<PAGE> 1
THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AND IS SUBJECT TO
COMPLETION OR AMENDMENT AND PROSPECTIVE PURCHASERS ARE REFERRED TO
THE RELATED FINAL PROSPECTUS SUPPLEMENT FOR DEFINITIVE INFORMATION
ON ANY MATTER CONTAINED HEREIN. NEITHER THIS PROSPECTUS SUPPLEMENT
NOR THE ACCOMPANYING PROSPECTUS SHALL CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED FEBRUARY 9, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 23, 1997)
$150,000,000
IDEX CORPORATION LOGO
% SENIOR NOTES DUE , 2008
------------------------
The % Senior Notes due , 2008 (the "Notes") are being
offered (the "Offering") by IDEX Corporation ("IDEX" or the "Company"). The
Company will pay interest on the Notes semi-annually on and
of each year, commencing , 1998. The Notes will be
unsecured obligations of the Company. Although the Notes will be senior to or
rank pari passu with all existing and future indebtedness of the Company
(including indebtedness incurred under the U.S. Credit Facility and the
Short-Term Facility (each as defined herein)), the Notes will be effectively
subordinated to all existing and future liabilities of IDEX's subsidiaries. At
December 31, 1997, on a pro forma basis, and after giving effect to the
amendment to the U.S. Credit Facility terminating subsidiary guarantees and
pledges of subsidiary stock thereunder, the Company's subsidiaries had
indebtedness aggregating approximately $29 million, which together with all
other liabilities of these subsidiaries would rank effectively senior in right
of payment to the Notes.
The Notes will be represented by Global Notes registered in the name of the
nominee of The Depository Trust Company, which will act as the Depositary (the
"Depositary"). Interests in the Global Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary and
its participants. Except as described herein, Notes in definitive form will not
be issued.
SEE "RISK FACTORS" BEGINNING ON PAGE S-10 FOR A DISCUSSION OF MATERIAL
RISKS RELATING TO AN INVESTMENT IN THE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
=============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- -------------------------------------------------------------------------------------------------------------
Per Note......................... % % %
- -------------------------------------------------------------------------------------------------------------
Total(3)......................... $ $ $
=============================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from , 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deduction of Offering expenses payable by the Company estimated at
$ .
------------------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject any orders in whole or in part. It is expected that delivery of the Notes
will be made through the book-entry facilities of the Depositary on or about
February , 1998.
------------------------
MERRILL LYNCH & CO. GOLDMAN, SACHS & CO.
------------------------
The date of this Prospectus Supplement is February , 1998.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
------------------------
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus Supplement contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such statements relate to, among other things,
capital expenditures, cost reduction, and cash flow and operating improvements,
and are indicated by words or phrases such as "anticipates," "estimates,"
"expects," "plans," "projects," "should," "will," "management believes," "the
Company believes," "the Company intends" and similar words or phrases. Such
statements are subject to inherent uncertainties and risks which could cause
actual results to vary materially from suggested results, including but not
limited to the following: levels of industrial activity and economic conditions
in the United States and other countries around the world, pricing pressures and
other competitive factors, and levels of capital spending in certain industries,
all of which could have a material impact on order rates and the Company's
results, particularly in light of the low levels of order backlogs typically
maintained by the Company; IDEX's ability to integrate and operate acquired
businesses on a profitable basis; the relationship of the U.S. dollar to other
currencies and its impact on pricing and cost competitiveness; interest rates;
utilization of IDEX's capacity and the effect of capacity utilization on costs;
labor market conditions and raw material costs; developments with respect to
contingencies, such as environmental matters and litigation; the "Risk Factors"
beginning on page S-10 of this Prospectus Supplement; and other risks detailed
from time to time in the Company's filings with the Securities and Exchange
Commission. The Company disclaims any obligation to update any forward-looking
statement in this Prospectus Supplement or any incorporated document.
S-2
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including the Consolidated Financial Statements of the Company, the
notes thereto, and the other financial data contained elsewhere or incorporated
by reference in this Prospectus Supplement and the accompanying Prospectus.
Prospective investors are urged to read this Prospectus Supplement, the
accompanying Prospectus and the other information incorporated by reference
herein in their entirety. All references to "IDEX" or the "Company" include IDEX
Corporation and its consolidated subsidiaries, including Corken, Inc.
("Corken"), Micropump, Inc. ("Micropump"), Pulsafeeder, Inc. ("Pulsafeeder"),
Viking Pump, Inc. ("Viking Pump") and Warren Rupp, Inc. ("Warren Rupp")
(collectively, the "Pump Products Group"); and Band-It-IDEX, Inc. ("Band-It"),
Fluid Management, Inc. ("Fluid Management"), Hale Products, Inc. ("Hale") and
Lubriquip, Inc. ("Lubriquip") (collectively, the "Engineered Equipment Group");
and exclude Strippit, Inc. ("Strippit") and Vibratech, Inc. ("Vibratech") which
the Company recently announced its intention to divest and which have been
treated as discontinued operations (see "Discontinued Operations" at page S-32
herein), unless the context indicates otherwise. Except where otherwise
indicated, all references to "pro forma" information are to IDEX after giving
effect to the acquisitions of Knight Equipment International, Inc. ("Knight")
and Gast Manufacturing Corporation ("Gast") (collectively, the "Acquisitions"),
the Offering and the application of the estimated net proceeds therefrom as if
such transactions had occurred on January 1, 1997 (with respect to income
statement data) and on December 31, 1997 (with respect to balance sheet data).
THE COMPANY
IDEX designs, manufactures and markets a broad range of pump products and
engineered equipment serving a diverse customer base in the United States and
internationally. For each of its ten principal business units, the Company
believes that it holds the number-one or number-two market share position in
that unit's niche market. IDEX believes that its consistent financial
performance has been attributable to the manufacture of quality proprietary
products designed and engineered by the Company and sold to a wide range of
customers, coupled with its ability to identify and successfully integrate
strategic acquisitions. For 1997, IDEX had net sales of $552 million and EBIT
(as defined herein) of $103 million. On a pro forma basis, 1997 net sales and
EBIT were $680 million and $118 million, respectively.
IDEX consists of two business segments, the Pump Products Group and the
Engineered Equipment Group. The Pump Products Group designs, manufactures and
sells a wide variety of industrial pumps and related controls, and
low-horsepower compressors for the movement of liquids, air and gases. The
devices and equipment produced by this Group are used in a diverse set of
industries, including chemical processing, non-electrical machinery, water and
wastewater treatment, medical equipment, petroleum distribution, oil and
refining, and food processing. In 1997, the Pump Products Group accounted for
48% of the Company's net sales (58% on a pro forma basis). Approximately 32% of
1997 pro forma net sales in this Group were to customers outside the United
States.
The Engineered Equipment Group designs, manufactures and sells proprietary
equipment that may combine pumps or other devices into products for industrial,
commercial and safety applications. The products and devices manufactured by
this Group are used in a variety of industries and applications, including
paints and coatings, fire and rescue, transportation equipment, non-electrical
machinery, traffic sign and signal, and oil and refining. In 1997, the
Engineered Equipment Group accounted for 52% of the Company's net sales (42% on
a pro forma basis). Approximately 52% of 1997 pro forma net sales in this Group
were to customers outside the United States.
The principal executive offices of the Company are located at 630 Dundee
Road, Northbrook, Illinois 60062. The telephone number of the Company is (847)
498-7070.
S-3
<PAGE> 4
THE IDEX STANDARD
The name IDEX is an acronym for Innovation, Diversity and Excellence, which
together represent the IDEX standard. IDEX applies this standard by following
ethical practices; striving for continuous operational improvement; consistently
seeking to provide superior quality state-of-the-art products; selling its wide
range of products to a broad spectrum of customers and industries throughout the
world; and continually working with end-users and customers to develop new and
redesigned products.
Innovation. IDEX is committed to designing and producing new products and
improved products for its customers. Management estimates that one out of every
ten employees at IDEX is directly engaged in product or process technology
development, and all employees are encouraged to contribute to new product
development. The Company's multidisciplinary teams often work with customers,
end-users, distributors and focus groups in seeking to assure that IDEX products
are state-of-the-art, incorporating the latest proven technology while providing
the best overall value to the customer. Since the year following its formation
in 1988, approximately one-quarter of IDEX's net sales each year have come from
products that had been redesigned or newly introduced in the preceding four
years.
Diversity. IDEX products serve a wide variety of industries, including
chemical processing, paints and coatings, fire and rescue, non-electrical
machinery, water and wastewater treatment, medical equipment, transportation
equipment, oil and refining, petroleum distribution, and food processing. IDEX
sells its products in more than 100 countries with international sales
representing 40% of 1997 pro forma net sales. Management believes that no single
industry accounted for more than approximately 15% of 1997 pro forma net sales
and no single customer accounted for more than approximately 2% of 1997 pro
forma net sales.
Excellence. IDEX has a dedicated and talented team of employees who are
required to follow a strict code of ethics. IDEX strives to offer the best
overall value to its customers in service, durability, performance, selection,
ease of use, features, productivity, safety, maintenance and long-term costs.
With the exception of the recent Knight acquisition, all of IDEX's manufacturing
locations are certified under the internationally recognized ISO 9000 standards
that have become the worldwide benchmark for quality.
COMPETITIVE STRENGTHS
Market Leadership. Management believes that each of IDEX's ten business
units holds either the number-one or number-two market position in that unit's
niche market. On a weighted average basis, IDEX's 1997 pro forma net sales
represented an approximate 40% share of niche markets served. IDEX believes it
has been able to achieve these market positions by placing the highest priority
on its customers. IDEX strives to respond quickly and efficiently to the needs
of its customers and to supply them with the highest quality products of the
latest design. To achieve this goal, IDEX emphasizes market, product and process
development. Due to its leadership position, IDEX generally has been able to
command a premium price for many of its products.
Profitability and Cash Flow. During the five-year period ended December
31, 1997, IDEX's net sales have grown at a 21% compound annual rate and its
diluted earnings per share from continuing operations have grown at a 22%
compound annual rate. Moreover, IDEX's operating margins have been at least 7
percentage points higher than those of the average industrial company in the
Value Line Industrial Composite Index for each of the years from 1988 through
1997.
Over the last 10 years, including 1997 on a pro forma basis, IDEX borrowed
a total of $580 million under its credit agreements and notes to sellers to
complete 13 strategic acquisitions while its long-term indebtedness increased by
$218 million. This increase would have been $159 million if net after tax
proceeds equal to twice the net book value of Strippit and Vibratech were
realized from their anticipated sale. In addition, during the same period, the
Company's EBIT increased from $27 million to $118 million.
S-4
<PAGE> 5
Acquisition Strategy. Since 1989, IDEX has completed 13 strategic
acquisitions, each synergistic and adhering to IDEX's rigorous criteria. Each of
the 10 businesses acquired through 1996 has contributed positively to the
Company's economic performance in the years subsequent to its purchase and
management expects the three acquisitions completed within the last year to
continue this trend. Management believes that the Company's acquisition strategy
has been successful for two primary reasons:
- Identifying Attractive Acquisitions. IDEX's acquisition strategy
focuses on companies that manufacture proprietary engineered products with
leading positions in niche markets. The Company's objective is to seek out
good companies and make them better. In addition, while the Company has
discussions with numerous acquisition candidates each year, it only
consummates those acquisitions that meet its rigid criteria and that
management concludes can be negotiated with appropriate terms and
conditions at a fair price. The Company's acquisition criteria are designed
to promote long-term profitability and cash flow gains rather than simply
revenue growth.
- Successful Integration into the Company Structure. IDEX believes
that the ability to successfully integrate acquired businesses into its
overall structure has resulted in improved financial performance. Following
the acquisition of a company, IDEX implements its financial control
systems. IDEX also analyzes the standard operating procedures of the
acquired company so that the acquired company can benefit from the
successful practices and strategies of IDEX's other business units and the
business units can incorporate the successful practices and strategies of
the acquired company. This "cross pollination" and cooperative improvement
are possible due to the general commonality in the engineering principles,
manufacturing methods, distribution channels and business systems among
IDEX's various business units. This process allows the Company to implement
proven methods and avoid known problems as it integrates a new business
unit.
International Presence. The potential in international markets has been a
focus of the Company since its inception in 1988 and has been a key factor in
its financial success. Through its market development efforts, the Company sells
its products to customers in over 100 countries worldwide. Approximately 40% of
the Company's 1997 pro forma net sales were to customers outside the United
States (compared with 24% in 1987) and about two-thirds of these pro forma net
sales were attributable to products manufactured in IDEX's plants and facilities
located outside the United States. The Company's international sales growth in
each of the last four years has outpaced domestic sales growth and the Company
expects this trend to continue as a result of the Company's emphasis on
international development.
Established Distribution Network. Most of the Company's products are sold
through well-established, technologically competent industrial distribution
networks. IDEX's distributors receive extensive training and support, and play
an important role in assisting end-users worldwide with product selection and
installation. Additionally, by sharing its application ideas with agents and
distributors around the world, the Company expands the base of industries and
customers it serves.
Dedicated Employees. IDEX believes its success depends on the talent and
performance of its people. The Company's dedicated employees strive for
operational excellence, seek to provide exceptional quality and state-of-the-art
products, and are required to follow a strict code of ethics. The Company
encourages its employees to work openly and continuously with end-users and
customers to improve existing products and develop new ones, thereby instilling
in its employees a commitment to, and pride in, IDEX and the acronym it
exemplifies.
S-5
<PAGE> 6
RECENT DEVELOPMENTS
Acquisition of Gast Manufacturing Corporation
In January 1998, the Company acquired Gast for a cash purchase price of
approximately $120 million, funded with borrowings under the U.S. Credit
Facility and the Short-Term Facility. Gast is one of the world's leading
manufacturers of an extensive and versatile line of air-moving products,
including vacuum pumps, air motors, vacuum generators, regenerative blowers and
fractional horsepower compressors. Gast, headquartered in Benton Harbor,
Michigan, with an assembly facility in England, had 1997 net sales of
approximately $105 million. Approximately 17% of Gast's 1997 net sales were to
customers outside the United States. Management believes that Gast has a leading
position with an estimated one-third U.S. market share in air motors, low and
medium range vacuum pumps, vacuum generators, regenerative blowers and
fractional horsepower compressors.
Acquisition of Knight Equipment International, Inc.
In December 1997, the Company acquired Knight for a cash purchase price of
approximately $38 million, funded principally with borrowings under the U.S.
Credit Facility. Knight, now operating as part of Pulsafeeder, is a leading
manufacturer of pumps and dispensing equipment for the commercial dishwashing,
industrial laundry and chemical metering markets with 1997 net sales of
approximately $25 million. In addition, Knight manufactures a variety of pumps
and electronic controls for industrial applications. Approximately 50% of
Knight's 1997 net sales were to customers outside the United States. Management
believes that Knight has the leading position worldwide in pumps and dispensing
equipment used in commercial dishwashing, warewashing and liquid-laundry systems
with an estimated 35% U.S. market share.
Discontinued Operations: Strippit and Vibratech
In December 1997, the Company announced its intention to divest its
Strippit and Vibratech businesses because management concluded that they no
longer fit the profile of the Company's other business units or its acquisition
strategy. These two business units generated 1997 net sales and EBIT of
approximately $84 million and $9 million, respectively. Strippit, which produces
computer-controlled turret punch presses, laser cutting machinery and related
tooling used in metal fabrication, and Vibratech, which makes engineered motion-
damping products used in diesel and motor sport engines, rail cars, off-road
vehicles and other applications, both serve higher-ticket capital goods markets
that tend to be more cyclical than the markets served by IDEX's other
businesses. IDEX anticipates that these divestitures will allow resources
formerly allocated to Strippit and Vibratech to be used by IDEX for the
development of positions in areas more consistent with its present strategy.
Strippit and Vibratech have been treated as discontinued operations in the
Company's 1997 Consolidated Financial Statements and prior years' consolidated
financial statements and other financial data throughout this document have been
restated to reflect this treatment. (See Note 3 to the Company's 1997
Consolidated Financial Statements on page F-8 herein.)
S-6
<PAGE> 7
THE OFFERING
Title...................$150,000,000 % Senior Notes due ,
2008.
Interest................ % per annum calculated on the basis of a 360-day year
of twelve 30-day months, payable on each and
(or, if such day is not a business day, the
next succeeding business day), commencing on ,
1998.
Principal...............Payable on , 2008, unless the Notes are
redeemed earlier pursuant to the provisions thereof.
Redemption..............The Notes may be redeemed at any time at the option of
the Company, in whole or from time to time in part, at a
redemption price equal to the sum of (i) the principal
amount of the Notes being redeemed and accrued interest
thereon to the redemption date and (ii) the Make-Whole
Amount, if any, with respect to such Notes. See
"Description of Notes--Optional Redemption."
Form of Notes...........The Notes will be initially issued as a Global Debt
Security registered in the name of Cede & Co., as
nominee for The Depository Trust Company.
Ranking.................The Notes will be senior to or rank pari passu with all
existing and future indebtedness of the Company,
including indebtedness incurred under the U.S. Credit
Facility and the Short-Term Facility. The Notes will be
effectively subordinated to all existing and future
liabilities of IDEX's subsidiaries. At December 31,
1997, on a pro forma basis, and after giving effect to
the amendment to the U.S. Credit Facility dated February
6, 1998, the Company's subsidiaries had indebtedness
aggregating approximately $29 million, which together
with all other liabilities of IDEX's subsidiaries would
rank effectively senior in right of payment to the
Notes.
S-7
<PAGE> 8
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The summary historical financial data presented below for each of the three
years in the period ended December 31, 1997 have been derived from the Company's
consolidated financial statements which were audited by Deloitte & Touche LLP,
independent auditors. The data set forth are qualified in their entirety by, and
should be read in conjunction with, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere herein and the
Company's Consolidated Financial Statements, the notes thereto and other
financial and statistical information included or incorporated by reference
herein. The summary pro forma financial data presented below for the year ended
December 31, 1997 and at December 31, 1997 are pro forma to reflect the
Acquisitions, the Offering and the application of the estimated net proceeds
therefrom as if such transactions had occurred on January 1, 1997 (with respect
to income statement data) and on December 31, 1997 (with respect to balance
sheet data). However, the summary pro forma financial data does not reflect the
net after tax proceeds expected to be realized from the sale of Strippit and
Vibratech. (See Note 3 to the Company's Consolidated Financial Statements on
page F-8 herein.) The pro forma data are derived from the pro forma combined
financial statements included herein under "Unaudited Pro Forma Combined
Financial Statements." The summary pro forma financial data do not purport to
represent what IDEX's operating results for 1997 would actually have been had
the transactions in fact occurred on the dates indicated above or to project the
results of operations for any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
HISTORICAL(1) PRO FORMA(2)
-------------------------------- -------------
1995 1996 1997 1997
-------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
EARNINGS DATA
Net sales.................................... $395,480 $474,699 $552,163 $679,655
Operating income............................. 74,769 87,616 103,595 117,777
Interest expense............................. 14,301 17,476 18,398 27,154
Income from continuing operations............ 39,147 44,424 53,475 56,519
OPERATING AND OTHER DATA
Ratio of earnings to fixed charges(3)........ 4.9 4.6 5.1 4.0
EBIT(4)...................................... $ 75,293 $ 86,920 $102,902 $117,656
Ratio of EBIT to interest expense............ 5.3 5.0 5.6 4.3
Depreciation and amortization(5)............. $ 14,653 $ 20,672 $ 24,293 $ 34,261
Capital expenditures......................... 8,181 11,634 13,562 18,855
Debt as a percentage of capitalization....... 57.7% 58.2% 52.0% 61.9%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------
HISTORICAL(1) PRO FORMA(2)
-------------------------------- -------------
1995 1996 1997 1997
-------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets................................. $450,077 $569,745 $599,193 $748,874
Working capital.............................. 103,091 108,313 119,466 146,527
Long-term debt............................... 206,184 271,709 258,417 384,141
Shareholders' equity......................... 150,945 195,509 238,671 236,116
</TABLE>
(footnotes on next page)
S-8
<PAGE> 9
(footnotes from previous page)
- ---------------
(1) Includes the operations of Micropump from May 2, 1995; Lukas Hydraulik GmbH
& Co. KG ("Lukas") from October 2, 1995; Fluid Management from July 29,
1996; Blagdon Pump from April 4, 1997; and Knight from December 9, 1997;
and excludes Strippit and Vibratech which have been treated as discontinued
operations.
(2) All references to "pro forma" information are to IDEX after giving effect
to the Acquisitions, the Offering and the application of the estimated net
proceeds therefrom. However, the anticipated cash proceeds from the sale
of Strippit and Vibratech have not been reflected in the pro forma
information as a reduction in long-term debt or interest expense. In
addition, the net book value of Strippit and Vibratech totaling $29
million remains in pro forma total assets. If net after tax proceeds
equaling the net book value of these two businesses were applied to reduce
long-term debt, then pro forma debt as a percentage of capitalization
would be 60.0%. Similarly, if net after tax proceeds equaling twice net
book value were applied to reduce long-term debt, then a gain of $29
million would be recorded in pro forma shareholders' equity and pro forma
debt as a percentage of capitalization would be 55.0%. Strippit and
Vibratech generated approximately $9 million of EBIT and $2 million of
depreciation and amortization in 1997. There can be no assurance as to
when or if these businesses will be sold or at what price.
(3) For the purpose of determining the ratio of earnings to fixed charges,
earnings are defined as income before income taxes and fixed charges. Fixed
charges consist of interest on indebtedness, amortization of debt issuance
expenses and the portion of rental expense considered representative of the
interest factor. Amounts presented herein supersede the amounts set forth
under the caption "Ratio of Earnings to Fixed Charges" in the accompanying
Prospectus.
(4) EBIT represents income before interest expense and income taxes.
(5) Depreciation and amortization includes amortization of goodwill and other
intangible assets and excludes amortization of debt issuance expenses.
S-9
<PAGE> 10
RISK FACTORS
A prospective investor should consider carefully all of the information
contained in this Prospectus Supplement before deciding whether to purchase the
Notes offered hereby and, in particular, the following factors.
ACQUISITION STRATEGY
The Company's markets primarily include mature industries. As a result, the
Company's historical growth has depended, and its future growth could continue
to depend, in large part, on its aggressive acquisition strategy and the
successful integration of acquired businesses into its existing operations. The
Company intends to continue to seek additional acquisition opportunities. There
can be no assurance, however, that the Company will be able to successfully
identify suitable candidates, negotiate appropriate acquisition terms, obtain
financing which may be needed to consummate such acquisitions, complete proposed
acquisitions, profitably integrate acquired businesses into its existing
operations or expand into new markets. In addition, there can be no assurance
that the Company will be able to successfully integrate the Acquisitions into
the Company or that the Acquisitions will perform as planned or prove to be
beneficial to the Company's operations and cash flow. Acquisitions involve
numerous risks, including difficulties in the assimilation of the operations,
technologies, services and products of the acquired companies and the diversion
of management's attention from other business concerns. The Acquisitions have
resulted, and future acquisitions by the Company could result, in the incurrence
of substantial additional indebtedness, the amortization of expenses related to
goodwill and other intangible assets and other expenses. This is the case
particularly in the fiscal quarters immediately following the completion of such
acquisitions while the operations of the acquired business are being integrated
into the Company's operations, which could have a material adverse effect on the
Company's financial condition, results of operations and debt service
capability. In addition, once integrated, acquired operations may not achieve
levels of revenues, profitability or productivity comparable with those achieved
by the Company's existing operations, or otherwise perform as expected. There
can be no assurance that the Acquisitions or the Company's continuing
acquisition strategy will not have a material adverse effect on the Company's
financial condition, results of operations and debt service capability.
COMPETITION
Most of the Company's products are sold in competitive markets. The Company
believes that the principal points of competition in its markets are product
quality, price, design and engineering capabilities, product development,
conformity to customer specifications, quality of post-sale support, timeliness
of delivery, and effectiveness of its distribution organization. Maintaining and
improving the Company's competitive position will require continued investment
by the Company in manufacturing, quality standards, marketing, customer service
and support, and its distribution networks. There can be no assurance that the
Company will have sufficient resources to continue to make such investments or
that it will be successful in maintaining its competitive position. The
Company's competitors may develop products that are superior to the Company's
products, or may develop methods of more efficiently and effectively providing
products and services, or may adapt more quickly than the Company to new
technologies or evolving customer requirements. Certain of the Company's
competitors may have greater financial, marketing, and research and development
resources than the Company. There can be no assurance that the Company will be
able to compete successfully with its existing competitors or with new
competitors. Failure to continue competing successfully could adversely affect
the Company's financial condition, results of operations and debt service
capability.
INTERNATIONAL OPERATIONS; CURRENCY FLUCTUATIONS
In 1997, approximately 30% of IDEX's net sales (27% on a pro forma basis)
and approximately 29% of operating income (32% on a pro forma basis) were
derived from the Company's international operations. In addition, approximately
14% of the Company's 1997 net sales (13% on a pro forma basis) were derived from
export sales. Both the sales from international operations and export sales are
subject in varying degrees to risks inherent in doing business outside the
United States. Such risks include the possibility of unfavorable circumstances
arising from host country laws or regulations. In addition, international
operations include risks of economic instability; partial or total
expropriation; currency exchange rate fluctuations and restrictions on
S-10
<PAGE> 11
currency repatriation; significant taxation policies; the disruption of
operations from labor and political disturbances, insurrection or war; and the
requirements of partial local ownership of operations in certain countries.
Although net sales to customers in the Far East represented approximately 8% of
the Company's 1997 pro forma net sales, recent instability in the financial
markets in this area of the world may adversely affect the Company's business
prospects in that region and in other markets to the extent that such markets
rely on business in the Far East.
The Company is exposed to fluctuations in currency exchange rates. Any
significant change in the value of the currencies of the countries in which the
Company does business against the U.S. dollar could affect the Company's ability
to sell products competitively and control its cost structure, which could have
a material adverse effect on the Company's financial condition, results of
operations and debt service capability.
LEVERAGE
The Company will remain significantly leveraged after the Offering. At
December 31, 1997, on a pro forma basis, the Company would have had total
indebtedness of approximately $384 million and shareholders' equity of
approximately $236 million. Also, on a pro forma basis, the Company's ratio of
earnings to fixed charges for the year ended December 31, 1997 would have been
4.0 to 1. The Company will be permitted to incur additional indebtedness in the
future, subject to certain limitations contained in the Indenture (as defined
herein) and the Company's other credit agreements, and certain of such
indebtedness may be secured. The Indenture contains no limitations on the
Company's ability to increase the size of the U.S. Credit Facility or to incur
any other unsecured indebtedness. See "--Holding Company Structure; Effective
Subordination," "Capitalization," "Unaudited Pro Forma Combined Financial
Statements," "Description of Credit Facilities" and "Description of Notes."
The Company's ability to make scheduled payments of principal of, to pay
the interest on, or to refinance its indebtedness (including the Notes) or to
fund planned capital expenditures will depend on its future performance, which,
to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. Based
upon the current level of the Company's operations, management believes that
cash flow from operations and available cash, together with available borrowings
under the U.S. Credit Facility and the Short-Term Facility, will be adequate to
meet the Company's future liquidity needs until the scheduled expiration of the
U.S. Credit Facility. There can be no assurance that the Company's business will
generate sufficient cash flow from operations or that future borrowings will be
available under the U.S. Credit Facility in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, or to fund its other
liquidity needs. The U.S. Credit Facility expires prior to the maturity of the
Notes and there can be no assurance that the Company will be able to replace the
U.S. Credit Facility or refinance any other indebtedness on commercially
reasonable terms or at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
The U.S. Credit Facility contains financial and other restrictive covenants
that limit the ability of the Company to, among other things, borrow additional
funds. Failure by the Company to comply with such covenants could result in an
event of default which, if not cured or waived, could have a material adverse
effect on the Company's financial condition, results of operations and debt
service capability. See "Description of Credit Facilities."
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION
IDEX is a holding company and does not have any material operations or
assets other than ownership of the capital stock of its subsidiaries. As a
holding company, the Company is dependent upon the earnings of its subsidiaries
and subsequent dividends or other intercompany transfers of funds from its
subsidiaries to meet the Company's debt service obligations, including its
obligations with respect to the Notes. Each subsidiary's management is given
broad discretion in conducting the day-to-day operations of such subsidiary, and
the performance of the subsidiaries is largely dependent upon their individual
efforts.
S-11
<PAGE> 12
The Notes will be effectively subordinated to all existing and future
liabilities of IDEX's subsidiaries, including indebtedness and trade and other
accounts payable of IDEX's subsidiaries. At December 31, 1997, on a pro forma
basis, and after giving effect to the amendment to the U.S. Credit Facility
dated February 6, 1998, the aggregate amount of indebtedness of IDEX's
subsidiaries to which the holders of the Notes would be effectively subordinated
was approximately $29 million. IDEX and its subsidiaries may incur additional
indebtedness in the future, subject to certain limitations contained in the
Indenture and the U.S. Credit Facility and certain of such indebtedness may be
secured.
Any right of IDEX to participate in any distribution of the assets of its
subsidiaries upon the liquidation, reorganization or insolvency of any such
subsidiary (and the consequent right of the holders of the Notes to participate
in the distribution of those assets) will be subject to the prior claims of the
respective subsidiary's creditors. As a result of the foregoing, holders of the
Notes may recover less ratably than other creditors of the Company's
subsidiaries in the event of any liquidation, reorganization or insolvency of
IDEX.
ECONOMIC CONDITIONS; INTEREST RATES
The Company's business may be adversely affected by periods of economic
slowdown or recession which may be accompanied by decreased demand for the
Company's products. The impact of any such decreased demand on the Company's
results would be immediate given the low level of order backlogs typically
maintained by the Company.
The Company's profitability may be adversely affected during any period of
unexpected or rapid increase in interest rates because the Company will remain
significantly leveraged after the Offering.
ENVIRONMENTAL MATTERS PERTAINING TO THE COMPANY
The past and present business operations of the Company and the past and
present ownership and operations of real property by the Company are subject to
extensive and changing federal, state, and local environmental laws and
regulations, as well as those of other countries, pertaining to the discharge of
materials into the environment, the handling and disposition of wastes
(including solid and hazardous wastes) or otherwise relating to protection of
the environment. In the future, the Company may be identified as a potentially
responsible party and be subject to liability under applicable law. No assurance
can be given that environmental issues relating to sites or matters related to
the Company or to regulatory proceedings or inquiries will not require future
expenditures.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part on the services of the
Company's senior management. Although certain of the senior managers of the
Company have employment agreements with the Company, there can be no assurance
that such individuals will remain with the Company. The death or loss of the
services of any of the senior managers or an inability to attract and retain
additional management personnel could have a material adverse effect on the
Company. There can be no assurance that the Company will be able to retain its
existing senior management personnel or to attract additional qualified senior
management personnel. See "Management."
LACK OF PUBLIC MARKET
The Notes are a new issuance of securities for which there is currently no
public market. The Company does not intend to apply for listing of any of the
Notes on any securities exchange. The Company has been advised by the
Underwriters that they presently intend to make a market in the Notes, although
the Underwriters are under no obligation to do so and may discontinue any market
making at any time without notice. No assurance, therefore, can be given as to
the liquidity of the trading market for the Notes or that an active trading
market for the Notes will develop. If an active public market does not develop,
the market price and liquidity of the Notes may be adversely affected.
S-12
<PAGE> 13
USE OF PROCEEDS
The net proceeds from the Offering, after deducting underwriting discounts
and commissions and estimated expenses of the Offering, will be approximately
$148.5 million. The Company intends to use approximately $81 million of the net
proceeds to redeem the Company's 9 3/4% Senior Subordinated Notes due 2002 (the
"Senior Subordinated Notes") (including the payment of the redemption premium
and accrued interest through the date of redemption) and the remainder to reduce
outstanding indebtedness under the U.S. Credit Facility (which had a weighted
average interest rate per annum of 5.75% at December 31, 1997 and matures on
July 1, 2001) and the Short-Term Facility (which bears interest at the bank
agent's cost of funds plus an applicable margin and matures on June 1, 1998). At
December 31, 1997, the interest rate on the Short-Term Facility was 6.375% per
annum.
Following application of the portion of the net proceeds of the Offering to
reduce outstanding indebtedness under the U.S. Credit Facility and the
Short-Term Facility, the Company may reborrow funds under the U.S. Credit
Facility and the Short-Term Facility for general corporate purposes and to fund
acquisitions.
CAPITALIZATION
The following table sets forth the historical capitalization, pro forma
capitalization and adjusted capitalization of IDEX as of December 31, 1997, as
described in the footnotes following the table. See "Use of Proceeds." This
table should be read in conjunction with the "Unaudited Pro Forma Combined
Financial Statements" and the Consolidated Financial Statements of IDEX and the
notes thereto included elsewhere in this Prospectus Supplement.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
------------------------------------------
HISTORICAL PRO FORMA(1) AS ADJUSTED(2)
---------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
LONG-TERM DEBT:
Notes payable under credit agreements, including accrued
interest.............................................. $169,807 $291,219 $220,531
Notes payable to sellers of Blagdon Pump and Knight..... 13,610 13,610 13,610
Senior Subordinated Notes............................... 75,000 75,000
Senior Notes............................................ 150,000
-------- -------- --------
Total long-term debt.................................. 258,417 379,829 384,141
-------- -------- --------
SHAREHOLDERS' EQUITY:
Common stock (75,000,000 shares authorized and
29,249,608 shares outstanding) and additional paid-in
capital............................................... 90,798 90,798 90,798
Retained earnings....................................... 149,403 149,403 146,848(3)
Minimum pension liability adjustment.................... (756) (756) (756)
Accumulated translation adjustment...................... (774) (774) (774)
-------- -------- --------
Total shareholders' equity............................ 238,671 238,671 236,116(3)
-------- -------- --------
Total capitalization.................................. $497,088 $618,500 $620,257
======== ======== ========
</TABLE>
- ---------------
(1) Pro forma to give effect only to the Acquisitions as if each transaction had
occurred on December 31, 1997.
(2) As adjusted to give effect to the Acquisitions, the issuance and sale of the
Notes offered hereby and the application of the estimated net proceeds
therefrom as if such transactions had occurred on December 31, 1997, but
does not reflect anticipated proceeds or potential gain from the sale of
Strippit and Vibratech. See "Use of Proceeds."
(3) Includes the estimated extraordinary loss, net of taxes, totaling $2,555 for
the early extinguishment of debt related to the planned redemption of the
Senior Subordinated Notes.
S-13
<PAGE> 14
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The accompanying unaudited pro forma financial statements set forth the pro
forma statement of combined operations for the year ended December 31, 1997 and
the pro forma condensed combined balance sheet as of December 31, 1997 to give
effect to the Acquisitions, the Offering and the application of the estimated
net proceeds therefrom as if such transactions had occurred on January 1, 1997
(with respect to the pro forma statement of combined operations) and on December
31, 1997 (with respect to the pro forma condensed combined balance sheet). The
Acquisitions were accounted for using the purchase method of accounting in
accordance with the provisions of Accounting Principles Board Opinion No. 16.
The historical financial data included in the pro forma financial
statements is as of the periods presented. The unaudited pro forma financial
statements are based on management's best estimate of the effects of the
Acquisitions. All references to "as adjusted" information are to IDEX after
giving effect to the Acquisitions, the Offering and the application of the
estimated net proceeds therefrom. The unaudited pro forma combined financial
statements are based on currently available information; however, the actual
adjustments will be based on more precise appraisals, evaluations and estimates
of fair values. It is possible that the actual adjustments could differ
substantially from those presented in the unaudited pro forma combined financial
statements.
The unaudited pro forma statement of combined operations for the year ended
December 31, 1997 is not necessarily indicative of the results that actually
would have been achieved had the Acquisitions been consummated as of the date
indicated or that may be achieved in the future. The unaudited pro forma
combined financial statements should be read in conjunction with the
accompanying notes and the Company's Consolidated Financial Statements and the
notes thereto.
The pro forma statement of combined operations presented does not reflect
the extraordinary loss IDEX expects to incur in connection with the early
extinguishment of debt related to the planned redemption of the Senior
Subordinated Notes. The extraordinary loss of $2,555,000 represents the after
tax amount of the redemption penalty and write-off of the unamortized debt
issuance expenses related to the Senior Subordinated Notes.
The anticipated cash proceeds from the sale of Strippit and Vibratech have
not been reflected in the pro forma information as a reduction in long-term debt
or interest expense. In addition, the net book value of Strippit and Vibratech
totaling $29 million remains in pro forma total assets. If net after tax
proceeds equaling the net book value of these two businesses were applied to
reduce long-term debt, then pro forma debt as a percentage of capitalization
would be 60.0%. Similarly, if net after tax proceeds equaling twice net book
value were applied to reduce long-term debt, then a gain of $29 million would be
recorded in pro forma shareholders' equity and pro forma debt as a percentage of
capitalization would be 55.0%. In 1997, Strippit and Vibratech generated
approximately $9 million of EBIT and $2 million of depreciation and
amortization. There can be no assurance as to when or if these businesses will
be sold or at what price.
S-14
<PAGE> 15
UNAUDITED PRO FORMA STATEMENT OF COMBINED OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
IDEX GAST KNIGHT ACQUISITION REFINANCING
HISTORICAL HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA ADJUSTMENTS AS ADJUSTED
---------- ------------- ------------- -------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................... $552,163 $105,122 $23,568 $ (1,198) $679,655 $ $679,655
Cost of sales............... 329,806 69,832 11,803 3,489(4) 414,930 414,930
-------- -------- ------- --------- -------- -------- --------
Gross profit................ 222,357 35,290 11,765 (4,687) 264,725 264,725
Selling, general and
administrative expenses... 110,588 21,052 7,965 (3,281)(5) 136,324 136,324
Goodwill amortization....... 8,174 2,450(6) 10,624 10,624
-------- -------- ------- --------- -------- -------- --------
Operating income............ 103,595 14,238 3,800 (3,856) 117,777 117,777
Other income
(expense)-net............. (693) 322 196 54 (121) (121)
-------- -------- ------- --------- -------- -------- --------
Income before interest
expense and income
taxes..................... 102,902 14,560 3,996 (3,802) 117,656 117,656
Interest expense............ 18,398 2,643 130 8,080(7) 29,251 (2,097)(8) 27,154
-------- -------- ------- --------- -------- -------- --------
Income before income
taxes..................... 84,504 11,917 3,866 (11,882) 88,405 2,097 90,502
Provision for income
taxes..................... 31,029 3,965 849 (2,636)(9) 33,207 776(9) 33,983
-------- -------- ------- --------- -------- -------- --------
Income from continuing
operations................ $ 53,475 $ 7,952 $ 3,017 $ (9,246) $ 55,198 $ 1,321 $ 56,519
======== ======== ======= ========= ======== ======== ========
EARNINGS PER COMMON
SHARE-BASIC
Continuing operations....... $ 1.83 $ 1.89 $ 1.94
Weighted average shares
outstanding............... 29,184 29,184 29,184
EARNINGS PER COMMON
SHARE-DILUTED
Continuing operations....... $ 1.78 $ 1.84 $ 1.88
Weighted average shares
outstanding............... 29,999 29,999 29,999
OPERATING AND OTHER DATA
Ratio of earnings to fixed
charges(10)............... 5.1 3.8 4.0
EBIT(11).................... $102,902 $ 14,560 $ 3,996 $ (3,802) $117,656 $117,656
Ratio of EBIT to interest
expense................... 5.6 4.0 4.3
Depreciation and
amortization(12).......... $ 24,293 $ 4,435 $ 639 $ 4,894 $ 34,261 $ 34,261
</TABLE>
(footnotes on next page)
S-15
<PAGE> 16
(footnotes from previous page)
(1) Includes the results for the fiscal year ended December 28, 1997.
(2) Includes the results for the fiscal year ended October 31, 1997.
(3) Eliminates the results of Knight from the December 9, 1997 acquisition date
to December 31, 1997 and reflects the reclassification of the respective
engineering expenses of Knight and Gast from selling, general and
administrative expenses to cost of sales to conform with IDEX's
presentation.
(4) Represents depreciation and amortization due to the revaluation and change
in lives of property, plant and equipment resulting from the purchase price
allocation related to the Acquisitions and the adjustments noted in (3)
above.
(5) Represents a reduction in certain expenses of Knight following its
acquisition by IDEX and the adjustments noted in (3) above.
(6) Represents goodwill amortization over 40 years arising from the
Acquisitions.
(7) Represents estimated interest expense on $160 million of debt incurred in
connection with the Acquisitions (net of cash flow) at an effective
interest rate of 7.0% and the elimination of the interest incurred by
Knight and Gast on their respective debt which was not assumed by IDEX.
(8) Represents the estimated net reduction in interest expense resulting from
the issuance of the Notes offered hereby and the application of the
estimated net proceeds therefrom to redeem the Senior Subordinated Notes
and to repay a portion of outstanding indebtedness under the existing bank
credit facilities as follows (000's omitted):
<TABLE>
<S> <C>
Issuance of the Notes:
Interest expense on $150 million Notes.................... $10,125
Amortization of debt issuance expenses (estimated to be
$1.5 million).......................................... 150
Redemption of Senior Subordinated Notes:
Interest savings resulting from the redemption of $75
million Senior Subordinated Notes at 9.75%............. (7,313)
Elimination of amortization of debt issuance expenses
related to the Senior Subordinated Notes............... (260)
Interest savings resulting from the application of remaining
proceeds to repay a portion of the outstanding
indebtedness under the existing bank credit facilities (at
a historical interest rate of 7.0%)....................... (4,799)
-------
Estimated net reduction in interest expense................. $(2,097)
=======
</TABLE>
(9) Represents the tax effect of the pro forma adjustments described above.
(10) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income before income taxes and fixed charges. Fixed
charges consist of interest on indebtedness, amortization of debt issuance
expenses and the portion of rental expense considered representative of the
interest factor.
(11) EBIT represents income before interest expense and income taxes.
(12) Depreciation and amortization includes amortization of goodwill and other
intangible assets and excludes amortization of debt issuance expenses.
S-16
<PAGE> 17
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
IDEX GAST ACQUISITION REFINANCING
HISTORICAL HISTORICAL(1) ADJUSTMENTS(2) PRO FORMA ADJUSTMENTS AS ADJUSTED
---------- ------------- -------------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents............ $ 11,771 $ 2,878 $ $ 14,649 $ $ 14,649
Receivables -- net........ 80,766 13,708 (100) 94,374 94,374
Inventories............... 84,240 8,539 9,500 102,279 102,279
Other current assets...... 20,490 743 21,233 21,233
-------- ------- -------- -------- -------- --------
Total current assets... 197,267 25,868 9,400 232,535 232,535
Property, plant and
equipment -- net.......... 88,628 24,131 15,000 127,759 127,759
Intangible assets -- net.... 293,803 71,305 365,108 365,108
Other noncurrent assets..... 19,495 3,720 23,215 257(3) 23,472
-------- ------- -------- -------- -------- --------
Total assets........... $599,193 $53,719 $ 95,705 $748,617 $ 257 $748,874
======== ======= ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities......... $ 77,801 $ 8,608 $ 1,099 $ 87,508 $ (1,500)(4) $ 86,008
Senior Subordinated Notes... 75,000 75,000 (75,000)
Senior Notes................ 150,000 150,000
Borrowings under credit
facilities, including
accrued interest.......... 169,807 17,100 104,312 291,219 (70,688)(5) 220,531
Notes payable to sellers of
Blagdon Pump and Knight... 13,610 13,610 13,610
Other noncurrent
liabilities............... 24,304 17,490 815 42,609 42,609
-------- ------- -------- -------- -------- --------
Total liabilities......... 360,522 43,198 106,226 509,946 2,812 512,758
-------- ------- -------- -------- -------- --------
Shareholders' equity
Common stock and
additional paid-in
capital................ 90,798 (4,018) 4,018 90,798 90,798
Retained earnings......... 149,403 15,539 (15,539) 149,403 (2,555)(6) 146,848
Minimum pension liability
adjustment............. (756) (756) (756)
Accumulated translation
adjustment............. (774) (1,000) 1,000 (774) (774)
-------- ------- -------- -------- -------- --------
Total shareholders'
equity................. 238,671 10,521 (10,521) 238,671 (2,555) 236,116
-------- ------- -------- -------- -------- --------
Total liabilities and
shareholders'
equity............... $599,193 $53,719 $ 95,705 $748,617 $ 257 $748,874
======== ======= ======== ======== ======== ========
</TABLE>
(footnotes on next page)
S-17
<PAGE> 18
(footnotes from previous page)
(1) Includes the results for the fiscal year ended December 28, 1997.
(2) Represents the approximate $120 million purchase price of Gast and the
current fair value purchase accounting adjustments.
(3) Represents the estimated $1.5 million of debt issuance expenses related to
the Notes offered hereby and the write-off of the unamortized debt issuance
expenses related to the Senior Subordinated Notes.
(4) Represents the reduction to current taxes relating to the extraordinary
loss in connection with the early extinguishment of debt related to
the planned redemption of the Senior Subordinated Notes.
(5) Represents the payment of accrued interest on the Senior Subordinated Notes
and application of the remaining proceeds from the issuance of the Notes
offered hereby to repay a portion of the outstanding indebtedness under the
Company's existing bank credit facilities, after the redemption of the
Senior Subordinated Notes (including the related $2.8 million redemption
penalty) and payment of the estimated debt issuance expenses of $1.5
million.
(6) Represents the extraordinary loss, net of taxes, of the redemption penalty
and write-off of the unamortized debt issuance expenses of the Senior
Subordinated Notes.
S-18
<PAGE> 19
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,(1)
----------------------------------------------------
1993 1994 1995 1996 1997
EARNINGS DATA -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................................... $239,704 $319,231 $395,480 $474,699 $552,163
Cost of sales................................. 142,801 192,280 237,803 287,625 329,806
-------- -------- -------- -------- --------
Gross profit.................................. 96,903 126,951 157,677 187,074 222,357
Selling, general and administrative
expenses.................................... 52,950 66,743 78,712 93,217 110,588
Goodwill amortization......................... 1,889 3,025 4,196 6,241 8,174
-------- -------- -------- -------- --------
Operating income.............................. 42,064 57,183 74,769 87,616 103,595
Other income (expense) -- net................. 728 281 524 (696) (693)
-------- -------- -------- -------- --------
Income before interest expense and income
taxes....................................... 42,792 57,464 75,293 86,920 102,902
Interest expense.............................. 9,168 11,939 14,301 17,476 18,398
-------- -------- -------- -------- --------
Income before income taxes.................... 33,624 45,525 60,992 69,444 84,504
Provision for income taxes.................... 11,187 16,181 21,845 25,020 31,029
-------- -------- -------- -------- --------
Income from continuing operations............. 22,437 29,344 39,147 44,424 53,475
Income from discontinued operations........... 2,889 4,266 6,178 5,774 5,151
-------- -------- -------- -------- --------
Net income.................................... $ 25,326 $ 33,610 $ 45,325 $ 50,198 $ 58,626
======== ======== ======== ======== ========
EARNINGS PER COMMON SHARE--BASIC
Continuing operations......................... $ 0.79 $ 1.03 $ 1.37 $ 1.54 $ 1.83
Net income.................................... 0.89 1.18 1.58 1.74 2.01
Weighted average shares outstanding........... 28,396 28,600 28,662 28,818 29,184
EARNINGS PER COMMON SHARE--DILUTED
Continuing operations......................... $ 0.77 $ 1.00 $ 1.32 $ 1.49 $ 1.78
Net income.................................... 0.87 1.15 1.53 1.69 1.95
Weighted average shares outstanding........... 28,976 29,331 29,609 29,779 29,999
OPERATING AND OTHER DATA
Ratio of earnings to fixed charges(2)......... 4.3 4.5 4.9 4.6 5.1
Ratio of earnings to fixed charges -- pro
forma(2).................................... 4.0
Cash dividends declared per common share...... $ $ 0.093 $ 0.387 $ 0.440 $ 0.495
EBIT(3)....................................... 42,792 57,464 75,293 86,920 102,902
Ratio of EBIT to interest expense............. 4.7 4.8 5.3 5.0 5.6
Depreciation and amortization(4).............. $ 9,452 $ 11,896 $ 14,653 $ 20,672 $ 24,293
Capital expenditures.......................... 6,120 6,818 8,181 11,634 13,562
Debt as a percentage of capitalization........ 58.4% 59.1% 57.7% 58.2% 52.0%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------
1993 1994 1995 1996 1997
BALANCE SHEET DATA -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total assets.................................. $245,291 $357,980 $450,077 $569,745 $599,193
Working capital............................... 72,826 82,007 103,091 108,313 119,466
Long-term debt................................ 117,464 168,166 206,184 271,709 258,417
Total shareholders' equity.................... 83,686 116,305 150,945 195,509 238,671
</TABLE>
(footnotes on next page)
S-19
<PAGE> 20
(footnotes from previous page)
(1) Includes the operations of Signfix from November 24, 1993; Hale from
May 26, 1994; Micropump from May 2, 1995; Lukas from October 2, 1995;
Fluid Management from July 29, 1996; Blagdon Pump from April 4, 1997;
and Knight from December 9, 1997; and excludes Strippit and Vibratech
which have been treated as discontinued operations.
(2) For the purpose of determining the ratio of earnings to fixed charges,
earnings are defined as income before income taxes and fixed charges. Fixed
charges consist of interest on indebtedness, amortization of debt issuance
expenses and the portion of rental expense considered representative of the
interest factor. Amounts presented herein supersede the amounts set forth
under the caption "Ratio of Earnings to Fixed Charges" in the accompanying
Prospectus.
(3) EBIT represents income before interest expense and income taxes.
(4) Depreciation and amortization includes amortization of goodwill and other
intangible assets and excludes amortization of debt issuance expenses.
S-20
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HISTORICAL OVERVIEW AND OUTLOOK
IDEX sells a broad range of proprietary pump products and engineered
equipment to a diverse customer base in the United States and internationally.
Accordingly, IDEX's businesses are affected by levels of industrial activity and
economic conditions in the United States and other countries where its products
are sold, and by the relationship of the U.S. dollar to other currencies. Among
the factors that influence the demand for IDEX's products are interest rates,
levels of capital spending, and overall industrial activity.
IDEX has a history of above-average operating margins. The Company's
operating margins are affected by, among other things, utilization of facilities
as sales volumes change and inclusion of newly acquired businesses which may
have lower margins that usually are further reduced by purchase accounting
adjustments.
Orders, net sales, income from continuing operations, net income and
earnings per share for 1997 surpassed the levels achieved in all prior years.
Backlogs decreased nominally as shipments exceeded incoming orders during 1997,
but remained at IDEX's typical operating level of approximately 1 to 1 1/2
months' sales. This customarily low level of backlog improves IDEX's ability to
respond quickly to customer needs, but also means that changes in orders are
felt quickly in operating results.
The following forward-looking statements are qualified by the cautionary
statement under the Private Securities Litigation Reform Act set forth on page
S-2 herein and the "Risk Factors" beginning on page S-10 herein. The slow rate
of growth in 1996 in the U.S. economy and many other economies in which IDEX
sells its products continued during 1997. With a steady incoming order pace,
strong market positions, a continuous flow of new and redesigned products,
recent acquisitions, and increasing opportunities for expansion worldwide,
management believes the outlook for IDEX remains positive. Based on current
activity levels and barring unforeseen circumstances, IDEX expects that orders,
net sales, income from continuing operations, net income and earnings per share
in 1998 will exceed 1997 levels. By stressing new product development; market
share growth; international expansion; and operating improvements, particularly
in newly acquired businesses; and by adhering to its disciplined approach to
acquisitions, management believes IDEX is well positioned to continue profitable
growth. The Company is addressing compliance with the year 2000 information
processing issue and does not anticipate any significant expense or interruption
to its operations.
S-21
<PAGE> 22
COMPANY AND BUSINESS GROUP FINANCIAL INFORMATION
(dollars in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,(1)
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
PUMP PRODUCTS GROUP
Net sales(2)............................................. $265,918 $245,620 $228,909
Operating income(3)...................................... 61,443 55,129 48,365
Operating margin......................................... 23.1% 22.4% 21.1%
Identifiable assets...................................... $237,870 $183,749 $195,166
Depreciation and amortization............................ 10,193 9,509 9,023
Capital expenditures..................................... 6,875 5,175 4,901
ENGINEERED EQUIPMENT GROUP
Net sales(2)............................................. $288,657 $230,118 $167,125
Operating income(3)...................................... 52,062 40,965 34,628
Operating margin......................................... 18.0% 17.8% 20.7%
Identifiable assets...................................... $322,493 $341,016 $205,838
Depreciation and amortization............................ 14,008 10,957 5,511
Capital expenditures..................................... 6,318 6,425 3,243
COMPANY
Net sales................................................ $552,163 $474,699 $395,480
Operating income......................................... 103,595 87,616 74,769
Operating margin......................................... 18.8% 18.5% 18.9%
Income before interest expense and income taxes.......... $102,902 $ 86,920 $ 75,293
Identifiable assets...................................... 599,193 569,745 450,077
Depreciation and amortization(4)......................... 24,293 20,672 14,653
Capital expenditures..................................... 13,562 11,634 8,181
</TABLE>
(1) Includes acquisition of Micropump (May 2, 1995), Blagdon Pump (April 4,
1997) and Knight (December 9, 1997) in the Pump Products Group; and
acquisition of Lukas (October 2, 1995) and Fluid Management (July 29, 1996)
in the Engineered Equipment Group.
(2) Group net sales include intersegment sales.
(3) Group operating income excludes net unallocated corporate operating
expenses.
(4) Excludes amortization of debt issuance expenses.
S-22
<PAGE> 23
RESULTS OF OPERATIONS
For purposes of this discussion and analysis, reference is made to the
table on page S-22 and the Company's Statements of Consolidated Operations on
page F-2. In December 1997, IDEX announced its intention to divest its Strippit
and Vibratech businesses. Revenues from the discontinued operations amounted to
$83.9 million, $87.9 million and $91.9 million for the years ended 1997, 1996
and 1995, respectively. In addition, the Company has realigned its historical
presentation of business segments into two new groups: Pump Products and
Engineered Equipment.
The Pump Products Group designs, produces and distributes a wide range of
engineered industrial pumps and related controls for process applications. The
Engineered Equipment Group designs, produces and distributes proprietary
equipment that may combine pumps or other devices into products for industrial,
commercial and safety applications.
The financial statements and the group financial information have been
reclassified to reflect Strippit and Vibratech as discontinued operations and
IDEX's revised group reporting structure.
PERFORMANCE IN 1997 COMPARED TO 1996
Orders, net sales, income from continuing operations, net income and
earnings per share exceeded the levels achieved in all prior years. Incoming
orders were 15% higher than in 1996, with recent acquisitions of Fluid
Management (July 1996), Blagdon Pump (April 1997) and Knight (December 1997)
contributing the majority of the growth. Orders for the base businesses
increased 3% in 1997 compared to 1996.
Net sales for 1997 reached a record $552.2 million and increased $77.5
million or 16% over 1996. Overall base business volume was up about 3% in 1997,
with acquisitions accounting for 14%, and foreign currency translation having a
negative 1% effect on the Company's sales growth. International sales
contributed 44% of the 1997 total, up from 43% last year. The increase in
international sales generated approximately 50% of the year-over-year
improvement in total sales.
Pump Products Group net sales of $265.9 million in 1997 increased by $20.3
million or 8% from 1996 with approximately two-thirds of the increase occurring
in the Company's base businesses and the remaining increase resulting from the
recently acquired Blagdon Pump and Knight businesses. Sales to customers outside
the U.S. in 1997 were unchanged from 36% of total in 1996.
Engineered Equipment Group net sales of $288.7 million increased by $58.5
million or 25% compared to 1996 with almost all of the increase resulting from
inclusion of Fluid Management for a full year in 1997. Base business sales in
1997 were essentially equal to the prior year with steady demand for this
Group's products. Sales to customers outside the U.S. increased to 52% of total
Engineered Equipment Group net sales in 1997, up from 51% in 1996 principally
due to the inclusion of Fluid Management for a full year in 1997.
Gross profit of $222.4 million in 1997 increased $35.3 million, or 19% from
1996. Gross profit as a percent of net sales was 40.3% in 1997, up from 39.4% in
1996. The improvement in gross profit margin principally was due to sales volume
growth, product mix and product efficiency improvements. Selling, general and
administrative expenses increased to $110.6 million in 1997 from $93.2 million
in 1996, and as a percent of net sales, increased slightly to 20.0% from 19.6%
in 1996. Goodwill amortization increased by 31% to $8.2 million in 1997 from
$6.2 million in 1996. As a percent of net sales, goodwill amortization remained
flat at about 1% for both years. The year-over-year increases in gross profit;
selling, general and administrative expenses; and goodwill amortization are
primarily due to the inclusion of Fluid Management for a full year in 1997.
Operating income increased by $16.0 million or 18% to $103.6 million in
1997 from $87.6 million in 1996. Operating margin as a percent of net sales
increased to 18.8% in 1997 from 18.5% in 1996. In the Pump Products Group,
operating income of $61.4 million and operating margin of 23.1% in 1997 compared
to the $55.1 million and 22.4% recorded in 1996. Operating margin improvements
resulted primarily from volume-related gains. Operating income of $52.1 million
in the Engineered Equipment Group and operating margin of 18.0% in 1997 compared
to the totals of $41.0 million and 17.8% achieved in 1996. The increase in
operating income for this Group primarily reflected the full year inclusion of
Fluid Management in 1997.
S-23
<PAGE> 24
Interest expense increased to $18.4 million in 1997 from $17.5 million in
1996 because of the additional long-term debt incurred to complete the
acquisitions of Fluid Management, Blagdon Pump and Knight Equipment, partially
offset by debt reductions from operating cash flow in 1997.
The provision for income taxes increased to $31.0 million in 1997 from
$25.0 million in 1996. The effective tax rate increased to 36.7% in 1997 from
36.0% in 1996 due to the changing mix of international earnings, state taxes,
and franchise taxes.
Income from continuing operations of $53.5 million in 1997 was 20% higher
than the $44.4 million in 1996. Diluted earnings per share from continuing
operations amounted to $1.78 in 1997, an increase of 29 cents per share or 19%
from $1.49 achieved in 1996.
PERFORMANCE IN 1996 COMPARED TO 1995
In 1996, orders, net sales, income from continuing operations, net income
and earnings per share exceeded the levels achieved in all previous years.
Incoming orders were 22% higher than in 1995, with almost all of the increase
resulting from the acquisitions of Micropump (May 1995), Lukas (October 1995)
and Fluid Management (July 1996). Orders for the base businesses increased 3% in
1996 compared to 1995.
Net sales from continuing operations of $474.7 million for 1996 increased
by $79.2 million or 20% over 1995. The inclusion of acquired businesses noted
above accounted for substantially all of the volume growth, while sales in the
core business units increased by 2% from 1995. Generally, the Company's Pump
Products Group experienced modest growth in net sales. Declines in volume at
capital goods-related industries unfavorably affected the year-to-year
comparisons of the Engineered Equipment Group net sales. International sales
accounted for 43% of the 1996 total, up from 37% in 1995. The increase in
international sales accounted for about three-quarters of the year-over-year
improvement in total net sales.
Pump Products Group net sales of $245.6 million increased by $16.7 million
or 7% from 1995. Base business sales were up about 4%, with the inclusion of
Micropump for a full year in 1996 accounting for the remaining sales
improvement. Sales to customers outside the U.S. increased to 36% of total Pump
Products Group net sales in 1996, up from 34% in 1995 due to inclusion of recent
acquisitions which have a greater international presence.
Engineered Equipment Group net sales of $230.1 million in 1996 increased by
$63.0 million or 38% compared to 1995. Inclusion of Fluid Management for a
portion of the year, along with Lukas for a full year, accounted for almost all
of the sales improvement. Base business sales were down about 1% from the prior
year. Sales to customers outside the U.S. were 51% of total Engineered Equipment
Group net sales in 1996, up from 42% in 1995 due to the inclusion of recent
acquisitions, each of which has a significant international presence, and a
stronger demand internationally for products in the Group's core businesses.
Gross profit of $187.1 million in 1996 increased by $29.4 million or 19%
from 1995. Gross profit as a percent of net sales was 39.4% in 1996, down
slightly from 39.9% in 1995. Selling, general and administrative expenses
increased to $93.2 million in 1996 from $78.7 million, but as a percent of net
sales, decreased slightly to 19.6% from 19.9% in 1995. Goodwill amortization
increased by 49% to $6.2 million in 1996 from $4.2 million in 1995. As a percent
of net sales, goodwill amortization remained flat at about 1% for both years.
The year-over-year increases in gross profit; selling, general and
administrative expenses; and goodwill amortization are primarily due to
inclusion of Micropump and Lukas for a full year and Fluid Management from its
acquisition in July 1996.
Operating income increased by $12.8 million or 17% to $87.6 million in 1996
from $74.8 million in 1995. Operating margin as a percent of net sales decreased
to 18.5% in 1996 from 18.9% in 1995. In the Pump Products Group, operating
income of $55.1 million and operating margin of 22.4% compared to the $48.4
million and 21.1% recorded in 1995. The slight operating margin improvement
resulted primarily from volume-related gains. The Engineered Equipment Group
operating income of $41.0 million and operating margin of 17.8% in 1996 compared
to the $34.6 million and 20.7% achieved in 1995. The operating margin decline
resulted from the inclusion of Fluid Management, whose operating margins were
lower than the other
S-24
<PAGE> 25
business units in the Group and whose operating income was further reduced by
purchase accounting adjustments.
Interest expense increased to $17.5 million in 1996 from $14.3 million in
1995 because of the additional borrowing required to complete the Fluid
Management acquisition, offset by debt reductions from operating cash flow and a
slightly lower interest rate environment in 1996.
The provision for income taxes increased to $25.0 million in 1996 from
$21.8 million in 1995. The effective tax rate of 36.0% in 1996 increased
slightly from the 35.8% recorded in 1995.
Income from continuing operations of $44.4 million in 1996 was 13% higher
than the $39.1 million recorded in 1995. Diluted earnings per share from
continuing operations were $1.49 in 1996, an increase of 17 cents per share from
$1.32 achieved in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, IDEX's working capital was $119.5 million and its
current ratio was 2.5 to 1. The Company's cash provided by continuing operations
increased by $3.9 million in 1997 to $81.6 million. The improvement in cash flow
resulted from the following: income from continuing operations increasing $9.1
million; depreciation and amortization adding $3.6 million; and deferred income
taxes generating $1.9 million; offset by working capital and other--net
declining by $10.7 million. Working capital was well managed in 1997 as
receivables generated cash flow of $3.6 million or 5% and inventories provided
another $7.7 million or 9%. Both of these improvements occurred during a year
when net sales increased by 16%. Decreases in current liabilities and other--net
caused a usage of cash of $14.4 million due to reductions in general corporate
liabilities. Cash from discontinued operations decreased $6.8 million to $5.7
million principally because of lower operating earnings and a decline in cash
generated from working capital in 1997 compared to 1996.
Cash flow provided by operations was more than adequate to fund capital
expenditures of $13.6 million, $11.6 million and $8.2 million in 1997, 1996 and
1995, respectively. Generally, capital expenditures were for machinery and
equipment which improved productivity, although a portion was for repair and
replacement of equipment and facilities. Management believes that IDEX has ample
capacity in its plant and equipment to meet expected needs for future growth in
the intermediate term.
In 1997, the Company acquired Blagdon Pump on April 4 and Knight on
December 9 for an aggregate purchase price of $49.7 million. These acquisitions
were accounted for using the purchase method of accounting and were financed
through borrowings under the Company's $250 million U.S. Credit Facility and the
issuance of notes to the sellers. At December 31, 1997, the notes payable to the
seller of Blagdon Pump totaled a U.S. dollar-equivalent $9.8 million, and notes
payable to the seller of Knight amounted to $3.8 million.
At December 31, 1997, the maximum amount available under the U.S. Credit
Facility was $250 million, of which $132.5 million was borrowed, including a
Netherlands guilder borrowing of NGL 82 million ($40.5 million), which provides
an economic hedge against the net investment in Fluid Management's Netherlands
operation. The availability under this facility declines in stages commencing
July 1, 1999, to $200 million on July 1, 2000. Any amount outstanding at July 1,
2001, becomes due at that date. At December 31, 1997, approximately $102.5
million of the facility was unused. Interest is payable quarterly on the
outstanding balance at the agent bank's reference rate or at LIBOR plus an
applicable margin. At December 31, 1997, the applicable margin was 25 basis
points.
The Company also has a $10 million Short-Term Facility available for
borrowing at the bank agent's reference rate or at an optional rate based on the
bank's cost of funds. At December 31, 1997, there was $5 million of borrowing
under the Short-Term Facility and the interest rate was 6.375% per annum. To
complete the Gast acquisition in January 1998, IDEX and the bank agent amended
the Short-Term Facility to provide for a temporary increase to $50 million for
up to 60 days, after which time the maximum line of credit returns to $10
million.
S-25
<PAGE> 26
On May 23, 1997, the Company's Lukas subsidiary amended the German Facility
reducing the interest rate structure and eliminating certain reductions in
availability. At December 31, 1997, the maximum amount available under the
German Facility was DM 52.5 million ($29.2 million), of which DM 52.0 million
($28.9 million) was being used. The availability under this facility declines in
stages commencing November 1, 1999, to DM 31.3 million at November 1, 2000. Any
amount outstanding at November 1, 2001, becomes due at that date. Interest is
payable quarterly on the outstanding balance at LIBOR plus an applicable margin.
At December 31, 1997, the applicable margin was 62.5 basis points.
IDEX believes it will generate sufficient cash flow from operations in 1998
to meet its operating requirements, interest and scheduled amortization payments
under both the U.S. Credit Facility and the German Facility, interest and
borrowings under the Short-Term Facility, interest and principal payments on the
9.75% Senior Subordinated Notes, approximately $25 million of planned capital
expenditures, and approximately $16 million of annual dividend payments to
holders of common stock. From commencement of operations in January 1988 until
December 31, 1997, IDEX had borrowed $460 million under the credit agreements
and notes to sellers to complete 12 acquisitions. During this same period IDEX
generated, principally from operations, cash flow of $370 million to reduce its
indebtedness. In the event that suitable businesses are available for
acquisition upon terms acceptable to the Company's Board of Directors, IDEX may
obtain all or a portion of the financing for the acquisitions through the
incurrence of additional long-term indebtedness.
The divestiture of the Strippit and Vibratech businesses, which generated
approximately $84 million in net sales and approximately $9 million of operating
income in 1997, will allow resources formerly allocated to these businesses to
be used to develop positions in areas more consistent with the Company's present
strategy.
In January 1998, IDEX acquired Gast Manufacturing Corporation for a cash
purchase price of approximately $120 million. The acquisition was accounted for
using the purchase method of accounting and was financed with borrowings under
the U.S. Credit Facility and the Short-Term Facility. Gast, which will be part
of the Pump Products Group, had net sales of approximately $105 million in 1997,
and is one of the world's leading manufacturers of air-moving products.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," and SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components. SFAS No. 131 establishes
standards for reporting information about operating segments and related
disclosures about products and services, geographic areas and major customers.
SFAS No. 132 revises current disclosure requirements for employers' pensions and
other retiree benefits. These standards are effective for years beginning after
December 15, 1997. These standards expand or modify current disclosures and,
accordingly, will have no impact on the Company's reported financial position,
results of operations and cash flows. The Company is assessing the impact of
SFAS No. 131 on its reported segments.
In December 1997, the Securities and Exchange Commission declared effective
the Company's shelf registration statement covering the possible future sale of
up to $250 million in securities, including senior and subordinated debt
securities, common and preferred stock, and warrants. The terms of any such
securities would be specified in a prospectus supplement.
S-26
<PAGE> 27
BUSINESS
THE COMPANY
IDEX designs, manufactures and markets a broad range of pump products and
engineered equipment serving a diverse customer base in the United States and
internationally. For each of its ten principal business units, the Company
believes that it holds the number-one or number-two market share position in
that unit's niche market. IDEX believes that its consistent financial
performance has been attributable to the manufacture of quality proprietary
products designed and engineered by the Company and sold to a wide range of
customers, coupled with its ability to identify and successfully integrate
strategic acquisitions. For 1997, IDEX had net sales of $552 million and EBIT
(as defined herein) of $103 million. On a pro forma basis, 1997 net sales and
EBIT were $680 million and $118 million, respectively.
IDEX consists of two business segments, the Pump Products Group and the
Engineered Equipment Group. The Pump Products Group designs, manufactures and
sells a wide variety of industrial pumps and related controls, and
low-horsepower compressors for the movement of liquids, air and gases. The
devices and equipment produced by this Group are used in a diverse set of
industries, including chemical processing, non-electrical machinery, water and
wastewater treatment, medical equipment, petroleum distribution, oil and
refining, and food processing. In 1997, the Pump Products Group accounted for
48% of the Company's net sales (58% on a pro forma basis). Approximately 32% of
1997 pro forma net sales in this Group were to customers outside the United
States.
The Engineered Equipment Group designs, manufactures, and sells proprietary
equipment that may combine pumps or other devices into products for industrial,
commercial and safety applications. The products and devices manufactured by
this Group are used in a variety of industries and applications, including
paints and coatings, fire and rescue, transportation equipment, non-electrical
machinery, traffic sign and signal, and oil and refining. In 1997, the
Engineered Equipment Group accounted for 52% of the Company's net sales (42% on
a pro forma basis). Approximately 52% of 1997 pro forma net sales in this Group
were to customers outside the United States.
The principal executive offices of the Company are located at 630 Dundee
Road, Northbrook, Illinois 60062. The telephone number of the Company is (847)
498-7070.
THE IDEX STANDARD
The name IDEX is an acronym for Innovation, Diversity and Excellence, which
together represent the IDEX standard. IDEX applies this standard by following
ethical practices; striving for continuous operational improvement; consistently
seeking to provide superior quality state-of-the-art products; selling its wide
range of products to a broad spectrum of customers and industries throughout the
world; and continually working with end-users and customers to develop new and
redesigned products.
Innovation. IDEX is committed to designing and producing new products and
improved products for its customers. Management estimates that one out of every
ten employees at IDEX is directly engaged in product or process technology
development, and all employees are encouraged to contribute to new product
development. The Company's multidisciplinary teams often work with customers,
end-users, distributors and focus groups in seeking to assure that IDEX products
are state-of-the-art, incorporating the latest proven technology while providing
the best overall value to the customer. Since the year following its formation
in 1988, approximately one-quarter of IDEX's net sales each year have come from
products that had been redesigned or newly introduced in the preceding four
years.
Diversity. IDEX products serve a wide variety of industries, including
chemical processing, paints and coatings, fire and rescue, non-electrical
machinery, water and wastewater treatment, medical equipment, transportation
equipment, oil and refining, petroleum distribution, and food processing. IDEX
sells its products in more than 100 countries with international sales
representing 40% of 1997 pro forma net sales. Management believes that no single
industry accounted for more than approximately 15% of 1997 pro forma net sales
and no single customer accounted for more than approximately 2% of 1997 pro
forma net sales.
S-27
<PAGE> 28
Excellence. IDEX has a dedicated and talented team of employees who are
required to follow a strict code of ethics. IDEX strives to offer the best
overall value to its customers in service, durability, performance, selection,
ease of use, features, productivity, safety, maintenance and long-term costs.
With the exception of the recent Knight acquisition, all of IDEX's manufacturing
locations are certified under the internationally recognized ISO 9000 standards
that have become the worldwide benchmark for quality.
COMPETITIVE STRENGTHS
Market Leadership. Management believes that each of IDEX's ten business
units holds either the number-one or number-two market position in that unit's
niche market. On a weighted average basis, IDEX's 1997 pro forma net sales
represented an approximate 40% share of niche markets served. IDEX believes it
has been able to achieve these market positions by placing the highest priority
on its customers. IDEX strives to respond quickly and efficiently to the needs
of its customers and to supply them with the highest quality products of the
latest design. To achieve this goal, IDEX emphasizes market, product and process
development. Due to its leadership position, IDEX generally has been able to
command a premium price for many of its products.
Profitability and Cash Flow. During the five-year period ended December
31, 1997, IDEX's net sales have grown at a 21% compound annual rate and its
diluted earnings per share from continuing operations have grown at a 22%
compound annual rate. Moreover, IDEX's operating margins have been at least 7
percentage points higher than those of the average industrial company in the
Value Line Industrial Composite Index for each of the years from 1988 through
1997.
Over the last 10 years, including 1997 on a pro forma basis, IDEX borrowed
a total of $580 million under its credit agreements and notes to sellers to
complete 13 strategic acquisitions while its long-term indebtedness increased by
$218 million. This increase would have been $159 million if net after tax
proceeds equal to twice the net book value of Strippit and Vibratech were
realized from their anticipated sale. In addition, during the same period, the
Company's EBIT increased from $27 million to $118 million.
Acquisition Strategy. Since 1989, IDEX has completed 13 strategic
acquisitions, each synergistic and adhering to IDEX's rigorous criteria. Each of
the 10 businesses acquired through 1996 has contributed positively to the
Company's economic performance in the years subsequent to its purchase and
management expects the three acquisitions completed within the last year to
continue this trend. Management believes that the Company's acquisition strategy
has been successful for two primary reasons:
- Identifying Attractive Acquisitions. IDEX's acquisition strategy
focuses on companies that manufacture proprietary engineered products with
leading positions in niche markets. The Company's objective is to seek out
good companies and make them better. In addition, while the Company has
discussions with numerous acquisition candidates each year, it only
consummates those acquisitions that meet its rigid criteria and that
management concludes can be negotiated with appropriate terms and
conditions at a fair price. The Company's acquisition criteria are designed
to promote long-term profitability and cash flow gains rather than simply
revenue growth.
- Successful Integration into the Company Structure. IDEX believes
that the ability to successfully integrate acquired businesses into its
overall structure has resulted in improved financial performance. Following
the acquisition of a company, IDEX implements its financial control
systems. IDEX also analyzes the standard operating procedures of the
acquired company so that the acquired company can benefit from the
successful practices and strategies of IDEX's other business units and the
business units can incorporate the successful practices and strategies of
the acquired company. This "cross pollination" and cooperative improvement
are possible due to the general commonality in the engineering principles,
manufacturing methods, distribution channels and business systems among
IDEX's various business units. This process allows the Company to implement
proven methods and avoid known problems as it integrates a new business
unit.
S-28
<PAGE> 29
International Presence. The potential in international markets has been a
focus of the Company since its inception in 1988, and has been a key factor in
its financial success. Through its market development efforts, the Company sells
its products to customers in over 100 countries worldwide. Approximately 40% of
the Company's 1997 pro forma net sales were to customers outside the United
States (compared with 24% in 1987) and about two-thirds of these pro forma net
sales were attributable to products manufactured in IDEX's plants and facilities
located outside the United States. The Company's international sales growth in
each of the last four years has outpaced domestic sales growth and the Company
expects this trend to continue as a result of the Company's emphasis on
international development.
Established Distribution Network. Most of the Company's products are sold
through well-established, technologically competent industrial distribution
networks. IDEX's distributors receive extensive training and support, and play
an important role in assisting end-users worldwide with product selection and
installation. Additionally, by sharing its application ideas with agents and
distributors around the world, the Company expands the base of industries and
customers it serves.
Dedicated Employees. IDEX believes its success depends on the talent and
performance of its people. The Company's dedicated employees strive for
operational excellence, seek to provide exceptional quality and state-of-the-art
products, and are required to follow a strict code of ethics. The Company
encourages its employees to work openly and continuously with end-users and
customers to improve existing products and develop new ones, thereby instilling
in its employees a commitment to, and pride in, IDEX and the acronym it
exemplifies.
PUMP PRODUCTS GROUP
The Pump Products Group designs, manufactures and sells a wide variety of
industrial pumps and related controls, and low-horsepower compressors for the
movement of liquids, air, and gases. The devices and equipment produced by this
Group are used in a large and diverse set of industries, including chemical
processing, non-electrical machinery, water and wastewater treatment, medical
equipment, petroleum distribution, oil and refining, and food processing. In
1997, the five business units then comprising the Group -- Corken, Micropump,
Pulsafeeder, Viking Pump and Warren Rupp -- accounted for 48% of the Company's
net sales (58% on a pro forma basis). The Company acquired Gast, now part of the
Pump Products Group, on January 21, 1998 for a cash purchase price of
approximately $120 million. Approximately 32% of 1997 pro forma net sales in
this Group were to customers outside the United States.
Corken. Management estimates that Corken has approximately 50% of the U.S.
market for pumps and small horsepower compressors used in liquefied petroleum
gas distribution facilities. Corken produces low-horsepower compressors, vane
and turbine pumps, and valves used for the transfer of liquefied petroleum gas,
compressed natural gas and other gaseous substances. Most of Corken's sales are
made through domestic and international distributors, and they often incorporate
Corken's products into engineered packages sold to end-users. Approximately 45%
of Corken's 1997 net sales were to customers outside the United States. Corken,
which was acquired by IDEX in 1991, is based in Oklahoma City, Oklahoma.
Gast. Gast is one of the world's leading manufacturers of an extensive and
versatile line of air-moving products, including vacuum pumps, air motors,
vacuum generators, regenerative blowers and fractional horsepower compressors.
Gast is headquartered in Benton Harbor, Michigan, with an assembly facility in
England. Founded in 1921, Gast had 1997 net sales of approximately $105 million.
Approximately 17% of Gast's 1997 net sales were to customers outside the United
States. Management believes that Gast has a leading position with an estimated
one-third U.S. market share in air motors, low and medium range vacuum pumps,
and rotary and diaphragm fractional horsepower compressors.
Micropump. Micropump is, according to management estimates, the leader in
corrosion-resistant, magnetically-driven miniature pump technology with an
estimated 40% U.S. market share. Micropump's products include pumps and fluid
management systems for low-flow abrasive and corrosive applications such as
inks, dyes, solvents, chemicals, petrochemicals, acids and chlorides. Micropump
products are used in a variety of industries including chemical processing,
laboratory, medical, printing, electronics, pulp and paper, water treatment and
textiles. Approximately 45% of Micropump's 1997 net sales were to customers
outside
S-29
<PAGE> 30
the United States. Micropump, which was acquired by IDEX in 1995, has its
headquarters and principal manufacturing facility in Vancouver, Washington, and
also conducts operations in England.
Pulsafeeder. Management estimates that Pulsafeeder has approximately 40%
of the U.S. market for metering pumps used in the process industries and water
treatment markets. Pulsafeeder designs and markets a wide range of metering
pumps, dispensing equipment and controllers. These products regulate precisely
the flow of liquids in mixing, blending and injection applications. Primary
markets served are water conditioning and wastewater treatment, chemical and
hydrocarbon processing, food processing, chemical metering and institutional
warewash. Pulsafeeder products are grouped into three categories: engineered
pumps, standard pumps and electronic controls. Engineered pumps include positive
displacement, hydraulically-actuated diaphragm pumps used in precise metering
applications, as well as specialty pumps targeted at niche markets. Standard
pumps include lower-priced metering pumps designed for water treatment and water
conditioning applications. Electronic controls are of microprocessor-based
design and are used to control the chemical composition of fluids being pumped.
Pulsafeeder products are sold through an extensive distribution network, which
includes company sales personnel, distributors and independent representatives,
and an estimated 25% of its 1997 net sales were to customers outside the United
States. Pulsafeeder, which was acquired by IDEX in 1992, is headquartered in
Rochester, New York with an additional manufacturing facility in Punta Gorda,
Florida, and has sales offices in Singapore and China.
In December 1997, IDEX acquired Knight for a cash purchase price of
approximately $38 million. The business will continue to operate as Knight,
Inc., but administratively will function as part of Pulsafeeder. Knight is a
leading manufacturer of pumps and dispensing equipment for the commercial
dishwashing, industrial laundry and chemical metering markets, with 1997 net
sales of approximately $25 million, of which approximately 50% were to customers
outside the United States. In addition, Knight manufactures a variety of pumps
and electronic controls for industrial applications. Management believes that
Knight has a leading position worldwide in commercial dishwashing and
liquid-laundry systems, with an estimated 35% U.S. market share. In addition to
its headquarters and manufacturing facility in Costa Mesa, California, Knight
has manufacturing locations in Georgia, Australia, Canada, England and the
Netherlands.
Viking Pump. Viking Pump is one of the world's largest manufacturers of
positive displacement rotary gear pumps. Management believes that Viking pumps
represent approximately 35% of the U.S. rotary gear pump market. Viking's other
products include rotary lobe and metering pumps, speed reducers, flow dividers
and basket-type line strainers. Viking pumps are used by numerous industries
such as the chemical, petroleum, food, pulp and paper, machinery and
construction industries. Sales of Viking pumps and replacement parts are made
through approximately 100 independent distributors and directly to original
equipment manufacturers. Approximately 35% of Viking's 1997 net sales were to
customers outside the United States. In addition to its facilities in Cedar
Falls, Iowa, Viking also maintains manufacturing facilities in England, Canada
and Ireland, and has sales offices in the Netherlands, Singapore, Mexico, Canada
and China. Viking operates two foundries in Cedar Falls, Iowa which supply a
majority of Viking's castings requirements. In addition, these foundries sell a
variety of castings to outside customers.
Warren Rupp. Warren Rupp is a producer of air-operated and motor-driven
double-diaphragm pumps. Management believes that Warren Rupp has approximately
one-third of the U.S. market for air-operated double-diaphragm pumps. Blagdon
Pump, the U.K.-based manufacturer of air-operated diaphragm pumps acquired by
IDEX in April 1997, is operated as part of Warren Rupp. Warren Rupp's pumps are
well suited for pumping liquids, slurries and solids in suspension. End-user
markets include the paint, chemical, mining, construction, and automotive
service industries. Warren Rupp pumps are sold through a network of independent
distributors and directly to a small number of original equipment manufacturers.
Sales to customers outside the United States represented approximately 50% of
Warren Rupp's 1997 net sales. Warren Rupp is headquartered in Mansfield, Ohio,
and has a distribution and assembly facility in Ireland and a sales office in
Singapore. Blagdon Pump has a manufacturing facility in England to serve the
European market and a sales office in Singapore.
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<PAGE> 31
ENGINEERED EQUIPMENT GROUP
The Engineered Equipment Group designs, manufactures and sells proprietary
equipment that may combine pumps or other devices into products for industrial,
commercial and safety applications. The products and devices manufactured by
these business units are used in a variety of industries and applications,
including paints and coatings, fire and rescue, transportation equipment,
non-electrical machinery, traffic sign and signal, and oil and refining. In
1997, the four business units comprising this Group -- Band-It, Fluid
Management, Hale and Lubriquip -- accounted for 52% of the Company's net sales
(42% on a pro forma basis). Approximately 52% of this Group's 1997 net sales
were to customers outside the United States.
Band-It. Band-It, headquartered in Denver, Colorado, is one of the world's
largest manufacturers of stainless steel bands, buckles and preformed clamps and
related installation tools. Its products include stainless steel bands and
clamps for various municipal, commercial and industrial applications and road,
traffic and commercial sign-mounting systems. Management believes that Band-It
has approximately 50% of the U.S. market for quality stainless steel bands and
buckles. Its clamps are used to secure hoses to nipples, devices to pipes and
poles, signs to sign standards, fences to posts, insulation to pipes and for
hundreds of other industrial clamping functions. Band-It also has developed an
exclusive line of tools for installing its band, buckle and preformed clamps.
Band-It's Signfix operating division, acquired by IDEX in 1993, is the leading
U.K.-based manufacturer of sign-mounting devices and related equipment with an
estimated 45% U.K. market share. Band-It markets its products domestically and
internationally. It has manufacturing and distribution facilities in three
locations in England, as well as in Germany and Singapore to serve the European
and Far East markets. International sales accounted for approximately 60% of
Band-It's 1997 net sales. Its products are sold through a worldwide network of
over 4,500 distributors to a wide range of markets, including the
transportation, commercial and governmental signage, utilities, mining, oil and
gas, industrial maintenance, construction, communication and electronics
industries.
Fluid Management. Fluid Management is the world's leading manufacturer of
dispensing and mixing equipment that precisely meters and mixes a wide variety
of liquids including paints, colorants, inks, dyes and other liquids and pastes.
Management believes Fluid Management has a 50% worldwide share in its niche
market. Its products can be found in local paint and building supply stores,
paint plants, vehicle manufacturing facilities and other locations where fluids
are dispensed and mixed in precise volumes. Fluid Management, which was acquired
by IDEX in 1996, has manufacturing facilities in Wheeling, Illinois, the
Netherlands and Australia, with sales and distribution facilities worldwide.
Approximately 55% of its 1997 net sales were to customers outside the United
States.
Hale. Hale, acquired by IDEX in 1994, is the world's leading manufacturer
of truck-mounted fire-fighting pumps and also manufactures a wide range of
portable, mobile and freestanding pump units. In addition, Hale is the world's
leading manufacturer of rescue tool systems with the Hurst Jaws of Life(R) and
Lukas(R) rescue systems. Lukas, headquartered in Germany, was acquired by IDEX
in 1995. Hale is estimated to have a worldwide market share for truck-mounted
fire-fighting pumps and rescue systems in excess of 50%. Sales of Hale's
truck-mounted fire-fighting pumps are made directly to manufacturers of fire
trucks, while portable pumps and rescue tools are generally sold through
independent distributors. Approximately 55% of Hale's 1997 net sales were to
customers outside the United States. Hale has its headquarters and a
manufacturing facility in Conshohocken, Pennsylvania. It also has production
facilities in North Carolina, Tennessee, England and Germany and service and
distribution centers in Germany and Singapore.
Lubriquip. Lubriquip is, according to management estimates, the largest
U.S. manufacturer of centralized oil and grease lubrication systems and
force-feed lubricators, with approximately one-third of the U.S. market for its
type of products. Lubriquip's lubrication system components include pumps and
pump packages for pneumatic, mechanical, electric and hydraulic operations,
metering devices, electronic controllers, monitors and timers, and accessories.
These systems are sold through a variety of sales channels, including
independent distributors, to a wide range of industrial markets including
machine tools (both automotive and general purpose), chemical processing,
construction equipment, food processing machinery, engine and compressor,
railroad, and over-the-road truck industries. Lubriquip's products are available
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<PAGE> 32
worldwide through over 100 independent distributors, with international sales
representing approximately 20% of its 1997 net sales. Lubriquip, headquartered
in Warrensville Heights, Ohio, also has manufacturing plants in Pennsylvania and
Wisconsin and has sales offices in Belgium and Singapore.
DISCONTINUED OPERATIONS
In December 1997, the Company announced its intention to divest its
Strippit and Vibratech businesses because management concluded that they no
longer fit the profile of the Company's other business units or its acquisition
strategy. These two business units generated 1997 net sales and EBIT of
approximately $84 million and $9 million, respectively. Strippit, which produces
computer-controlled turret punch presses, laser cutting machinery and related
tooling used in metal fabrication, and Vibratech, which makes engineered
motion-damping products used in diesel and motor sport engines, rail cars,
off-road vehicles and other applications, both serve higher-ticket capital goods
markets that tend to be more cyclical than the markets served by IDEX's other
businesses. IDEX anticipates that these divestitures will allow resources
formerly allocated to Strippit and Vibratech to be used by IDEX for development
of positions in areas more consistent with its present strategy. Strippit and
Vibratech have been treated as discontinued operations in the Company's 1997
Consolidated Financial Statements.
COMPETITORS
The Company's businesses are highly competitive in most product lines.
Generally, all of the Company's businesses compete on the basis of performance,
quality, service and price.
Principal competitors of the businesses in the Pump Products Group are the
Blackmer division of Dover Corporation (with respect to rotary gear pumps and
pumps and small horsepower compressors used in liquefied petroleum gas
distribution facilities); Milton Roy, a unit of Sundstrand Corporation (with
respect to metering pumps and controls); Roper Industries (with respect to
rotary gear pumps); Wilden Pump and Engineering Co. (with respect to
air-operated double-diaphragm pumps); Tuthill Corporation (with respect to
rotary gear pumps); and Thomas Industries (with respect to vacuum pumps and
compressors).
The principal competitors of the Engineered Equipment Group are the
Waterous Company, a subsidiary of American Cast Iron Pipe Company (with respect
to truck-mounted fire-fighting pumps); Corob North America (with respect to
dispensing and mixing equipment for the paint industry); A.J. Gerrard (with
respect to stainless steel bands, buckles and tools); and Lincoln, a unit of
Pentair Corporation (with respect to centralized lubrication systems).
EMPLOYEES
At December 31, 1997, IDEX had approximately 3,800 employees (approximately
4,000 on a pro forma basis), of which approximately 500 were employed by the
Company's discontinued operations. On a pro forma basis approximately 16% were
represented by labor unions with various contracts expiring through December
2000. Management believes that the Company's relationship with its employees is
good. The Company has historically been able to satisfactorily renegotiate its
collective bargaining agreements with its last work stoppage in March 1993.
SUPPLIERS
IDEX manufactures many of the parts and components used in its products.
Substantially all materials, parts and components purchased by IDEX are
available from multiple sources.
INVENTORY AND BACKLOG
Backlogs do not have material significance in either of the Company's
business segments. The Company regularly and systematically adjusts production
schedules and quantities based on the flow of incoming orders. Backlogs are
therefore typically limited to approximately 1 to 1 1/2 months' sales. While
total inventory levels may also be affected by changes in orders, the Company
generally tries to maintain relatively stable inventory levels based on its
assessment of the requirements of the various industries served.
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<PAGE> 33
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, their ages as of
January 15, 1998, years of service and their positions with the Company are as
follows:
<TABLE>
<CAPTION>
YEARS OF
NAME AGE SERVICE(1) POSITION
---- --- ---------- --------
<S> <C> <C> <C>
Donald N. Boyce...................... 59 28 Chairman of the Board and Chief Executive
Officer
Frank J. Hansen...................... 56 22 President, Chief Operating Officer and
Director
Wayne P. Sayatovic................... 51 25 Senior Vice President--Finance, Chief
Financial Officer and Secretary
Jerry N. Derck....................... 51 5 Vice President--Human Resources
David T. Windmuller.................. 40 17 Vice President--Operations
James R. Fluharty.................... 54 7 Vice President--Corporate Marketing and
President, Fluid Management
P. Peter Merkel, Jr.................. 64 25 Vice President--Group Executive and
President, Band-It
Dennis L. Metcalf.................... 50 24 Vice President--Corporate Development
Wade H. Roberts, Jr.................. 51 7 Vice President--Group Executive and
President, Hale
Rodney L. Usher...................... 52 17 Vice President--Group Executive and
President, Pulsafeeder
Clinton L. Kooman.................... 54 33 Controller
Douglas C. Lennox.................... 45 18 Treasurer
Richard E. Heath..................... 67 9 Director
Henry R. Kravis...................... 54 10 Director
William H. Luers..................... 68 9 Director
Paul E. Raether...................... 51 10 Director
Clifton S. Robbins................... 39 10 Director
George R. Roberts.................... 54 10 Director
Neil A. Springer..................... 59 8 Director
Michael T. Tokarz.................... 48 10 Director
</TABLE>
(1) The years of service for executive officers include the period prior to
acquisition by IDEX or with IDEX's predecessor company.
Mr. Boyce was elected Chairman of the Board, President and Chief Executive
Officer of the Company on January 22, 1988, the date of the Company's
acquisition of its six original operating subsidiaries from Houdaille
Industries, Inc. On January 1, 1998, Mr. Hansen assumed the title of President
from Mr. Boyce with Mr. Boyce continuing as Chairman of the Board and Chief
Executive Officer. Mr. Boyce is a director of United Dominion Industries Ltd.
and Metromail Corporation.
Mr. Hansen has served as President, Chief Operating Officer and Director of
the Company since January 1998. Previously, he served as Senior Vice
President--Operations and Chief Operating Officer from August 1994 to December
1997. Mr. Hansen was Vice President--Group Executive of the Company from January
1993 to July 1994. From 1989 to July 1994, Mr. Hansen was President of Viking
Pump. Mr. Hansen is a director of Gardner Denver Machinery, Inc.
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<PAGE> 34
Mr. Sayatovic has been Senior Vice President--Finance, Chief Financial
Officer and Secretary of the Company since August 1994. Mr. Sayatovic was Vice
President--Finance, Chief Financial Officer and Secretary from January 1992 to
July 1994, and he was Vice President, Treasurer and Secretary from January 1988
to December 1991.
Mr. Derck has been Vice President--Human Resources of the Company since
November 1992.
Mr. Windmuller has served as Vice President--Operations of the Company
since January 1998. Previously, Mr. Windmuller was President of Fluid Management
from January 1997 to December 1997. From July 1994 to December 1996, Mr.
Windmuller served as President of Viking Pump, and from May 1993 to June 1994 as
Executive Vice President of Viking Pump. Mr. Windmuller served as Vice
President--Engineering of Viking Pump from November 1991 to April 1993.
Mr. Fluharty has served as Vice President--Corporate Marketing of the
Company since March 1997 and as President of Fluid Management since January
1998. From April 1996 to February 1997, Mr. Fluharty was President of Micropump.
Previously, Mr. Fluharty served as President of John Crane North America from
May 1993 to March 1996, as Executive Vice President of Viking Pump from May 1992
to April 1993, and Vice President-Marketing of Viking Pump from 1988 to April
1992.
Mr. Merkel has been Vice President--Group Executive of the Company since
October 1995 and Chairman of Band-It since January 1998. He was President of
Band-It from March 1978 to December 1997.
Mr. Metcalf has served as Vice President--Corporate Development of the
Company since March 1997. Mr. Metcalf was Director of Business Development of
the Company from March 1991 to February 1997.
Mr. Wade Roberts has been Vice President--Group Executive of the Company
since January 1993 and President of Hale since May 1994. Mr. Roberts served as
President of Strippit from September 1990 to April 1994.
Mr. Usher has been Vice President--Group Executive of the Company since
August 1997 and President of Pulsafeeder since August 1994. From 1986 to July
1994, Mr. Usher served as President of Warren Rupp.
Mr. Kooman has been Controller of the Company since November 1995. Mr.
Kooman served as Assistant Controller of Manufacturing Accounting from January
1988 to October 1995.
Mr. Lennox has served as Treasurer of the Company since November 1995. From
April 1991 to October 1995, Mr. Lennox was Vice President--Controller of
Lubriquip. Mr. Lennox was Assistant Controller of Financial Accounting from
January 1988 to March 1991.
Mr. Heath has been a director of the Company since June 1989. Mr. Heath has
been a senior partner of the law firm Hodgson, Russ, Andrews, Woods & Goodyear
since prior to 1993.
Mr. Kravis has been a director of the Company since January 1988. Mr.
Kravis has been a managing member of the limited liability company which acts as
the general partner of Kohlberg Kravis Roberts & Co. ("KKR") since January 1996.
Mr. Kravis is a general partner of KKR Associates and was a general partner of
KKR from its organization in 1976 to December 1995. Mr. Kravis is a director of
Accuride Corporation, Amphenol Corporation, Borden, Inc., Bruno's, Inc., Evenflo
& Spalding Holdings Corporation, KinderCare Learning Centers, Inc., Merit
Behavioral Care Corporation, Newsquest Capital, PLC, Owens-Illinois, Inc.,
Owens-Illinois Group, Inc., Primedia, Inc., Safeway, Inc., Sotheby's Holding,
Inc., The Gillette Company, Union Texas Petroleum Holdings, Inc., and World
Color Press, Inc.
Mr. Luers has been a director of the Company since June 1989. Mr. Luers has
been President of the Metropolitan Museum of Art in New York, New York since
prior to 1993. Formerly, he served as Ambassador to Czechoslovakia and
Venezuela. Mr. Luers has written extensively for newspapers and magazines on the
former Soviet Union and Eastern Europe, on East/West relations and on Latin
America. He serves on the boards of The Scudder Brazil Fund, Inc., The Scudder
New Europe Fund, Inc., The Scudder Global/International Funds, Inc. and Wickes
Lumber Co.
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<PAGE> 35
Mr. Raether has been a director of the Company since January 1988. Mr.
Raether has been a member of the limited liability company which acts as the
general partner of KKR since January 1996. Mr. Raether has been a general
partner of KKR Associates since prior to 1993 and was a general partner of KKR
from prior to 1993 to December 1995. Mr. Raether is a director of Bruno's, Inc.
Mr. Robbins has been a director of the Company since September 1987. Mr.
Robbins has been a member of the limited liability company which acts as the
general partner of KKR since January 1996. He has been a general partner of KKR
Associates since December 1994 and was a general partner of KKR from December
1994 to December 1995. From prior to 1993 to December 1994 he was an executive
of KKR and a limited partner of KKR Associates. Mr. Robbins is a director of AEP
Industries, Inc., Borden, Inc., Borden Chemicals & Plastics, L.P., KinderCare
Learning Centers, Inc., and Newsquest Capital, PLC.
Mr. George Roberts has been a director of the Company since January 1988.
Mr. Roberts has been a managing member of the limited liability company which
acts as the general partner of KKR since January 1996. He was a general partner
of KKR from its organization in 1976 to December 1995. Mr. Roberts is a director
of Accuride Corporation, Amphenol Corporation, Borden, Inc., Bruno's Inc.,
Evenflo & Spalding Holdings Corporation, KinderCare Learning Centers, Inc.,
Merit Behavioral Care Corporation, Owens-Illinois, Inc., Owens-Illinois Group,
Inc., Primedia, Inc., Safeway, Inc., Union Texas Petroleum Holdings, Inc., and
World Color Press, Inc. Mr. Roberts and Mr. Kravis are first cousins.
Mr. Springer has been a director of the Company since February 1990. Mr.
Springer has been Managing Director of Springer Souder & Associates, L.L.C.
since June 1994. From September 1992 to May 1994 he was Senior Vice President of
Slayton International, Inc. and from August 1991 to August 1992 he was
President-Central Region of Alexander Proudfoot Company. Mr. Springer is a
director of CUNA Mutual Insurance Group, Dorsey Trailer, Inc., and Freightways
Corporation.
Mr. Tokarz has been a director of the Company since September 1987. Mr.
Tokarz has been a member of the limited liability company which acts as the
general partner of KKR since January 1996. He has been a general partner of KKR
Associates since January 1993 and was a general partner of KKR from January 1993
to December 1995. From prior to 1993 he was an executive of KKR and a limited
partner of KKR Associates. Mr. Tokarz is a director of Evenflo & Spalding
Holdings Corporation, Primedia, Inc., Safeway, Inc., and Walter Industries, Inc.
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<PAGE> 36
DESCRIPTION OF CREDIT FACILITIES
In July 1996, the Company entered into a multicurrency, amended and
restated revolving credit facility with Bank of America National Trust and
Savings Association (the "Bank Agent"), in its individual capacity and as agent
for the other banks named therein (the "U.S. Credit Facility"), which currently
provides for a maximum availability of $250 million. The maximum availability
under the U.S. Credit Facility declines in stages commencing July 1, 1999, and
will be $200 million at July 1, 2000. Any amount outstanding at July 1, 2001
will become due and payable at that date. At December 31, 1997, $132.5 million
was outstanding, which includes a Netherlands guilder borrowing of NGL 82.0
million ($40.5 million) which provides an economic hedge against the net
investment in Fluid Management's Netherlands operation. At December 31, 1997,
interest on outstanding borrowings is payable quarterly at a rate based on the
Bank Agent's reference rate or, at the Company's election, at a rate based on
LIBOR plus 25 basis points per annum. The weighted average interest rate on
outstanding borrowings under the U.S. Credit Facility was 5.75% per annum at
December 31, 1997. In addition, a facility fee equal to 15 basis points per
annum is payable quarterly on the entire $250 million available under the U.S.
Credit Facility. On January 20, 1998 and February 6, 1998, the Company amended
the U.S. Credit Facility in order to: (i) permit the issuance of the Notes
offered hereby, (ii) terminate the subsidiary guarantees and the pledge of the
stock and intercompany notes of such subsidiaries in favor of the banks under
the U.S. Credit Facility, and (iii) permit the redemption of the Senior
Subordinated Notes.
In September 1996, the Company entered into a $10 million demand line of
credit with the Bank Agent (the "Short-Term Facility"), which the Company
renewed in June 1997, for short-term borrowing requirements. To complete the
Gast acquisition in January 1998, IDEX and the Bank Agent amended the Short-Term
Facility to provide for a temporary increase to $50 million for up to 60 days,
after which time the maximum line of credit returns to $10 million.
Approximately $30 million of the line of credit was used by the Company to fund
the Gast acquisition, and at December 31, 1997 there was $5 million of
availability under the Short-Term Facility. Interest under the Short-Term
Facility is payable at the Bank Agent's reference rate, or at an optional rate
based on the Bank Agent's cost of funds and the interest rate at December 31,
1997 was 6.375% per annum.
Lukas, a German subsidiary of the Company, is the borrower under a credit
agreement (the "German Facility"), with respect to which IDEX is the guarantor.
In May 1997, Lukas negotiated an amendment to the German Facility, improving the
interest rate structure and eliminating certain reductions in availability. At
December 31, 1997, the maximum amount available under the German Facility was DM
52.5 million ($29.2 million), of which DM 52.0 million ($28.9 million) was
outstanding. The borrowings provide an economic hedge against the net investment
in the Lukas operation. The availability under the German Facility declines in
stages commencing November 1, 1999, to DM 31.3 million at November 1, 2000. Any
amount outstanding at November 1, 2001 becomes due and payable at that date.
Interest is payable quarterly on the outstanding balance at LIBOR plus an
applicable margin, which was 62.5 basis points at December 31, 1997.
The U.S. Credit Facility contains certain covenants binding on the Company
and its subsidiaries, including without limitation, restrictions and limitations
relating to the incurrence of liens, paying cash dividends, repaying any
subordinated indebtedness, disposition of assets, consolidation and mergers,
loans and investments, transactions with affiliates, incurrence of indebtedness
and contingent obligations, changes in business, accounting changes,
sale-leasebacks, entry into negative pledges and subsidiary payments
restrictions, and foreign operations. The U.S. Credit Facility also contains
certain financial covenants, including, without limitation, a minimum fixed
charge coverage ratio, a maximum leverage ratio and a maximum funded debt to
EBITDA ratio.
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<PAGE> 37
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby (referred to elsewhere in the accompanying Prospectus as the "Debt
Securities") supplements the description of the general terms and provisions of
the Debt Securities set forth in the accompanying Prospectus, to which
description reference is hereby made. Reference should be made to the
accompanying Prospectus and the Indenture under which the Notes will be issued
for the definitions of certain capitalized terms used herein. The Notes will be
issued under an Indenture dated as of February , 1998 (the "Indenture") between
the Company and Norwest Bank Minnesota, National Association, as Trustee.
GENERAL
References to the "Company" in this section, unless the context indicates
otherwise, are to IDEX Corporation and its Subsidiaries. The Notes will mature
on , 2008, and will be limited to $150,000,000 aggregate principal
amount. Each Note will bear interest at the rate per annum stated on the cover
page hereof from the date of issuance or from the most recent interest payment
date to which interest has been paid, payable semi-annually on and
of each year (each such date being referred to herein as an "Interest
Payment Date"), commencing , 1998, to the person in whose name a Note is
registered at the close of business on or , as the case may be,
next preceding such Interest Payment Dates. Interest on the Notes will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
The Notes will be unsecured and will be pari passu with all other unsecured
and unsubordinated indebtedness of the Company. However, because the Company is
a holding company which conducts substantially all of its operations through
subsidiaries, the right of the Company, and hence the right of creditors of the
Company (including the holders of the Notes), to participate in any distribution
of the assets of any subsidiary upon its liquidation or reorganization or
otherwise is necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that claims of the Company itself as a creditor
of the subsidiary may be recognized.
The Indenture provision described under "Description of Debt
Securities -- Defeasance of Debt Securities and Certain Covenants in Certain
Circumstances" in the accompanying Prospectus will be applicable to the Notes.
The Indenture does not contain any covenants or other provisions applicable to
the Notes which might afford beneficial owners of Notes protection in the event
of a recapitalization or highly leveraged transaction, change in credit quality
of the Company or other similar occurrence.
The Notes will not be entitled to any sinking fund.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Company, in
whole or from time to time in part, at a redemption price equal to the sum of
(i) the principal amount of the Notes being redeemed and accrued interest
thereon to the redemption date and (ii) the Make-Whole Amount (as defined
below), if any, with respect to such Notes (the "Redemption Price").
If the notice of redemption has been given as provided in the Indenture and
funds for the redemption of any Notes called for redemption have been made
available on the redemption date referred to in such notice, such Notes will
cease to bear interest on the date fixed for such redemption specified in such
notice and the only right of the Holders of the Notes from and after the
redemption date will be to receive payment of the Redemption Price upon
surrender of such Notes in accordance with such notice.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the security register for the Notes, not more than
60 nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Notes held by such Holder to be redeemed.
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<PAGE> 38
If less than all the Notes are to be redeemed at the option of the Company,
the Company will notify the Trustee at least 45 days prior to giving notice of
redemption (or such shorter period as may be satisfactory to the Trustee) of the
aggregate principal amount of Notes to be redeemed and their redemption date.
The Trustee shall select, in such manner as it may deem fair and appropriate,
Notes to be redeemed in whole or in part.
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption of
any Notes, the excess, if any, of (i) the aggregate present value as of the date
of such redemption of each dollar of principal being redeemed and the amount of
interest (exclusive of interest accrued to the date of redemption) that would
have been payable in respect of each such dollar if such redemption had not been
made, determined by discounting, on a semi-annual basis, such principal and
interest at the Reinvestment Rate (determined on the third business day
preceding the date notice of such redemption is given) from the respective dates
on which such principal and interest would have been payable if such redemption
had not been made, to the date of redemption over (ii) the aggregate principal
amount of the Notes being redeemed.
"Reinvestment Rate" means the yield on treasury securities at a constant
maturity corresponding to the remaining life (as of the date of redemption, and
rounded to the nearest month) to Stated Maturity of the principal being redeemed
(the "Treasury Yield"), plus .25%. For purposes hereof, the Treasury Yield shall
be equal to the arithmetic mean of the yields published in the Statistical
Release under the heading "Week Ending" for "U.S. Government
Securities -- Treasury Constant Maturities" with a maturity equal to such
remaining life; provided, that if no published maturity exactly corresponds to
such remaining life, then the Treasury Yield shall be interpolated or
extrapolated on a straight line basis from the arithmetic mean of the yields for
the next shortest and/or next longest published maturities, as applicable,
rounding each of such relevant periods to the nearest month. For purposes of
calculating the Reinvestment Rate, the most recent Statistical Release published
prior to the date of determination of the Make-Whole Amount shall be used. If
the format or content of the Statistical Release changes in a manner that
precludes determination of the Treasury Yield in the above manner, then the
Treasury Yield shall be determined in the manner that most closely approximates
the above manner, as reasonably determined by the Company.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which reports yield on actively traded United States government
securities adjusted to constant maturities, or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Company.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest will be made by the
Company in immediately available funds. The Notes will trade in the Depositary's
Same-Day Funds Settlement System until maturity, and secondary market trading
activity in the Notes will therefore be required by The Depository Trust Company
(the "Depositary") to settle in immediately available funds.
GLOBAL NOTES
The Company has established a depositary arrangement with the Depositary
with respect to the Notes, the terms of which are summarized below.
Upon issuance, all Notes will be represented by Global Notes. The Global
Notes representing the Notes will be deposited with, or on behalf of, the
Depositary and will be registered in the name of the Depositary or a nominee of
the Depositary. No Global Notes may be transferred except as a whole by a
nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or such nominee to a successor of the
Depositary or a nominee of such successor.
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So long as the Depositary or its nominee is the registered owner of a
Global Note, the Depositary or its nominee, as the case may be, will be the sole
Holder of the Notes represented thereby for all purposes under the Indenture.
Except as otherwise provided in this section, the Beneficial Owners (as defined
below) of the Global Notes representing the Notes will not be entitled to
receive physical delivery of certificated Notes and will not be considered the
holders thereof for any purpose under the Indenture, and no Global Note
representing the Notes shall be exchangeable or transferable. Accordingly, each
Beneficial Owner must rely on the procedures of the Depositary and, if such
Beneficial Owner is not a Participant, on the procedures of the Participant
through which such Beneficial Owner owns its interest in order to exercise any
rights of a Holder under such Global Note or the Indenture. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. Such limits and such laws may
impair the ability to transfer beneficial interests in a Global Note
representing the Notes.
The Global Notes representing the Notes will be exchangeable for
certificated Notes of like tenor and terms and of differing authorized
denominations aggregating a like principal amount, only if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Notes, (ii) the Depositary ceases to be a clearing agency
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (iii) the Company in its sole discretion determines that the Global Notes
shall be exchangeable for certificated Notes or (iv) there shall have occurred
and be continuing an Event of Default under the Indenture with respect to the
Notes. Upon any such exchange, the certificated Notes shall be registered in the
names of the Beneficial Owners of the Global Notes representing the Notes, which
names shall be provided by the Depositary's relevant Participants (as identified
by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Notes. The
Notes will be issued as fully registered securities registered in the name
of Cede & Co. (the Depositary's partnership nominee). Fully registered
Global Notes will be issued for the Notes, in the aggregate principal
amount of such issue, and will be deposited with the Depositary.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary
also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes to Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants of the Depositary ("Direct Participants")
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Securities and Exchange Commission (the
"Commission").
Purchases of Notes under the Depositary's system must be made by or
through Direct Participants, which will receive a credit for such Notes on
the Depositary's records. The ownership interest of each actual purchaser
of each Note represented by a Global Note ("Beneficial Owner") is in turn
to be recorded on the Direct and Indirect Participants' records. Beneficial
Owners will not receive written confirmation from the Depositary of their
purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participants
through which such Beneficial Owner entered into the transaction. Transfers
of ownership interests in the Global Notes representing the Notes are to be
accomplished by entries made on the books of Participants acting on behalf
of Beneficial Owners. Beneficial Owners of the
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Global Notes representing the Notes will not receive certificated Notes
representing their ownership interests therein, except in the event that
use of the book-entry system for such Notes is discontinued.
To facilitate subsequent transfers, all Global Notes representing the
Notes which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit
of Global Notes with, or on behalf of, the Depositary and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners
of the Global Notes representing the Notes; the Depositary's records
reflect only the identity of the Direct Participants to whose accounts such
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the Global Notes representing the Notes. Under its usual
procedure, the Depositary mails an Omnibus Proxy to the Company as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Notes are credited on the applicable record date (identified
in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on the
Global Notes representing the Notes will be made to the Depositary. The
Depositary's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings shown
on the Depositary's records unless the Depositary has reason to believe
that it will not receive payment on such date. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of the Depositary, the Trustee
or the Company, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal, premium, if any,
and/or interest, if any, to the Depositary is the responsibility of the
Company or the Trustee, disbursement of such payments to Direct
Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
The Depositary may discontinue providing its services as securities
depository with respect to the Notes at any time by giving reasonable
notice to the Company or the Trustee. Under such circumstances, in the
event that a successor securities depositary is not obtained, certificated
Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depositary). In
that event, certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company assumes no responsibility for the accuracy thereof.
A further description of the Depositary's procedures with respect to the
Global Notes representing the Notes is set forth in the accompanying Prospectus
under "Transfer and Exchange -- Global Debt Securities and Book-Entry System."
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CERTAIN COVENANTS
Under the Indenture, the Company has agreed that it will not engage in
certain transactions, as described below.
Limitation on Secured Debt. The Company will not, nor will it permit its
Subsidiaries to, create or incur any Secured Debt without in either case
effectively providing that the Notes (together with, if the Company shall so
determine, any other Debt of or guaranteed by the Company ranking equally with
the Notes) shall be secured equally and ratably with (or, at the option of the
Company, prior to) such Secured Debt, with certain stated exceptions. These
exceptions permit (a) Secured Debt (i) in respect of Liens on property existing
at the time such property is acquired by the Company or a Subsidiary, (ii) in
respect of Liens created upon or within 120 days following the acquisition or
construction of property (including any improvements to existing property) to
secure the payment of all or part of the purchase price thereof, or (iii)
incurred by the Company or a Subsidiary prior to, at the time of or within 120
days following the acquisition of property which is or becomes subject to a Lien
related to such acquisition, which Secured Debt is incurred for the purpose of
financing all or part of the purchase price thereof, provided that no such Lien
applies to any property theretofore owned by the Company or a Subsidiary
(including property transferred by the Company to any subsidiary of the Company
in contemplation of or in connection with the creation of such Lien) or to any
property of the Company or a Subsidiary other than the property so acquired
(other than, in the case of construction or improvement, any theretofore
unimproved real property or portion thereof on which the property so
constructed, or the improvement, is located); (b) Secured Debt in respect of
Liens on property of a Person (i) existing at the time such Person is merged
into or consolidated with the Company or a Subsidiary or at the time of a sale,
lease or other disposition of the properties of a Person as an entirety or
substantially as an entirety to the Company or a Subsidiary, (ii) resulting from
such merger, consolidation, sale, lease or disposition by virtue of any Lien on
property granted by the Company or a Subsidiary prior to such merger,
consolidation, sale, lease or disposition (and not in contemplation thereof or
in connection therewith) which applies to after-acquired property of the Company
or a Subsidiary or (iii) resulting from such merger, consolidation, sale, lease
or disposition pursuant to a Lien or contractual provision granted or entered
into by such Person prior to such merger, consolidation, sale, lease or
disposition (and not at the request of the Company); provided, however, that any
such Lien referred to in clause (i) shall not apply to any property of the
Company or a Subsidiary other than the property subject thereto at the time such
Person or properties were acquired and any such Lien referred to in clause (ii)
or (iii) shall not apply to any property of the Company or a Subsidiary other
than the property so acquired; (c) Liens existing at the date of the Indenture;
(d) Liens in favor of a government or governmental entity to secure partial
progress, advance or other payments, or other obligations, or to secure any Debt
incurred for the purpose of financing all or any part of the cost of acquiring,
constructing or improving the property subject thereto (including, without
limitation, Liens incurred in connection with industrial revenue, pollution
control, private activity bond or similar financing); (e) Liens arising by
reason of deposits with, or the giving of any form of security to, any
governmental agency or any body created or approved by law or governmental
regulation, which Lien is required by law or governmental regulation as a
condition to the transaction of any business or the exercise of any privilege,
franchise, license or permit; (f) Liens for taxes, assessments or governmental
charges or levies not yet delinquent or governmental charges or levies already
delinquent, the validity of which charge or levy is being contested in good
faith and for which any reserves required in accordance with generally accepted
accounting principles have been established; (g) Liens (including judgment
liens) arising in connection with legal proceedings so long as such proceedings
are being contested in good faith and, in the case of judgment liens, execution
thereon is stayed and for which any reserves required in accordance with
generally accepted accounting principles have been established; and (h) Secured
Debt secured by any extension, renewal or replacement (or successive extensions,
renewals or replacements) of any Liens referred to in the foregoing clauses (a)
to (g), inclusive (provided that the principal amount of Secured Debt secured
thereby does not exceed the principal amount of such Debt immediately prior to
such extension, renewal or replacement and that any Lien created in connection
therewith is limited to all or part of the property (plus improvements to such
property) which secured the Secured Debt so extended, renewed or replaced).
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The foregoing restrictions do not apply if, immediately after the
incurrence of such Secured Debt (giving effect to the application of the
proceeds therefrom), the aggregate principal amount of Secured Debt (other than
Secured Debt described in clauses (a) to (h), inclusive, of the immediately
preceding paragraph), plus the aggregate amount of Capitalized Rent in respect
of Sale and Leaseback Transactions (other than Sale and Leaseback Transactions
the proceeds of which are or will be applied as described in clauses (a) to (e)
inclusive, under "Limitation on Sale and Leaseback Transactions" below), would
not exceed 10% of Consolidated Capitalization.
Limitation on Sale and Leaseback Transactions. The Company will not, nor
will it permit its Subsidiaries to, enter into any Sale and Leaseback
Transaction unless immediately after the completion of such Sale and Leaseback
Transaction (giving effect to the application of the proceeds therefrom), the
aggregate amount of Capitalized Rent in respect of Sale and Leaseback
Transactions (other than Sale and Leaseback Transactions described in clauses
(a) to (e), inclusive, of the immediately succeeding paragraph), plus the
aggregate principal amount of Secured Debt (other than Secured Debt described in
clauses (a) to (h), inclusive, under "Limitation on Secured Debt" above), would
not exceed 10% of Consolidated Capitalization.
The foregoing restrictions do not apply to, and there shall be excluded in
computing the aggregate amount of Capitalized Rent for the purpose of such
restrictions, the following Sale and Leaseback Transactions: (a) any Sale and
Leaseback Transaction entered into to finance the payment of all or any part of
the purchase price of property acquired or constructed by the Company or a
Subsidiary (including any improvements to existing property) or entered into
prior to, at the time of or within 120 days after the acquisition or
construction of such property, which Sale and Leaseback Transaction is entered
into for the purpose of financing all or part of the purchase or construction
price thereof; provided, however, that in the case of any such acquisition, such
Sale and Leaseback Transaction shall not involve any property transferred by the
Company to a subsidiary thereof in contemplation of or in connection with such
Sale and Leaseback Transaction or involve any property of the Company or a
Subsidiary other than the property so acquired (other than, in the case of
construction or improvement, any theretofore unimproved real property or portion
thereof on which the property so constructed, or the improvement, is located);
(b) any Sale and Leaseback Transaction involving property of a Person existing
at the time such Person is merged into or consolidated with the Company or a
Subsidiary or at the time of a sale, lease or other disposition of the
properties of a Person as an entirety or substantially as an entirety to the
Company or a Subsidiary; (c) any Sale and Leaseback Transaction in which the
lessor is a government or governmental entity and which Sale and Leaseback
Transaction is entered into to secure partial progress, advance or other
payments, or other obligations, pursuant to any contract or statute or to secure
any Debt incurred for the purpose of financing all or any part of the cost of
constructing or improving the property subject to such Sale and Leaseback
Transaction (including, without limitation, Sale and Leaseback Transactions
incurred in connection with pollution control, industrial revenue, private
activity bond or similar financing); (d) any Sale and Leaseback Transaction
involving the extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of a lease pursuant to a Sale and
Leaseback Transaction referred to in the foregoing clauses (a) to (c),
inclusive; provided, however, that such lease extension, renewal or replacement
shall be limited to all or any part of the same property leased under the lease
so extended, renewed or replaced (plus improvements to such property); and (e)
any Sale and Leaseback Transaction the net proceeds of which are at least equal
to the fair value (as determined by the Board of Directors of the Company) of
the property leased pursuant to such Sale and Leaseback Transaction, so long as
within 120 days of the effective date of such Sale and Leaseback Transaction,
the Company or the Subsidiary applies (or irrevocably commits to an escrow
account for the purpose or purposes hereinafter mentioned) an amount equal to
the net proceeds of such Sale and Leaseback Transaction to either (x) the
purchase of other property having a fair value at least equal to the fair value
of the property leased in such Sale and Leaseback Transaction and having a
similar utility and function, or (y) the retirement or repayment (other than any
mandatory retirement or repayment at maturity) of (i) the Notes, (ii) other
Funded Debt of the Company which ranks prior to or on a parity with the Notes or
(iii) indebtedness of any Subsidiary maturing by its terms more than one year
from its date of issuance (notwithstanding that any portion of such indebtedness
is included in current liabilities) or preferred stock of any Subsidiary (other
than any such indebtedness owed to or preferred stock owned by the Company or
any
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Subsidiary ); provided, however, that in lieu of applying an amount equivalent
to all or any part of such net proceeds to such retirement or repayment (or
committing such an amount to an escrow account for such purpose), the Company or
the Subsidiary may deliver to the Trustee Outstanding Notes and thereby reduce
the amount to be applied pursuant to (y) of this clause (e) by an amount
equivalent to the aggregate principal amount of the Notes so delivered.
CERTAIN DEFINITIONS
"Capital Stock" means and includes any and all shares, interests,
participations or other equivalents (however designated) of ownership in a
corporation or other Person.
"Capitalization" means with respect to a Person the total of (a) Funded
Debt, (b) the par value or, in the case of Capital Stock with no par value, a
value stated on the books, of all outstanding shares of Capital Stock, (c) the
paid-in surplus and retained earnings (or minus the net surplus deficit, as the
case may be), (d) deferred taxes and deferred investment tax credits, (e)
Capitalized Rent, and (f) minority interests in subsidiaries of such Person.
"Capitalized Rent" means the present value (discounted semi-annually at a
discount rate equal to the weighted average rate of interest borne by the Notes
then Outstanding) of the total net amount of rent payable for the remaining term
of any lease of property by the Company (including any period for which such
lease has been extended); provided, however, that no such rental obligation
shall be deemed to be Capitalized Rent unless the lease resulted from a Sale and
Leaseback Transaction. The total net amount of rent payable under any lease for
any period shall be the total amount of the rent payable by the lessee with
respect to such period but shall not include amounts required to be paid on
account of maintenance and repairs, insurance, taxes, assessments, water rates,
sewer rates and similar charges.
"Consolidated Capitalization" means the Capitalization of the Company and
its Subsidiaries determined on a consolidated basis at the end of the Company's
then most recently reported fiscal year or quarter, as the case may be.
"Debt" means with respect to a Person all obligations of such Person for
borrowed money and all such obligations of any other Person for borrowed money
guaranteed by such Person.
"Funded Debt" means any Debt maturing by its terms more than one year from
its date of issuance (notwithstanding that any portion of such Debt is included
in current liabilities).
"Lien" means any mortgage, pledge, security interest, lien, charge or other
encumbrance.
"Outstanding" means, subject to certain exceptions, all Notes issued under
the Indenture, except those theretofore canceled by the Trustee or delivered to
it for cancellation, defeased in accordance with the Indenture, paid in full, or
in respect of which substitute Notes have been authenticated and delivered by
the Trustee.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture joint-stock company, trust unincorporated organization or
government or any agency or political subdivision thereof.
"Property" means any directly-held interest of a Person in any kind of
property or asset, whether real, personal or mixed and whether tangible or
intangible, and includes Capital Stock of a subsidiary or other Person.
"Sale and Leaseback Transaction" means any arrangement with any Person
other than a Tax Consolidated Subsidiary providing for the leasing (as lessee)
by the Company of any property (except for temporary leases for a term,
including any renewal thereof, of not more than three years (provided that any
such temporary lease may be for a term of up to five years if (a) the Board of
Directors of the Company reasonably finds such term to be in the best interest
of the Company and (b) the primary purpose of the transaction of which such
lease is a part is not to provide funds to or financing for the Company)), which
property has been or is to be sold or transferred by the Company (i) to any
subsidiary of the Company in contemplation of or in connection with such
arrangement or (ii) to such other Person.
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"Secured Debt" means Debt of the Company or any Subsidiary secured by any
Lien on property (including Capital Stock or indebtedness of Subsidiaries of the
Company) owned by the Company or any Subsidiary.
"Subsidiary" means a Person which is consolidated with the Company in
accordance with generally accepted accounting principles.
"Tax Consolidated Subsidiary" means a subsidiary of the Company with which,
at the time a Sale and Leaseback Transaction is entered into by the Company, the
Company would be entitled to file a consolidated federal income tax return.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture with respect to
the Notes: (a) default in the payment of any interest on any Note when it
becomes due and payable, and continuance of such default for a period of 30 days
(unless the entire amount of such payment is deposited by the Company with the
Trustee or with a paying agent prior to the expiration of such period of 30
days); (b) default in the payment of principal of or premium, if any, on any
Note when due and payable; (c) default in the performance or breach of any other
covenant or warranty of the Company in the Indenture (other than a covenant or
warranty that has been included in the Indenture solely for the benefit of a
series of Debt Securities other than the Notes), which default continues uncured
for a period of 60 days after written notice to the Company by the Trustee or to
the Company and the Trustee by the Holders of not less than 25% in principal
amount of the outstanding Notes as provided in the Indenture; (d) certain events
of bankruptcy, insolvency or reorganization with respect to the Company; or (e)
(i) an event of default occurs under any instrument under which there is
outstanding, or by which there may be secured or evidenced, any indebtedness of
the Company for money borrowed (other than non-recourse indebtedness) which
results in acceleration of, or non-payment at maturity (after giving effect to
any applicable grace period) of such indebtedness in an amount exceeding the
greater of $15,000,000 or 2% of Consolidated Capitalization, in which case the
Company shall immediately give notice to the Trustee of such acceleration or
non-payment, and (ii) there shall have been a failure to cure such default or to
discharge such indebtedness within ten days after notice thereof to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least 25%
in aggregate principal amount of the Notes then Outstanding; provided that no
such Event of Default described in this clause (e) shall exist as long as the
Company is contesting any such default or acceleration in good faith and by
appropriate proceedings. No Event of Default with respect to the Notes (except
as to certain events of bankruptcy, insolvency or reorganization with respect to
the Company) necessarily constitutes an Event of Default with respect to any
other series of Debt Securities. (Indenture Section 6.1). The occurrence of an
Event of Default may constitute an event of default under the Company's bank
credit agreements in existence from time to time. In addition, the occurrence of
certain Events of Default or an acceleration under the Indenture may constitute
an event of default under certain other indebtedness of the Company outstanding
from time to time.
If an Event of Default with respect to the Notes occurs and is continuing,
then in every such case the Trustee or the Holders of not less than 25% in
principal amount of the outstanding Notes may, by a notice in writing to the
Company (and to the Trustee if given by the Holders), declare to be due and
payable immediately the principal amount of and accrued and unpaid interest, if
any, on all Notes. In the case of an Event of Default resulting from certain
events of bankruptcy, insolvency or reorganization, the principal amount (or
such specified amount) of and accrued and unpaid interest, if any, on all
outstanding Notes shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder of
outstanding Notes. At any time after a declaration of acceleration with respect
to the Notes has been made, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the Holders of 25% in principal
amount of the outstanding Notes may rescind and annul such acceleration if all
Events of Default, other than the non-payment of accelerated principal and
interest, if any, with respect to the Notes have been cured or waived as
provided in the Indenture. (Indenture Section 6.2) For information as to waiver
of defaults see the discussion set forth below under "-- Modification and
Waiver."
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The Indenture provides that the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of outstanding Notes, unless the Trustee receives indemnity satisfactory
to it against any loss, liability or expense. (Indenture Section 7.1(e)) Subject
to certain rights of the Trustee, the Holders of 25% in principal amount of the
outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee with respect to the Notes.
(Indenture Section 6.12)
No Holder of any Note will have any right to institute any proceeding,
judicial or otherwise, with respect to the Indenture, or for the appointment of
a receiver or trustee, or for any remedy under the Indenture, unless such Holder
shall have previously given to the Trustee written notice of a continuing Event
of Default with respect to the Notes and unless also the Holders of not less
than 25% in principal amount of the outstanding Notes shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of 25% in principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. (Indenture Section 6.7) Notwithstanding the foregoing, the Holder of any
Note will have an absolute and unconditional right to receive payment of the
principal of, premium, if any, and any interest on such Note on or after the due
dates expressed in such Note and to institute suit for the enforcement of any
such payment. (Indenture Section 6.8)
The Indenture requires the Company, within 90 days after the end of each of
its fiscal years, to furnish to the Trustee a statement as to compliance with
the Indenture. (Indenture Section 4.3) The Indenture provides that the Trustee
may withhold notice to the Holders of the Notes of any Default or Event of
Default (except in payment on any Notes) with respect to the Notes if it in good
faith determines that withholding such notice is in the interest of the Holders
of such Notes. (Indenture Section 7.5)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge into any other Person or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, unless (i) any successor or purchaser is a corporation,
partnership, or trust organized and validly existing under the laws of the
United States of America, any State or the District of Columbia, and any such
successor or purchaser expressly assumes the Company's obligations on
Outstanding Securities under a supplemental indenture, (ii) immediately after
giving effect to the transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing, (iii) if properties or assets of the Company become
subject to a mortgage not permitted by the Indenture, the Company or such
successor Person, as the case may be, takes such steps as shall be necessary
effectively to secure the Securities equally and ratably with (or prior to) all
indebtedness secured thereby, and (iv) the Company has delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel stating compliance with these
provisions.
MODIFICATION AND WAIVER
The Indenture provides that modifications to, and amendments of, the
Indenture or any of the Notes issued thereunder may be made by the Company and
the Trustee without the consent of the Holders for the following purposes: (i)
to cure any ambiguity, defect or inconsistency; (ii) to comply with Article V
(which governs the Company's ability to merge or consolidate with, and to be
replaced by, a successor corporation); (iii) provide for uncertificated Notes in
addition to or in place of certificated Notes; (iv) to make any change that does
not adversely affect the rights of any Holder; (v) to provide for the issuance
of and establish the form and terms and conditions of the Notes as permitted by
the Indenture; (vi) to evidence and provide for the acceptance of appointment
under the Indenture by a successor Trustee with respect to the Notes and to add
or change any of the provisions of the Indenture as shall be necessary to
provide for or facilitate the administration of the trusts under the Indenture
by more than one Trusteee; or (vii) to comply with requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act of 1939, as amended. (Indenture Section 9.1).
S-45
<PAGE> 46
Other modifications to, and amendments of, the Indenture or any of the
Notes issued thereunder may be made by the Company and the Trustee with the
consent of the Holders of at least a majority in principal amount of the
outstanding Notes to such modifications or amendments; provided, however, that
no such modification or amendment may, without the consent of the Holder of each
outstanding Note affected thereby: (a) change the amount of the Notes whose
Holders must consent to an amendment, supplement or waiver; (b) reduce the rate
or extend the time for payment of interest (including default interest) on any
Note; (c) reduce the principal of or premium, if any, on, or change the fixed
maturity of, any Note or reduce the amount of, or postpone the date fixed for,
the payment of any sinking fund or analogous obligation with respect to the
Notes; (d) reduce the principal amount of the Notes payable upon the
acceleration of the maturity thereof; (e) waive a default in the payment of the
principal of, premium, if any, or interest, if any, on any Note (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes and a waiver of the
payment default that resulted from such acceleration); (f) make the principal
of, or premium, if any, or interest, if any, on any Note payable in currency
other than that stated in the Note; (g) make any change to certain provisions of
the Indenture relating to, among other things, the right of Holders of the Notes
to receive payment of the principal of, premium, if any, and interest, if any,
on such Notes and to institute suit for the enforcement of any such payment and
to waivers or amendments; or (h) waive a redemption payment with respect to any
Note or change any of the provisions with respect to the redemption of any Note.
(Indenture Section 9.3)
The Holders of at least a majority in principal amount of the outstanding
Notes may on behalf of the holders of all Notes waive compliance by the Company
with provisions of the Indenture other than certain specified provisions.
(Indenture Section 9.2) The Holders of not less than a majority in principal
amount of the outstanding Notes may on behalf of the Holders of all the Notes
waive any past default under the Indenture with respect to the Notes and its
consequences, except a default in the payment of the principal of, premium, if
any, or interest, if any, on any Note or in respect of a covenant or provisions
which cannot be modified or amended without the consent of the Holder of each
outstanding Note affected.
THE TRUSTEE
Norwest Bank Minnesota, National Association is the Trustee under the
Indenture.
S-46
<PAGE> 47
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), among the Company and each of Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. (collectively, the
"Underwriters"), the Company has agreed to sell to each of the Underwriters and
each of the Underwriters has severally agreed to purchase, the respective
principal amount of the Notes set forth after their names below. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the Notes if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $
Goldman, Sachs & Co.........................................
------------
Total.................................................. $150,000,000
============
</TABLE>
The Underwriters have advised the Company that they propose to offer the
Notes to the public at the public offering price set forth on the cover page of
this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of % of the principal amount of the Notes to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
There is no public trading market for the Notes and the Company does not
intend to apply for listing of the Notes on any national securities exchange or
for quotation of the Notes on any automated dealer quotation system. The Company
has been advised by the Underwriters that they presently intend to make a market
in the Notes after the consummation of the offering contemplated hereby,
although they are under no obligation to do so and may discontinue any
market-making activities at any time without any notice. No assurance can be
given as to the liquidity of the trading market for the Notes or that an active
public market for the Notes will develop. If an active public trading market for
the Notes does not develop, the market price and liquidity of the Notes may be
adversely affected. If the Notes are traded, they may trade at a discount from
their initial offering price, depending on prevailing interest rates, the market
for similar securities, the performance of the Company and certain other
factors.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments that the Underwriters may be required to make in
respect thereof.
Until the distribution of the Notes is completed, rules of the Commission
may limit the ability of the Underwriters and certain selling group members to
bid for and purchase the Notes. As an exception to these rules, the Underwriters
are permitted to engage in certain transactions that stabilize the price of the
Notes. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Notes.
If the Underwriters create a short position in the Notes in connection with
the offering, i.e., if they sell more Notes than are set forth on the cover page
of this Prospectus Supplement, the Underwriters may reduce that short position
by purchasing Notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
S-47
<PAGE> 48
From time to time the Underwriters and certain of their affiliates have
engaged, and may in the future engage, in transactions with, and perform
services for, the Company and its affiliates in the ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the issuance and sale of the Notes will
be passed upon for the Company by Latham & Watkins, Chicago, Illinois. Certain
legal matters relating to the Offering will be passed upon for the Underwriters
by Mayer, Brown & Platt, Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996 and for each of the three years in the period ended December 31,
1997 have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report appearing herein, and are included herein in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing. The consolidated financial statements of Gast as of December 28, 1997
and for the fiscal year then ended have been audited by Grant Thornton LLP,
independent auditors, as stated in their report incorporated by reference
herein, and are incorporated herein in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
S-48
<PAGE> 49
IDEX CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 11,771 $ 4,730
Receivables--net.......................................... 80,766 79,130
Inventories............................................... 84,240 84,731
Net current assets of companies held for disposition...... 16,200 16,918
Other current assets...................................... 4,290 6,090
-------- --------
Total current assets................................... 197,267 191,599
Property, plant and equipment--net.......................... 88,628 88,377
Intangible assets--net...................................... 293,803 272,160
Net noncurrent assets of companies held for disposition..... 13,089 12,889
Other noncurrent assets..................................... 6,406 4,720
-------- --------
Total assets........................................... $599,193 $569,745
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable.................................... $ 34,991 $ 34,824
Dividends payable......................................... 3,949 3,471
Accrued expenses.......................................... 38,861 44,991
-------- --------
Total current liabilities.............................. 77,801 83,286
Long-term debt.............................................. 258,417 271,709
Other noncurrent liabilities................................ 24,304 19,241
-------- --------
Total liabilities...................................... 360,522 374,236
-------- --------
Commitments and contingencies (Note 7)
Shareholders' equity
Common stock, par value $.01 per share
Shares authorized 1997 and 1996--75,000,000
Shares issued and outstanding: 1997--29,249,608;
1996--28,925,867...................................... 292 289
Additional paid-in capital................................ 90,506 89,657
Retained earnings......................................... 149,403 105,238
Minimum pension liability adjustment...................... (756) --
Accumulated translation adjustment........................ (774) 325
-------- --------
Total shareholders' equity............................. 238,671 195,509
-------- --------
Total liabilities and shareholders' equity............. $599,193 $569,745
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-1
<PAGE> 50
IDEX CORPORATION & SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net sales................................................... $552,163 $474,699 $395,480
Cost of sales............................................... 329,806 287,625 237,803
-------- -------- --------
Gross profit................................................ 222,357 187,074 157,677
Selling, general and administrative expenses................ 110,588 93,217 78,712
Goodwill amortization....................................... 8,174 6,241 4,196
-------- -------- --------
Operating income............................................ 103,595 87,616 74,769
Other income (expense)--net................................. (693) (696) 524
-------- -------- --------
Income before interest expense and income taxes............. 102,902 86,920 75,293
Interest expense............................................ 18,398 17,476 14,301
-------- -------- --------
Income before income taxes.................................. 84,504 69,444 60,992
Provision for income taxes.................................. 31,029 25,020 21,845
-------- -------- --------
Income from continuing operations........................... 53,475 44,424 39,147
Income from discontinued operations, net of taxes........... 5,151 5,774 6,178
-------- -------- --------
Net income.................................................. $ 58,626 $ 50,198 $ 45,325
======== ======== ========
EARNINGS PER COMMON SHARE--BASIC:
Continuing operations....................................... $ 1.83 $ 1.54 $ 1.37
Discontinued operations..................................... .18 .20 .21
-------- -------- --------
Net income.................................................. $ 2.01 $ 1.74 $ 1.58
======== ======== ========
EARNINGS PER COMMON SHARE--DILUTED:
Continuing operations....................................... $ 1.78 $ 1.49 $ 1.32
Discontinued operations..................................... .17 .20 .21
-------- -------- --------
Net income.................................................. $ 1.95 $ 1.69 $ 1.53
======== ======== ========
SHARE DATA:
Weighted average common shares outstanding.................. 29,184 28,818 28,662
======== ======== ========
Weighted average common shares outstanding assuming full
dilution.................................................. 29,999 29,779 29,609
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE> 51
IDEX CORPORATION & SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MINIMUM
COMMON STOCK PENSION ACCUMULATED TOTAL
AND ADDITIONAL RETAINED LIABILITY TRANSLATION SHAREHOLDERS'
PAID-IN CAPITAL EARNINGS ADJUSTMENT ADJUSTMENT EQUITY
--------------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994........... $85,134 $ 33,490 $ -- $(2,319) $116,305
Issuance of 77,461 shares of common
stock from exercise of stock
options............................ 1,175 1,175
Cash dividends declared--$.387 per
common share outstanding........... (11,086) (11,086)
Unrealized translation adjustment.... (774) (774)
Net income........................... 45,325 45,325
------- -------- ----- ------- --------
Balance, December 31, 1995........... 86,309 67,729 -- (3,093) 150,945
Issuance of 113,550 shares of common
stock related to an acquisition.... 2,271 2,271
Issuance of 116,891 shares of common
stock from exercise of stock
options............................ 1,366 1,366
Cash dividends declared--$.440 per
common share outstanding........... (12,689) (12,689)
Unrealized translation adjustment.... 3,418 3,418
Net income........................... 50,198 50,198
------- -------- ----- ------- --------
Balance, December 31, 1996........... 89,946 105,238 -- 325 195,509
Issuance of 323,741 shares of common
stock from exercise of stock
options, net of those
surrendered........................ 852 852
Cash dividends declared--$.495 per
common share outstanding........... (14,461) (14,461)
Minimum pension liability
adjustment......................... (756) (756)
Unrealized translation adjustment.... (1,099) (1,099)
Net income........................... 58,626 58,626
------- -------- ----- ------- --------
Balance, December 31, 1997........... $90,798 $149,403 $(756) $ (774) $238,671
======= ======== ===== ======= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE> 52
IDEX CORPORATION & SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
-------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Income from continuing operations........................... $53,475 $ 44,424 $ 39,147
Adjustments to reconcile to net cash provided by continuing
operations:
Depreciation and amortization............................. 14,350 12,532 9,240
Amortization of intangibles............................... 9,943 8,140 5,413
Amortization of debt issuance expenses.................... 650 640 624
Deferred income taxes..................................... 6,304 4,385 2,346
(Increase) decrease in receivables........................ 3,605 (6,587) (2,632)
(Increase) decrease in inventories........................ 7,659 13,025 (5,811)
Increase (decrease) in trade accounts payable............. (2,216) (949) 342
Increase (decrease) in accrued expenses................... (8,117) (2,312) 3,698
Other--net................................................ (4,091) 4,390 (1,624)
------- --------- --------
Net cash provided by continuing operations.................. 81,562 77,688 50,743
Net cash provided by discontinued operations................ 5,669 12,427 118
------- --------- --------
Net cash flows from operating activities............... 87,231 90,115 50,861
------- --------- --------
Cash flows from investing activities
Additions to property, plant and equipment................ (13,562) (11,634) (8,181)
Acquisition of businesses (net of cash acquired).......... (49,744) (132,584) (69,760)
------- --------- --------
Net cash flows from investing activities............... (63,306) (144,218) (77,941)
------- --------- --------
Cash flows from financing activities
Dividends paid............................................ (13,983) (12,278) (10,697)
Notes issued in connection with acquisitions.............. 13,546 -- --
Borrowings under credit agreements for acquisitions....... 36,198 136,100 69,760
Net repayments under credit agreements.................... (51,909) (71,514) (31,792)
Increase (decrease) in accrued interest................... (736) 939 50
------- --------- --------
Net cash flows from financing activities............... (16,884) 53,247 27,321
------- --------- --------
Net increase (decrease) in cash............................. 7,041 (856) 241
Cash and cash equivalents at beginning of year.............. 4,730 5,586 5,345
------- --------- --------
Cash and cash equivalents at end of year.................... $11,771 $ 4,730 $ 5,586
======= ========= ========
Supplemental cash flow information:
Cash paid for--
Interest............................................... $18,781 $ 17,363 $ 15,303
Income taxes........................................... 25,446 23,686 21,425
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE> 53
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
1. Significant Accounting Policies
BUSINESS
IDEX Corporation ("IDEX" or the "Company") is a manufacturer of a broad
range of proprietary pump products and engineered equipment sold to a diverse
customer base in a variety of industries in the U.S. and internationally. Its
products include industrial pumps and related controls for use in a wide variety
of process applications, and proprietary equipment that may combine pumps or
other devices into products for industrial, commercial and safety applications.
These activities are grouped into two business segments: Pump Products and
Engineered Equipment.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the Company and its
subsidiaries. Significant intercompany transactions and accounts have been
eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, and reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
REVENUE RECOGNITION
The Company recognizes revenue from product sales upon shipment. The
Company estimates and records provisions for sales returns, allowances and
original warranties in the period the sale is reported, based on its experience.
CASH EQUIVALENTS
For purposes of the Statements of Consolidated Cash Flows, the Company
considers all highly liquid debt instruments purchased with a maturity of three
or fewer months to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost, which includes
labor, material and factory overhead, is determined on the first-in, first-out
("FIFO") basis or the last-in, first-out ("LIFO") basis.
DEBT EXPENSES
Expenses incurred in securing and issuing long-term debt are amortized over
the life of the related debt.
EARNINGS PER COMMON SHARE
On December 31, 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share", which requires the disclosure
of two earnings per common share computations: basic and diluted. Earnings per
common share ("EPS") are computed by dividing net income by the weighted average
number of shares of common stock (basic) plus common stock equivalents (diluted)
outstanding during the year. Common stock equivalents consist of stock options
and have been included in the calculation of weighted average shares outstanding
using the treasury stock method. EPS computations for prior years have been
restated to reflect this new standard.
F-5
<PAGE> 54
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The basic weighted average shares reconciles to fully diluted weighted
average shares as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Basic weighted average common shares outstanding............ 29,184 28,818 28,662
Dilutive effect of stock options............................ 815 961 947
------ ------ ------
Weighted average common shares outstanding assuming full
dilution.................................................. 29,999 29,779 29,609
====== ====== ======
</TABLE>
DEPRECIATION AND AMORTIZATION
Depreciation is recorded using the straight-line method. The estimated
useful lives used in the computation of depreciation generally are as follows:
<TABLE>
<S> <C>
Land improvements........................................... 10 to 12 years
Buildings and improvements.................................. 3 to 30 years
Machinery and equipment, tooling and engineering drawings... 3 to 12 years
Office and transportation equipment......................... 3 to 10 years
</TABLE>
Identifiable intangible assets are amortized over their estimated useful
lives using the straight-line method. The cost in excess of net assets acquired
is amortized over a period of 30 to 40 years.
The carrying amount of all long-lived assets is evaluated periodically to
determine if adjustment to the depreciation or amortization period or to the
unamortized balance is warranted. Such evaluation is based on the expected
utilization of the long-lived assets and the projected, undiscounted cash flows
of the operations in which the long-lived assets are deployed.
RESEARCH AND DEVELOPMENT EXPENDITURES
Expenditures associated with research and development are expensed in the
year incurred and are included in cost of sales. Research and development
expenses, which include costs associated with the development of new products
and major improvements to existing products, were $6.7 million, $6.0 million and
$3.8 million in 1997, 1996 and 1995, respectively.
RECLASSIFICATIONS
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current year presentation.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", and SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components. SFAS No. 131 establishes standards for reporting information about
operating segments and related disclosures about products and services,
geographic areas and major customers. SFAS No. 132 revises current disclosure
requirements for employers' pensions and other retiree benefits. These standards
are effective for years beginning after December 15, 1997. These standards
expand or modify current disclosures and, accordingly, will have no impact on
the Company's reported financial position, results of operations and cash flows.
The Company is assessing the impact of SFAS No. 131 on its reported segments.
F-6
<PAGE> 55
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
2. Acquisitions
The Company expects to complete the acquisition of Gast Manufacturing
Corporation in January 1998, for a cash purchase price of approximately $120
million. The acquisition cost will be financed through borrowings under the
Company's bank credit facilities. Gast, headquartered in Benton Harbor,
Michigan, is one of the world's leading manufacturers of its type of air-moving
products.
In 1997, the Company acquired Blagdon Pump on April 4 and Knight Equipment
on December 9 at an aggregate purchase price of $49.7 million with financing
provided by borrowings under the Company's U.S. Credit Facility and the issuance
of notes to the sellers. Blagdon Pump manufactures air-operated diaphragm pumps
and is located in Washington, Tyne & Wear, England. Knight is based in Costa
Mesa, California, and is the leading manufacturer of pumps and dispensing
equipment for industrial laundries, commercial dishwashing, and chemical
metering.
On July 29, 1996, IDEX purchased substantially all of the net operating
assets of Fluid Management Limited Partnership, headquartered in Wheeling,
Illinois, a leading worldwide manufacturer of dispensing and mixing equipment
for paints, coatings, inks, colorants and dyes. The $135 million purchase price
was financed through a borrowing under the U.S. Credit Facility and the issuance
of 113,550 shares of IDEX common stock.
All acquisitions were accounted for as purchases, and operating results
include the acquisitions from the dates of purchase. The excess of the
acquisition purchase price over the fair market value of net assets acquired is
being amortized on a straight-line basis over periods not exceeding 40 years.
The unaudited pro forma consolidated results of operations, including Gast, for
the years ended December 31, 1997 and 1996, reflecting the allocation of the
purchase price and related financing of the transactions are as follows,
assuming that these acquisitions had occurred at the beginning of each of the
respective periods.
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net sales.................................................. $679,655 $643,012
Income from continuing operations.......................... 55,198 46,311
Net income................................................. 60,349 52,085
Basic EPS
Continuing operations.................................... 1.89 1.61
Net income............................................... 2.07 1.81
Diluted EPS
Continuing operations.................................... 1.84 1.56
Net income............................................... 2.01 1.75
</TABLE>
The liabilities assumed in connection with acquisition of businesses that
represent noncash investing activities for 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
Fair value of assets acquired................... $ 16,884 $ 51,055 $ 50,218
Cost in excess of net assets acquired........... 38,599 101,473 34,386
Cash paid....................................... (49,744) (132,584) (69,760)
Common stock issued in connection with
acquisitions.................................. -- (2,271) --
-------- --------- --------
Liabilities assumed............................. $ 5,739 $ 17,673 $ 14,844
======== ========= ========
</TABLE>
F-7
<PAGE> 56
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
3. Discontinued Operations
In December 1997, the Company announced its intention to divest its
Strippit and Vibratech business operations. The consolidated financial
statements and related footnotes reflect these businesses as discontinued
operations. The revenues from these operations amounted to $83.9 million in
1997, $87.9 million in 1996 and $91.9 million in 1995. Income taxes allocated to
these operations were $3.1 million, $3.6 million and $3.9 million for the years
1997, 1996 and 1995, respectively. The assets and liabilities of these
operations, consisting primarily of receivables, inventories, property and
accounts payable, are classified as net current and net noncurrent assets of
companies held for disposition. Interest expense of $0.6 million, $1.5 million,
and $1.6 million for the years 1997, 1996 and 1995, respectively, has been
allocated to these operations based on their acquisition debt less repayments
generated from subsequent operating cash flows that can be specifically
attributed to these operations.
4. Common and Preferred Stock
On December 19, 1996, the Company's Board of Directors authorized a
three-for-two common stock split effected in the form of a 50% stock dividend
payable on January 31, 1997, to shareholders of record on January 15, 1997. Par
value of common stock remained at $.01 per share.
At December 31, 1997 and 1996, the Company had five million shares of
preferred stock with a par value of $.01 per share authorized but unissued.
5. Balance Sheet Components
The components of inventories as of December 31, 1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Raw materials.............................................. $20,841 $16,223
Work in process............................................ 13,647 12,030
Finished goods............................................. 49,752 56,478
------- -------
Total.................................................... $84,240 $84,731
======= =======
</TABLE>
Those inventories, which were carried on a LIFO basis, amounted to $65,080
and $62,068 at December 31, 1997 and 1996, respectively. The excess of current
cost over LIFO inventory value and the impact on earnings of using the LIFO
method are not material.
F-8
<PAGE> 57
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The components of certain other balance sheet accounts as of December 31,
1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Receivables
Customers............................................... $ 82,293 $ 76,813
Other................................................... 1,034 4,428
-------- --------
Total................................................ 83,327 81,241
Less allowance for doubtful accounts.................... 2,561 2,111
-------- --------
Receivables--net..................................... $ 80,766 $ 79,130
======== ========
Property, plant and equipment, at cost
Land and improvements................................... $ 7,184 $ 7,127
Buildings and improvements.............................. 45,895 46,684
Machinery and equipment................................. 112,795 105,137
Engineering drawings.................................... 3,281 3,291
Office and transportation equipment..................... 22,900 20,572
Construction in progress................................ 5,261 1,002
-------- --------
Tota1................................................ 197,316 183,813
Less accumulated depreciation and amortization.......... 108,688 95,436
-------- --------
Property, plant and equipment--net................... $ 88,628 $ 88,377
======== ========
Intangible assets
Cost in excess of net assets acquired................... $310,242 $279,049
Other................................................... 22,416 22,611
-------- --------
Tota1................................................ 332,658 301,660
Less accumulated amortization........................... 38,855 29,500
-------- --------
Intangible assets--net............................... $293,803 $272,160
======== ========
Accrued expenses
Accrued payroll and related items....................... $ 22,426 $ 19,123
Accrued taxes........................................... 4,851 6,149
Accrued insurance....................................... 3,006 2,959
Other................................................... 8,578 16,760
-------- --------
Total................................................ $ 38,861 $ 44,991
======== ========
Other noncurrent liabilities
Pension and retiree medical reserves.................... $ 13,722 $ 12,157
Lease obligations....................................... 2,097 2,265
Other................................................... 8,485 4,819
-------- --------
Total................................................ $ 24,304 $ 19,241
======== ========
</TABLE>
F-9
<PAGE> 58
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
6. Retirement Benefits
The Company has noncontributory pension plans covering substantially all
employees, other than certain bargaining unit employees who participate in a
multiemployer pension plan. The defined benefit plans covering salaried
employees provide pension benefits that are based on compensation over an
employee's full career. The defined benefit plans covering hourly employees and
bargaining unit members generally provide benefits of stated amounts for each
year of service. The Company's funding policy for these plans is to fund
benefits as accrued within the minimum and maximum limitations of the Internal
Revenue Code. The defined contribution plans provide for annual contributions to
individuals' accounts. The level of the contribution is generally a percent of
salary based on age and years of service.
Pension costs for the years ended December 31, 1997, 1996 and 1995 included
the following components:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost....................................... $ 2,525 $ 2,438 $ 1,609
Interest cost...................................... 3,031 2,808 1,713
Return on assets................................... (2,742) (4,849) (4,407)
Net amortization and deferra1...................... 202 2,789 2,881
------- ------- -------
Net periodic pension cost........................ 3,016 3,186 1,796
Contributions to multiemployer plan, defined
contribution plans and other..................... 4,423 3,265 2,518
------- ------- -------
Total pension costs........................... $ 7,439 $ 6,451 $ 4,314
======= ======= =======
</TABLE>
Assumptions used in accounting for pension costs at December 31 were:
<TABLE>
<S> <C> <C> <C>
Assumed discount rate:
U.S. plans..................................... 7.25% 7.50% 7.25%
Non-U.S. plans................................. 6.0-7.2% 6.0-9.0% 8.0-9.0%
Assumed rate of compensation increase for
salaried plans:
U.S. plans..................................... 4.0% 4.0% 4.0%
Non-U.S. plans................................. 5.7% 7.5% 7.5%
Expected rate of return on plan assets:
U.S. plans..................................... 9.0% 9.0% 8.0%
Non-U.S. plans................................. 7.2% 9.0% 9.0%
</TABLE>
F-10
<PAGE> 59
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The funded status of the defined benefit plans and amounts recognized in
the Company's consolidated balance sheets at December 31, 1997 and 1996 are
presented as follows:
<TABLE>
<CAPTION>
U.S. PLANS NON-U.S.
------------------------- -----------
ASSETS ACCUMULATED ACCUMULATED
EXCEED BENEFITS BENEFITS
ACCUMULATED EXCEED EXCEED
BENEFITS ASSETS ASSETS
----------- ----------- -----------
<S> <C> <C> <C>
DECEMBER 31, 1997
Actuarial present value of benefit
obligations
Vested benefit obligation................. $26,094 $ 5,204 $ 9,428
======= ======= =======
Accumulated benefit obligation............ $28,841 $ 5,204 $ 9,464
======= ======= =======
Projected benefit obligation................ $34,400 $ 5,284 $10,033
Plan assets at fair value(1)................ 36,889 4,970
------- ------- -------
Projected benefit obligation less than (in
excess of) plan assets.................... 2,489 (5,284) (5,063)
Prior service cost not yet recognized....... 1,957 238
Unrecognized transition (asset)
obligation(2)............................. (457) 814
Unrecognized net (gain) loss................ (2,955) 1,261 627
Minimum pension liability................... (2,234) (170)
------- ------- -------
Pension asset (liability)................. $ 1,034 $(5,205) $(4,606)
======= ======= =======
DECEMBER 31, 1996
Actuarial present value of benefit
obligations
Vested benefit obligation................. $19,588 $ 6,022 $ 8,471
======= ======= =======
Accumulated benefit obligation............ $21,887 $ 6,467 $ 8,504
======= ======= =======
Projected benefit obligation................ $27,716 $ 6,594 $ 8,892
Plan assets at fair value(1)................ 25,914 1,812 4,196
------- ------- -------
Projected benefit obligation less than (in
excess of) plan assets.................... (1,802) (4,782) (4,696)
Prior service cost not yet recognized....... 1,895 358
Unrecognized transition (asset)
obligation(2)............................. (551) 902
Unrecognized net (gain) loss................ (509) 1,294 (365)
------- ------- -------
Pension asset (liability)................... $ (967) $(2,228) $(5,061)
======= ======= =======
</TABLE>
(1) Primarily listed stocks and fixed income securities.
(2) Amortized by plan over the greater of the average remaining service period
of the employee workforce or 15 years.
7. Commitments and Contingencies
At December 31, 1997, total minimum rental payments under noncancelable
operating leases, primarily for office facilities, warehouses and data
processing equipment, were $30.1 million. The minimum rental commitments for
each of the next five years are as follows: 1998--$6.1 million; 1999--$4.8
million; 2000--$4.2 million; 2001--$3.3 million; 2002--$2.2 million;
thereafter--$9.5 million.
Rental expense totaled $6.7 million, $5.0 million and $4.0 million for the
years ended December 31, 1997, 1996 and 1995, respectively.
F-11
<PAGE> 60
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The Company is involved in certain litigation arising in the ordinary
course of business. None of these matters is expected to have a material adverse
effect on the Company's financial position or results of operations. However,
the ultimate resolution of these matters could result in a change in the
Company's estimate of its liability for these matters.
8. Postretirement Health Care and Life Insurance Benefits
The Company provides health care and life insurance benefits to certain
retired employees, their covered dependents, and beneficiaries. The Company
provides for the estimated cost of such retiree benefit payments during the
employee's active service period.
Net periodic postretirement expense for 1997, 1996 and 1995 included the
following components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost.............................................. $277 $249 $203
Interest cost............................................. 395 348 352
Net amortization and deferral............................. (57) (63) (67)
---- ---- ----
Total cost.............................................. $615 $534 $488
==== ==== ====
</TABLE>
The Company's postretirement health and life insurance benefit plans are
not funded. The accumulated postretirement benefit obligation (APBO) of the
plans at December 31, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Retirees.................................................... $1,306 $1,384
Fully eligible active participants.......................... 690 500
Other active participants................................... 4,301 3,480
------ ------
Total APBO................................................ 6,297 5,364
Unrecognized net gain (loss)................................ (530) (86)
------ ------
Postretirement health care liability...................... $5,767 $5,278
====== ======
</TABLE>
For measurement purposes, an 11.5% annual rate of increase in the cost of
covered health care benefits was assumed for 1997, gradually declining to 6% by
the year 2008 and remaining at that level thereafter. The health care trend rate
assumption has a significant effect on the amount of the obligation and the net
periodic cost reported. An increase or decrease of the trend rate of 1% would
change the APBO as of December 31, 1997, by $0.9 million and the net periodic
cost for this year by $0.1 million. The assumed discount rate used in
determining the APBO was 7.25% in 1997 and 7.5% in 1996.
9. Stock Options
The Company has stock option plans providing for the grant of options to
purchase common shares to outside directors, executives and certain key
employees which are accounted for using the intrinsic value method. Accordingly,
no compensation cost has been recognized. Had compensation cost been determined
F-12
<PAGE> 61
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
using the fair value method the Company's pro forma net income and diluted EPS
would have been as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net income
As reported...................................... $58,626 $50,198 $45,325
Pro forma........................................ 57,063 49,312 45,022
Basic EPS
As reported...................................... 2.01 1.74 1.58
Pro forma........................................ 1.96 1.71 1.57
Diluted EPS
As reported...................................... 1.95 1.69 1.53
Pro forma........................................ 1.90 1.66 1.52
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions for
1997, 1996 and 1995, respectively: dividend yield of 1.94%, 1.70% and 1.86%;
volatility of 28.9%, 28.6% and 29.7%; risk-free interest rates of 6.6%, 6.2% and
6.9%; and expected lives of 5.5 years.
The Compensation Committee of the Board of Directors administers the plans
and approves stock option grants. The Company may grant additional options for
up to 2.4 million shares. Stock options granted under the plans are exercisable
at a price equal to the market value of the stock at the date of grant. The
options become exercisable from one to five years from the date of grant and
generally expire 10 years from the date of grant. The following table summarizes
option activity under the plans:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OPTION PRICE
OF OPTIONS PER SHARE
---------- ------------
<S> <C> <C>
Outstanding at December 31, 1994........................ 1,627,464 $ 9.52
Granted............................................... 336,600 20.08
Exercised............................................. (77,461) 10.45
Forfeited............................................. (31,995) 14.51
---------
Outstanding at December 31, 1995........................ 1,854,608 11.27
Granted............................................... 442,875 25.56
Exercised............................................. (116,891) 6.32
Forfeited............................................. (45,900) 20.63
---------
Outstanding at December 31, 1996........................ 2,134,692 14.27
Granted............................................... 514,250 24.90
Exercised............................................. (431,748) 2.36
Forfeited............................................. (87,980) 23.47
---------
Outstanding at December 31, 1997........................ 2,129,214 18.87
=========
Exercisable at December 31, 1995........................ 786,576 5.59
=========
Exercisable at December 31, 1996........................ 953,482 8.38
=========
Exercisable at December 31, 1997........................ 943,431 14.25
=========
</TABLE>
F-13
<PAGE> 62
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
The following table summarizes information about options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ -----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER LIFE OF EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACT PRICE EXERCISABLE PRICE
------------------------ ----------- --------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0 to 10................................... 201,157 3.6 years $ 7.27 201,157 $ 7.27
11 to 20................................... 1,114,641 6.4 years 16.17 679,841 15.23
21 to 30................................... 813,416 8.9 years 25.44 62,433 26.14
--------- -------
Total..................................... 2,129,214 7.1 years 18.87 943,431 14.25
========= =======
</TABLE>
10. Long-Term Debt
Long-term debt at December 31, 1997 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Bank revolving credit facilities, including accrued
interest............................................... $169,807 $196,709
9.75% Senior Subordinated Notes.......................... 75,000 75,000
Other long-term debt..................................... 13,610
-------- --------
Total.................................................. $258,417 $271,709
======== ========
</TABLE>
The Company has a $250 million domestic multi-currency bank revolving
credit facility (the "U.S. Credit Facility"). The availability under the U.S.
Credit Facility declines in stages commencing July 1, 1999, to $200 million at
July 1, 2000. Any amount outstanding at July 1, 2001, becomes due at that date.
At December 31, 1997, approximately $102.5 million of the facility was unused.
Interest on the outstanding borrowings under the U.S. Credit Facility is payable
quarterly at a rate based on the bank agent's reference rate or, at the
Company's election, at a rate based on LIBOR plus 25 basis points per annum. The
weighted average interest rate on outstanding borrowings under the U.S. Credit
Facility was 5.75% at December 31, 1997. A facility fee equal to 15 basis points
per annum is payable quarterly on the entire amount available under the U.S.
Credit Facility.
The Company also has entered into a $10 million demand line of credit (the
"Short-Term Facility") expiring on June 1, 1998. Borrowings under the Short-Term
Facility are at the bank agent's reference rate, or at an optional rate based on
the bank's cost of funds. At December 31, 1997, there was $5 million borrowed
under the Short-Term Facility and the interest rate was 6.375% per annum. To
complete the Gast acquisition in January 1998, IDEX and the bank agent amended
the Short-Term Facility to provide a temporary increase to $50 million for up to
60 days, after which time the Short-Term Facility returns to $10 million.
A DM 52.5 million ($29.2 million) credit facility (the "German Facility")
declines in stages commencing November 1, 1999, to DM 31.3 million at November
1, 2000. Any amount outstanding at November 1, 2001, becomes due at the date. At
December 31, 1997, DM 52.0 million ($28.9 million) was outstanding. Interest is
payable quarterly on the outstanding balance at LIBOR plus 62.5 basis points per
annum.
Total long-term debt outstanding at December 31, 1997 and 1996 included
$3.4 million and $4.2 million, respectively, of accrued interest as interest
generally is paid through borrowings under the U.S. Credit Facility.
Borrowings under the U.S. Credit Facility are guaranteed jointly and
severally by certain of the Company's subsidiaries and secured by a pledge of
their stock and intercompany notes.
The Company's $75 million of Senior Subordinated Notes (the "Sub Notes")
due 2002 are jointly and severally guaranteed by certain of the Company's
subsidiaries and are subordinated to the U.S. Credit Facility.
F-14
<PAGE> 63
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Interest is payable semiannually at the rate of 9.75% per annum. The Sub Notes
are payable in annual installments of $18.75 million commencing in 2000 and are
redeemable at various premiums by the Company commencing in 1997. At December
31, 1997, the fair market value of the Sub Notes was approximately $77.7 million
based on the quoted market price.
Other long term-debt is comprised of notes issued to the sellers in
connection with the acquisitions of Blagdon Pump and Knight Equipment (see Note
2). These notes generally bear interest at rates ranging from 6.0% to 8.0% per
annum.
The U.S. Credit Facility and the Indenture for the Sub Notes permit the
payment of cash dividends only to the extent that no default exists under these
agreements and limit the amount of cash dividends in accordance with specified
formulas. At December 31, 1997, under the most restrictive of these provisions,
the Company has available approximately $69.6 million for the payment of cash
dividends in 1998.
The Company does not use derivative financial instruments for trading or
other speculative purposes. Interest rate swaps, a form of derivative, are used
to manage interest rate risk. Currently, the Company has entered into three
interest rate swaps, expiring between August 1998 and August 1999, which have
effectively converted approximately $60 million of floating rate debt into fixed
rate debt at rates ranging from 4.3% to 6.7%.
11. Business Segments and Geographic Information
IDEX consists of two business segments: Pump Products and Engineered
Equipment. No single customer accounted for more than 2% of consolidated net
sales.
Segment information for the years ended December 31, 1997, 1996 and 1995 is
presented in the table titled "Company and Business Group Financial Information"
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Information about the Company's operations in different geographical
regions for the years ended December 31, 1997, 1996 and 1995 is shown below. The
Company's primary operations are in the U.S. and Europe.
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Sales
United States.................................. $378,343 $335,393 $304,735
Europe......................................... 150,511 125,308 77,183
Americas (Non-U.S.)............................ 14,281 8,236 8,295
Other.......................................... 9,028 5,762 5,267
-------- -------- --------
Total....................................... $552,163 $474,699 $395,480
======== ======== ========
Operating income
United States.................................. $ 73,374 $ 64,744 $ 61,140
Europe......................................... 26,304 20,211 11,487
Americas (Non-U.S.)............................ 1,870 1,715 1,120
Other.......................................... 2,047 946 1,022
-------- -------- --------
Total....................................... $103,595 $ 87,616 $ 74,769
======== ======== ========
Identifiable assets
United States.................................. $423,988 $393,510 $334,001
Europe......................................... 159,722 159,869 106,108
Americas (Non-U.S.)............................ 9,712 8,608 7,696
Other.......................................... 5,771 7,758 2,272
-------- -------- --------
Total....................................... $599,193 $569,745 $450,077
======== ======== ========
</TABLE>
F-15
<PAGE> 64
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Export sales from the U.S. for the years ended December 31, 1997, 1996 and
1995 were to the following geographical areas:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
North America (Non-U.S.)............................ $21,048 $15,432 $16,801
South America....................................... 17,139 12,311 6,393
Far East............................................ 14,053 16,354 13,503
Europe.............................................. 10,481 10,029 9,321
Other............................................... 14,471 13,659 11,479
------- ------- -------
Total............................................. $77,192 $67,785 $57,497
======= ======= =======
</TABLE>
12. Income Taxes
Pretax income for the years ended December 31, 1997, 1996 and 1995 was
taxed as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Domestic............................................ $58,748 $49,694 $46,918
Foreign............................................. 25,756 19,750 14,074
------- ------- -------
Total............................................. $84,504 $69,444 $60,992
======= ======= =======
</TABLE>
The provision for income taxes for the years ended December 31, 1997, 1996
and 1995 was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current
U.S............................................... $17,178 $15,356 $15,813
State and local................................... 1,379 1,152 960
Foreign........................................... 6,168 4,127 2,726
------- ------- -------
Total current.................................. 24,725 20,635 19,499
------- ------- -------
Deferred
U.S............................................... 3,125 1,795 487
State and local................................... 500 125 (189)
Foreign........................................... 2,679 2,465 2,048
------- ------- -------
Total deferred................................. 6,304 4,385 2,346
------- ------- -------
Total provision for income taxes............... $31,029 $25,020 $21,845
======= ======= =======
</TABLE>
Deferred (prepaid) income taxes result from the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Employee and retiree benefit plans.................... $ 1,481 $ (269) $ (23)
Depreciation and amortization......................... 3,536 852 175
Inventories........................................... 323 670 (419)
Allowances and accruals............................... 2,103 3,745 2,204
Financing............................................. (103) (100) (86)
Other................................................. (1,036) (513) 495
------- ------ ------
Total deferred tax provision..................... $ 6,304 $4,385 $2,346
======= ====== ======
</TABLE>
F-16
<PAGE> 65
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
Deferred tax assets (liabilities) relate to the following at December 31,
1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Employee and retiree benefit plans.......................... $ 4,030 $ 5,085
Depreciation and amortization............................... (12,545) (8,784)
Inventories................................................. (1,860) (1,486)
Allowances and accruals..................................... 3,738 5,086
Financing................................................... (209) (312)
Other....................................................... 1,731 404
-------- -------
Total..................................................... $ (5,115) $ (7)
======== =======
</TABLE>
The consolidated balance sheets at December 31, 1997 and 1996 include
current deferred tax assets of $2,132 and $4,022, respectively, included in
"Other current assets" and noncurrent deferred tax liabilities of $7,247 and
$4,029, respectively, included in "Other noncurrent liabilities."
The total income tax provision differs from the amount computed by applying
the statutory federal income tax rate to pretax income. The computed amount and
the differences for the years ended December 31, 1997, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pretax income...................................... $84,504 $69,444 $60,992
======= ======= =======
Income tax provision:
Computed amount at statutory rate of 35%......... $29,576 $24,305 $21,347
Foreign sales corporation........................ (1,113) (1,091) (918)
Amortization of cost in excess of net assets
acquired...................................... 941 896 868
State and local income tax (net of federal tax
benefit)...................................... 1,221 830 501
Other--net....................................... 404 80 47
------- ------- -------
Total income tax provision.................... $31,029 $25,020 $21,845
======= ======= =======
</TABLE>
No provision has been made for U.S. or additional foreign taxes on $17.9
million of undistributed earnings of foreign subsidiaries, which are permanently
reinvested. It is not practical to estimate the amount of additional tax which
might be payable if these earnings were repatriated. However, the Company
believes that U.S. foreign tax credits would, for the most part, eliminate any
additional U.S. tax and offset any additional foreign tax.
F-17
<PAGE> 66
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
13. Quarterly Results of Operations (unaudited)
The following is a summary of the unaudited quarterly results of operations
for the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
QUARTER
--------------------------------------------
DECEMBER 31, 1997
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................. $131,375 $141,976 $141,799 $137,013
Gross profit.......................... 52,109 57,290 56,988 55,970
Operating income...................... 23,966 25,966 26,568 27,095
Income from continuing operations..... 12,101 13,284 13,724 14,366
Net income............................ 13,395 14,995 14,484 15,752
Basic EPS:
Continuing operations............... $ .41 $ .46 $ .47 $ .49
Net income.......................... .46 .51 .50 .54
Weighted average shares outstanding... 29,178 29,180 29,226 29,247
Diluted EPS:
Continuing operations............... $ .41 $ .44 $ .45 $ .48
Net income.......................... .45 .50 .48 .52
Weighted average shares outstanding... 29,809 30,028 30,333 30,210
DECEMBER 31, 1996
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
Net sales............................. $109,445 $109,927 $121,065 $134,262
Gross profit.......................... 43,854 44,172 47,616 51,432
Operating income...................... 20,504 21,792 21,282 24,038
Income from continuing operations..... 10,698 11,702 10,462 11,562
Net income............................ 12,214 12,662 11,828 13,494
Basic EPS:
Continuing operations............... $ .37 $ .41 $ .36 $ .40
Net income.......................... .43 .44 .41 .47
Weighted average shares outstanding... 28,709 28,761 28,902 28,917
Diluted EPS:
Continuing operations............... $ .36 $ .39 $ .35 $ .39
Net income.......................... .41 .43 .40 .45
Weighted average shares outstanding... 29,726 29,735 29,735 29,711
</TABLE>
F-18
<PAGE> 67
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of IDEX Corporation:
We have audited the accompanying consolidated balance sheets of IDEX
Corporation and its subsidiaries as of December 31, 1997 and 1996 and the
related statements of consolidated operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and its
subsidiaries at December 31, 1997 and 1996 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Chicago, Illinois
January 20, 1998
F-19
<PAGE> 68
PROSPECTUS
[IDEX CORPORATION LOGO]
$250,000,000
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
SECURITIES WARRANTS
------------------------
IDEX Corporation (the "Company" or "IDEX") may offer from time to time, in
one or more series, (i) unsecured debt securities (the "Debt Securities"), (ii)
warrants to purchase Debt Securities (the "Debt Warrants"), (iii) shares of
serial preferred stock, par value $.01 per share, in one or more series (the
"Preferred Stock"), (iv) warrants to purchase share of Preferred Stock (the
"Preferred Stock Warrants"), (v) shares of common stock, $.01 par value per
share (the "Common Stock"), or (vi) warrants to purchase shares of Common Stock
(the "Common Stock Warrants"), in amounts, at prices, and on terms to be
determined by market conditions at the time of offering. The Debt Warrants,
Preferred Stock Warrants and Common Stock Warrants are referred to herein
collectively as the "Securities Warrants." The Debt Securities, Preferred Stock,
Common Stock and Securities Warrants are referred to herein collectively as the
"Offered Securities."
The specific terms of the Offered Securities with respect to which this
Prospectus is being delivered will be set forth in a supplement to this
Prospectus (a "Prospectus Supplement"), together with the terms of the offering
and sale of the Offered Securities, the initial offering price and the net
proceeds to the Company from the sale thereof. The Prospectus Supplement will
include, with regard to the particular Offered Securities, the following
information: (i) in the case of Debt Securities, the specific designation,
aggregate principal amount, ranking, subordination provisions, authorized
denomination, maturity, rate or method of calculation of interest and dates for
payment thereof, any terms for optional or mandatory redemption or payment of
additional amounts or any sinking fund provisions, any index or formula for
determining the amount of any principal, premium, or interest fund provisions,
the currency or currency unit in which principal, premium, or interest is
payable, whether the securities are issuable in registered form or in the form
of global securities and any provisions for the conversion or exchange of such
Debt Securities; (ii) in the case of Preferred Stock, the designation, number of
shares, liquidation preference per share, initial public offering price,
dividend rate (or method of calculation thereof), dates on which dividends shall
be payable and dates from which dividends shall accrue, any redemption or
sinking fund provisions and any conversion or exchange provisions; (iii) in the
case of Common Stock, the number of shares; (iv) in the case of Securities
Warrants, the duration, offering price, exercise price and detachability; and
(v) in the case of all Offered Securities, whether such Offered Securities will
be offered separately or as a unit with other Offered Securities. The Prospectus
Supplement also will contain information, where applicable, about material
United States federal income tax considerations relating to, and any listing on
a securities exchange of, the Offered Securities covered by such Prospectus
Supplement.
The Company's Common Stock is listed on the New York Stock Exchange and the
Chicago Stock Exchange. Any Common Stock offered hereby will be listed, subject
to notice of issuance, on such exchanges.
The Debt Securities of any series may be issued with Securities Warrants.
The Debt Securities may be designated as senior debt or subordinated debt of the
Company. Any Debt Securities designated as senior debt, when issued, will rank
on a parity with all the unsecured and unsubordinated indebtedness of the
Company, and any Debt Securities designated as subordinated debt, when issued,
will be subordinated in right of payment to obligations of the Company to its
other creditors to the extent set forth in the applicable Prospectus Supplement.
See "Description of Debt Securities."
The Offered Securities may be sold directly by the Company, through agents
designated from time to time or to or through underwriters or dealers. See "Plan
of Distribution." If any agents of the Company, underwriters or dealers are
involved in the sale of any Offered Securities in respect of which this
Prospectus is being delivered, the names of such agents, underwriters or dealers
and any applicable commissions or discounts and the net proceeds to the Company
will be set forth in a Prospectus Supplement.
(Continued on next page)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is December 23, 1997.
<PAGE> 69
(Continued from cover page)
The Offered Securities may be issued in one or more series or issuances and
will be limited to $250,000,000 in aggregate public offering price (or its
equivalent, based on the applicable exchange rate, to the extent Debt Securities
are issued for one or more foreign currencies or currency units). The Offered
Securities may be sold for United States dollars, or any foreign currency or
currencies or currency units, and the principal of, any premium on, and any
interest on, the Debt Securities may be payable in United States dollars, or any
foreign currency or currencies or currency units.
The Offered Securities may be offered separately or as units with other
Offered Securities, in separate series in amounts, at prices and on terms to be
determined at or prior to the time of sale. The sale of other securities under
the Registration Statement of which this Prospectus forms a part, or under a
Registration Statement to which this Prospectus relates, will reduce the amount
of Offered Securities which may be sold hereunder.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information concerning the Company may be inspected and copies may be obtained
(at prescribed rates) at the Commission's Public Reference Section, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at the web site
(http://www.sec.gov) maintained by the Commission and at the Commission's
Regional Offices located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Company's Common Stock is listed on the New York and Chicago
Stock Exchanges, where reports, proxy statements and other information
concerning the Company can also be inspected. The offices of the New York Stock
Exchange are located at 20 Broad Street, New York, New York 10005, and the
offices of the Chicago Stock Exchange are located at One Financial Place, 440
South LaSalle Street, Chicago, Illinois 60605.
The Company has filed a registration statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with the Commission with respect to the Offered Securities.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information contained in the Registration Statement. For further
information with respect to the Company and the Offered Securities, reference is
hereby made to such Registration Statement, including the exhibits filed as a
part thereof. Statements contained in this Prospectus concerning the provisions
of certain documents filed with, or incorporated by reference in, the
Registration Statement are not necessarily complete, each such statement being
qualified in all respects by such reference. Copies of all or any part of the
Registration Statement, including the documents incorporated by reference
therein or exhibits thereto, may be obtained upon payment of the prescribed
rates at the offices of the Commission set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company pursuant
to the Exchange Act are incorporated herein by reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) the Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1997, June 30, 1997 and September 30, 1997; and
(3) all other documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and before the termination of the offering of all Offered
Securities to which this Prospectus relates, which shall be deemed to be a
part hereof from the date of filing of such documents.
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<PAGE> 70
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
This Prospectus may not be used to consummate sales of offered securities
unless accompanied by a Prospectus Supplement. The delivery of this Prospectus
together with a Prospectus Supplement relating to particular Offered Securities
in any jurisdiction shall not constitute an offer in such jurisdiction of any
other securities covered by this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, on written or oral request
of such person, a copy of any or all of the documents incorporated by reference
herein (other than exhibits to such documents unless such exhibits are
incorporated by reference into such documents). Such written requests should be
addressed to: Secretary, IDEX Corporation, 630 Dundee Road, Northbrook, Illinois
60062. Telephone requests may be directed to the Secretary at (847) 498-7070.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including the documents that are incorporated by reference
as set forth in "Information Incorporated by Reference," contains
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such statements relate to, among other
things, capital expenditures, cost reduction, cash flow and operating
improvements and are indicated by words or phrases such as "anticipate,"
"estimate," "plans," "projects," "management believes," "the Company believes,"
"the Company intends" and similar words or phrases. Such statements are subject
to inherent uncertainties and risks, including but not limited to the following:
IDEX's utilization of its capacity and the effect of capacity utilization on
costs; developments with respect to contingencies such as environmental matters
and litigation; labor market conditions and raw materials costs; levels of
industrial activity and economic conditions in the U.S. and other countries
around the world; pricing pressures and other competitive factors and levels of
capital spending in certain industries, all of which could have a material
impact on order rates; the relationship of the U.S. dollar to other currencies;
interest rates; IDEX's ability to integrate and operate acquired businesses on a
profitable basis, and other components of IDEX's business. Consequently, actual
events and results may vary significantly from those included in or contemplated
or implied by such statements.
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<PAGE> 71
THE COMPANY
IDEX designs, manufactures and markets a broad range of fluid handling
products and industrial products serving a diverse customer base in the United
States and internationally. IDEX competes with relatively few major
manufacturers in most of its markets, and believes that each of its eleven
principal subsidiaries (the "Subsidiaries") has a significant domestic market
share in its respective product area. The Company manufactures proprietary
products, designed and engineered by the Company itself.
The Fluid Handling Group of Subsidiaries, which in 1996 accounted for
approximately three-fourths of the Company's total sales, manufactures a wide
variety of industrial pumps and controls, fire-fighting pumps and rescue tools,
dispensing and mixing equipment, lubrication systems and low-horsepower
compressors. Eight of the Company's Subsidiaries operate in the Fluid Handling
Group, and a significant percentage of sales in this Group was to customers
outside of the United States. The devices and equipment produced by these
Subsidiaries are used in a large and diverse set of industries, including paints
and coatings, chemical processing, construction and material handling equipment,
food processing, transportation equipment, water conditioning, petroleum
distribution, oil and refining, utilities and power generation.
The Industrial Products Group of Subsidiaries manufactures sheet metal
fabricating equipment and tooling, stainless steel banding and clamping devices,
vibration control devices and sign-mounting products and systems. Three of the
Company's Subsidiaries operate in the Industrial Products Group, and a
significant percentage of sales in this Group was to customers outside of the
United States. The products and devices manufactured by these Subsidiaries are
used in a variety of industries and applications, including sign mounting
systems used for road, traffic and general signage, transportation equipment,
utilities, petroleum distribution, electronics and office equipment.
The address of the principal executive office of the Company is 630 Dundee
Road, Northbrook, Illinois 60062. The telephone number of the Company is (847)
498-7070.
RECENT DEVELOPMENT
On December 4, 1997, the Company announced that it had entered into an
agreement to acquire Knight Equipment International, Inc. ("Knight"), a
privately-held company with annual revenues of approximately $25 million. The
transaction, which is scheduled to close in mid-December 1997, will involve the
purchase by the Company of Knight for a cash purchase price of approximately $38
million. Knight manufactures pumps and dispensing equipment for industrial
laundries, commercial dishwashing and chemical metering customers, and is
expected to become part of the Company's Fluid Handling Group.
USE OF PROCEEDS
Unless otherwise provided in the applicable Prospectus Supplement, the
Company anticipates that any net proceeds will be used for general corporate
purposes, which may include but are not limited to working capital, capital
expenditures, acquisitions and the repayment or refinancing of indebtedness of
the Company.
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<PAGE> 72
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratio of earnings
(before fixed charges) to fixed charges for each of the (i) years ended December
31, 1996, 1995, 1994, 1993 and 1992, and (ii) nine months ended September 30,
1997 and 1996:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------- ---------------
1996 1995 1994 1993 1992 1997 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings (before fixed
charges) to fixed charges:........... 5.16x 5.45x 4.87x 4.48x 3.54x 5.71x 5.24x
</TABLE>
For purposes of computing the ratio of earnings (before fixed charges) to
fixed charges, (i) earnings consist of income before income taxes, extraordinary
items and fixed charges, and (ii) fixed charges consist of interest on
indebtedness, amortization of debt issuance expenses and rental expense
representative of the interest factor.
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<PAGE> 73
DESCRIPTION OF DEBT SECURITIES
The Debt Securities offered hereby are to be issued under an indenture (the
"Indenture") to be executed by the Company and a trustee, as Trustee (the
"Trustee"). A copy of the form of Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Section references
used in this Prospectus refer to sections of the Indenture.
The following statements relating to the Debt Securities and the Indenture
are summaries and do not purport to be complete, and are subject to and are
qualified in their entirety by reference to all the provisions of the Indenture.
Certain other specific terms of any series of Debt Securities will be described
in the applicable Prospectus Supplement. To the extent that any particular terms
of the Debt Securities described in a Prospectus Supplement differ from any of
the terms described herein, then such terms described herein shall be deemed to
have been superseded by such Prospectus Supplement. As used in this "Description
of Debt Securities," all references to the "Company" shall mean IDEX Corporation
excluding, unless the context otherwise requires or as otherwise expressly
stated, its Subsidiaries.
GENERAL
The terms of each series of Debt Securities will be established by or
pursuant to a resolution of the Board of Directors of the Company and set forth
or determined in the manner provided in an officer's certificate or by a
supplemental indenture. (Indenture ss. 2.2) The particular terms of each series
of Debt Securities will be described in a Prospectus Supplement relating to such
series (including any pricing supplement thereto).
The Debt Securities that may be offered under the Indenture are not limited
in aggregate principal amount. The Debt Securities may be issued in one or more
series with the same or various maturities, at par, at a premium, or at a
discount. The applicable Prospectus Supplement (including any pricing supplement
thereto) will set forth the initial offering price, the aggregate principal
amount and the following terms of the Debt Securities in respect of which this
Prospectus is delivered: (1) the title of such Debt Securities; (2) any
subordination provisions pertaining to such Debt Securities; (3) the price or
prices (expressed as a percentage of the principal amount thereof) at which the
Debt Securities will be issued; (4) any limit on the aggregate principal amount
of such Debt Securities; (5) the date or dates on which principal on such Debt
Securities will be payable; (6) the rate or rates (which may be fixed or
variable) per annum or, if applicable, the method used to determine such rate or
rates (including any commodity, commodity index, stock exchange index or
financial index) at which such Debt Securities will bear interest, if any, the
date or dates from which such interest, if any, will accrue, the date or dates
on which such interest, if any, will commence and be payable and any regular
record date for the interest payable on any interest payment date; (7) the place
or places where principal of, premium, if any, and interest, if any, on such
Debt Securities will be payable; (8) the period or periods within which, the
price or prices at which and the terms and conditions upon which the Debt
Securities may be redeemed, in whole or in part, at the option of the Company;
(9) the obligation, if any, of the Company to redeem or purchase the Debt
Securities pursuant to any sinking fund or analogous provisions or at the option
of a Holder thereof; (10) the dates, if any, on which and the price or prices at
which the Debt Securities will be repurchased by the Company at the option of
the Holders thereof and other detailed terms and provisions of such repurchase
obligations; (11) the denominations in which such Debt Securities may be
issuable, if other than denominations of $1,000 and any integral multiple
thereof; (12) whether the Debt Securities are to be issuable in the form of
Certificated Debt Securities (as defined below) or Global Debt Securities (as
defined below); (13) the portion of principal amount of such Debt Securities
that shall be payable upon declaration of acceleration of the maturity date
thereof, if other than the principal amount thereof; (14) the currency of
denomination of such Debt Securities; (15) the designation of the currency,
currencies or currency units in which payment of principal of, premium, if any,
and interest, if any, on such Debt Securities will be made; (16) if payments of
principal of, premium, if any, or interest, if any, on the Debt Securities are
to be made in one or more currencies or currency units other than that or those
in which such Debt Securities are denominated, the manner in which the exchange
rate with respect to such payments will be determined; (17) the manner in which
the amounts of payment of principal of, premium, if any, or interest, if any, on
such Debt Securities will be determined, if such amounts may be determined by
reference to an index based on a currency or currencies other than that in which
the Debt Securities are denominated or
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<PAGE> 74
designated to be payable or by reference to a commodity, commodity index, stock
exchange index or financial index; (18) the provisions, if any, relating to any
security provided for such Debt Securities; (19) any addition to or change in
the Events of Default described herein or in the Indenture with respect to such
Debt Securities and any change in the acceleration provisions described herein
or in the Indenture with respect to such Debt Securities; (20) any addition to
or change in the covenants described in the Indenture with respect to such Debt
Securities; (21) any other terms of such Debt Securities, which may modify or
delete any provision of the Indenture insofar as it applies to such series; and
(22) any depositories, interest rate calculation agents, exchange rate
calculation agents or other agents with respect to the Debt Securities.
(Indenture ss. 2.2).
Debt Securities may be issued that provide for an amount less than the
stated principal amount thereof to be due and payable upon declaration of
acceleration of the maturity thereof pursuant to the terms of the Indenture
("Discount Securities"). Federal income tax considerations and other special
considerations applicable to any such Discount Securities will be described in
the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units, or if the
principal of and any premium and interest, if any, on any series of Debt
Securities is payable in a foreign currency or currencies or a foreign currency
unit or units, the restrictions, elections, general tax considerations, specific
terms and other information with respect to such issue of Debt Securities and
such foreign currency or currencies or foreign currency unit or units will be
set forth in the applicable Prospectus Supplement.
TRANSFER AND EXCHANGE
Each Debt Security will be represented by either one or more global
securities (a "Global Debt Security") registered in the name of The Depository
Trust Company, as Depository (the "Depository") or a nominee of the Depository
(each such Debt Security represented by a Global Debt Security being herein
referred to as a "Book-Entry Debt Security"), or a certificate issued in
definitive registered form (a "Certificated Debt Security"), as set forth in the
applicable Prospectus Supplement. Except as set forth under "-- Global Debt
Securities and Book-Entry System" below, Book-Entry Debt Securities will not be
issuable in certificated form. The information in this section concerning the
Depository and its book-entry system and procedures has been obtained from
sources the Company believes to be reliable, but the Company takes no
responsibility for the accuracy of the information in this section.
Certificated Debt Securities. Certificated Debt Securities may be
transferred or exchanged at the Trustee's office or paying agencies in
accordance with the terms of the Indenture. No service charge will be made for
any transfer or exchange of Certificated Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
The transfer of Certificated Debt Securities and the right to receive the
principal of, premium, if any, and interest, if any, on such Certificated Debt
Securities may be effected only by surrender of the certificate representing
such Certificated Debt Securities and either reissuance by the Company or the
Trustee of such certificate to the new Holder or the issuance by the Company or
the Trustee of a new certificate to the new Holder.
Global Debt Securities and Book-Entry System. Each Global Debt Security
representing Book-Entry Debt Securities will be deposited with, or on behalf of,
the Depository, and registered in the name of the Depository or a nominee of the
Depository. Except as set forth below, Book-Entry Debt Securities will not be
exchangeable for Certificated Debt Securities and will not otherwise be issuable
as Certificated Debt Securities.
The Depository is a limited purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depository was created to hold securities for its
participating organizations ("participants") and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes in accounts of its participants, thereby eliminating the need
for physical
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<PAGE> 75
movements of certificates. Participants include securities brokers and dealers,
banks, trust companies and clearing corporations, and may include certain other
organizations. Indirect access to the Depository's system is also available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly. The procedures that the Depository has indicated it intends to
follow with respect to Book-Entry Debt Securities are set forth below.
Ownership of beneficial interests in Book-Entry Debt Securities will be
limited to participants or persons that may hold interests through participants.
Upon the issuance of a Global Debt Security, the Depository will credit, on its
book-entry registration and transfer system, the participants' accounts with the
respective principal amounts of the Book-Entry Debt Securities represented by
such Global Debt Security beneficially owned by such participants. The accounts
to be credited shall be designated by participants participating in the
distribution of such Book-Entry Debt Securities. Ownership of Book-Entry Debt
Securities will be shown on, and the transfer of such ownership interests will
be effected only through, records maintained by the Depository for the related
Global Debt Security (with respect to interests of participants) and on the
records of participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to own, transfer or pledge beneficial interests in
Book-Entry Debt Securities.
So long as the Depository for a Global Debt Security, or its nominee, is
the registered owner of such Global Debt Security, the Depository or such
nominee, as the case may be, will be considered the sole owner or Holder of the
Book-Entry Debt Securities represented by such Global Debt Security for all
purposes under the Indenture. Except as set forth below, beneficial owners of
Book-Entry Debt Securities will not be entitled to have such securities
registered in their names, will not receive or be entitled to receive physical
delivery of a certificate in definitive form representing such securities and
will not be considered the owners or Holders thereof under the Indenture.
Accordingly, each person beneficially owning Book-Entry Debt Securities must
rely on the procedures of the Depository for the related Global Debt Security
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest, to exercise any rights of a Holder
under the Indenture.
The Company understands, however, that under existing industry practice,
the Depository will authorize the persons on whose behalf it holds a Global Debt
Security to exercise certain rights of Holders of Debt Securities, and the
Indenture provides that the Company, the Trustee and their respective agents
will treat as the Holder of a Debt Security the persons specified in a written
statement of the Depository with respect to such Global Debt Security for
purposes of obtaining any consents or directions required to be given by Holders
of the Debt Securities pursuant to the Indenture. (Indenture ss. 2.14.6)
Payments of principal of, premium, if any, and interest on Book-Entry Debt
Securities will be made to the Depository or its nominee, as the case may be, as
the registered Holder of the related Global Debt Security. (Indenture ss.
2.14.5) None of the Company, the Trustee or any other agent of the Company or
agent of the Trustee will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in such Global Debt Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests; provided,
however, that the Trustee may maintain physical possession of such Global Debt
Security on behalf of the Depository or its nominee pursuant to an agreement
between the Trustee and the Depository.
If the Depository is at any time unwilling or unable to continue as
Depository or ceases to be a clearing agency registered under the Exchange Act,
and a successor Depository registered as a clearing agency under the Exchange
Act is not appointed by the Company within 90 days, the Company will issue
Certificated Debt Securities in exchange for each Global Debt Security. In
addition, the Company may at any time and in its sole discretion determine not
to have the Book-Entry Debt Securities of any series represented by one or more
Global Debt Securities and, in such event, will issue Certificated Debt
Securities in exchange for the Global Debt Securities of such series. Global
Debt Securities will also be exchangeable by the Holders for Certificated Debt
Securities if an Event of Default with respect to the Book-Entry Debt Securities
represented by such Global Debt Securities has occurred and is continuing. Any
Certificated Debt Securities issued in exchange for a Global Debt Security will
be registered in such name or names as the Depository shall instruct
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<PAGE> 76
the Trustee. It is expected that such instructions will be based upon directions
received by the Depository from participants with respect to ownership of
Book-Entry Debt Securities relating to such Global Debt Security.
The foregoing information in this section concerning the Depository and the
Depository's book-entry system has been obtained from sources the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
NO PROTECTION IN THE EVENT OF A CHANGE OF CONTROL
Unless otherwise set forth in the applicable Prospectus Supplement, the
Debt Securities will not contain any provisions which may afford Holders of the
Debt Securities protection in the event of a change in control of the Company or
in the event of a highly leveraged transaction (whether or not such transaction
results in a change in control of the Company) which could adversely affect
Holders of Debt Securities.
COVENANTS
The applicable Prospectus Supplement will set forth any restrictive
covenants applicable with respect to any issue of Debt Securities.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all of its properties and assets to, any
Person (a "successor Person") unless (i) the Company is the surviving
corporation or the successor Person (if other than the Company) is a
corporation, partnership, trust or other entity organized and validly existing
under the laws of any United States domestic jurisdiction and expressly assumes
the Company's obligations on the Debt Securities and under the Indenture, (ii)
immediately after giving effect to the transaction, no Event of Default, and no
event which, after notice or lapse of time, or both, would become an Event of
Default, shall have occurred and be continuing under the Indenture and (iii)
certain other conditions are met. (Indenture Section 5.1)
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture with respect to
Debt Securities of any series: (a) default in the payment of any interest on any
Debt Security of that series when it becomes due and payable, and continuance of
such default for a period of 30 days (unless the entire amount of such payment
is deposited by the Company with the Trustee or with a paying agent prior to the
expiration of such period of 30 days); (b) default in the payment of principal
of or premium, if any, on any Debt Security of that series when due and payable;
(c) default in the deposit of any sinking fund payment, when and as due in
respect of any Debt Security of that series; (d) default in the performance or
breach of any other covenant or warranty of the Company in the Indenture (other
than a covenant or warranty that has been included in the Indenture solely for
the benefit of a series of Debt Securities other than that series), which
default continues uncured for a period of 60 days after written notice to the
Company by the Trustee or to the Company and the Trustee by the Holders of not
less than a majority in principal amount of the outstanding Debt Securities of
that series as provided in the Indenture; (e) certain events of bankruptcy,
insolvency or reorganization with respect to the Company; and (f) any other
Event of Default provided with respect to Debt Securities of that series that is
described in the applicable Prospectus Supplement. No Event of Default with
respect to a particular series of Debt Securities (except as to certain events
of bankruptcy, insolvency or reorganization with respect to the Company)
necessarily constitutes an Event of Default with respect to any other series of
Debt Securities. (Indenture ss. 6.1). The occurrence of an Event of Default may
constitute an event of default under the Company's bank credit agreements in
existence from time to time. In addition, the occurrence of certain Events of
Default or an acceleration under the Indenture may constitute an event of
default under certain other indebtedness of the Company outstanding from time to
time.
Unless otherwise specified in the applicable Prospectus Supplement, if an
Event of Default with respect to Debt Securities of any series at the time
outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than a majority in principal amount of the outstanding Debt
Securities of
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<PAGE> 77
that series may, by a notice in writing to the Company (and to the Trustee if
given by the Holders), declare to be due and payable immediately the principal
amount (or, if the Debt Securities of that series are Discount Securities, such
portion of the principal amount as may be specified in the terms of that series)
of and accrued and unpaid interest, if any, on all Debt Securities of that
series. In the case of an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization, the principal amount (or such
specified amount) of and accrued and unpaid interest, if any, on all outstanding
Debt Securities shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder of
outstanding Debt Securities. At any time after a declaration of acceleration
with respect to Debt Securities of any series has been made, but before a
judgment or decree for payment of the money due has been obtained by the
Trustee, the Holders of a majority in principal amount of the outstanding Debt
Securities of that series may rescind and annul such acceleration if all Events
of Default, other than the non-payment of accelerated principal and interest, if
any, with respect to Debt Securities of that series, have been cured or waived
as provided in the Indenture. (Indenture ss. 6.2) For information as to waiver
of defaults see the discussion set forth below under "-- Modification and
Waiver." Reference is made to the applicable Prospectus Supplement (i) relating
to any series of Debt Securities that are Discount Securities for the particular
provisions relating to acceleration of a portion of the principal amount of such
Discount Securities upon the occurrence of an Event of Default, or (ii) relating
to any series of Debt Securities that are designated as subordinated debt for
the particular provisions relating to acceleration of a portion of the principal
amount of such subordinated Debt Securities upon the occurrence of an Event of
Default.
The Indenture provides that the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of outstanding Debt Securities, unless the Trustee receives indemnity
satisfactory to it against any loss, liability or expense. (Indenture ss.
7.1(e)) Subject to certain rights of the Trustee, the Holders of a majority in
principal amount of the outstanding Debt Securities of any series shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Debt Securities of that series. (Indenture
Section 6.12)
No Holder of any Debt Security of any series will have any right to
institute any proceeding, judicial or otherwise, with respect to the Indenture,
or for the appointment of a receiver or trustee, or for any remedy under the
Indenture, unless such Holder shall have previously given to the Trustee written
notice of a continuing Event of Default with respect to Debt Securities of that
series and unless also the Holders of not less than a majority in principal
amount of the outstanding Debt Securities of that series shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in principal amount of the outstanding Debt Securities of that
series a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. (Indenture ss. 6.7) Notwithstanding
the foregoing, the Holder of any Debt Security will have an absolute and
unconditional right to receive payment of the principal of, premium, if any, and
any interest on such Debt Security on or after the due dates expressed in such
Debt Security and to institute suit for the enforcement of any such payment.
(Indenture Section 6.8)
The Indenture requires the Company, within 90 days after the end of each of
its fiscal years, to furnish to the Trustee a statement as to compliance with
the Indenture. (Indenture ss. 4.3) The Indenture provides that the Trustee may
withhold notice to the Holders of Debt Securities of any series of any Default
or Event of Default (except in payment on any Debt Securities of such series)
with respect to Debt Securities of such series if it in good faith determines
that withholding such notice is in the interest of the Holders of such Debt
Securities. (Indenture Section 7.5)
MODIFICATION AND WAIVER
The Indenture provides that modifications to, and amendments of, the
Indenture or any series of Debt Securities issued thereunder may be made by the
Company and the Trustee without the consent of the Holders for the following
purposes: (i) to cure any ambiguity, defect or inconsistency; (ii) to comply
with Article V (which governs the Company's ability to merge or consolidate
with, and to be replaced by, a successor corporation); (iii) to provide for
uncertificated Debt Securities in addition to or in place of
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certificated Debt Securities; (iv) to make any change that does not adversely
affect the rights of any Holder; (v) to provide for the issuance of and
establish the form and terms and conditions of Debt Securities of any series as
permitted by the Indenture; (vi) to evidence and provide for the acceptance of
appointment under the Indenture by a successor Trustee with respect to the Debt
Securities of one or more series and to add to or change any of the provisions
of the Indenture as shall be necessary to provide for or facilitate the
administration of the trusts under the Indenture by more than one Trustee; or
(vii) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act of
1939, as amended. (Indenture Section 9.1)
Other modifications to, and amendments of, the Indenture or any series of
Debt Securities issued thereunder may be made by the Company and the Trustee
with the consent of the Holders of at least a majority in principal amount of
the outstanding Debt Securities of each series affected by such modifications or
amendments; provided, however, that no such modification or amendment may,
without the consent of the Holder of each outstanding Debt Security affected
thereby: (a) change the amount of Debt Securities whose Holders must consent to
an amendment, supplement or waiver; (b) reduce the rate of or extend the time
for payment of interest (including default interest) on any Debt Security; (c)
reduce the principal of or premium, if any, on, or change the fixed maturity of,
any Debt Security or reduce the amount of, or postpone the date fixed for, the
payment of any sinking fund or analogous obligation with respect to any series
of Debt Securities; (d) reduce the principal amount of Discount Securities
payable upon acceleration of the maturity thereof; (e) waive a default in the
payment of the principal of, premium, if any, or interest, if any, on any Debt
Security (except a rescission of acceleration of the Debt Securities of any
series by the Holders of at least a majority in aggregate principal amount of
the then outstanding Debt Securities of such series and a waiver of the payment
default that resulted from such acceleration); (f) make the principal of, or
premium, if any, or interest, if any, on any Debt Security payable in currency
other than that stated in the Debt Security; (g) make any change to certain
provisions of the Indenture relating to, among other things, the right of
Holders of Debt Securities to receive payment of the principal of, premium, if
any, and interest, if any, on such Debt Securities and to institute suit for the
enforcement of any such payment and to waivers or amendments; or (h) waive a
redemption payment with respect to any Debt Security or change any of the
provisions with respect to the redemption of any Debt Security. (Indenture
Section 9.3)
The Holders of at least a majority in principal amount of the outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned, compliance
by the Company with provisions of the Indenture other than certain specified
provisions. (Indenture ss. 9.2) The Holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series may on behalf
of the Holders of all the Debt Securities of such series waive any past default
under the Indenture with respect to such series and its consequences, except a
default in the payment of the principal of, premium, if any, or interest, if
any, on any Debt Security of that series or in respect of a covenant or
provision which cannot be modified or amended without the consent of the Holder
of each outstanding Debt Security of such series affected (provided, however,
that the Holders of a majority in principal amount of the outstanding Debt
Securities of any series may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
(Indenture Section 6.13)
DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
Satisfaction and Discharge of Indenture. The Indenture provides that, upon
satisfaction by the Company of certain conditions, the terms of the Indenture
will cease to be of further effect (except for certain obligations to register
the transfer or exchange of Debt Securities, to replace stolen, lost or
mutilated Debt Securities, to maintain paying agencies, to compensate and
indemnify the Trustee and certain provisions relating to the treatment of funds
held by paying agents) in the event that either (i) all Debt Securities
theretofore authenticated and delivered under the Indenture (other than Debt
Securities that have been destroyed, lost or stolen and that have been replaced
or paid) have been delivered to the Trustee for cancellation; or (ii) all Debt
Securities issued under the Indenture not theretofore delivered to the Trustee
for cancellation (a) have become due and payable, or (b) will become due and
payable at their stated maturity
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within one year, or (c) are to be called for redemption within one year under
arrangements satisfactory to the Trustee, at the expense of the Company, or (d)
are deemed paid and discharged pursuant to the provisions of the Indenture
described under "-- Legal Defeasance," below. The Company must, in order to be
discharged from its obligations under the Indenture as a result of events
described in the preceding sentence, (1) deposit or cause to be deposited with
the Trustee trust funds in an amount sufficient for the purpose of paying and
discharging the entire indebtedness on such Debt Securities not theretofore
delivered to the Trustee for cancellation, for principal and interest to the
date of such deposit (in the case of Debt Securities which have become due and
payable on or prior to the date of such deposit) or to the stated maturity or
redemption date, as the case may be; (2) have paid or caused to be paid all
other sums payable by the Company under the Indenture; and (3) delivered to the
Trustee an officer's certificate and an opinion of counsel, each stating that
all conditions precedent provided for in the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with. (Indenture
Section 8.1)
Legal Defeasance. The Indenture provides that, unless otherwise provided by
the terms of the applicable series of Debt Securities, the Company may be
discharged from any and all obligations in respect of the Debt Securities of any
series (except for certain obligations to register the transfer or exchange of
Debt Securities of such series, to replace stolen, lost or mutilated Debt
Securities of such series, and to maintain paying agencies and certain
provisions relating to the treatment of funds held by paying agents) upon the
deposit with the Trustee, in trust, of money and/or United States Government
Obligations or, in the case of Debt Securities denominated in a single currency
other than United States Dollars, Foreign Government Obligations, that, through
the payment of interest and principal in respect thereof in accordance with
their terms, will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants to pay and
discharge each installment of principal (and premium, if any) and interest, if
any, on and any mandatory sinking fund payments in respect of the Debt
Securities of such series on the stated maturity of such payments in accordance
with the terms of the Indenture and such Debt Securities. Such discharge may
occur only if, among other things, the Company shall have delivered to the
Trustee an opinion of counsel stating that the Company has received from, or
there has been published by, the United States Internal Revenue Service a ruling
or, since the date of execution of the Indenture, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of the Debt
Securities of such series will not recognize income, gain or loss for United
States federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to United States federal income tax on the same
amounts and in the same manner and at the same times as would have been the case
if such deposit, defeasance and discharge had not occurred. (Indenture Section
8.3)
Defeasance of Certain Covenants. The Indenture provides that, unless
otherwise provided by the terms of the applicable series of Debt Securities,
upon compliance with certain conditions, (i) the Company may omit to comply with
the covenants described above under "-- Consolidation, Merger and Sale of
Assets" and certain other covenants set forth in the Indenture and any other
covenants applicable to such Debt Securities, as well as any additional
covenants which may be set forth in the applicable Prospectus Supplement, and
(ii) any omission to comply with such covenants will not constitute a Default or
an Event of Default with respect to, and certain Events of Default will be
inapplicable to, the Debt Securities of such series ("covenant defeasance"). The
conditions include: the deposit with the Trustee of money and/or United States
Government Obligations or, in the case of Debt Securities denominated in a
single currency other than United States Dollars, Foreign Government
Obligations, that, through the payment of interest and principal in respect
thereof in accordance with their terms, will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent public
accountants to pay and discharge each installment of principal of, premium, if
any, and interest, if any, on and any mandatory sinking fund payments in respect
of the Debt Securities of such series on the stated maturity of such payments in
accordance with the terms of the Indenture and such Debt Securities; and the
delivery to the Trustee of an opinion of counsel to the effect that the Holders
of the Debt Securities of such series will not recognize income, gain or loss
for United States federal income tax purposes as a result of such deposit and
related covenant defeasance and will be subject to United States federal income
tax on the same amounts and in the same manner and at the same times as
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would have been the case if such deposit and related covenant defeasance had not
occurred. (Indenture Section 8.4)
Covenant Defeasance and Events of Default. In the event the Company
exercises its option to effect covenant defeasance with respect to any series of
Debt Securities and the Debt Securities of such series are declared due and
payable because of the occurrence of any Event of Default, the amount of money
and/or United States Government Obligations or Foreign Government Obligations on
deposit with the Trustee will be sufficient to pay amounts due on the Debt
Securities of such series at the time of their stated maturity but may not be
sufficient to pay amounts due on the Debt Securities of such series at the time
of the acceleration resulting from such Event of Default. However, the Company
shall remain liable for such payments.
"Foreign Government Obligations" means, with respect to Debt Securities of
any series that are denominated in a currency other than United States Dollars,
(i) direct obligations of the government that issued or caused to be issued such
currency for the payment of which obligations its full faith and credit is
pledged or (ii) obligations of a Person controlled or supervised by or acting as
an agency or instrumentality of such government the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by such
government, which, in either case under clauses (i) or (ii), are not callable or
redeemable at the option of the issuer thereof.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the internal laws of the State of New York. (Indenture Section
10.10).
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DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
general terms and provisions of the Preferred Stock to which any Prospectus
Supplement may relate. Certain other terms of any series of the Preferred Stock
will be described in the applicable Prospectus Supplement. The description of
certain provisions of the Preferred Stock set forth below and in any Prospectus
Supplement does not purport to be complete and is subject to and qualified in
its entirety by reference to the Company's Restated Certificate of
Incorporation, as amended to date (the "Restated Certificate of Incorporation"),
and the certificate of designation (a "Certificate of Designation") relating to
each series of the Preferred Stock which will be filed with the Commission and
incorporated by reference in the Registration Statement of which this Prospectus
is a part at or prior to the time of the issuance of such series of the
Preferred Stock.
GENERAL
The Company has authorized 5,000,000 shares of Preferred Stock, par value
$.01 per share, of which no shares are currently outstanding. The Board of
Directors has been authorized, subject to certain limitations set forth in the
Restated Certificate of Incorporation, to issue shares of Preferred Stock in one
or more series, by resolution providing for the issuance of such series, and to
(i) fix the number of shares which will constitute such series and the
designation thereof, (ii) fix the stated value, if any, of such series and the
consideration for which shares of such series may be issued, (iii) determine the
voting rights of shares of such series, (iv) determine the terms and conditions,
if any, under which such series may be redeemable, (v) determine the rate of any
dividends payable with respect to shares of such series and any preferences or
relations to dividends payable with respect to shares of other classes of the
Company's capital stock, (vi) determine the rights of shares of such series upon
the liquidation of the Company, (vii) determine if shares of such series are
convertible into or exchangeable for shares of another class or classes of
capital stock of the Company and the rates or prices at which shares of such
series are convertible or exchangeable, and (viii) determine such other
preferences and relative, participating, optional or other special rights and
qualifications of shares of such series as are not inconsistent with the terms
of the Restated Certificate of Incorporation. To the extent permitted by the
resolutions of the Board of Directors authorizing any such series of Preferred
Stock, a duly authorized committee of the Board of Directors may determine
certain of the designations described above which are made with respect to such
series.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in the applicable
Prospectus Supplement relating to the particular series of the Preferred Stock
offered thereby for the specific terms of such series.
The Preferred Stock will, when issued, be fully paid and nonassessable and
will have no preemptive rights. The rights of the holders of each series of the
Preferred Stock will be subordinate to those of the Company's general creditors.
Unless otherwise noted in the applicable Prospectus Supplement, Harris
Trust and Savings Bank of Chicago, Illinois will be the registrar and transfer
agent for any Preferred Stock.
DIVIDEND RIGHTS
Holders of the Preferred Stock of each series will be entitled to receive,
when and as declared by the Board of Directors of the Company, out of funds of
the Company legally available therefor, cash dividends on such dates and at such
rates as are set forth in, or as are determined by the method described in, the
applicable Prospectus Supplement. Each such dividend will be payable to the
holders of record as they appear on the stock books of the Company on such
record dates, fixed by the Board of Directors of the Company, as specified in
the applicable Prospectus Supplement. Such dividends may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement. If the Board
of Directors of the Company fails to declare a dividend payable on a dividend
payment date on any series of Preferred Stock for which dividends are
noncumulative, then the right to receive a dividend in respect of the dividend
period ending on such dividend payment date will be lost, and the Company will
have no obligation to pay any dividend for such period, whether or not dividends
on such series are declared payable on any future dividend payment dates.
Dividends
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on the shares of each series of Preferred Stock for which dividends are
cumulative will accrue from the date fixed by the Board of Directors. Unless
dividends on all outstanding shares of series of Preferred Stock having
cumulative dividend rights have been fully paid, no dividend (other than stock
dividends) may be paid on the Common Stock or any other class of stock ranking
junior to such series of Preferred Stock.
LIQUIDATION PREFERENCES
Unless otherwise specified in the applicable Prospectus Supplement, in the
event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of each series of the Preferred Stock will
be entitled to receive out of the assets of the Company available for
distribution to stockholders, before any distribution of assets is made to the
holders of Common Stock or any other shares of stock of the Company ranking
junior as to such distribution to such series of the Preferred Stock, the amount
(if any) set forth in the applicable Prospectus Supplement, together with any
unpaid cumulative dividends. If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Preferred Stock of any series are not paid in full, the holders of the
Preferred Stock of such series and of any other series of equal preference will
share ratably in any such distribution of assets of the Company in proportion to
the full respective preferential amounts to which they are entitled. After
payment to the holders of the Preferred Stock of each series that has a
liquidation preference of the full preferential amounts of the liquidating
distribution to which they are entitled, the holders of each such series of the
Preferred Stock will be entitled to no further participation in any distribution
of assets by the Company. A consolidation, merger or sale of all or
substantially all of the assets of the Company would not be considered a
"liquidation" within the meaning of the foregoing provisions.
REDEMPTION
A series of the Preferred Stock may be redeemable, in whole or from time to
time in part, at the option of the Company, and may be subject to mandatory
redemption, in each case upon terms, at the time and at the redemption prices
set forth in the applicable Prospectus Supplement. Shares of the Preferred Stock
redeemed by the Company will be restored to the status of authorized but
unissued shares of Preferred Stock of the Company.
CONVERSION AND EXCHANGE RIGHTS
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted into shares of Common Stock, shares of another series
of Preferred Stock or into any other security will be set forth in the
applicable Prospectus Supplement. Such terms may include provisions for
conversion, either mandatory, at the option of the holder, or at the option of
the Company, in which case the number of shares of Common Stock, the shares of
another series of Preferred Stock or the amount of any other securities to be
received by the holders of Preferred Stock would be calculated as of a time and
in the manner stated in the applicable Prospectus Supplement.
VOTING
Except as set forth below, the holders of shares of Preferred Stock will
not have any right or power to vote on any matter presented to a vote of
stockholders. So long as there are any shares of Preferred Stock outstanding,
the Company would be prohibited, without the affirmative vote of at least
two-thirds of the outstanding Preferred Stock, from (i) authorizing a new class
of stock which ranks senior to or on parity with the Preferred Stock in the
payment of dividends or in liquidation preference; (ii) adversely altering the
rights, preferences or privileges of the Preferred Stock; or (iii) effecting a
sale, lease or conveyance of all or substantially all of the Company's assets,
or a merger or consolidation of the Company with or into another entity, if the
result of such transaction would be (A) the redemption of the Preferred Stock
for less than its stated liquidation preference plus any accrued and unpaid
dividends or (B) the adverse alteration of the rights, preferences or privileges
of the Preferred Stock, unless in the case of clauses (i), (ii) or (iii),
provision is made for the redemption of all shares of Preferred Stock at the
time outstanding. If accrued dividends on any series of Preferred Stock have not
been paid or set aside in an amount equivalent to six quarterly dividends or
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the Company shall have failed to discharge any applicable mandatory redemption
provisions, the holders of a majority of the outstanding shares of any series of
Preferred Stock, voting separately as a class, would be entitled to increase the
number of directors of the Company by a number specified with respect to such
series of Preferred Stock and elect such number of additional directors. These
directors would serve until all accrued and unpaid dividends on all outstanding
shares of Preferred Stock had been paid or set aside in full or until all shares
of such series of Preferred Stock have been redeemed by the Company. Except for
the specific voting rights summarized above in this paragraph, the holders of
any series of Preferred Stock would have only such voting rights as may be
authorized by the Board of Directors of the Company in establishing the terms of
that series.
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DESCRIPTION OF COMMON STOCK
GENERAL
The Company's Restated Certificate of Incorporation authorizes the issuance
of 75,000,000 shares of Common Stock, par value $.01 per share. As of November
30, 1997, there were 29,240,183 shares of Common Stock outstanding. The
outstanding shares of Common Stock are validly issued, fully paid and
non-assessable, and the shares of Common Stock offered pursuant to this
Prospectus and a related Prospectus Supplement, when issued and sold as
contemplated herein and therein, will be validly issued, fully paid and
non-assessable.
Subject to the rights of the holders of any Preferred Stock and except as
provided below, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefor. In the event of liquidation,
dissolution or winding-up of the Company, each stockholder of record on the
applicable date has the right to share equally and ratably in any distribution
of the Company's assets after payment of liabilities (including payments with
respect to any outstanding shares of Preferred Stock). Each holder of Common
Stock is entitled to one vote for each share held of record on the applicable
record date on all matters presented to a vote of stockholders, and, except as
described below, a majority vote is required for all action to be taken by
stockholders. The Common Stock has no preemptive rights and no redemption,
sinking fund or conversion provisions.
Harris Trust and Savings Bank of Chicago, Illinois is the registrar and
transfer agent for the Common Stock.
Dividends. The entitlement of holders of Common Stock to receive dividends
is subject to the dividend and liquidation rights of any preferred stock that
may be issued, and subject to the dividend restrictions in the multicurrency
amended and restated domestic bank revolving credit facility, entered into by
the Company and the banks a party thereto in July 1996 (as amended, the "Credit
Agreement") and the Indenture, dated as of September 16, 1992 (as supplemented,
the "Existing Indenture"), governing the Company's $75,000,000 aggregate
principal amount of 9 3/4% Senior Subordinated Notes due 2002 (the "Existing
Notes"). Borrowings under the Credit Agreement are guaranteed jointly and
severally by certain of the Company's subsidiaries and secured by a pledge of
their stock and intercompany notes. The Existing Notes are jointly and severally
guaranteed by certain of the Company's subsidiaries and are subordinated to the
Credit Agreement. Principal on the Existing Notes is payable in annual
installments of $18,750,000 commencing in 2000 and the Existing Notes are
redeemable at various premiums by the Company commencing in 1997.
As of September 30, 1997, the Company had approximately $71 million
available for payment of cash dividends pursuant to the Credit Agreement, which
is more restrictive than the Existing Indenture.
CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND
RESTATED BY-LAWS
The following summary of certain provisions of the Restated Certificate of
Incorporation and the Company's Amended and Restated By-Laws (the "Amended and
Restated By-Laws") does not purport to be complete and is subject to and
qualified in its entirety by reference to the Restated Certificate of
Incorporation and the Amended and Restated By-Laws which are incorporated by
reference as exhibits to the Registration Statement of which this Prospectus is
a part.
Classification of Directors. The Company's Restated Certificate of
Incorporation provides that its Board of Directors shall be divided into three
classes, each class being as nearly equal in number as possible, and that at
each annual meeting of the Company's stockholders, the successors to the
directors whose terms expire that year shall be elected for a term of three
years. Within the limit of not less than three nor more than twelve directors,
the number of directors is fixed by the Board of Directors. Newly created
directorships and any vacancies on the Board of Directors are filled by a
majority vote of the remaining directors then in office, and are to be
apportioned among the three classes so as to keep the number of directors in
each class as nearly equal as possible. The provisions of the Restated
Certificate of Incorporation relating to the classified Board may be amended
only upon the vote of the holders of at least 80% of the outstanding shares of
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Common Stock. Directors may be removed by the affirmative vote of the holders of
a majority of the outstanding voting shares of the Company, but only for cause.
Stockholder Nominations and Proposals. Any stockholder intending to
nominate a person for election as director or present a proposal at annual or
special meetings of stockholders may do so only if written notice of the
stockholder's intent to make such nomination, including certain related
information specified in the Amended and Restated By-Laws, is given to the
Secretary of the Company at least 60 days prior to the anniversary date of the
previous year's annual meeting (or in the case of a special meeting, not later
than the seventh day following the date on which notice of that meeting is first
given to stockholders).
CERTAIN ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
the Company's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with the Company (or its majority-owned
subsidiaries) for three years following the time such person became an
interested stockholder unless: (i) before such person became an interested
stockholder, the Company's Board of Directors approved the transaction in which
the interested stockholder became an interested stockholder or approved the
business combination; (ii) upon consummation of the transaction that resulted in
the interested stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the Company's voting stock outstanding at the
time the transaction commenced (excluding stock held by directors who are also
officers of the Company and by employee stock plans that do not provide
employees with the rights to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer); or (iii) at
or following the transaction in which such person became an interested
stockholder, the business combination is approved by the Company's Board of
Directors and approved at a meeting of stockholders by the affirmative vote of
the holders of at least two-thirds of the Company's outstanding voting stock not
owned by the interested stockholder. Under Section 203, the restrictions
described above also do not apply to certain business combinations proposed by
an interested stockholder following the earlier of the announcement or
notification of one of certain extraordinary transactions involving the Company
and a person who had not been an interested stockholder during the previous
three years or who became an interested stockholder with the approval of a
majority of the Company's directors, if such extraordinary transaction is
approved or not opposed by a majority of the directors who were directors prior
to any person becoming an interested stockholder during the previous three years
or were recommended for election or elected to succeed such directors by a
majority of such directors.
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DESCRIPTION OF SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt
Securities, Preferred Stock or Common Stock. Securities Warrants may be issued
independently or together with Debt Securities or shares of Preferred Stock or
Common Stock offered by any Prospectus Supplement and may be attached to or
separate from such Debt Securities or shares of Preferred Stock or Common Stock.
Each series of Securities Warrants will be issued under a separate warrant
agreement (a "Securities Warrant Agreement") to be entered into between the
Company and Harris Trust and Savings Bank of Chicago, Illinois or another bank
or trust company, as warrant agent (the "Securities Warrant Agent"), all as set
forth in the applicable Prospectus Supplement. The Securities Warrant Agent will
act solely as an agent of the Company in connection with the Securities Warrants
and will not assume any obligation or relationship of agency or trust for or
with any holders of Securities Warrants or beneficial owners of Securities
Warrants. The description of certain provisions of the Securities Warrants set
forth below and in any Prospectus Supplement does not purport to be complete and
is subject to and qualified in its entirety by reference to the applicable
Securities Warrant Agreement, including the forms of Securities Warrant
Certificates representing the Securities Warrants, which will be filed with the
Commission and incorporated by reference in the Registration Statement of which
this Prospectus is a part at or prior to the time of the issuance of such series
of the Securities Warrants.
The Prospectus Supplement relating to a particular issue of Securities
Warrants will set forth the terms of such Securities Warrants, including, as
applicable: (i) the designation, aggregate principal amount, currencies,
denominations and terms of the series of Debt Securities purchasable upon
exercise of Securities Warrants to purchase Debt Securities and the price at
which such Debt Securities may be purchased upon such exercise; (ii) the
designation, number, stated value and terms (including, without limitation,
liquidation, dividend, conversion and voting rights) of the series of Preferred
Stock purchasable upon exercise of Securities Warrants to purchase Preferred
Stock and the price at which such number of shares of Preferred Stock of such
series may be purchased upon such exercise; (iii) the number of shares of Common
Stock purchasable upon the exercise of Securities Warrants to purchase Common
Stock and the price at which such number of shares of Common Stock may be
purchased upon such exercise; (iv) the date on which the right to exercise such
Securities Warrants shall commence and the date (the "Expiration Date") on which
such right shall expire; (v) United States federal income tax consequences
applicable to such Securities Warrants; and (vi) any other terms of such
Securities Warrants. Securities Warrants for the purchase of Preferred Stock and
Common Stock will be offered and exercisable for United States dollars only.
Securities Warrants will be issued in registered form only. The exercise price
for Securities Warrants will be subject to adjustment as described in the
applicable Prospectus Supplement.
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or such number of shares of Preferred Stock
or Common Stock, as the case may be, at such exercise price as shall in each
case be set forth in, or calculable from, the Prospectus Supplement relating to
the offered Securities Warrants, which exercise price may be subject to
adjustment upon the occurrence of certain events as set forth in such Prospectus
Supplement. After the close of business on the Expiration Date (or such later
date to which such Expiration Date may be extended by the Company), unexercised
Securities Warrants will become void. The place or places where, and the manner
in which, Securities Warrants may be exercised shall be specified in the
Prospectus Supplement relating to such Securities Warrants.
Prior to the exercise of any Securities Warrants to purchase Debt
Securities, holders of such Securities Warrants will not have any of the rights
of holders of the Debt Securities purchasable upon such exercise, including the
right to receive payments of principal of, premium, if any, or interest on the
Debt Securities purchasable upon such exercise or to enforce covenants in the
Indenture. Prior to the exercise of any Securities Warrants to purchase
Preferred Stock or Common Stock, holders of such Securities Warrants will not
have any rights of holders of the Preferred Stock or Common Stock purchasable
upon such exercise, including the right to receive payments of dividends, if
any, on the Preferred Stock or Common Stock purchasable upon such exercise or to
exercise any applicable right to vote.
19
<PAGE> 87
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities in or outside of the United
States to one or more underwriters for public offering and sale by them and may
also sell the Offered Securities to investors directly or through agents. Any
such underwriter or agent involved in the offer and sale of Offered Securities
will be named in the applicable Prospectus Supplement. The Company has reserved
the right to sell Offered Securities directly to investors on its own behalf in
those jurisdictions where and in such manner as it is authorized to do so.
The distribution of the Offered Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices, or at negotiated prices. The Company may also,
from time to time, authorize dealers, acting as the Company's agents, to offer
and sell Offered Securities upon the terms and conditions as are set forth in
the applicable Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may receive compensation from the Company in the form
of underwriting discounts or commissions and may also receive commissions from
purchasers of the Offered Securities for whom they may act as agent.
Underwriters may sell Offered Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agent. Unless otherwise indicated in a Prospectus Supplement, an agent
will be acting on a best efforts basis and a dealer will purchase Offered
Securities as a principal, and may then resell such Offered Securities at
varying prices to be determined by the dealer.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Dealers and agents
participating in the distribution of Offered Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Offered Securities may be deemed to be
underwriting discounts and commissions. Underwriters, dealers and agents may be
entitled, under agreements entered into with the Company, to indemnification
against and contribution toward certain civil liabilities, including liabilities
under the Securities Act, and to reimbursement by the Company for certain
expenses.
Certain of the underwriters, dealers or agents and their affiliates may be
customers of, engage in transactions with and perform services for the Company
in the ordinary course of business.
LEGAL MATTERS
Certain legal matters with respect to the Offered Securities offered hereby
will be passed upon for the Company by Latham & Watkins, Chicago, Illinois.
Certain partners of Latham & Watkins, members of their families, related persons
and others, have an indirect interest, through limited partnerships, in less
than 1% of the Company's common stock. Such persons do not have the power to
vote or dispose of such shares of common stock. Certain legal matters will be
passed upon for any agents or underwriters by counsel for such agents or
underwriters identified in the applicable Prospectus Supplement.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and December 31, 1995 and for each of the three years in the period ended
December 31, 1996, incorporated by reference herein from the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated by reference herein, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
20
<PAGE> 88
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER
OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Disclosure Regarding Forward-Looking
Statements.......................... S-2
Prospectus Supplement Summary......... S-3
Summary Historical and Pro Forma
Financial Data...................... S-8
Risk Factors.......................... S-10
Use of Proceeds....................... S-13
Capitalization........................ S-13
Unaudited Pro Forma Combined Financial
Statements.......................... S-14
Selected Historical Financial Data.... S-19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-21
Business.............................. S-27
Management............................ S-33
Description of Credit Facilities...... S-36
Description of Notes.................. S-37
Underwriting.......................... S-47
Legal Matters......................... S-48
Experts............................... S-48
Financial Statements.................. F-1
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Disclosure Regarding Forward-Looking
Statements.......................... 3
The Company........................... 4
Use of Proceeds....................... 4
Ratio of Earnings to Fixed Charges.... 5
Description of Debt Securities........ 6
Description of Preferred Stock........ 14
Description of Common Stock........... 17
Description of Securities Warrants.... 19
Plan of Distribution.................. 20
Legal Matters......................... 20
Experts............................... 20
</TABLE>
======================================================
======================================================
$150,000,000
[IDEX CORPORATION LOGO]
% SENIOR NOTES
DUE , 2008
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
FEBRUARY , 1998
======================================================
