IDEX Corporation Q3 2009 Earnings Call Transcript

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IDEX Corporation (NYSE:IEX) Q3 2009 Earnings Call October 20, 2009 10:30 AM ET


Heath Mitts - VP of Corporate Finance

Larry Kingsley - Chairman and CEO

Dom Romeo - VP and CFO


Mike Schneider - Robert W. Baird

Christopher Glynn - Oppenheimer

Tom Brinkman - BMO Capital Markets

Matt Summerville - KeyBanc

Walt Liptak - Barrington Research


Good day and welcome everyone to the IDEX Third Quarter 2009 Earnings Results Conference Call. This call is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Heath Mitts, Vice President of Corporate Finance. Please go ahead, sir.

Heath Mitts

Good morning and thank you for joining us for our discussion of the IDEX third quarter 2009 financial results.

Yesterday, we issued a press release outlining our company's financial and operating performance for the three-month period ending September 30, 2009. The press release along with presentation slides to be used during today's webcast can be accessed on your company website, at

Joining me today from IDEX management are Larry Kingsley, Chairman and Chief Executive Officer; and Dom Romeo, Vice President and CFO.

The format for our call today is as follows. We will begin with an update on our overall performance for the quarter, and then provide detail on our four business segments. We will then wrap-up with an outlook for the fourth quarter of 2009 and a brief update on innovation. Following our prepared remarks, we will then open the call for 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 888-203-1112 and entering conference ID 2354138, or simply log on to our company homepage 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 now turn this call over to our Chairman and CEO, Larry Kingsley.

Larry Kingsley

The majority of our end markets have stabilized and we're seeing some of those markets now beginning to improve. Overall, our third quarter results were very strong, and accordingly, we raised our full year guidance to $1.44 to $1.46.

During the third quarter, we experienced the benefit of a pick up in global infrastructure spend in the energy and water businesses, and several of the product categories otherwise across the company are also seeing better order rates. The shorter cycle businesses are seeing early signs of a return to growth.

Conversely, we expect that some end markets will remain slow for the foreseeable future. The chemical end markets, the paint producers, the Dispensing business, which is the retail capital equipment for paint and a couple of others will be flat to down sequentially in the coming quarter.

Daily order rates clearly indicate that the worst is behind us, and while still erratic, they are trending upward. However, we do anticipate that many of our customers will shut down for two weeks at yearend, and therefore, we are assuming a shorter quarter from a comparison standpoint.

Our operating performance through the bottom has been very strong. We've improved our customer service levels, protected our margins and we continue to generate outstanding cash flow. Full year adjusted operating margins should be 15%. Full year free cash should exceed 150% of net income.

As I mentioned during last quarter's call, our new products and market initiatives are on track, and I'll outline a few of those examples of our organic initiatives as I wrap-up. In general, though, coming out of this we are in great shape to realize profitable growth as our end markets continue to improve, our balance sheet is strong and we have the organizational bench to acquire both domestically and overseas.

I'm going to turn over to slide four, the one that's titled Q3 2009 Financial Performance. For the quarter, orders were down 4% and that's down 9% organically. Sale were down 12% and down 17% organically. Third quarter adjusted operating margin of 15.2% was down 290 basis points with the revenue decline, but the impact of lower volume was partially offset by the ongoing cost containment and structural actions that we've taken year-to-date.

The adjusted EPS of $0.39 for the quarter was down 25% and free cash flow and IDEX quarterly record was $78 million. Year-to-date, our free cash flow to net income conversion is 175% and our working capital management has been just outstanding. Again, our operating teams have responded well to the challenges and we look forward to continued progress as our strong cash generation facilitates our future growth.

Overall, I'm pleased with our performance despite the challenging market conditions. We've been able to deliver solid profit performance as a testament to our ability to maintain a flexible cost structure as we continue to focus on expanding market share and reinvesting in the business.

Now I'm going to flip over and walk through the segments. For the Fluid and Metering segment, orders were down 1% in the quarter. Organic orders were down 12%. Sales decreased 8%, that's down 19 on an organic basis. Adjusting operating margin of 16.8% was down 390 basis points from Q3 of '08.

With regard to the FMT end markets, as I mentioned earlier, our energy business is benefiting from strong international demand in the areas of both power generation and in the oil and gas segment. Sequentially, we expect to see improvements in the fourth quarter, and we expect global project activity to drive growth as we move into 2010.

Our water business, also as a segment, is also seeing some very nice sequential improvement. As you know, our business model consists of projects that address regulation-driven activity associated with wastewater treatment. Many of them have been bottlenecked awaiting federal funding, the impact of which has been slow to reach the market.

However, we did see some improvement in municipal funding releases during the third quarter. Additionally, we expect growth to be further supported by continued global project activity. As a result, we anticipate that modest sequential growth will be the case for the fourth quarter and its good news on the horizon here.

At the other end of the FMT market spectrum, our sales to the chemical end markets again were down the most in the quarter, and we expect the chemical markets to be down slightly sequentially as we go into the fourth quarter. This business has stabilized and we're seeing the very beginning of increased daily order rates here as well.

In summary, for the Fluid and Metering segment, we are pretty bullish about the short and long term in the energy and water pieces of the segment. We are taking a little bit more of a wait-and-see posture for the rest of the segment.

Turning over to Health and Science, the Health and Science segment totals orders were down 1% for the quarter, and that was down 7% organically. Sales were down 8% in total and down 13% organically. Our core analytical instrumentation and life sciences business, which represents about 60% of the segment, was down just slightly, while the remaining more industrially exposed HST businesses experienced a significant year-over-year decline that's north of about 20.

Operating margin of 20.1% was only down 120 basis points compared to the prior year, and that's entirely due to the lower revenue. For the fourth quarter of 2009, we expect that the HST segment will be flat to growing sequentially. The core HST businesses should see modest growth, while the non-core, more industrially expected portion of HST is expected to be sequentially down just a bit.

For the long term, our core Health and Science business will benefit from increased NIH and other federal government sponsored spend for research and development. Our OEM customers in the segment are anticipating an acceleration of demand as we head into 2010. We continue to invest in new technology to enable next-generation instrumentation development.

The bottom-line is that we're well positioned in the markets we like, the ones that we're serving in the segment and we expect reasonable growth as we head into next year.

In Dispensing on slide seven, total orders in the quarter were down 1% organically. They are up 3%. Sales decreased 19 and organically sales were down 15%. Operating margin of 1.2% was down 180 basis points compared to the prior year due to the lower revenue.

Unfortunately, underlying market conditions in the segment in both North America and Europe remain soft. Last quarter, we spoke about the national market drivers that dictate system upgrades or replacement. Those drivers are the new paint chemistries and the color combination that are initiated by the paint suppliers, but they're also the requirements that are driven by the machine users to enable ease of use.

While we are supplying system upgrades retrofits and replacements as a function of those new paint products, order activity in the US retail channel continues to be challenged and the European market is still pretty sluggish as well. As we move into Q4, we expect further sequential declines, primarily due to the lack of significant retail projects over the next couple months.

While we do not foresee any big short-term programs, the overall market drivers will continue to support upgrade requirements and replacement activity, and we're confident that the cost actions that we've taken to size the Dispensing business, positions us very well to ensure profitability and strong cash generation. The business, even in this environment, to put in perspective, is positioned to achieve mid teens operating profit on a full year basis.

I'm moving now to Fire and Safety, slide eight. For the quarter, total orders were down 14%. That's down 11% organically. Sales were down 19%, organically down 16. Operating margin at 24.4% was down just 90 basis points compared to last year, primarily due to lower volume.

Global product demand for rescue tools drove performance in the third quarter. For the fourth quarter, we expect rescue tools to grow sequentially due to strong global activity, most notably in China where the disaster management continues to be an emerging focus and the area of spend within their central government. The new products that are working well in our adjacent markets have also enabled us to gain share in total and to further expand our global footprint.

Fire suppression experienced a slowdown in order activity as anticipated due to the municipal budgetary constraints in North America. For the fourth quarter, we expect that the North American fire market will be further challenged as a result of continued pressure in the muni budget.

As anticipated, we saw improvement in the third quarter for BAND-IT in the segment due to new project wins and share gain. The band clamping daily order rates have also improved. For the fourth quarter, we expect band clamping markets to grow on a sequential basis. In total, for the segment, for Fire and Safety, we expect very modest growth sequentially in the fourth quarter.

Moving on to slide nine, our guidance, we expect again that full year EPS will be in the $1.44 to $1.46 range. Full year organic growth is projected to be down approximately 15%. FX at current rates will have a negative impact to sales of approximately 2%, and then acquisitions add back 5% to 6%.

Adjusted operating margins should finish the year at approximately 15%, as I said. Our earnings projections exclude the estimate for additional severance of about $0.02 in the fourth quarter. Our full year CapEx will be 24 million to 25 million, and we will continue to convert cash very well in excess of 150% of net income.

For the fourth quarter, our EPS range is $0.35 to $0.37. Within that, organic growth will be down about 12. We expect FMT, HST and Fire and Safety to be flat to growing modestly sequentially and Dispensing to be down versus the third quarter. As far as other modeling items, our Q4 tax rate should be anticipated at 34%.

Again, to be clear, we've seen order rates in most of our non-project type businesses improve over the past few months. We're not anticipating a slowdown, but we are also taking a view that at yearend, a number of customers may take two weeks as shut downs, hence, the view of the fourth quarter.

Now, before we go into Q&A, I'll take a few minutes just to characterize the current state of the company. Across the company, our new product initiatives are on track and our ability to move quickly through a number of restructuring initiatives set the stage for 2010.

Our focus, as always, is innovation to enable organic growth and then capital deployment to acquire new growth opportunities. We think we're in great shape relative to most of our competition. Due to the course of the recession, we continued to invest in R&D and in new market development. On a year-over-year basis, our R&D spend in '09 will actually be up 10%.

In Fluid and Metering, we continue to grow our global presence in the energy markets through a variety of new initiatives. Our Systems Group in Europe is winning skid-based applications in developing markets and in the reconstruction regions fair. We've also further developed our military end segment by way of some turnkey systems capability that can be shipped in to serve energy distribution requirements, and our relatively new Middle East sales team has succeeded in winning several roles, both energy and water projects in the region.

The new leak detection products and services enable us to differentiate our capabilities to go after capital programs that are aimed at water conservation, so good news that I think portrays a good 2010 for energy and water.

In similar form within Fluid and Metering, capital spend in the food and beverage industry is projected to grow nicely over the next three years. We've introduced a suite of new pump technologies that enables efficient clean and place service advantages to the end users of our products, and we position the products again to incumbent technology that requires up to three times the time to service those systems.

In our Health and Science segment, the analytical instrumentation, biotechnology and in-vitro diagnostic markets continue to require faster throughput, higher precision and improved accuracy. The pharmaceutical industry is investing increasingly in biologics versus the small molecule research and production.

One of the key elements to enabling efficient sample processing in the large molecular or protein-based research applications is the ability to operate at very high pressures. High pressure always enables better separation and faster sample throughput, but it's even more critical in these emerging pharma and biotech applications.

The new IDEX product development both is aimed at new component development, but also integrated solutions that enable up to 18,000 PSI performance for these systems. We've talked before about our Integrated Solutions Group. Here, again, the ability to work with leading instrumentation providers by helping them solve for their issues with the fluid path is improving their product design and it's also decreasing their time to offer new product to the market.

Also in the Health and Science segment, our Semrock business, it's had success with the new BrightLine Multiband fluorescence filter sets. These are award winning filters that enable life science customers to simultaneously excite and capture high contrast optic overlays of up to four different fluorescent images, and thereby, they save significant experimental time and expense.

Semrock is expanding the number of fluorescent dye combination that can be imaged in a white light microscope system and recently launched a new set of multiband filters specifically designed to unlock the resolution capabilities of laser-based fluorescence.

The point here is not to run you through a laundry list of product innovation, but just to give you a sense really of the following. We haven't stopped innovating. We continue to believe that niche market development is one of our core capabilities. It's never been more important than now to position us well as the economy returns. Our view is that having a very broad end market exposure but tied to a clear core competence allows us excellent maneuvering capabilities as we move forward.

The company is focused on strengthening our exposure to the BRIC countries, but also on the other developing countries of the world. As you know, we have a global footprint, but it's also a very flexible manufacturing model. We don't have to spend months tooling up or configuring operations or supply chain to get at new opportunities. We, again, continue to invest in new product.

New sales, be they from adjacent segments or new geographies, basically should flow through the existing cost structure at a very profitable incremental rate. If you think about it, the point is the economy is recovering and we think some end markets will outperform others next year, some countries will as well for that matter. Our strategy is to migrate capital in all forms to take advantage of the best growth opportunities, which we will.

I am going to get off my soapbox here. Operator, we're going to open the line for questions around the quarter and also our outlook for Q4.

Question-and-Answer Session


(Operator Instructions). We'll take our first question from Mike Schneider with Robert W. Baird.

Mike Schneider - Robert W. Baird

I think the most encouraging aspect to me is the Fluid and Metering orders this quarter being down just 1% on a year-over-year, and when 3Q last year was a pretty good quarter. I realize energy which presumably is liquid controls and then the water businesses you mentioned are stronger, but, do you sense that this is more distributor-related, is it project-related, any color you can give us.

Then I guess presumably orders in Q4 are going to be positive, just again how sustainable this is and your gut feel for the underlying strength of the business, or indeed is it just unique projects coming through?

Larry Kingsley

Mike, it's a combination of the two. We did see a broad-based order bottoming certainly in the quarter and daily rates improved pretty nicely from the distribution base in the US and in Europe during the quarter. Some of the improvements though later in the quarter and orders did come from some of the larger projects that I spoke to, referred to anyway that came out of regions of the world that we haven't historically served.

Probably I want to think about those as not one-off because there's more to follow. Frankly, it comes down to the ability to serve some of these larger programs with the energy suite of products, the liquid control suite of products, which includes Toptech as you probably remember. Couple years ago we wouldn't have been under position either bid on some of these and frankly not only we successfully bid, but we're winning.

If you want to model it economically, I think you'd say that some of what you're seeing reflected in terms of organic orders in the quarter is, there's a decent, solid foundation, the process across the segment to the distribution base and the smaller OEM base, but some of the spikiness, the improvement we saw late in the quarter did come out as a specific projects and we think we'll see some more of those to follow as we move into new year.

Mike Schneider - Robert W. Baird

In the water projects that you've seen, are these domestic or European? Secondly, are these projects that you were in touch with already late last year that were shelved or indeed are these new [ROKs] coming out?

Larry Kingsley

The water projects have been on the radar screen for some time. We've been tracking the ones that we're seeing as wins now for better than nine months. The wins came out of a combination of the US and the Middle East, actually. There wasn't any significant project, water project wins in Western Europe in the quarter, but we are seeing again in this case, the acquisition of ADS with leak monitoring and protection being the biggest differentiator, opportunities to bid on programs that historically our water business wouldn't have participated in. We'll see not just some service revenue out of these but good product pull-through from the FMT product content as we get more of these.

If you think about what's happening domestically in the water projects, for the most part what we're seeing is federal dollars replacing local and state dollars. In some cases, there's a little bit of incremental spend versus what the local or state allocation has been, but it's not federal incremental to the project dollars that had been planned either on the local or state basis.

Mike Schneider - Robert W. Baird

Just on flow through; if you look sequentially your flow through was only about a negative 5% and the revenue decline of about $13 million, obviously very impressive. Can you just describe what's different in the cost structure looking from Q1 to Q2 when you did over 40%, even over 50% incrementals on the way up sequentially, and then now just down 5% on lower seasonal revenue in Q3. I'm curious as some of the moving parts that would have benefited Q3 much more than Q2.

Larry Kingsley

It's the continuation of the cost actions coming out through the course of the year. On a year-to-date basis, you'd see in both quarters, obviously sequentially more impressive even as you just said from Q2 to Q3. The body of the cost coming out is structural actions that we talked about. This is not one-time furlough kinds of activities that add back in 2010 or for that matter whenever we see the revenue line, pick up again. These are integrated plans where we get both SG&A saving as well as direct cost improvement.

I think we're also seeing a little bits of benefit from material cost improvement through the course of the year, but the bottom-line is that cost actions taken ought to play it pretty nicely as we go into the next year.

Mike Schneider - Robert W. Baird

Conceptually now, if we look out several years into this recovery, your revenue peak last year just shy at $1.5 billion. If you were to re-achieve that rate in whatever year we forecast, what do you believe the permanent cost reductions have been to get there? If you were operating again at $1.5 billion, how much do you think you've taken out permanently from the cost structure?

Larry Kingsley

We still refer back to the numbers that we've talked about on a year-to-date basis. Earlier in the year, we talked about a target of 40 to 45. We are getting every bit of that, certainly toward the high end of that. Clearly, bottom-build identified cost improvement in structural on a current basis of 45, and we are still working obviously to optimize where we stand going forward.


We'll take our next question from Christopher Glynn with Oppenheimer.

Christopher Glynn - Oppenheimer

It feels that FMT might have the best kind of recovery prospects next year. Just first comment, maybe if that's fair, but the other part of the question is, as markets recover how do we think about the outgrowth dynamic there relative to whatever the markets do?

Larry Kingsley

I would just say maybe in reverse order to the two parts of your question. I think the operational execution is in very good shape. I'm very pleased with how we're doing. You could see it reflected both in the P&L and working capital progress in the quarter, for that matter, year-to-date. I think the way to think about us all up is growth dollars flow-through very profitably at this point. Not to say that we're not going to continue to invest in the business, but again where we've achieved the savings this year it's been structural. It hasn't been temporary '09 actions that come back in the form of 2010 in the case of almost everything we've done.

The segment-based recovery in 2010 I would tell you, I think, is on a rate basis probably led first by HST, then FMT simply from the standpoint that, as I said in our prepared remarks, the couple of the FMT end markets will lag, chemical being the largest. We'll start to see some signs of good profitability from the chemical producers depending on product category, but I think their need for capacity-based expansion, which drives the capital spend, which is what we are all about, lags probably six to nine months. We don't expect that FMT across the board has an early 2010 strong growth start. I think that energy and water within FMT, a little more than half of the segment, will have an early strong start.

Christopher Glynn - Oppenheimer

Just looking at the very strong margin performance sequentially at HST and FMT, are we thinking completely right sized here and the kind of the volume differential over time is really the exclusive driver at this point?

Larry Kingsley

Essentially the short answer is yes. We're going it continue to always work some of the issues that help us with optimizing our footprint globally. By and large part for modeling sake, I think you can view current cost and the numbers that we just talked about prior question as a way to think about how we go forward sequentially.

Christopher Glynn - Oppenheimer

Lastly just given a lot of the cost sizing this year across the segments, can you compare the degree of operating leverage that you'd expect?

Larry Kingsley

Pretty ratable. When you think about the actions that have been taken and you can see that in the sequential numbers too, both up and down. I think that the leverage on the upside will be basically right down to the business unit level in many cases. Within the segment depending on product margin mix more than leverage from a sequential sales growth standpoint, we ought to see pretty nice margin pick up if and when sales do grow in the respective businesses.


We'll take our next question from Charles Brady with BMO Capital Markets.

Tom Brinkman - BMO Capital Markets

This is actually Tom Brinkman standing in for Charlie Brady. Just wanted to ask you some things about, I guess, the Dispensing equipment. Is this the level of sales and profitability we should expect going forward about this rate or are there some unusual items that impacted the quarter?

Larry Kingsley

If you think about dispensing somewhere between the second quarter and the third quarter is the way to think about the business going forward. It's always been a lumpy business and there is a seasonality trend, and then, typically, you are not, this is one in the business. I wouldn't assume that the Q3 sales rate is certainly not more than a short-term view of the business. The way to think about the business all up is that it's always by way of project activity seen sequentially $10 million, for that matter, this year even $20 million quarter-to-quarter top-line moves.

What you can see obviously when you look at the business is while the third quarter doesn't reflect steady state and full form from a cost out position that even at this pretty low sales level the business is better than breakeven. You can also see where sales sequentially picking up, flows through extremely profitably, for that matter, it's a good cash generator. Probably the other way to think about it is, if you look at year-to-date sales for this segment, it was about 104 million or 105 million. When the operating margin is mid teens, if you think about that, it's probably a pretty good profile for where the current P&L is within the business. Even on a sales volume that were annualized, if we were lower than that, I still think low to mid teens operating margin and great cash generation is the way to think about it.

Tom Brinkman - BMO Capital Markets

I apologize if you touched on this, but I didn't catch it. I was wondering where the restructuring charges were focused this quarter and what additional actions you may have planned?

Larry Kingsley

They are within each of the segments and the go-forward is kind of cleanup is the best way to characterize it. There is work to be done to finalize some of the things that were initiated through the course of the last 12 months. By and large, the bigger area projects are kind of already under belt. There is little bits of work to do in all the segments going forward.

Tom Brinkman - BMO Capital Markets

You mentioned, in term of municipal budgets, that fire suppression has been down and is expected to continue to be down, but water has seen some activity from the federal stimulus dollars. We takeaway from that the federal stimulus dollars are not having a significant impact on fire suppression, only on the water side?

Larry Kingsley

I would say, first, for sure, federal stimulus dollars are impacting water positively. As I said, not to confuse the subject, that what we've seen thus far is the projects that we've had on our target list for the last 12 months that were either locally funded, state funded, sometimes there is kind of regional project, we've seen federal dollars come in and replace those in many cases. In some cases, there's been a bit of positive. There's been an incremental spend in terms of project size as a function of the federal dollars coming in. The same is true for that matter in the UK and selectively across the Continental European country markets. We think water is going to continue to be a targeted area, priority area for spending for that matter. It's been called out in some of the US federal original stimulus package.

On the fire truck side, there is not a bucket identified for equipment spend per se. There is ongoing federal money that's targeted toward equipment and we do anticipate that there will be some spend, say, that we have equipment purchases and for that matter constructing fire houses, which will necessitate equipment purchases and things of this sort. In the short term, particularly as we look through the rest of this year and early into 2010, we don't think that we'll see a large federal-based equipment spend opportunity in the US in particular. Hence, the comments about nothing federal in subsidy form there to what's going on at the local level.

Tom Brinkman - BMO Capital Markets

Last question, just geographically, where are your expectations for recovery in Europe in terms of the timing versus North America, or how the end markets outlook is?

Larry Kingsley

On an IDEX view of the world, it's tracked pretty closely. We've seen Europe actually bottom kind of in sync with the US and generally outside of the UK things stay pretty decent. It's not an issue of how far it's lagging other than the UK and that's a comment that I would make essentially across all the segments.


(Operator Instructions). We'll now move to our next questioner, Matt Summerville with KeyBanc.

Matt Summerville - KeyBanc

Couple of questions on HST, first obviously you saw very nice sequential margin improvement in that business on slightly higher revenue. Can you talk a little more about the margin dynamic and sustainability there in the quarter? Then Larry, when do you expect the more favorable NIH budget to sort of flow through and begin the core business from IDEX in 2010.

Larry Kingsley

The team did a great job, Q2 to Q3 as you can see. Where it came from? Essentially it was two areas; one continued cost out, so same team as previously mentioned with respect to the entire company. They did a nice job, particularly in the non-core side of the business, getting costs out such that its margins weren't a real drag on the segment, and we'll see that sustained.

Frankly, any improvement to the sales rate on the non-core side of HST will continue to true that up in the 20% operating margin range, so very, very good cost performance out of the team. Also mix was good, frankly, in the quarter and so now you see those sequential sales dollars generating huge margin move. Some of that is mixed and we always see within the segment sequentially that margin can move around, 150 to a couple hundred basis points, even in typical economic times.

I do think though that the team with the actions taken, again, structural has the opportunity to generate, obviously in this case better than IDEX, but IDEX like operating margins on a go-forward basis. As far as the NIH spending and when we see that start to flow, I would say our customers should start to see that towards the end of this year. We by the early part of 2010 ought to be benefiting from volume rates, principally around some of the targeted areas for academic and for other forms of institutional R&D spend that the government again is focused on, and for that matter other federal governments around the world. We think that we'll see early 2010 buoyancy out of the federal dollars aimed at research and development.

Matt Summerville - KeyBanc

One final question; you had indicated in your prepared remarks that your thought is some of your customers might take two weeks shutdowns at the ends of the year. I guess I am trying to get a feel for what would be sort of the normal scenario, and if there is specific end markets that you are really referring to when you address that concern?

Larry Kingsley

What we've heard thus far, Matt, from a number of OEMs and it's earlier in the quarter than would typically be the case, particularly for a broader set of OEMs that they may take the last two weeks of the year to shutdown. I think, we've got to see how that plays out right now, and you have to do some kind of a calendar, what that looks like on a sequential basis for that matter, if it's pertinent on a year-to-year basis to see how many less days there are in the quarter, but it could play out that there are four to five less days in the fourth quarter than typical or then you would think about on a typical comparative basis.

I think that it's an appropriately prudent way to think about the tail end of the year where people are already thinking about shutdown to realize that the number of days available to ship is likely impacted. Beyond the OEMs and some end markets, we also think that some end users may take that time where they don't typically have the opportunities for shutdown to gain efficiencies because they don't have the number of days and the strength to do so. We'll see some of that very tail end of the year.


Our next question comes from Walt Liptak with Barrington Research.

Walt Liptak - Barrington Research

My question is on Fluid and Metering. I wondered about your comments about energy prices and strong global markets. I guess if you can compare energy to water, you talk to your customers looking like energy is stronger and maybe to dive into your fuel retailing or wholesaling part of the business, are you hearing a pickup or are you seeing a pickup in that business yet?

Larry Kingsley

We don't serve the retail end of fuel, Walt. Replay is the another point of refinery down to …

Walt Liptak - Barrington Research

That's what I meant, from the refinery out to the retailer.

Larry Kingsley

What we're seeing is project dollars committed for a number of reasons, not just because the price is supporting of it, but its global projects more than US projects but also I'd say a decent foundation of US projects that are on the docket now for the rest of the year and headed into 2010. I think a lot of its IDEX execution, frankly, versus what are commodity-based swings or crack price based opportunities and what's going on in the downstream world.

We're seeing pretty solid execution again out of the fact that we've got systems capability now that we never had historically. I would tell you that energy and water both look good. As to which one looks better, I think it kind of depends on how the federal stimulus dollars continue to play through in the water side. As we currently see, the whole developed world plus the newer opportunities like the ones that I spoke to in the Middle East play out, I think that we're positioned pretty nicely, frankly.


With no further questions in queue, I'd like to turn it over to Mr. Larry Kingsley for any additional comments and closing remarks.

Larry Kingsley

Thank you everyone for joining. I think we covered it pretty well in both the prepared remarks and the Q&A. Again, as we head into the fourth quarter, we see a pretty solid foundation of the daily order rates. It gives us good cause for optimism. At the same time, we see that the quarter might be a short one.

With that in mind, we think that the economy is generally moving us in the right direction. We think that our execution will ensure that. The company focuses back to how do we grow, how do we deploy capital effectively, and as we head into 2010, we're in good shape. Look forward to talking to some of you through the course of the quarter and all of you again three months from now. Thanks.


That does conclude today's conference. Thank you for your participation.

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