藝達思 (IEX) 2010 Q4 法說會逐字稿

Good morning, my name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth quarter 2010 earnings conference call for IDEX Corporation. 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 call over to Mr. Bruce Manning, Director of Corporate Finance for IDEX. Thank you, Mr. Manning, you may begin your conference.

Thanks, Carly. Good morning, everyone, and thank you for joining us for a discussion of the IDEX fourth quarter and full year 2010 financial results. Last night, we issued a press release outlining our Company's financial and operating performance for the three month period ending December 31, 2010. The press release, along with presentation slides to be used during today's webcast, can be accessed on our company website at www.IDEXcorp.com. Joining me today from IDEX management are Larry Kingsley Chairman and CEO; Dom Romeo Vice President and CFO; Heath Mitts, Vice President of Corporate Finance, and Mike Yates, Vice President and Chief Accounting Officer.

Our format for today -- for our call today is as follows -- we'll begin with a summary of the quarter and full year. We'll then walk through our four business segments, and, finally, we'll wrap up with our outlook for 2011. Following our prepared remarks, we will then open the call to your questions. If you should need to exit the call for any reason, you may access a complete replay, beginning approximately two hours after the call concludes, by dialing the toll-free number, 1-800-642-1687, and entering conference ID number 35655677. Or, you can simply log on to our Company web page for the webcast replay. As we begin, a brief reminder, this call may contain certain forward looking statements that are subject to the safe harbor language in today's press release and in IDEX's filings with the Securities and Exchange Commission.

With that, I'll turn this call over to our Chairman and CEO, Larry Kingsley, Larry?

Thanks, Bruce. Good morning, everyone. I'm on slide five, if you have the deck in front of you. By now, you've all had a chance to take a look at our fourth quarter results. It was a strong finish to a very good year. A record year, in fact. For the year, sales were up 14% in total, with sales reaching over $1.5 billion. We completed a few very nice acquisitions in the FMT and HST space. Which will enhance our technology and product offering, but, most importantly, we realize broad-based organic performance sets the stage for a strong year, this year, as well.

Full-year adjusted EPS was $1.99, up $0.49 or 33% over 2009 results. Another record and represents a full recovery from the recession. And, full-year adjusted operating margin of 17.2%, was up 240 basis points from the prior year. Productivity was strong, with solid operating leverage on the organic growth. As you will see as we go through the segment detail, all of our businesses performed well. For the fourth quarter, sales grew 14% organically. Operating margins were up 100 basis points year-over-year. Given our sales growth and IDEX typical operational execution, we would have expected the margin expansion to be better than 100 bips, though.

And, there were three bridging items that impacted margins in the quarter. First, there was about $2 million of acquisition transaction-related costs in the quarter. Second, our completed acquisitions had an initially dilutive impact on reported results due to the acquisition accounting. The intangible amortization. And, third, we were impacted by selected material inflation with little offsetting price in the quarter. With those three bridging items back into the equation, we would be well north of 18% operating margins for the quarter. And, we're seeing that material price relationship is already normalizing as we head into 2011.

Nevertheless, a very impressive quarter with a healthy order rate headed into the year. Free cash flow for the year was $187 million and represented 119% of net income. Continuing our unbroken streak of free cash exceeding net income on an annual basis. And, a balance sheet is in just fantastic shape with over $750 million of capability, based on cash on-hand plus committed bank revolver available for use on acquisitions. So, an outstanding year for the Company, and I'm proud of the team's achievements.

And, I'll now walk you through the segment results. I'll begin the segment walk here with fluid metering. For the years, orders were up 15%, and that's up 14% organically. Sales increased 14% for the year, up 13% on an organic basis. Adjusted operating margin of 18.5% was up 220 basis points from 2009, and up a very solid 250 basis points, if you exclude the impact of the acquisitions. And, we achieved very broad-based growth in the segment with energy, water, pharma, food, and chemical markets all strong.

Our brick market expansion initiatives continue to pay off across the portfolio. Our longstanding presence in China has served us well, and we have made great progress in India to serve that local market with a comparable operating model now. As you will see when we discuss our 2011 outlook, we expect this performance to continue. Organic growth will be strong, and we'll couple that with acquisitions to continue to grow FMT at double digit rates. With that said, before we move on to HST, I would like to jump to the next slide here and discuss in a little more detail the recent build out of our pharma platform within the FMT segment. As you recall in 2007, we acquired Quadro Engineering, as we identified the pharma lab and production space as an attractive expansion area within our FMT segment. Quadro has executed great growth, thanks to our team's product offerings and geographic expansion. And, we have significantly improved the profitability of the business.

Quadro is now growing, both in the developed world but, more importantly, in Asia, where markets are rapidly developing. We are also taking the lead with technology designed to specifically address the needs of the faster growing, high-volume generic producers. We continue to add product content that is targeted for the so-called phar-merging regions, those beyond Asia. There's been a paradigm shift as the economy recovers in the way that our customers order. Customers continue to place orders later, with shorter cycle time expectations. This works well for our operating model across the board, which is built around flexibility. But, with this pharma group as a great example, our on-time delivery measured against customer requests is near 100%. The product development and mix is gravitating toward more complex, customized solutions, as the pharma market becomes more complex itself, with advanced customized medicines. Again, this puts IDEX in the driver's seat, given our ability to respond quickly and flex accordingly.

With the market and operational expertise gained with Quadro, we are now building out with other acquisition targets in the space. Fitzpatrick and MicroFloridics, the recent additions, have been in our bolt-on acquisition pipeline for some time. If you have the slide in front of you, the illustration attempts to position how these three businesses fit, relative to industry from nano to micro size. And, dry particle handling to medicines and new food applications that are emulsions and colates. All of these applications require particle forming and handling, and many also require mixing and blending techniques. It's a good example of how we realize great returns on strategically placed acquisitions. Now, if you think about it as stand alone building blocks, they're not big. But, if persistent in our process, and, we are, we'll look back, soon, at the construction of a $200 million high growth platform that fits our operating model. And, that will serve the Company well for a long time to come. So, the build out continues here, along with other similar new platforms within the Company.

So, okay, moving on to health and science. Orders were up 34% for the year, up 24% organically. Sales increased 31%, that's up 21% on an organic basis. Adjusted operating margin of 22% was up 390 basis points from 2009. As we've seen throughout the year, HST performance has been just outstanding across the business. Within the instrumentation and life science markets we serve, we continue to gain share on customer platforms and the progress we made in the new regions, particularly in Asia, has contributed to that great growth. As with FMT, we expect the HST business to continue to perform well. The markets we serve will continue to grow at GDP rates or better. And, our businesses continue to outgrow our markets, with our new product and geographic expansion initiatives. And, we just completed the acquisition of AT Films, which enhances the build out of our optics and photonics platforms, within HST. Again, the same approach that we just discussed with regard to the pharma products.

AT Films aligns well with our existing [Samaright] business as both readers in global niche markets with high value optical filtration. And we'll continue to build out the space, as you know HST remains a first priority for our capital deployment. In our dispensing segment, orders were down 9% in 2010, down 8% organically. Sales were down 2% flat organically, the adjusted operating margin of 16.1% was up 260 basis points from 2009. So, flat revenues, but healthy margin expansion. As we look forward, the large DIY order that we filled in the first half of 2010 will not repeat in 2011. But, our team has done a good job protecting our share, actually increasing our share in most parts of the world. The global growth initiatives we have been working in Eastern Europe and Asia will continue to help offset some of that North American market softness.

Our fourth segment, Fire and Safety, also performed well given somewhat challenging markets conditions. Orders were up 2% in 2010, up 3% organically. Sales increased 1%, up 2% on an organic basis, and adjusted operating margin was 23.9%, up 60 basis points from 2009. Our Fire Supression business anticipates that he North American fire market will remain soft, but that the team just continues to be very successful, offsetting domestic market performance by winning internationally, where the markets are growing. Within the segment, our rescue tools business continues to perform. Again, global growth well outpacing the domestic activity. And, last quarter if you remember, we highlighted the new edraulic battery powered rescue tool family. I got to tell you, what a success story. It's just exceeding our expectations.

Also in the segment, BAND-IT is performing very well, with lots of new applications as a result of their BAND-IT edge-based clear strategy and value proposition. So, in summary, other than the end of the year, the little bit of material margin pressure which is normalizing now, just solid operational execution across the board for all of the segments. Before we review formal guidance, I wanted to discuss the current outlook for our end markets, the geographies, and our other broader assumptions. So, this is a big picture assumption set that we took into our view of 2011.

First, in terms of end markets, the process and infrastructure end markets that comprise much of fluid metering will grow at or better than GDP. With new project activity and MRO spend, that's assumed to be pretty healthy. And, that's the case across energy, chemical, ag-pharma, virtually all the markets for FMT, except US water. So, the portion of water that's in the US. Most importantly, though, for FMT, our continued international expansion's playing out as anticipated, which is very well. Even the water markets internationally in 2011, where federal and regionally funded projects are underway. In continuing with the market assumptions, the life science and research markets and other analytical instrumentation markets will have a good year, again in 2011. So, those HST end markets will be healthy. The markets themselves should grow at probably two times GDP. And, fields like bio-fields like Biotech are actually accelerating, and developing markets are rapidly deploying all forms of health and science instrumentation and diagnostics equipment.

On the other side of the scale, we do expect two of our end markets to be slow this year. We have about 12% of our total Company revenues exposed to the US municipal spend dynamic. And, that includes some of the US water projects, and our US Fire Suppression business. While these markets may be flat to down in 2011, again, our ability to execute in the new geographies and capture share will mitigate much of that market softness.

Our other challenged market this year involves our dispensing equipment business. The segment will grow nicely in Asia, it'll be flat in Europe, and it'll be down in the US. In total, the segment will be down year-over-year, and again, due to that lag on the comparable to the large DIY project we had in 2010. The segment will finish 2011 at about 6% of total Company sales, so, not a big deal. And, certainly, not a big performance drag. If you look at it all up, the simple summary is that 80% or better of the end market will grow at varying rates while less than 20% of the end markets will be flat to down. So, that's a view of end markets.

Just talk here a second about how we think things look from a geographic contribution. In terms of the regional assumptions, more broadly summarized, about 55% of our business is North American based. 27% of our revenue is in Europe, and about -- excuse me -- 18% of our business is in Asia and the Middle East. Our cost structure pretty closely aligns regionally to the revenue breakdown. And, market mix and geographic contribution will not have a major impact on Company-wide margins. As we enter 2011, our expectation is that, similar to 2010, the US and European markets grow at a moderate pace and the emerging markets grow significantly faster. It's our ability to capture share through new product and geographic expansion that'll allow us to outgrow the geographic markets that we serve.

As I referenced in our last call, our Asian presence is now well established. We're still underpenetrated, though. And, our Latin American position is improving, but with lots of opportunity to grow. And, we grew nicely in India this past year. But, here again, well short of our entitlement. And, the Middle East continues to perform well, and it will again this year. So, we're established, but we will continue to invest overseas in 2011 to drive expansion. Most of the incremental cost is people. Sales and technical talent. And, we've assumed this in our guidance for the year. So, we've seen over the past few months select commodity price increases that will impact our business.

The FMT and select portions of HST have already gone out with planned price increases at the end of Q4, in the last couple of weeks. We expect to yield one to two points of price in 2011, based on actions already taken. And, we expect that will offset current material inflation pressure. And, as far as acquisitions, our acquisition pipeline is in good shape. While we walked away from a couple of transactions in the fourth quarter, we have some later stage in cultivation now. The size range is a mix of small and mid-size, and they're all very solid strategic fits, proprietary processes. Our business development process is built on that foundation of the solid understanding of what we want strategically, coupled with a very disciplined eye toward return on investment. And, that said, as typical, our 2011 guidance does not include any contribution from yet to be completed acquisitions, those are the upside.

With that, I'm now on to slide 11, which is the EPS year-over-year bridge slide. If you look at the bridge in the lower part of the chart, we illustrate in some detail how we translate our top line expectations to the bottom line. The organic growth we expect out of FMT, HST and Fire Safety will yield approximately $0.30 of EPS growth. And, if you do the math there, you can see those businesses will flow through nicely. And, that's, again, inclusive of the reinvestment required to drive the international growth. Dispensing will be down with minimal impact to EPS, as the lower cost structure helps minimize the decline. And, our already completed or announced acquisitions will give us approximately 4% on the top line and $0.05 to $0.07 of EPS. And, again, this doesn't include acquisitions yet to be completed.

The FX impact is relatively minimal. With the long-term debt we took on late last year, though, we'll see a $0.07 negative impact to the bottom line. As we made the decision to go ahead and lock in cheap, long-term money to use for acquisitions this year and beyond. And to retire our revolver. So, all this bridges to an EPS range of $2.23 to $2.33, and that's 12% to 17% EPS growth. So, if you flip to the last slide, we expect Q1 EPS to be in the $0.52 to $0.54 range. Q1 organic revenue growth will be 5% to 7%. FX will have a negative impact on Q1 of about 1%, a sales impact of 1%. And, again, for the full year, we anticipate organic revenue growth will be in the mid-to-high single digits, operating margin for the Company for the full year will exceed 18%. With the flow through on incremental revenue between 30% and 35%. And, as far as the other modeling items, the 2011 tax rate is anticipated to be 32.5%, full-year CapEx will be $32 million to $35 million.

We, as you know, continue to convert cash well, and we will again in 2011. And, again, our earnings projections exclude those acquisitions that are yet to be done. So, with that we're going to open the call to questions, operator.

(Operator Instructions)

We'll pause for just a moment to compile the Q&A roster. Your first question comes from Wendy Caplan from SunTrust.

Good morning. Thank you.

Can we talk a little bit more about this material cost inflation? Doesn't sound as if it's expected to be a huge headwind going into 2011. Can you kind of remind us what materials we're looking at and kind of size it for us? And what are your expectations are relative to, not only the pricing offsets, but obviously the cost downs to cover it, as well?

Yes. Let me start with your assumption, Wendy, in terms of it we don't think it being an issue in 2011. We would agree with that statement. The contributing commodity elements to it are stainless, copper, some of the sheet steel, and some of the other elements that we see going to the FMT product and both metals. And we do anticipate that we'll see plastics increase this year as price per barrel of oil continues to notch up.In the fourth quarter, what you had happen there was some spikyness, principally metals, come up ahead of the price increases. And we made the conscious decision to not be the price leader, in a couple of those cases even though we anticipated some of the impact.

I think all up, the size just over $1 million in the quarter. And as I said in the prepared remarks, it's tough to tell on one month's results as I would tell you as we look at January results, we've already mitigated it by way of what we're seeing in the way of actions taken. So, we still remain flexible with the way our business model works. It's in many cases a project-to-project spend pricing kind of consideration. As we go forward in the year, we'll certainly anticipate what we would see in the way of all the direct costs and price it accordingly. And I don't think we're going to have any trouble with that pass-through. If you were to frame it up and think about whether we maintain material margin rate, price minus material on a rate basis or an absolute basis. It's probably on an absolute basis, we'll see if it's preservation from a rate basis or not.

Okay. Thank you.

And can you -- since we're talk something about pricing -- we've come to expect that your new products tend to have more favorable pricing, or potential for more favorable pricing as you introduce them. Can you give us some sense of new products this year and R&D spend, and what we're looking at for next year? And did we in fact capture some of that pricing?

Yeah, sure. Let me start with some of the stuff we talked about over the last couple of calls to give a sense of -- that stuff's a really the point where it's been introduced. It's hitting the market now. It will comprise some of the content that we measure as product vitality as we head into 2011. So, now we talked about the new HST products. Those components that enable some of the 25,000 PSI fluid path. We talked about some of the new rescue tool products, the edraulic products that I mentioned. And FMT you've got a scattering of new stuff that comes in by way of new family introductions like the new Pulsa product that we talked earlier in the year last year about the Pulsa 900 product series.

You've got a number of new pump families coming out in the metering space, new weights and measures-based metering products that have come out of our liquid controls group. As those hit, and we're seeing those hit now in terms of sales contribution. Now as is typical, our metric for success is that the gross margins on those need to be accretive to the base in those respective businesses, and that appears to be playing out quite well. I can't think now off the top of my head of any new product launched anywhere in the Company that's going to be at rates less than the base for that respective business. There are a couple cases where we're introducing new products where the gross margins, again, will be accretive, but the price points are anticipated and planned to be appropriate for some of those emerging markets. Where price points by design need to be at not quite the full functionality that some of the Western world equivalents have seen.

You know, certainly not going adversely impact margin rates. But priced appropriately. All up, I think we'll look at product vitality for 2011. It will be, you know, well in the acceptable or much better than acceptable range. So north of 20% of revenues. And that's product that's three years old or less. And, you know, for our business and given our life cycles, that's kind of right where we want to be.

Thanks, Larry, that's real helpful.

Our next question is from Robert Barry with UBS.

Hi guys, good morning.

Good morning.

Actually, just to quickly follow occupy that last question. Have you said what the product vitality percentage was for 2010?

It's in that same range.

Okay. So it's about flattish going from year-to-year?

Yes. We're not -- actually, in the way that we've rolled up this year, we're -- we don't see product vitality on a rate basis increasing tremendously.

Yes..

But that's not a bad thing. That's-- frankly a good thing. Again, in many cases, in our businesses, you got seven to 10-year product life cycles. And trying to artificially shorten them is more costly than it is beneficial.

Okay. And in terms of thinking about dispensing going forward, should we assume that this $25 million a quarter run rate should go forward until you happen to get the next big order?

If you were to think about dispensing as follows, and we've talked about this in the last couple quarter calls, too. But in the US, if you take the big program orders out which took place -- through the recession and look at just the base or core business run rate for equipment for the vast majority of customers, that's actually now beginning to tick up a tad. So we're encouraged by the fact that -- the replenishment requirements that's driven by the age of the equipment, some of the new -- constituents of the paint products that drive new equipment purchases, you look at just that coming out of the trough, there's positive organic growth even in the US.

The issue that we've got is the first half of 2011 has got an unfavorable comp relative to the large US DIY project we had last year. In Europe it didn't dip as hard. And frankly, I think the good assumption is flat, maybe a little better than flat in 2011. And in Asia while on a much smaller base -- very good, strong growth. So, there's certainly not going to be a terrible falloff in the market this year. The team is doing a fabulous job, both in terms of introducing new product that's going after some of the better growth markets globally. And also mitigating -- the cost structure issues that were necessary in the developing parts of the world.

So I think that it's a ride it out 2011, if you will, and a -- hopefully a much better prognosis for 2012.

Yep. And just a question on HST. I know that the key to your strategy there has been growing platform content. I'm just curious what the competitive response has been to your consistent growth of content on these instruments.

Sure, a good question. You know, most of the plarm gained, so it's kind of a share the wallet expectations out of HST has come by way of somewhat disintegrating the customers' value contribution to what they've done historically. So, as their new platforms have been launched, we've taken over increasingly large percentages of the hardware. Now the foundation of the product. And in most cases, they're focused on their software. And that tends to be a win-win for us with the customer.

As we talked -- again about how we've enabled some of the customers to really move forward almost a generation against their peer competition, it's fundamentally been because we've helped them get to that, in most cases it's -- sounds as simple as a very, very high-pressure fluid path. That if you're trying to develop that on your own, it's going to be a much longer development cycle. Not to say that we don't have competition. You know, there are peer competitors out there in the HST space. And they've seen the kind of results we've demonstrated this year. In the fringes of where we play -- I'd say they're certainly interested in trying to fast follow some of the new technology that we've introduced.

And we see some of that happening.

And then just finally, I see you flagged that the US muni continues to be a soft spot which is probably not surprising given everything we've seen in the press about the muni budgets. Is that -- do you think that's justice something that we're going to have to live with for a while?

Well I do think it's something we're all going to have to live with for a while.

I mean for IDEX and --

You know, I think we try to quantify the impacts as -- about 12% of Company sales which our US municipal budget exposed. If you look at where muni budget are still preserving their spend assumptions, water's pretty much at the top of the list. And some of that's going to continue to be consent decree driven. Some of it's just absolute requirements to fix things that are way too costly to not fix. So I don't think that water suffers -- proportionally relative to a lot of other things that are happening in muni budget cut.

And on the fire side, we do expect -- those US -- the US portion of our fire suppression business to be down this year. The plan is to outgrow it with international expansion. That's been working. That's been a great equation so far.

Okay, thank you very much.

Sure.

Our next question comes from Jim Lucas with Janney Montgomery.

Hello, this is Mike Whirly standing in. How are you guys?

Hi, Mike.

Just a couple of questions. On the HST, are you guys forecasting any potential cut in NIH funding into the guidance?

We saw I'd say -- everyone realized a step down in NIH funding Q2 of last year. And we didn't see a dramatic impact to the business in terms of really source of moneys for where people are spending on both the equipment that we're on the OEM basis or some of the components that we sell directly to the various research labs, that go out, you know, and support the ongoing use of that equipment. So, you know, does NIH continue to come down a bit -- we'll see. I don't think it's going to have a very large impact on our business this year.

Okay. Thanks a lot.

Sure.

And then on -- what do you see as the principal drivers for strength in that segment? I mean, you talked about platform expansions and new products, and you've made some acquisitions. So how would you sort of categorize the strength?

Well, you know, if you start with the markets themselves, globally they're very strong. You've got folks around the world who are moving to -- current state technology for all form of drug discovery, for -- the capital equipment that's used for diagnostics equipment in the hospitals and various treatment centers. So you've got fantastic base growth out of the emerging world. And many of our customers, even if they're European or US based are seeing -- strong growth principally out of those market. But even in the developed world, you've got a pretty healthy equation between large pharmaceuticals investing in new lab and production equipment to go after higher end medicine -- a lot of the personalized medicine stuff is now very -- early but starting to take shape.

And we see certainly investment in CapEx accordingly. And the generics continue to invest to get at -- higher production capabilities and better production capabilities. So, the end market growth drivers are combinations of global demographics and people spending on health care. The new drugs and the interest of both the big pharma and continuing to reinvest, as well as the generics as they play in some of the segments. The content piece which is the, want to call it I guess sales kicker on top of what we see our customers' growth rates, is as I was just describing in the prior question -- as a function of being able to do hardware development in tandem with our customers, but to enable them -- to get to market faster, to have product that fits the bill and certainly try and get a leapfrog opportunity against their competition in some cases.

That content gain for us has been, as we've quantified I think two quarter calls ago, as much as 10 points of growth in the bridge that we saw in terms of our performance versus the market. So, you know, summary is you got healthy markets, you got -- a strong activity base that's global. You got healthy customers in terms of the OEM population. And you have a nice share of wallet equation that helps on top of that.

Very helpful. And the just moving over to the MMA, you said you walked away from a few in the fourth quarter. I'm just wondering was that more because of the valuation or the fit with the company or anything you can share on that?

You know, obviously for confidentiality reasons, we can't get into a lot of detail. But not fit, is the simple descriptor. We know fit long in advance of spending out-of-pocket money and spending time. Very rare -- in fact I don't think of a situation where we said late stage this really doesn't fit. That needs to be dealt with at the very beginning. It has more to do with what you find as you work through these processes.

And can you classify them by size? Whether they were in that small or mid-size, the ones you walked away from?

Both. Some in the larger end of mid-size.

Okay. All right. Thanks a lot for your help.

Sure.

Your next question is from Matt Summerville with KeyBanc.

Good morning. A couple questions. First Larry, in 2010 how much of your revenue out of the 1.5-plus would you say was generated from emerging markets? And what was the underlying organic growth in that piece of the business? And what would be the expectation -- built into 2011? Just focusing on emerging markets.

Yeah, the -- Asia follow-up with Middle East is about 18% of the total Company. The growth on a full-year basis was fantastic. I'm not sure I'm going to quantify it right now. I can give you a sense, it's just under 30%. As we bridge into '11, we see that growth rate on a comp basis will moderate a tad. But still the fundamentals for huge growth exists there.

And then maybe could you talk a little about within FMT on the energy or oil and gas side, and then on the chemical side, what you're seeing in that business in terms of project activity versus MRO. And maybe you can talk a little bit of -- domestic versus international in those buckets, as well.

Yes, sure. Certainly the further upstream, the healthier the spend. The simple statement. And that would apply globally. You know, on a regional basis, international spend is better than domestic spend.

That said, -- we really don't play in what most people describe as the downstream -- when it gets down to the point of retail. We play typically midstream with a little bit lesser content upstream. Midstream's healthy. It's good. And we expect it to be good for the year. Some of the project activity that could bolster results -- internationally in particular, will come further upstream as we see those. But it -- all in it's healthy.

Thanks, Larry.

Sure.

Your next question is from Chris [Wiggins] with Oppenheimer.

Hi, good morning.

Good morning.

Just revisiting the acquisition environment a little bit. You know, I know the timing is really impossible to predict on when some of these can get over the goal line. I guess you've spoken before, I believe, that long term you would expect acquisitions to outpace core growth. And I'm just wondering kind of if things went as expected and you were able to get the stuff in the pipeline over the goal line. Would that hold for 2011?

That's certainly the desire. But I think you said it well. It's really hard to predict. And I would tell you in this environment, it's especially hard to predict. There's good opportunities out there. We are -- focused as typical, more on the proprietary discussion set than in the typical options. But we got quite a few that we'd like that we've got good relationships with these folks. We've been in conversation for quite a while.

But -- we don't lose our discipline. We want to build out something that we want to live with for a long time. That means it has to fit well. You know, large or small. It has to be a solid short-term contribution, accretive contribution to our -- business. But even more importantly, it's got to be something that we can continue to build out organically around. So, whether it's portrayed in those examples, it's continuing to build out the pharma platform or building out the optics and photonics platform, or doing some things that fit nicely adjacently within FMT and HST.

Otherwise those things enhance the scope of what we can take through our channel, and we can build by way of our operating model. And as far as '11 goes, I think the M&A markets will be healthy. I think they'll be a bit frothy. You know, we'll be disciplined, and we'll get the deals done that we like. And I'd hope that the rate of growth out of them could surpass the organic rate this year.

Great. That's helpful. And with the international investment that you've talked about picking up this year, can we think of that as being pretty spread across the segments, or is it going to focus more on --, FMT or HST, or how should I think about that?

It's pretty well across the segments. Now the rates are more greatly differentiated in a couple of the segments. But if you look at all up, you kind of have the same story. HST growing hugely, internationally, and plenty of opportunity to continue that. FMT, similar story, but with pretty solid performance domestically through 2010 and assumed so again for 2011. Fire as we talked about, and rescue for that matter, too, tremendously outgrowing the domestic performance assumptions. And dispensing while a smaller base in terms of the international growth outside of Europe -- that's where the growth opportunity is for 2011.

Thank you. And just one last question if I could. In the fire segment, particularly on the rescue tools, I know that international penetration's been a big driver there. And I'm just wondering -- if I kind of tie into weakness in municipal budgets and I look kind of toward the US for rescue tools, I mean, is there -- is there a replacement cycle in that business that maybe is getting pushed out because of muni weakness? You know, how should I think about kind of a replacement cycle in the US rescue tools business?

Well, there is a replacement cycle. There is what has always been a technology driver, the primary issues, and we've talked about them many times before. To try and get portable, better product in the hands of rescuers. And in many cases it's new fire and rescue personnel be they professionals or volunteer who -- are smaller people who want smaller tools but just as much power. There's been other drivers, lots of them along the way, more versatility in the tool and with the edraulic product, the real beauty of that one is it's complete portability. It's much safer as a electro mechanical product than a hydraulic product.

Those things drive reinvestment perhaps faster than what the natural reinvestment rate would be out of where spend is coming out of these departments. That applies universally. Internationally as well as domestically. Now, our assumptions as we've justice mapped them in to 2011, are that the rescue tool spend in the US will be on a rate basis much smaller or shorter, slower than what it will be internationally. And so we assume that -- the base rate assumption set for US spend for muni will be -- certainly lackluster if you were to look at it stand alone. But the international spend will be fantastic.

Great. Thank you for your time. That's all -- that's all I have.

Sure.

(Operator Instructions)

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

Thanks. Good morning.

Good morning.

Hey. Just with regard to HST, maybe I'm splitting hairs here, I just want to make sure I understand -- your growth assumption going out into '11 is near double digits. And you previously talked about a double digit growth rate for that business, although that was over a three-year timeframe. So, maybe I'm looking at apples and oranges here. But has there been any change in thinking to your long-term outlook for HST in terms of organic growth rate?

Not significantly so. You know, we -- in our planning assumptions as we head into this year, we see a lot of that great activity continuing. We-- the comps get tougher for that team for sure, that's part of it in the math. But, I think the team's hitting on all cylinders and going do very well. So, it doesn't change our long-term prognosis.

Okay. And in terms of FST, as we look out to the margin profile of that business today with the acquisitions you've done over the past two years, relative to the margin level you hit back in '06 and '07, do you see that business -- a bit of a different business today than it was a few years back, because of acquisitions that are baked into it now. Do you see the margins getting back or better than that prior level going forward?

I'm sorry, that's an HST-specific question?

Sorry, FMT for that question. FMT, sorry my mistake.

Yes, it depends on what you go back, to frankly. Yes, FMT's got lots of margin upside. The marching orders to the FMT team for 2011 are to flow through well and to grow their operating margin. So, you know, that's the task for 2011. They absolutely can get back to historical margins if you look at those years. And again, you have to factor in the initial kind of dilutive impact to acquisitions that you see. And as a function of that in the -- you know, the accounting for those. But if you were to look at FMT EBITDA rates -- you're already in -- a very, very healthy scenario now with, again, opportunity to continue to grow on an EBITDA rate basis.

Okay. Thanks. One final one. Can you give us the -- you gave some order rates, growth rates. But could you just run through the order growth, total order growth and give us what it is organically? And then for FMT and HST, what the acquisition impact on orders was in the quarter?

Sure. The organic order rate in the quarter is FMT is up 14, HST 19. Dispensing is actually up 18. FSD is up four. So Company-wide you get about 14. And probably a better way to look at it, sometimes folks get too lost I think in organic rates in a quarter because they can bounce around a fair amount.

Obviously you have to think about backlog build in the quarter which is just under $4 million for shippable backlog. So, those are the numbers. You can foot that on a total basis back to what we said earlier about the relative acquisition contribution, to get the total. But that's the organic rates.

Dispensing was plus-18 in fourth quarter on organic order growth?

Yes. But again, you got that -- bounces around tremendously. And I wouldn't -- don't assume, again, a few percent of the total Company. And you had an easy comp from an orders perspective in '09. So --

Right.

Not a -- kind of an exit rate that you assume going into this year.

Right. Thanks, that's helpful.

Sure.

Your final question is from Walt Liptak with Barrington.

Hi, thanks. Good morning, guys.

Let me ask a follow-up after Charlie's question. Your order growth accelerated sequentially. And so you've got probably a pretty good entry point, especially since you're able to pass along pricing. Are you assuming things slow down in the back half of the year, or I mean, how are you looking at sequential growth throughout 2011?

I don't think we're going to break it down in any further detail for you right now, Walt. But the bottom line is that you're right, the rate did grow sequentially from Q3. And -- January looks good, frankly. So, you know, we need that head of steam to head into the year. We've got it. You know, forward looking visibilities is pretty decent, but I think if you look at the assumptions that we built back into the bridge there, the EPS, top line EPS bridge, probably a pretty good read on the year.

Right. Yes, I agree. You know, the 12% to 17% EPS growth is a good growth rate. Let me ask you this.

And maybe it's a leading question, but for -- if you look at 2012, I wonder if you would comment on the growth? Because I mean right now dispensing -- maybe it would start recovering in 2012, fire North America, maybe that would recover. You mentioned from Charlie's question that HST might accelerate. And then you got accretion from deals. And the analysts out there have got 12% to 15% growth in 2012. Is that like a reasonable, you know, guess for 2012, or do you think you could see your growth rate -- accelerating?

I'd say that's a good assumption. For sure -- I think it's hard to forecast some of those --

Right, I understand.

Markets. You know, 12 months or better out. But, -- certainly recovery as it relates to some of the pieces that are still slower growth than that, less than 20% of our end market assumptions for this year, those recover I think in '12. Maybe before then. But likely in '12. And, you know, I think that you continue to pace -- pretty strongly in the FMT and HST segment. You know, you could probably say 2012 looks pretty good.

All right. Okay, thanks, guys.

There are no further questions at this time. I would now like to turn the call back over to Mr. Kingsley for any closing remarks.

Well I'd like to thank everyone for joining. I'd also like to particularly thank the employees of the Company for delivering a very solid year. Also, I'd like to thank Dom Romeo. This is Dom's last earnings call with IDEX. Dom's been just a great partner, and an outstanding CFO for the Company. And the Board and I are just very grateful for his contribution to the Company over the past seven years. And Dom, thanks.

Thank you.

To everyone else, we look forward to a robust '11, and we look forward to talking to you throughout the year. Thank you.

This does conclude today's conference call. Thank you for participating. You may disconnect.