basis for what we see in the way of the relatively lumpy revenue.

Thanks. That's great clarification. I appreciate it. And just one more on the Fire segment, you talked about sales up 5% but you're looking at your backlog, your commentaries sort of imply that you would expect organic order rates in coming quarters to perhaps exceed Q1 organic order growth rate. I'm just trying to see if I understood that correctly.

Yes, just to clarify the numbers, in Q1 -- I'm sorry, in Q4, organic orders within the segment were up 16% and we highlighted that we had some orders that were blankets for '07. Q1, were up 5%, organically, but when I bake that all into how we see the backlog, we're up near double digit backlog and we look at the end of the quarter going into the rest of the year, so when we add that to our pipeline, we feel very good about the order intake thus far relative to FSD.

Thanks very much. That's all I had.

Your next question comes from Jack Kelly with Goldman Sachs

Good afternoon.

Hello, Jack.

Larry, just want to expand that prior question in terms of what are you hearing from customers, not so much just in housing but more broadly speaking, and obviously it didn't show up in your organic order growth of 9%, but so far in the reporting period we've heard some comments from companies where things kind of slowed down in March. Again, it didn't impact you, but did you hear any of that kind of commentary broadly speaking?

Not at all, Jack. We saw, as Dom mentioned, January was extremely strong. February was a little bit softer but not tremendously so and then March is back up and frankly, I think the sentiment is pretty strong right now. I think when you get outside of U.S. residential construction and the U.S. automotive segments, we still see very strong investment, and particularly internationally, but I would have to tell you that our global growth rates for, as I said earlier, across the regions for the target segments we're in for fluid metering and for health and science essentially across the board don't vary that much. We think we're going to have a good opportunity based on the end market drivers, frankly, for the full year.

Okay. Mostly in terms of dispensing in Europe, up until a quarter or two ago there was kind of a log jam in terms of spending, you're up 4% organically in this latest quarter. Do you have any visibility there now or are you just keeping your fingers crossed where you don't go back to where we were six months ago?

Well we always have some degree of visibility. And I would say our performance now, I think, is indicative of a couple things. One, we're bringing some nice new products to market and some that are particularly well suited for the Eastern European market. We've launched a new bench top dispenser, the TM 300, which is a lower cost, lower end sequential automatic dispenser, that we can build either in Europe or we can build in China, that's doing very well in Eastern Europe. And I think we've got now with our global platform, as I referred to in my prepared comments, the ability to give product to market on an even more cost effective basis, so I think we'll still see a similar market dynamic in Western Europe. There's no huge reg driven revenue opportunity, but I think we're in pretty good shape to take advantage of what is a lower growth rate than what we see for most of the IDEX end market growth.

Your comments on foreign safety were fairly upbeat. With regard to government spending, whether at the State and local level, is that, in your opinion, flowing as it should at this point or is there another leg up that could come in future months?

It is flowing, Jack. What we saw, if you remember, I think actually you asked the question last quarter, about the relative fourth quarter calendar year release of funds versus what had been the historical run rate.

Right.

What we saw through the first quarter was a bit of catch up, and we're still seeing that activity, so I think we'll see the full deployment of the funds as legislated. And for our U.S. rescue tools business, we're seeing that in the way of project activity. So I think, when we wind up the fiscal year here, we'll have been able to say, we got our appropriate share, hopefully more than our appropriate share of the federally funded rescue tool opportunities.

Dom, I just wanted to revisit the margin question in the health area. The impact from acquisitions, you'd indicated was 200 basis points, half of which came from amortization, so in the first quarter, there was a step up in that from the fourth quarter, or it was the same?

No, Jack. My comments on the acquisitions are year-over-year, Q1 versus last year. That's the 200 basis points. The primary drivers on the sequential are mix and are additional investment in medical versus Q4.

Okay. Got it. Thank you.

Thank you, Jack.

Your next question comes from Robert Lagaipa with CIBC World Markets.

Hi, good afternoon. Just had a few questions, a couple just a follow-up on the previous questions. I guess, one, with regard to the health and science margins again, I hate to beat a dead horse here, but in terms of the investments in the quarter, I understand that's the major change in addition to mix like you had just said sequentially. How about investments moving forward? Have you added the people that are necessary for the growth of the business moving forward or should we expect this higher level of investments from here on out and if so, how long?

Bob, we're not going to give specific guidance on future margins, but I think that the run rate, you look at now, we see that as being a pretty appropriate run rate based on the investment and the growth that we see, so it could wiggle either way, but I wouldn't expect to see it going down based on additional investments.

Okay, so --

-- the margin rate.

Yes, just not even --

The way to think about this, we'll lever that investment as we see growth. It's a growth question as well, and we're not going to get into second half growth rates for HST at this point, but obviously, this has been a significant growth story for the Company, and the investment, when we look at mix of R&D and sales force and direct sales force, this is money well spent as we see the future.

So should I take that to mean that the cost in this quarter are going to be the same, not just the margin, just the cost end of things. Are the costs going to be different moving forward or are they going to be kind of at the same level? At least for the next several quarters?

I think the short answer to your question, Bob, is that we've made the fixed cost investment that we think to make, particularly in medical, to support the growth rate, the opportunity that we see in that business, and the same statement would apply for the complete health and science segment, so this was in our plan. We knew we wanted to hire these folks. We're building out a platform that we like a lot, and with the right growth, we should be able to leverage that, as Dom said.

Okay. And one other question with regard to health and science. The contracts that you mentioned with the OEM's, the 2 million for the next few quarters, what is that a result of? Is it the completion of a contract? You're waiting for it to get renewed? Is it something different? Can you just provide maybe a little bit more color there?

Sure. The health and science business is an OEM business, so we're principally supplying components or multiple components to customer's OEM product lines. Those OEM product lines have various life cycles that apply, and the comment was that for the first quarter and for the next two or three quarters, based on OEM product life cycle timing, essentially, that we think we'll see 2% or so of organic, adverse organic impact, so it has a pretty minor impact relative to health and science, and a very minor impact relative to the total Company. But we just wanted to be transparent about it given the fact that we obviously have been talking about health and science and great growth opportunity.

And in the particular end market is it tech related?

No, it's source specific. It's truly programmatic customer specific. The end market for health and science is in real good shape.

Okay and last question if I could, again circle back to Fire Products segment and the government funding. The fact that the sales are fairly flat sequentially, and again, you mentioned last quarter the fact that there was this build up in funding, and you're mentioning now the fact that the backlog levels are fairly high, is this benefit because of the fiscal year end, I think it's in September, around that range, should we see a significant uptick as a result of that, in the June and September quarter, that it should be compressed or is there a chance that this backlog is spread out further?

If you look at it, Bob, well first of all you're correct about the fiscal year timing. In terms of current order backlog, and some kind of bubble for now through the end of the fiscal year, there could be some positive impact, but frankly, as I think we've talked about before, the growth, the existing backlog within Fire and Safety is much more driven by international markets expansion. That's where we're seeing biggest new programs. That's where we're seeing best opportunities. And if you look at our domestic market performance, a lot of it is basically base market performance, whereas the largest impact as a function of the fire axe spending is in the rescue tools business just within the U.S. And that, on a contributing basis to the total business, could present us with some up side for sure for the rest of the year, but I think you'll see the better performing contribution out of what we're doing internationally.

Terrific. Thanks very much.

You bet.

[OPERATOR INSTRUCTIONS] We'll pause for just a moment to compile the q&a roster. There are no further questions. Ms. Fisher are there any closing remarks?

Yes, thank you for joining our call today. We're very pleased with our first quarter results, and look forward to updating you on our progress as we move through '07. Thanks again.

Thank you, everybody.

Thank you. This concludes the IDEX Corp's first quarter '07 earnings release conference call. You may now disconnect.