藝達思 (IEX) 2011 Q4 法說會逐字稿

Good morning. My name is Kristin, and I will be your conference operator today. At this time, I would like to welcome everyone to the IDEX Corporation Q4 2011 earnings 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. At this time, I'd like to turn the call over to our host, Mr. Mike Yates, Vice President and Chief Accounting Officer. Please go ahead.

Thank you, Kristin. Good morning, everyone, and thank you for joining us for our discussion of the IDEX 2011 financial highlights. Last night we issued a Press Release outlining our Company's financial and operating performance for the 3 and 12 month periods ended December 31, 2011. The Press Release, along with the presentations slides to be used during today's webcast, can be accessed on our Company's website www.idexcorp. Joining me today from IDEX management are Andy Silvernail, our Chairman and CEO and Heath Mitts, Vice President and Chief Financial Officer.

The format for our call today is as follows. We will begin with a summary of the fourth quarter and full year 2011. We will then disclose our redefined segmentation followed by a walk through of our four legacy business segments and finally, we will wrap up with the outlook for 2012. Following our prepared remarks, we will then open the call for your questions. If you should need to exit the call or any reason, you may access a complete replay beginning approximately two hours after the call concludes by dialing the toll-free number (855)859-2056 and the entering conference ID 40912918. Or, you may simply log on to our Company's 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 will now turn this call over to our Chairman, Andy Silvernail. Andy?

Hey, thanks, Mike. Hey, good morning, everybody. I want to start here on slide 5. By now you've all had a chance to review our Press Release and take notice of the strong finish to a very good year. We established record orders, sales, cash flow and EPS. For the year, orders were up 18% and sales were up 22%, exceeding $1.8 billion. Organically, we achieved 9% sales growth despite off volatile markets. We completed the largest transaction in IDEX history with the acquisition of CVI Melles Griot which further enhances our optics and photonic capabilities. Our integration of CVI is on track, and we're in the process of executing our integration plan including a commercial strategy and plan footprint consolidation. Full-year EPS was $2.56, up 29% over 2010 and full-year adjusted operating margin of 18.1% was up 90 basis points from prior year. On an apples to apples basis, that is excluding the impact of 2011 acquisitions, operating margins would have increased 200 basis points, so. I'm pleased with our team's focus and execution to drive strong profitable growth.

Now onto the fourth quarter. Sales grew 19%, 7% organically. Operating margins were up 40 basis points year over year, or up 160 basis points when we normalize for acquisitions. As we get into the segment detail, you will see a broad based performance where we drove productivity throughout the organization. Free cash flow was $74 million in the quarter resulting in cash conversion of 155% of net income. Again, our team executed well, and this is reflected in our improved working capital. In Q4 we completed the issuance of $350 million ten year public bond which allowed us to secure long-term capital and an attractive low rate. Effectively, this frees up our bank revolver so that our strong free cash flow generation and securing attractive long-term debt, the balance sheet is in great shape and we have plenty of dry powder to execute our short and long-term acquisition strategy.

I'm proud of the team's achievements. As we enter 2012, we see healthy order rates and outlook for many of our end markets. The January order rates were solid, and although markets remain volatile, we are encouraged by the start. We are still driving selective restructuring acquisition -- actions and we will benefit, particularly in the back half of the year, as we begin to realize savings from our manufacturing footprint consolidation.

As I reflect on our outstanding year and the end markets driving our success, I tend to put our business in two general categories, high growth and high value. Our high growth platforms for those that will continue to acquire highly quality businesses and technologies that accelerate profitable growth and improve our competitive position. Not only do we have a full M&A pipeline for these businesses, we believe these have attractive organic growth potential. The high growth businesses are those that are primarily in our HST and FMT segments. High-value businesses are those businesses that command premier margins due to the critical nature of their solutions and market and brand position. While these businesses also have attractive organic growth potential, strategically we've chosen not to focus on M&A. These businesses fall into our FSD and Dispensing segments. Both high growth and high value businesses receive investment to innovate and continue to expand their market and geographic reach.

Before I walk you through the segment results, I wanted to explain our re-segmentation. We've elected to realign our high-value businesses. We will no longer disclose the dispensing equipment business as a standalone segment. Dispensing will now join BAND-IT, Hale, Hurst, Class 1 and Lukas brands, which all hold a number one or number two position in their respective markets. We believe having a combined fire safety and diversified segment reduces unnecessary complexity.

This newly combined segment is led by Eric Ashleman. Eric joined IDEX in 2008 and has done an outstanding job leading our gas business unit. In 2010 he added dispensing to his responsibilities. Earlier in 2011, Eric was given responsibility for BAND-IT and Fire and Rescue. Under his leadership, we anticipate continued global growth across this portfolio while driving productivity and efficiency. This combined segment now makes up in excess of 20% of total IDEX sales and delivers great operating margins. So, there's no change in the fourth quarter with respect to how to report the four segments. However, going forward, there will be three reportable segments.

Now, moving onto the segment results, this will be the last time we separately break out Dispensing. With that clarification, I'll begin the segment discussion starting with fluid and metering on slide 6. I'd like to commend the FMT team or their outstanding performance in 2011, really a terrific job. For the fourth quarter, orders were modestly down organically as we came up against some tough comps from large projects and blanket orders in 2010. Sales increased 8% organically for the quarter and 13% organically for the year. FMT delivered an operating margin of 19.9% for the year, which was 140 basis points better than 2010.

In Q4, our sales did benefit from specific project related shipments, mainly in Europe and the Middle East, some of which have been in our backlog for several quarters. Within the AG space, Banjo had an exceptional year. Banjo is the clear market leader in a very strong end market, and they are experiencing tremendous growth, up 27% from prior year. Their orders have not shown any signs of softening, and we believe Banjo will deliver yet again in 2012. Within Chemical and Energy, infrastructure expansion internationally and our focus in the aftermarket generated double-digit organic growth for the full year. I'm very pleased with the team's reinvigoration efforts in the aftermarket. Our Water business continues to face municipal economic headwinds. While the near-term outlook remains muted, we expect long-term growth as global infrastructure investment picks up.

Now onto Health and Science. Orders were up 40% for the quarter, organic orders were up 2%. Fourth-quarter sales increased 51%, up 7% on an organic basis. Adjusted operating margin of 19.5% was impacted by CVI's margins that were dilutive to the segment. Excluding acquisitions, fourth-quarter HST operating margins would have increased 230 basis points versus prior year. We expect HST's margin profile to expand over time as we continue to execute the CVI integration including manufacturing footprint consolidation in utilization of IDEX's commercial and operational excellence programs. We pride ourselves on being an innovative and solution driven business. This winter, Precision Palmer Engineering, or PPE, an IDEX company that is a world leader in high-performance seals, launched a low temperature seal, good to 40 degrees below zero. This solution addresses the need for reliable, durable ceiling in conditions where competitors failed. It's enduring performance characteristics and ability to fill a void in the marketplace is what sets PPE's Perlast ICE apart from its competition, and I believe this is yet another example of what IDEX does best. PPE is well-positioned to have another great year in 2012 through delivering new products, penetrating adjacent markets and expanding globally.

As you may recall, our material process technology platform which is heavily concentrated in food, chemical and pharma, built significant backlog in Q3. While the pace moderated in the fourth quarter, we're still experiencing very solid orders. The outlook for MPT platform is robust and provides us with confidence heading into 2012. Within HST's solid platform, that's the business which provides components to the instrumentation OEMs, we experienced moderation in growth rates as we come up against different comparisons. In 2010 and the first half of 2011, we saw more blanket orders in several large end market new product ramp ups. Also, we continue to see volatility in the OEM environment. However, the end markets in the specific applications where we provide content have begun to stabilize. We're being cautious with our expectations for this platform, at least in the first half of 2012, as OEM funding concerns are worked out.

In summary, for HST, we had great traction and our MPT platform and ceiling business. The optics platform integration is on track and we are taking a cautious approach to the fluidics platform. We will feel great about our leadership position and end markets for this segment, and we will continue to invest accordingly.

I'm now on Dispensing, page 8, and as I mentioned, this will be reported under Fire Safety and Diversified in the future. In the quarter, organic orders were down 16%, sales where down 1% flat organically. If you recall, Q3 2011 organic orders were up 23%. This is the type of fluctuation quarter to quarter that is typical for Dispensing. Operating margin in Q4 of 3.7% is down 20 basis points versus 2010, primarily due to mix. However, operating margin was 16.3% for the full year 2011, up 20 bips compared to 2010 which is evidence of our ability to control costs and drive efficiency, even in a slowing market. This is largely due to structural actions we've taken where we consolidated a number of European offices to supply of -- simplify our footprint.

We're not forecasting a broader market rebound, however, there are signs of recovery on the horizon. In 2012, we plan to further solidify our position as a global market leader through new product introductions with a particular focus on emerging markets. With our right size cost structure, we are well-positioned globally for a market rebound. We will wrap up or segment discussion with Fire Safety and Diversified on page 9. The segment continues to perform extremely well given a challenging market environment. In Q4, organic orders were up 1% as sales grew 6% organically. For the full-year, orders grew 6% organically -- excuse me, orders grew 6% organically and sales grew 5% organically. Our Fire Suppression business anticipates the North American market will remain flat in 2012, but the team's success continues to their ability to reduce cost and drive growth internationally.

Our Rescue Tools business continues to perform. We believe our global growth will outpace the domestic activity. Bandit had another excellent year. The team continues to find new applications and markets for their fastening products. In summary, FSD delivered top line growth while expanding margins 140 basis points. Further growth in the platform will continue in 2012 as we expand our reach across the globe and into new markets.

With that, I'm now on slide 10. I'll walk you through our full year 2012 guidance, I'll start at the top of the bridge. As we previously disclosed, we secured long-term money Q4 resulting in incremental interest expense of $0.10 in 2012. In Q4, FX turned against us as the dollar strengthened. When we apply the January 31 month end rates, the result is a $20 million headwind for full-year results when compared to prior year rates. We anticipate mid single-digit growth across all platforms in 2012, which will provide $0.22 to $0.28 of EPS.

The full-year impact of our IDEX Optics and photonic platform will be $0.10 to $0.12 accretive over the partial year 2011 contributions as CVI was acquired in the summer of 2011. The impact from our recent restructuring actions will generate another $0.04 of EPS. We're also making some pretty significant investments in our operational and commercial excellence programs. Most significantly, we made an investment in our global supply chain. These incremental costs will deliver sustainable profitable growth in savings today and over the long-term. And all of this bridges to EPS range of $2.74 to $2.82, or 7% to 10% EPS growth.

So, if you'll flip to the next slide. I'm now on slide 11. I will give you more color on Q1 2012 expectations and a few other modeling considerations. We expect Q1 EPS to be $0.62 to $0.64, up 9% to 12% year-over-year. Q1 organic revenue growth will be approximately 4%. Just to be clear, our forecast assumes Q1 revenue is modestly higher than Q4 revenue in absolute dollars. In Q1, FX will have a negative year-over-year impact on sales of proximally 1%, and the new debt structure will have $0.03 EPS impact versus prior year. For the full year 2012, operating margin for the Company will be approximately 19%. Other modeling items I what you guys to consider, the full year 2012 tax rate is anticipated to be approximately 30%. Full year CapEx will be around $40 million, and as I said a few minutes ago, we've demonstrated ability to convert cash extremely well, and we anticipate similar performance in 2012 where cash generation will be well in excess of net income. Our earnings projections exclude any future restructuring, future acquisitions or charges associated with acquisitions.

That concludes my prepared comments on an excellent year and 2012 outlook. And with that, I will open it up to your questions. Operator?

(Operator Instructions). And your first question is from the line of Jim Lucas with Janney Capital Markets.

Thanks, good morning, and thanks for building our models for us, Andy.

No problem, Jim. Good morning.

Wanted to start first on the order patterns that you saw through the fourth quarter and how the year has started because obviously a lot of focus there, especially with references to the blanket orders. So, was hoping you could flush out a little bit more of the patterns there.

Yes, no problem at all, Jim. We've talked about this, even through the last year, of how we've seen kind of an overall change in order patterns where we are seeing fewer blanket orders and order patterns, the volatility increasing, call it lead time decreasing. And so we've seen blankets turn more and more into book in turn, and that trend has continued, and we anticipate it to continue going forward. So, that's pretty consistent with what we've communicated in the past, and that's what we saw in Q4.

In terms of the question on the start of the year, the year started well. January was very solid, we are encouraged to see -- I guess coming out of the gates, we're pretty encouraged to see all of the markets responding. We do believe that we saw some destocking in Q4 in a number of businesses, particularly in HST. And we've seen a nice bounce back in the start of the year.

Okay, and with that change from -- to more of that book in turn business, is this part of the evolution of the portfolio, or what has specifically changed with your customers' order patterns?

Jim, I think it is a couple of things. First and foremost, this trend started, to some degree or another, coming out of the recession where we saw a lot of destocking throughout the recession and not as much coming back in post. So, I think it is fair to say, to some degree, this started back in 2009, 2010.

The other part is, candidly, with our operational excellence activities, our ability to shorten lead times. In particular, I was over in Europe a few weeks ago and visiting one of our businesses that had literally cut lead times on the last 14 months by 75%. And when you see that, customers get used to that, and they bring down their inventory basis and move more to conbon-like behavior. So, it's -- to some degree, it's the marketplace, and I think that's the overriding trend.

To some degree, it is our ability to take down lead times, and I think everybody will continue to be cautious in the marketplace around building inventories until there's more, I guess overall confidence in the overall end markets.

Okay, and then as a follow-up on a separate topic, you've -- obviously, we all see the headlines about Europe. And emerging markets, many people have been talking about a slowing in the growth rate there. Can you just give us a little bit of color of what you are seeing in the emerging markets and how you're thinking about it in 2012?

You bet. I think like a lot of folks, we saw deceleration in Europe in -- starting in the late summer, and that certainly continued into the fourth quarter. At the same time, is has not been a wholly negative story, so please don't let anyone read into that. Our Europe has remained, I'd call it solid, but the growth rate certainly decelerated meaningfully in Europe starting in the summer and into the fourth quarter.

Asia, I think we all saw some slowdown in the third quarter in Asia and we saw a kick back up in the fourth quarter, and I think that trend is going to continue, really driven by what we are seeing out of China as we look into the balance of the year.

Okay, great. Thank you very much.

You bet, thanks, Jim.

Your next question is from the line of Scott Graham with Jefferies.

Hi, Andy, and hey, Heath. So, I was hoping that maybe on the back of Jim's question, you might be able to give us -- you gave us a little bit of color on the blanket orders and oil and gas and projects for FMT. I was hoping you could give similar color on HST as well as SST, and then I have a follow-up.

Yes, no problem. I think the HST FST stores are little bit different, and what I mean by that is as we talked about in the third quarter report, the HST -- some of the HST end markets, and let's be very clear about this, we are really talking about the fluidics piece, which is selling into the instrumentation OEMs.

We have actively seen a significant change in terms of moving to more conbon by a number of our major customers in that business, which really reduces the number of blanket orders, and we saw that in the midpoint of last year and accelerate through the third and the fourth quarter. Part of that is due to our operational performance, part of that is due to their operational performance in terms of their ability to manage inventory.

But the biggest piece has been the uncertainty around the funding environment, and I think we are seeing some pretty mixed results at the end market level around that. And I think we're going to see some of that through the first quarter. There's no doubt we're going to see that behavior to the first quarter, and then as the funding considerations get dealt with here in the back half, I think it improves.

I've said pretty consistently that I'm not sure if it is a 3- or a 12-month phenomenon, but it is going to play itself out because the overriding trends in this business, meaning the scientific fluidics business, are positive, and we expect the growth rates to return, whether it is in the back half of the year or not. But we expect that to return.

On the FSD side, Scott, a little bit different. We had a really strong Q3 in FST. We saw a number pretty big things come through in Q3 ship in Q4, and so the phenomenon is not quite as great there. I will tell you that in FSD, specifically in rescue, we are seeing some pretty nice things internationally from a large order perspective, so we are encouraged by that. But I think the trends between HST and FSD are little bit different.

Would you be willing to tell us an organic with a number in the month of January for the whole Company?

We don't break that out. I will say that it is a positive. Significantly positive, better than our expectations.

Okay, okay. Thank you. The follow-up question is simply with this -- with the debt issuance in the fourth quarter, it sounds to me, Andy, like you guys are setting yourselves up for another good period of M&A, and I was wondering -- I know where the M&A is going to a targeted, the segments, but could you give us an idea of if it is a fat pipeline like you said? What could we -- what do you think we could reasonably expect in 2012 in terms of disbursements?

Can it be something north of $500 million on the capital outlays to -- for acquisition activity? Could be in the $750 million area? What you are you thinking on back of the envelope?

Well, let me tackle two things, Scott, and one around the debt. I just want to say first and foremost, I'm really delighted with the team here and how they went about getting this debt placement. They did a terrific job, and when you think about it, we really have our path set in terms of capital structure for a very long period of time here, and we have a tremendous amount of dry powder.

It will be at a very inexpensive rate as we utilize that, and you put that together with the strong free cash flow and this really aligns us well to that $1 billion to $1.2 billion that we've talked about being able to deploy over the next three years. So first, kudos to the team for that.

On the M&A front, Scott, when you said $750 million, I had a couple of guys in the room kind of choke a little bit. But -- I've got to resuscitate Heath. In all seriousness, though, if we do $200 million to $300 million, that would be a good year for us at $200 million to $300 million in capital outlay, and that would be in line with our $1 billion to $1.2 billion goal, and we've got a pretty good pipeline.

That being said, the nature of our pipeline is if more things broke our way, right, you could see the number creep pretty quickly as we saw in 2011. So, $200 million to $300 million would be solid, and if things break our way, it could be significantly more than that.

Thanks very much.

You bet, Scott. Thank you.

Your next question is from Matt Summerville with Keybanc.

Hey, Matt. Are you there?

Hello?

Hi, Matt.

Oh, sorry about that.

No problem.

Must have been the mute button. I was wondering if with regards to FMT orders being down 1%, if we bucket that with oil and gas or energy and chemical and AG other general industrial and then water, how would those four buckets have looked around that 1%?

AG was really good, and we anticipate it is going to continue to be really good. The team at Banjo is just doing a great job, really terrific. Energy and chemical where okay. They were solid, and water was down, as we expected. And I will say, however, that we feel pretty good that we are kind of hitting along the bottom with water. And if I kind of think about -- actually water and fire, kind of put them in the muni bucket, so to speak, we feel pretty good that we are at or near the bottom relative to those businesses.

And then if we think about your three reportable segments now going forward and you lining that up with organic growth guidance of about 5%, I guess, how do you see those three businesses scattered around that 5%? Which do you see growing above, at, maybe below that level? And if you look at the three, were would you be most optimistic, based on what you are seeing in your order book early in the year? And then where would you be most pessimistic based on what you are seeing in your order book?

You know, Matt, not to be dodgy about it, but I've got to tell you, the way our annual operating plan rolled up, and what we've seen early on really shows the three segments being plus or minus, pretty close to that midrange. If I had to handicap different pieces of it, you've got some pieces that -- FMT could definitely beat the number just because of the strength in the infrastructure end markets, and we could see better than expected performance there.

On the HST side, you've got what I talked about in terms of the instrumentation, which I don't see downside to our expectations there. And potentially in the back half, if funding concerns get better, we could see some better performance there. And then within FSD, we are still expecting dispensing to be pretty flat and we are expecting fire to be pretty flat.

And we don't see -- there's not a -- there really isn't a catalyst here if I look at the back half of the year on an increase in muni spend, so I wouldn't to handicap that up. At the same time, I wouldn't handicap it down. So, if I look at it relative to the portfolio, I don't see a lot of potential negatives and I see definitely a couple potential positives.

If you think about this public funding environment being there for a while and we think about an organic growth equation around HST in terms of content or share gains versus market growth versus price, how are you thinking about how those three buckets will evolve? I'm really not talking about this quarter of this year, but over a longer period of time.

Sure. I think if you look at it long-term and you are looking at HST as a whole -- Matt, I assume you're referring to the fluidics piece, right?

If you'd like to speak to the fluidics and then the non-fluidics, I think that would be helpful as well.

Okay. On the fluidics side, there are really two big drivers to accelerated growth in that business and, well, I will call it three big drivers. You've got one which is the market itself, and I do think, as we move past these funding concerns, where going to see more like historical rates organically in that business. And all the market trends, I think, point in that direction over a three, five-year period of time, so I think very favorably about that.

The second piece of the equation is a new product introductions. And you look at 2010 and 2011, early 2011, for those of you who know that space well, there were some pretty big new product launches that came out to the marketplace that drove some incremental growth, and we obviously played well in those and did well. And then the third piece, Matt, to your comment, is really around taking share, and that's a pretty consistent theme for us.

2010, early 2011, we did better on some new stuff that came out, so that was positive. And we will still see some improvements. I will say, though, that if you look at the pipeline, our visibility into the pipeline of what's being launched, which is not 100%, but it is pretty good, that's not as robust in 2012. But I think over time, that cycles and two- to four-year cycles, depending upon the market. So generally, Matt, I feel good over the long-term in terms of those three things.

The other things you mentioned were really around price. Price has been okay for us. We have -- it is not an environment where we're going to go out and get a budget price, there's a doubt about it. But it is also not a deflationary environment, so I will call that a neutral. Net/net, in the intermediate term, I think it is about funding concerns, and in the long-term, I really like how we are positioned.

Thanks a lot, Andy.

You bet, thanks Matt.

Your next question is from Robert Barry with UBS.

Robert, are you there?

Can you hear me?

Yes, now.

Okay, sorry.

No problem.

Wanted to ask about the operating margin assumption and where you see the biggest improvement year over year.

Rob, this is Heath. I will take this one. We -- on an organic flow through basis, we are still holding to our 30% to 35% as we've been consistent with for several years now. That still allows for with this type of growth rate for some healthy margin expansion, we are guiding for the year somewhere in the 19%s.

If you look at where we've come in at the segment level, ex even some of the acquisition, and some of that is non-cash, as you know, some of the amortization costs that came with CVI. The Company did very well in terms of what our expansion was this year, even with that as a headwind towards the full-year numbers.

So, I would say in general, I would model the around the 19%s, and we will see where we come in. Price will be a good guy in total for the Company. It will be around 1%, so that gives us some tailwind heading into the year. But there will be some inflationary pieces that have to be offset by that, so.

I think you had talked on the last call about the HST segment tracking in the 19%s as you're just layering in the amortization from CVI. Has the outlook changed there at all, or is that still comparable to what --?

No, we did 19.5% this quarter, which is consistent with the third quarter view as well. I'd say we're -- in terms of cost that are coming out, especially some of the structural costs that are coming out related to some footprint consolidations within the CVI or the overall optics platform, you'll begin to see that begin to increment up with the flow through assumptions still at 30% to 35% for that segment.

We won't see full run rate or a couple of those consolidations until the later part of 2012, and there is a little bit of investment that will come in ahead of that. But I would tell you to -- I would model HST in the mid-19% and the 19.5%, and you'll begin to see it incremented up to an exit rate of 2012 with probably a 2 in front of it.

Yes, okay. And then just finally, I wanted to be clear on the HST segment. I think it was about 7%, 8% of that segment that you thought was directly impacted by NIH funding and maybe as much, again, that impacted because of its adjacency to NIH funding. In your planning assumptions, are you modeling that, call it 15%, 16% of the segment to be kind of flat, down, up? How are you thinking about that piece?

Yes, that's a great question, and the way we've talked about it with everybody is if you think about the end market, so the piece that we are talking about here, Robert, is about 30% of HST, right? And HST is about 30% of IDEX, that's how we've talked about it. And in the end markets that business touches, to one degree or another, if you look across the globe, NIH or NIH-like funding is about 30% of the money flows. That's how the math works.

So the -- our expectations -- by the way, for those of you who have been watching, the NIH budget did not get cut. As you look to those, it actually was up 1% for their fiscal year, I think they announced that in October or November. So, it was a little bit better than expected. But obviously, with the election and what happens next year, we will see how that plays through. But other NIH-like bodies across the globe are more positive, especially when you look at Asia.

So, specific to your question, how we've thought about that is we look at the first part of the year for that business to be pretty flat in terms of revenue. The first quarter being the most challenged, not necessarily because of the sequential order rates, Robert, but because last 2011, Q1 2011 for that business was a monster. It was a great quarter. We had a number of very large blanket orders and some pretty good-sized product ramp ups. So, first quarter is pretty tough comp.

Second quarter is kind of flattish, than we expect to see very modest improvement in Q3 and Q4. So, we are not modeling in or building a plan that has an expectation of a blowout rebound, which I think is the prudent thing to do for the balance of this year.

Yes, so sounds like first quarter will be kind of the weakest quarter of the year and then between the NIH issues, the restructuring, et cetera, it sounds like momentum should build during the year?

Yes, no doubt, that's exactly right.

Okay, thank you.

You bet.

(Operator Instructions). And your next question is from Allison Poliniak.

Hi, guys. Good morning.

Hey, Allison.

Just going back to the Q1 orders, is there any specific segment driving that? It sounds like HST, the fluidic side still a bit weak. Can we just assume FMT is the strength here?

I think what you see is HST was actually up two in orders -- no, I'm sorry, you say first quarter, Allison?

Yes, for January, sorry.

My apologies. Actually, Allison, it was very broad-based. January was surprisingly broad-based, and so we feel -- that's one of the reasons that we feel pretty good about it. So, there hasn't been kind of a massive move one way or the other.

Allison, this is Heath. I'd say, just to add onto Andy's comments, as we've talked in the past, there are certain businesses within IDEX that we look at that are fairly reliant upon the daily book and bill rates, and those are not just FMT, those are portions of Fire and Safety, specifically Bandit. Those are portions of HST, not just with the OEMs there, but also businesses like gas and so forth that really were strong in January, which give us a lot of confidence as we are in.

I'd say the only soft spot we saw was probably, and it is not an organic numbers, because we have not anniversaried it yet, the semi-con is a bit soft, and that impacts portions of HST, specifically within the optics business of CVI and a little bit within our seals business. But other than that, it was very good.

Okay, great. And then obviously the US water market's challenged, but can you comment on what you're seeing outside the US for those businesses?

The bright spots for us in water have been -- have certainly been outside the US. Now, I should say outside the US as you look east. The Western markets still look a lot like the US, and I think that is very fair to say. But the Asian markets and the Eastern European markets and the Latin America are pretty solid. So -- and we expect that trend to kind of continue.

And the other bright spot there has been the industrial water side. So, the trends that we've been talking about here for quite some time, pretty consistent. And again, we built our annual operating plan and if you look at our -- the actions that we have taken, the restructuring actions that we've taken, they've been focused around these businesses, including water where we've seen sluggishness.

Okay, great, thank you.

Thank you.

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

Hey, thanks, good morning, guys.

Good morning.

With respect to FMT, I just want to make sure I'm clear on the direction you are giving people into Q1 in particular and for the Company as a whole. You had a negative -- you had minus 1 orders in FMT in Q4. In Q1, you've got a tougher comp, but January sounds like it was a pretty strong snap back, and I'm just trying to square that up with -- was there something that either pushed Q4 down that's not going to be repeated?

Or conversely, in Q1, was there something that popped it up that reversed direction somehow? Because you would think that with a tougher comp your orders in FMT in Q1 would be about the same or maybe a little bit worse.

You've got a few things in there, the most important is really looking at the blanket/project orders that we're coming against at the end of Q4. Q1, as we mentioned a moment ago, we've seen a pretty good start collectively across the board. And so as we have -- as we look at that, that's kind of the big thing, Charlie, that's in there, is really looking at the blankets in the project. Other than that, it is just been a solid rebound, and we are encouraged by it.

Charlie, the only thing I would chime in is we do expect the fourth quarter to be our slowest on a year-over-year organic growth perspective on the sales. We do expected it to be the slowest. We're -- as you've seen, we're guiding around 4% for the fourth-quarter organic and our full-year is guided a little bit higher than that. So, you will see just the natural flow, and there's some seasonality with pieces of it as well. So, I think we are confident in Q4 and the orders are lining up well to support that.

Okay. You said Q4, do you mean Q1?

I'm sorry, Q1. I apologize.

No worries. And just switching gears, so on the emerging markets, Brazil, India, China, you have got a new facility opened recently in India. Can you talk about Brazil though? You've been looking at maybe putting more manufacturing footprint in country. Just an update on what's going on that and where you see also what's going on within China opportunities?

Yes, so let's talk about Brazil first, Charlie. Brazil, I would say that the commentary is similar to what it was in the third quarter. We've got some pretty intense focus there on looking at our options. There are some acquisitions that we've looked at pretty heavily in Brazil that would help us accelerate our footprint there, and we are studying that and making sure we make a good investment. But we are certainly going to continue our press in South America.

Relative to China and India also, I think both of those we saw nice rebounds in the fourth quarter compared to the third quarter in terms of activity, and we think those will continue. The investment that we've made in India is very similar to the investment that we made in China in terms of the capability of the footprint we've put in place. And we've seen much faster adoption by our businesses in terms of utilizing that infrastructure to be much more local, and we are pretty encouraged by that.

China is a good story. It's -- we've been very successful. We've had incredible growth rates there for the last few years, and we expect much better than market growth going forward.

One more and I will hop in queue. Just on the supply chain, are you seeing any meaningful constraints or bottlenecks in the supply chain right now?

No. We are really not. At this time last year, if you all recall, there were a lot of concerns out there around inflation and around that question, Charlie, around constraints. We really don't see that at this point. I will say, however, that the investments that we're making in 2012, and we will make more investments in 2013, are to improve our supply chain.

We really think that an outstanding supply chain can be a significant competitive differentiator, and we are trying to build similar capability throughout the world that we've built over the last three or four years in Asia. And we think having a very strong regional supply chain capability is the right way to go in a world that is certainly converging.

Thanks.

Thank you.

Your next question is from the line of Scott Graham with Jefferies.

Yes, I have two follow-up questions, if I may. Last quarter, Andy, you indicated that sales in 85% of your businesses rose. I was wondering if you can give a similar metric for this quarter?

It's overall about 80%, so that 80% to 85% is pretty good. And the trends are really consistent, Scott. The places that we see pressure, the places that are facing municipal and to Heath's point, it is not a big piece in the organic, but the semiconductor, I think as everyone has been -- for the last six months was pretty tough. Although we are starting to see that I think maybe hit bottom, but you've got a couple comps here that are going forward. But it is really municipal and semi that you have the biggest issues.

I got you. The second thing is historically the Company has eliminated, reduce costs by $20 million to $25 million from your productivity initiatives, including purchasing mixed model lean and otherwise. Excluding restructuring costs, benefits that is, do you see staying with that number under your -- as CEO going forward, Andy?

I absolutely do. We've had a great history of driving productivity in the Company, and as everyone knows, that bar gets raised a little bit every year. And that's a big piece, Scott, of putting more investment into the supply chain. We want to drive that and over time, frankly, improve that and also to the benefits of improved lead time and improve quality. So yes, the answer is yes. That's what we should expect here in 2012. The answer is yes, that should be the expectation as we go forward.

Thanks very much.

Thank you.

(Operator Instructions). And at this time, I'm showing that there are no further questions in queue.

Well, everybody, thank you very much for taking the time this morning. Again, we are delighted with how we finished the year and we are pleased with how we are seeing a start to 2012. We are exceptionally proud of what the team has accomplished across IDEX, and we look forward to having a solid year in 2012, and we will talk to you again in the first quarter.

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