<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 1-10235
IDEX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
630 DUNDEE ROAD, NORTHBROOK, ILLINOIS
(Address of principal executive offices)
36-3555336
(I.R.S. Employer
Identification No.)
60062
(Zip Code)
Registrant's telephone number: (847) 498-7070
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __
Number of shares of common stock of IDEX Corporation ("IDEX" or the
"Company") outstanding as of October 25, 2000: 30,105,973.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 6,851 $ 2,895
Receivables -- net........................................ 107,492 100,805
Inventories............................................... 112,104 106,141
Other current assets...................................... 6,110 3,874
-------- --------
Total current assets................................. 232,557 213,715
Property, plant and equipment -- net........................ 125,721 129,917
Intangible assets -- net.................................... 389,759 385,061
Other noncurrent assets..................................... 10,994 9,874
-------- --------
Total assets......................................... $759,031 $738,567
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt........................................... $ 92,638 $ --
Trade accounts payable.................................... 43,259 44,289
Dividends payable......................................... 4,214 4,153
Accrued expenses.......................................... 42,154 43,192
-------- --------
Total current liabilities............................ 182,265 91,634
Long-term debt.............................................. 162,680 268,589
Other noncurrent liabilities................................ 50,829 49,320
-------- --------
Total liabilities.................................... 395,774 409,543
-------- --------
Shareholders' equity
Common stock, par value $.01 per share
Shares authorized: 2000 and 1999 -- 75,000,000
Shares issued and outstanding: 2000 -- 30,101,593;
1999 -- 29,635,576.................................... 301 296
Additional paid-in capital................................ 111,738 99,802
Retained earnings......................................... 270,608 233,326
Minimum pension liability adjustment...................... (1,759) (1,759)
Accumulated translation adjustment........................ (8,784) (2,543)
Treasury stock............................................ (144) (98)
Unearned compensation on restricted stock................. (8,703) --
-------- --------
Total shareholders' equity........................... 363,257 329,024
-------- --------
Total liabilities and shareholders' equity........... $759,031 $738,567
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE> 3
IDEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales.......................................... $176,218 $169,892 $538,138 $487,864
Cost of sales...................................... 106,041 104,065 324,475 295,987
-------- -------- -------- --------
Gross profit....................................... 70,177 65,827 213,663 191,877
Selling, general and administrative expenses....... 36,593 35,401 112,542 105,400
Goodwill amortization.............................. 3,006 2,921 8,824 8,339
-------- -------- -------- --------
Operating income................................... 30,578 27,505 92,297 78,138
Other income (expense) -- net...................... (172) 100 (315) 334
-------- -------- -------- --------
Income before interest expense and income taxes.... 30,406 27,605 91,982 78,472
Interest expense................................... 4,284 4,716 12,508 13,579
-------- -------- -------- --------
Income before income taxes......................... 26,122 22,889 79,474 64,893
Provision for income taxes......................... 9,557 8,438 29,564 24,400
-------- -------- -------- --------
Net income......................................... $ 16,565 $ 14,451 $ 49,910 $ 40,493
======== ======== ======== ========
Basic earnings per common share.................... $ .56 $ .49 $ 1.68 $ 1.37
======== ======== ======== ========
Diluted earnings per common share.................. $ .54 $ .48 $ 1.63 $ 1.35
======== ======== ======== ========
Share data:
Weighted average common shares outstanding......... 29,740 29,594 29,700 29,514
======== ======== ======== ========
Weighted average common shares outstanding assuming
full dilution.................................... 30,899 30,301 30,618 30,056
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 4
IDEX CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON
STOCK & MINIMUM UNEARNED
ADDITIONAL PENSION ACCUMULATED COMPENSATION TOTAL
PAID-IN RETAINED LIABILITY TRANSLATION TREASURY ON RESTRICTED SHAREHOLDERS'
CAPITAL EARNINGS ADJUSTMENT ADJUSTMENT STOCK STOCK EQUITY
---------- -------- ---------- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999....... $100,098 $233,326 $(1,759) $(2,543) $ (98) $ -- $329,024
-------- -------- ------- ------- ----- ------- --------
Net income....................... 49,910 49,910
Unrealized translation
adjustment..................... (6,241) (6,241)
-------- ------- --------
Comprehensive income............. 49,910 (6,241) 43,669
-------- ------- --------
Issuance of 118,017 shares of
common stock from exercise of
stock options.................. 2,447 2,447
Issuance of 350,000 shares of
restricted common stock........ 9,494 (9,494) --
Amortization of restricted stock
awards......................... 791 791
Purchase of common stock......... (46) (46)
Cash dividends declared on common
stock ($.42 per share)......... (12,628) (12,628)
-------- -------- ------- ------- ----- ------- --------
Balance, September 30, 2000
(unaudited).................... $112,039 $270,608 $(1,759) $(8,784) $(144) $(8,703) $363,257
======== ======== ======= ======= ===== ======= ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 5
IDEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------
2000 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities
Net income.................................................. $ 49,910 $ 40,493
Adjustments to reconcile to net cash provided by operations:
Depreciation and amortization............................. 17,033 16,351
Amortization of intangibles............................... 9,986 9,534
Amortization of unearned compensation..................... 791 --
Amortization of debt issuance expenses.................... 168 307
Deferred income taxes..................................... -- 3,052
Increase in receivables................................... (4,163) (7,197)
(Increase) decrease in inventories........................ (1,243) 5,078
Decrease in trade accounts payable........................ (1,682) (2,809)
Decrease in accrued expenses.............................. (2,066) (805)
Other -- net.............................................. (5,724) (1,906)
-------- --------
Net cash flows from operating activities............... 63,010 62,098
-------- --------
Cash flows from investing activities
Additions to property, plant and equipment................ (13,825) (14,812)
Acquisitions of businesses (net of cash acquired)......... (34,369) (48,175)
-------- --------
Net cash flows from investing activities............... (48,194) (62,987)
-------- --------
Cash flows from financing activities
Borrowings under credit facilities for acquisitions....... 34,369 48,175
Net repayments under credit facilities.................... (28,156) (28,608)
Repayments of other long-term debt........................ (3,517) (3,815)
Decrease in accrued interest.............................. (2,637) (3,029)
Dividends paid............................................ (12,566) (12,390)
Proceeds from stock option exercises...................... 1,693 2,871
Purchase of common stock.................................. (46) (98)
-------- --------
Net cash flows from financing activities............... (10,860) 3,106
-------- --------
Net increase in cash........................................ 3,956 2,217
Cash and cash equivalents at beginning of year.............. 2,895 2,721
-------- --------
Cash and cash equivalents at end of period.................. $ 6,851 $ 4,938
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest.................................................. $ 15,314 $ 16,301
Income taxes.............................................. 30,116 18,790
Significant non-cash activities:
Debt acquired with acquisition of business................ -- 13,065
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 6
IDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
IDEX Corporation ("IDEX" or the "Company") manufactures an extensive array
of proprietary engineered industrial products sold to customers in a variety of
industries around the world. The Company believes that each of its principal
business units holds the number-one or number-two market share position in each
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, coupled with its ability to identify and
successfully integrate strategic acquisitions. IDEX consists of three reportable
business segments: Pump Products Group, Dispensing Equipment Group, and Other
Engineered Products Group.
The Pump Products Group designs, produces and distributes a wide variety of
industrial pumps, compressors and related controls for the movement of liquids,
air and gases. The devices and equipment produced by the group are used by a
large and diverse set of industries, including chemical processing, machinery,
water treatment, medical equipment, petroleum distribution, oil and refining,
and food processing.
The Dispensing Equipment Group produces highly engineered equipment for
dispensing, metering and mixing colorants, paints, inks and dyes; refinishing
equipment; and centralized lubrication systems. This proprietary equipment is
used in a variety of retail and commercial industries around the world. These
units provide componentry and systems for applications such as tinting paints
and coatings, industrial and automotive refinishing, and the precise lubrication
of machinery and transportation equipment.
The Other Engineered Products Group manufactures engineered banding and
clamping devices, fire fighting pumps and rescue tools. The high-quality
stainless steel bands, buckles and preformed clamps and related installation
tools are used in applications including securing hoses, signals, pipes, poles,
electrical lines, sign-mounting systems and numerous other "hold-together"
applications. The group also includes a leading manufacturer of truck-mounted
fire pumps and rescue tool systems used by public and private fire and rescue
organizations.
Information about the operations of IDEX in different business segments
follows based on the nature of products and services offered. The Company's
basis of segmentation and basis of segment profit measurement for the quarter
and nine months ended September 30, 2000, are the same as those set forth under
"Business Segments and Geographic Information" on pages 30 and 31 of the 1999
Annual Report to Shareholders. Intersegment sales are accounted for at fair
value as if the sales were to third parties. Amounts are in thousands.
5
<PAGE> 7
IDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales
Pump Products
From external customers........................ $ 99,304 $ 92,880 $298,754 $280,678
Intersegment sales............................. 718 657 2,161 2,058
-------- -------- -------- --------
Total group sales......................... 100,022 93,537 300,915 282,736
-------- -------- -------- --------
Dispensing Equipment
From external customers........................ 41,713 41,470 128,804 100,870
Intersegment sales............................. -- 3 1 5
-------- -------- -------- --------
Total group sales......................... 41,713 41,473 128,805 100,875
-------- -------- -------- --------
Other Engineered Products
From external customers........................ 35,201 35,542 110,580 106,316
Intersegment sales............................. 1 -- 3 2
-------- -------- -------- --------
Total group sales......................... 35,202 35,542 110,583 106,318
-------- -------- -------- --------
Intersegment elimination.......................... (719) (660) (2,165) (2,065)
-------- -------- -------- --------
Total net sales........................... $176,218 $169,892 $538,138 $487,864
======== ======== ======== ========
Operating income
Pump Products..................................... $ 18,783 $ 15,486 $ 57,048 $ 50,169
Dispensing Equipment.............................. 8,538 8,414 26,470 19,552
Other Engineered Products......................... 7,042 6,591 21,030 18,672
Corporate Office and Other........................ (3,785) (2,986) (12,251) (10,255)
-------- -------- -------- --------
Total operating income.................... $ 30,578 $ 27,505 $ 92,297 $ 78,138
======== ======== ======== ========
</TABLE>
2. ACQUISITIONS
The Company acquired Ismatec SA on April 17, 2000 and Trebor International,
Inc. on May 31, 2000 at a total cost of approximately $34 million with
borrowings under the Company's U.S. bank credit facilities. Ismatec, with
headquarters near Zurich, Switzerland is a leading European manufacturer of
peristalic metering pumps, analytical process controllers and sample preparation
systems. These products typically are used for scientific research and
development in the pharmaceutical, medical, biotech and institutional laboratory
markets. Trebor, with headquarters near Salt Lake City, is a leading designer
and manufacturer of high purity fluid handling products, including air-operated
diaphragm pumps and deionized water-heating systems. Trebor's products are
incorporated into wet chemical processing and chemical delivery and blending
systems. Ismatec and Trebor are being operated as part of the Pump Products
group.
On June 4, 1999, IDEX acquired FAST S.p.A. at a cost of $61.6 million with
financing provided by borrowings under the Company's U.S. bank credit facilities
and debt acquired. FAST, with headquarters near Milan, Italy, is a leading
European manufacturer of refinishing and color-formulation equipment for a
number of applications, including paints, coatings, inks, colorants and dyes.
FAST is being operated as part of IDEX's Dispensing Equipment Group.
All acquisitions were accounted for as purchases, and operating results
include the acquisitions from the dates of purchase. Cost in excess of net
assets acquired is amortized on a straight-line basis over a period not
exceeding 40 years. The effects of the Ismatec and Trebor acquisitions on IDEX's
results of operations are not significant. The unaudited pro forma consolidated
results of operations, including FAST, for the nine months
6
<PAGE> 8
IDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ended September 30, 1999, reflecting the allocation of the purchase price and
related financing of the transaction are as follows, assuming the acquisition
had occurred at the beginning of the period (in thousands except per share
amounts):
<TABLE>
<CAPTION>
1999
-----------
(UNAUDITED)
<S> <C>
Net sales................................................... $507,673
Net income.................................................. 42,063
Basic EPS -- Net income..................................... 1.43
Diluted EPS -- Net income................................... 1.40
</TABLE>
3. EARNINGS PER COMMON SHARE
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 outstanding (diluted) 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. Basic weighted
average shares reconciles to fully diluted weighted average shares as follows
(in thousands):
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------
2000 1999 2000 1999
-------- -------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Basic weighted average common shares
outstanding............................ 29,740 29,594 29,700 29,514
Dilutive effect of stock options......... 1,159 707 918 542
------ ------ ------ ------
Weighted average common shares
outstanding assuming full dilution..... 30,899 30,301 30,618 30,056
====== ====== ====== ======
</TABLE>
4. INVENTORIES
The components of inventories as of September 30, 2000, and December 31,
1999, were (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
(UNAUDITED)
<S> <C> <C>
Raw materials and supplies.......................... $ 32,757 $ 28,930
Work in process..................................... 13,787 12,722
Finished goods...................................... 65,560 64,489
-------- --------
Total..................................... $112,104 $106,141
======== ========
</TABLE>
Those inventories which were carried on a LIFO basis amounted to $90,564
and $86,587 at September 30, 2000, and December 31, 1999, respectively. The
excess of current cost over LIFO inventory value and the impact of using the
LIFO method on earnings are not material.
5. COMMON AND PREFERRED STOCK
The Company had five million shares of preferred stock authorized but
unissued at September 30, 2000, and December 31, 1999.
7
<PAGE> 9
ITEM 2. 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, dispensing equipment
and other engineered products 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 U.S. and in 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 capacity utilization and capital spending in certain
industries, and overall industrial activity.
IDEX has a history of above-average operating margins. The Company's
operating margins are impacted by, among other things, utilization of facilities
as sales volumes change and inclusion of newly acquired businesses, which may
have lower margins and whose margins are normally further reduced by purchase
accounting adjustments.
IDEX reported record sales, net income and earnings per share for the third
quarter ended September 30, 2000. New orders for the third quarter totaled
$164.0 million, unchanged from the third quarter of last year and 9% lower than
this year's second quarter. Order activity is strongest for IDEX in its first
six months, as OEM customers often will order their requirements for the new
year during this period. As expected, the order backlog was reduced $12.2
million during the third quarter. IDEX ended the quarter with a typical unfilled
order backlog of slightly over one month's sales. This customarily low level of
backlog allows the Company to provide excellent customer service, 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 below.
Management is very optimistic about the short- and long-term prospects of the
Company. IDEX anticipates its strong results will continue, with fourth quarter
performance at third quarter levels. This would lead to record orders, sales and
earnings per share in 2000. Management believes that IDEX will benefit from its
continued emphasis on profitable growth initiatives, margin improvements at
recently acquired businesses, the use of the Company's strong cash flow to cut
debt and interest expense, and an active and successful acquisition strategy.
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
The preceding paragraph and the "Liquidity and Capital Resources" sections
of this management's discussion and analysis of IDEX operations contain
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 such as "anticipate," "estimate,"
"expects," "plans," "projects," "should," "will," "management 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 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 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
affect of capacity utilization on costs; labor market conditions and raw
material costs; developments with respect to contingencies, such as
environmental matters and litigation; and other risks detailed from time to time
in the Company's filings with the Securities and Exchange Commission.
8
<PAGE> 10
RESULTS OF OPERATIONS
For purposes of this discussion and analysis section, reference is made to
the table on page 10 and the Company's Statements of Consolidated Operations
included in the Financial Statements section. IDEX consists of three reporting
groups: Pump Products, Dispensing Equipment and Other Engineered Products.
PERFORMANCE IN THE THIRD QUARTER ENDED SEPTEMBER 30, 2000 COMPARED TO THE SAME
PERIOD OF 1999
IDEX reported record sales, net income and earnings per share for the third
quarter ended September 30, 2000. Incoming orders, $164.0 million, were
unchanged from 1999 with 3% growth from recent acquisitions (FAST-June 1999,
Ismatec-April 2000 and Trebor-April 2000) offset by a 3% decline from base
business which was totally attributable to the negative effect from foreign
currency translation. Net sales for the three months ended September 30, 2000
were $176.2 million, a 4% increase over the $169.9 million for the comparable
1999 period. Acquisitions added 4% to third quarter sales and base business
volume was up 3%, while foreign currency translation had a 3% negative effect.
Net income was $16.6 million, 15% higher than the $14.5 million earned in the
third quarter of 1999. Diluted earnings per share rose 6 cents to 54 cents, up
13% compared with the same period a year ago.
In the third quarter of 2000, the Pump Products Group contributed 56% of
sales and 55% of operating income, the Dispensing Equipment Group accounted for
24% of sales and 25% of operating income, and the Other Engineered Products
Group represented both 20% of sales and operating income. International sales
were 42% of total sales, up from 40% in the same quarter of 1999. In the third
quarter of 2000, international sales grew by 9% while domestic sales increased
by 1% compared with last year. Excluding the recent acquisitions and currency
translation, international sales increased 11% reflecting increases in all
international markets.
Pump Products Group sales of $100.0 million for the three months ended
September 30, 2000 increased by $6.5 million, or 7%, from 1999 principally
reflecting the Ismatec and Trebor acquisitions which added 6% to the third
quarter sales. Base business sales volume was up 2% from last year while foreign
currency had a 1% negative effect on the Group's sales comparison to 1999. In
the third quarter of 2000, international sales grew by 19%, while domestic sales
increased by 2%. As a result, sales to customers outside the U.S. increased to
33% of total group sales in 2000 from 30% in 1999 due to higher sales in all
international markets.
Dispensing Equipment Group sales of $41.7 million increased $0.2 million,
or 1%, in the third quarter of 2000 compared with last year's third quarter.
Base business volume was up 6% from 1999 and acquisitions added 1% to this
Group's sales growth, while foreign currency translation had a 6% negative
effect. In the third quarter of 2000, international sales grew by 9%, while
domestic sales decreased by 8%, principally reflecting a temporary change in
market conditions in the paints and coatings markets. The business environment
for the Group's dispensing equipment, which primarily serves the paints and
coatings markets, remains robust in Europe, due to the European Union-mandated
change to water-based pigments. However, this strength is being offset as some
paint manufacturers and retailers in the U.S. have reduced their short-term
demand for paint dispensing equipment. Sales to customers outside the U.S. were
56% of total group sales in 2000, up from 52% in 1999 primarily reflecting a
change in sales mix due to the stronger European sales increase in 2000.
Other Engineered Products Group sales of $35.2 million decreased by $0.3
million, or 1%, in the third quarter of 2000 compared with 1999. Overall base
business increased by 3% and foreign currency translation had a negative effect
of 4% on this Group's sales volume. In the third quarter of 2000, domestic sales
increased by 6% and international sales decreased by 8% with the lower
international sales resulting from foreign currency translation. Excluding
foreign currency, international sales increased by 1% in 2000 compared to last
year. Sales to customers outside the U.S. were 46% of total group sales in 2000,
down from 50% in 1999 principally reflecting the foreign currency translation
effect on international sales in 2000.
Gross profit of $70.2 million in the third quarter of 2000 increased by
$4.4 million, or 7%, from 1999 reflecting higher sales volume at the Pump
Products Group. Gross profit as a percent of sales was 39.8% in 2000 and
increased from 38.7% in 1999 principally reflecting productivity improvements at
the Company's
9
<PAGE> 11
IDEX CORPORATION AND SUBSIDIARIES
COMPANY AND BUSINESS GROUP FINANCIAL INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000(1) 1999(2)
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Pump Products Group
Net sales(3)..................................... $100,022 $ 93,537 $300,915 $282,736
Operating income(4).............................. 18,783 15,486 57,048 50,169
Operating margin................................. 18.8% 16.6% 19.0% 17.7%
Depreciation and amortization.................... $ 4,959 $ 4,846 $ 14,981 $ 14,656
Capital expenditures............................. 2,732 2,767 6,565 6,966
Dispensing Equipment Group
Net sales(3)..................................... $ 41,713 $ 41,473 $128,805 $100,875
Operating income(4).............................. 8,538 8,414 26,470 19,552
Operating margin................................. 20.5% 20.3% 20.6% 19.4%
Depreciation and amortization.................... $ 2,347 $ 2,453 $ 6,729 $ 5,875
Capital expenditures............................. 1,413 2,258 3,896 4,765
Other Engineered Products Group
Net sales(3)..................................... $ 35,202 $ 35,542 $110,583 $106,318
Operating income(4).............................. 7,042 6,591 21,030 18,672
Operating margin................................. 20.0% 18.5% 19.0% 17.6%
Depreciation and amortization.................... $ 1,615 $ 1,671 $ 5,120 $ 5,120
Capital expenditures............................. 1,181 902 3,337 3,027
Company
Net sales........................................ $176,218 $169,892 $538,138 $487,864
Operating income................................. 30,578 27,505 92,297 78,138
Operating margin................................. 17.4% 16.2% 17.2% 16.0%
Depreciation and amortization(5)................. $ 9,416 $ 9,048 $ 27,810 $ 25,885
Capital expenditures............................. 5,258 5,931 13,825 14,812
</TABLE>
---------------
(1) Includes acquisition of Ismatec SA (April 17, 2000) and Trebor
International, Inc. (May 31, 2000) in the Pump Products Group from the dates
of acquisition.
(2) Includes acquisition of FAST S.p.A. (June 4, 1999) in the Dispensing
Equipment Group from the date of acquisition.
(3) Group net sales include intersegment sales.
(4) Group operating income excludes net unallocated corporate operating
expenses.
(5) Excludes amortization of debt issuance expenses.
10
<PAGE> 12
base businesses. Selling, general and administrative expenses increased to $36.6
million in 2000 from $35.4 million in 1999, and as a percent of net sales, was
20.8%, unchanged from 1999. Goodwill amortization increased by $0.1 million to
$3.0 million in 2000 reflecting the recent acquisitions. As a percent of sales,
goodwill amortization remained flat at about 1.7% for both years.
Operating income increased by $3.1 million, or 11%, to $30.6 million in
2000 from $27.5 million in 1999. Operating income as a percent of sales
increased to 17.4% in 2000 from 16.2% in 1999. The increase in operating income
and margin growth reflected improvements at all three business groups and
resulted from expense controls and productivity improvements at all business
groups and from higher sales volumes in the Pump Products Group. In the Pump
Products Group, operating income of $18.8 million and operating margin of 18.8%
in 2000 compared to the $15.5 million and 16.6% recorded in 1999. Operating
income of $8.5 million and operating margin of 20.5% in the Dispensing Equipment
Group increased from the $8.4 million and 20.3% recorded in 1999. Operating
income in the Other Engineered Products Group of $7.0 million and operating
margin of 20.0% in 2000 increased from $6.6 million and 18.5% achieved in 1999.
Other expense increased $0.3 million to expense of $0.2 million in the
third quarter of 2000 from income of $0.1 million last year reflecting lower
income from fixed asset dispositions.
Interest expense decreased to $4.3 million in the third quarter of 2000
from $4.7 million in 1999. The decrease in interest was due to debt reductions
from operating cash flow, partially offset by additional debt required for the
acquisition of the FAST, Ismatec and Trebor businesses.
The provision for income taxes increased to $9.6 million in 2000 from $8.4
million in 1999 reflecting higher income. The effective tax rate decreased to
36.6% in 2000 from 36.9% in 1999.
Net income of $16.6 million in 2000 was 15% higher than income of $14.5
million recorded in 1999. Diluted earnings per share amounted to 54 cents in
2000, an increase of 6 cents per share, or 13%, from the 48 cents achieved in
1999.
PERFORMANCE IN THE NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE SAME
PERIOD OF 1999
Orders, sales, net income and earnings per share for the first nine months
of 2000 were the highest for any comparable period in the Company's history. New
orders in the first three quarters of 2000 totaled $538.1 million, a 10%
increase from the same period last year. In the first nine months, sales of
$538.1 million also rose 10% from the comparable 1999 period. Acquisitions added
5% to nine-month sales, and base business was up 7%, while foreign currency
translation had a 2% negative effect. Net income of $49.9 million was 23% above
the $40.5 million recorded in 1999. Year-to-date diluted earnings per share rose
28 cents to $1.63, a 21% improvement over the same period a year ago.
For the first three quarters of 2000, the Pump Products Group contributed
56% of sales and 55% of operating income, the Dispensing Equipment Group
accounted for 24% of sales and 25% of operating income, and the Other Engineered
Products Group represented both 20% of sales and operating income. International
sales were 41% of total sales, up from 38% in the same period last year.
International sales grew by 17 percent for the first nine months of 2000, while
domestic sales increased by 6%. Excluding the recent acquisitions and foreign
currency, international sales increased 12% reflecting higher sales volume in
all international markets.
Pump Products Group sales of $300.9 million increased by $18.2 million, or
6%, for the nine months ended September 30, 2000 compared with 1999 principally
reflecting 4% higher base sales volume. The Ismatec and Trebor acquisitions
added 3% to the first nine months sales while foreign currency had a 1% negative
on the Group's sales comparison to 1999. In the first three quarters of 2000,
international sales grew by 14%, while domestic sales increased by 3%. As a
result, sales to customers outside the U.S. increased to 33% of total group
sales in 2000 from 30% in 1999 due to higher sales in all international markets.
Dispensing Equipment Group sales of $128.8 million increased $27.9 million,
or 28%, in the first nine months of 2000 compared with the comparable period of
last year. The FAST acquisition added 17% to the first nine months sales and
base business volume was up 16%, but foreign currency translation had a 5%
negative effect. In the first nine months of 2000, international sales grew by
47%, while domestic sales
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<PAGE> 13
increased by 11%. The increase in international sales reflected the FAST
acquisition and higher base business volume. Sales to customers outside the U.S.
were 54% of total group sales in 2000, up from 47% in 1999 chiefly resulting
from the additional international sales from the FAST acquisition.
Other Engineered Products Group sales of $110.6 million increased by $4.3
million, or 4%, in the first nine months of 2000 compared with 1999. Overall
base business increased by 8% and foreign currency translation had a negative
effect of 4% on this Group's sales volume. In the nine months ended September
30, 2000, domestic sales increased by 11% and international sales were 3% lower.
Sales to customers outside the U.S. were 47% of total group sales in 2000, down
from 50% in 1999 principally reflecting a change in sales mix due to the
stronger domestic sales increase in 2000.
Gross profit of $213.7 million in the first nine months of 2000 increased
by $21.8 million, or 11%, from 1999 reflecting higher sales volume in all of
IDEX's business groups. Gross profit as a percent of sales was 39.7% in 2000 and
increased from 39.3% in 1999 principally reflecting productivity improvements at
the Company's base businesses. Selling, general and administrative expenses
increased to $112.5 million in 2000 from $105.4 million in 1999, and as a
percent of net sales, decreased to 20.9% from 21.6% in 1999. Goodwill
amortization increased by 6% to $8.8 million in 2000 from $8.3 million in 1999
reflecting the recent acquisitions. As a percent of sales, goodwill amortization
remained flat at about 2% for both years.
Operating income increased by $14.2 million, or 18%, to $92.3 million in
2000 from $78.1 million in 1999. Operating income as a percent of sales
increased to 17.2% in 2000 from 16.0% in 1999. The increase in operating income
and margin growth reflected improvements at all three business groups and
resulted from higher sales volumes, expense controls and productivity
improvements. In the Pump Products Group, operating income of $57.0 million and
operating margin of 19.0% in 2000 compared to the $50.2 million and 17.7%
recorded in 1999. Operating income of $26.5 million and operating margin of
20.6% in the Dispensing Equipment Group increased from the $19.6 million and
19.4% recorded in 1999. Operating income in the Other Engineered Products Group
of $21.0 million and operating margin of 19.0% in 2000 increased from $18.7
million and 17.6% achieved in 1999.
Other expense increased $0.6 million to expense of $0.3 million for the
nine months ended September 30, 2000 from income of $0.3 million last year
reflecting lower income from fixed asset dispositions.
Interest expense decreased to $12.5 million in the first nine months of
2000 from $13.6 million in 1999. The decrease in interest was due to debt
reductions from operating cash flow, partially offset by additional debt
required for the acquisition of the FAST, Ismatec and Trebor businesses.
The provision for income taxes increased to $29.6 million in 2000 from
$24.4 million in 1999 reflecting higher income. The effective tax rate decreased
to 37.2% in 2000 from 37.6% in 1999.
Net income of $49.9 million in 2000 was 23% higher than income of $40.5
million in 1999. Diluted earnings per share amounted to $1.63 in 2000, an
increase of 28 cents per share, or 21%, from the $1.35 achieved in 1999.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, excluding short-term debt, IDEX's working capital
was $142.9 million and its current ratio was 2.6 to 1. The Company's cash flow
from operations increased by $0.9 million to $63.0 million in 2000. The increase
principally reflected higher income partially offset by higher working capital
requirements due to higher sales volume.
Cash flow provided from operations was more than adequate to fund capital
expenditures of $13.8 million and $14.8 million in 2000 and 1999, respectively.
Capital expenditures were generally 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.
The Company acquired Ismatec SA on April 17, 2000 and Trebor International,
Inc. on May 31, 2000 at a total cost of approximately $34 million. The
acquisitions were accounted for using the purchase method and
12
<PAGE> 14
were financed under the Company's U.S. bank credit facilities. Interest is
payable at rates ranging from 3.8% to 7.0%.
At September 30, 2000, the maximum amount available under the U.S. Bank
Credit Facility was $235 million, of which $90.9 million was borrowed including
$85.4 million in western european currencies. The western european currency
borrowings provide an economic hedge against the net investment in Fluid
Management's Netherlands operation, FAST's Italian operation and Micropump's
Ismatec Switzerland operation. Any amount outstanding at July 1, 2001, becomes
due at that date, accordingly, the company has classified the borrowings under
the U.S. Bank Credit Facility, along with accrued interest, as short-term debt
at September 30, 2000. The Company anticipates securing a similar credit
facility prior to July 1, 2001. Interest is payable quarterly on the outstanding
balance at the agent bank's reference rate or at LIBOR plus an applicable
margin. At September 30, 2000, the applicable margin was 35 basis points. The
Company pays an annual facility fee of 15 basis points on the total facility.
The Company also has an $8 million demand line of credit available for
short-term borrowing requirements at the bank's reference rate or at an optional
rate based on the bank's cost of funds. At September 30, 2000, the Company had
no borrowings under this short-term line of credit.
At September 30, 2000, the maximum amount available under the Company's
German credit agreement was 52.5 million marks ($23.7 million), of which 16.5
million marks ($7.4 million) was being used, which provides an economic hedge
against the net investment in the Company's Lukas subsidiary. The availability
under this agreement declines to 37 million marks 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 September 30, 2000, the applicable margin was 62.5 basis points.
On October 20, 1998, IDEX's Board of Directors authorized the repurchase of
up to 1.5 million shares of common stock either at market prices or on a
negotiated basis as market conditions warrant. Any such purchases would be
funded with borrowings under the Company's existing lines of credit. At
September 30, 2000, IDEX has purchased a total of 6,500 shares under the program
at a cost of approximately $144,000 including 2,000 shares at a cost of
approximately $46,000 during the first nine months of 2000.
IDEX believes it will generate sufficient cash flow from operations in 2000
to meet its operating requirements, interest and scheduled amortization payments
under the U.S. Bank Credit Facility, the demand line of credit and the German
credit agreement, interest and principal payments on the Senior Notes, any share
repurchases, approximately $20 million of planned capital expenditures, and
approximately $17 million of annual dividend payments to holders of common
stock. From commencement of operations in January 1988 until September 30, 2000,
IDEX has borrowed $674 million under its various credit agreements to complete
16 acquisitions. During this same period IDEX generated, principally from
operations, cash flow of $585 million to reduce its indebtedness. In the event
that suitable businesses are available for acquisition by IDEX upon terms
acceptable to the Board of Directors, IDEX may obtain all or a portion of the
financing for the acquisitions through the incurrence of additional long-term
indebtedness.
YEAR 2000
IDEX initiated a year 2000 compliance program in late 1996 to ensure that
its information systems and other date-sensitive equipment continue an
uninterrupted transition into the year 2000. All of the Company's essential
processes, systems, and business functions were compliant with the year 2000
requirements by the end of 1999. IDEX did not experience any year 2000
consequences affecting its financial position, liquidity, or results of
operations.
The costs of IDEX's year 2000 transition program were funded with cash
flows from operations. Some of these costs related solely to the modification of
existing systems, while others were for new systems, which also improved
business functionality. In total, these costs were not substantially different
from the normal, recurring costs incurred for system development and
implementation, in part due to the reallocation of internal resources to
implement the new business systems. Expenditures related to this multi year
program were approximately $6 million.
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<PAGE> 15
EURO PREPARATIONS
During 1998, 1999 and 2000, the Company upgraded its business systems to
accommodate the euro currency. The cost of this upgrade was immaterial to the
Company's financial results. Although difficult to predict, any competitive
implications and any impact on existing financial instruments resulting from the
euro implementation are also expected to be immaterial to the Company's results
of operations, financial position or liquidity.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is subject to market risk associated with changes in interest
rates and foreign currency exchange rates. Interest rate exposure is limited to
the $255.3 million of total debt of the Company outstanding at September 30,
2000. Approximately 23% of the debt is priced at interest rates that float with
the market. A 50 basis point movement in the interest rate on the floating rate
debt would result in an approximate $292,000 annualized increase or decrease in
interest expense and cash flows. The remaining debt is either fixed rate debt or
debt that has been essentially fixed through the use of interest rate swaps. The
Company will from time to time enter into interest rate swaps on its debt when
it believes there is a clear financial advantage for doing so. A formalized
treasury risk management policy adopted by the Board of Directors exists that
describes the procedures and controls over derivative financial and commodity
instruments, including interest rate swaps. Under the policy, the Company does
not use derivative financial or commodity instruments for trading purposes, and
the use of such instruments is subject to strict approval levels by senior
officers. Typically, the use of such derivative instruments is limited to
interest rate swaps on the Company's outstanding long-term debt. The Company's
exposure related to such derivative instruments is, in the aggregate, not
material to the Company's financial position, results of operations and cash
flows.
The Company's foreign currency exchange rate risk is limited principally to
the euro, British pound and Swiss franc. The Company manages its foreign
exchange risk principally through the invoicing of its customers in the same
currency as the source of the products.
14
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. None.
ITEM 2. CHANGES IN SECURITIES. Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
15
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
The exhibits listed in the accompanying "Exhibit Index" are filed as
part of this report.
(b) Reports on Form 8-K:
There have been no reports on Form 8-K filed during the quarter for
which this report is filed.
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<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized in the capacity and on the date
indicated.
IDEX CORPORATION
/s/ WAYNE P. SAYATOVIC
--------------------------------------
WAYNE P. SAYATOVIC
Senior Vice President -- Finance
and Chief Financial Officer
(Duly Authorized and Principal
Financial Officer)
October 27, 2000
17
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of IDEX Corporation
(formerly HI, Inc.) (incorporated by reference to Exhibit
No. 3.1 to the Registration Statement on Form S-1 of IDEX,
et al., Registration No. 33-21205, as filed on April 21,
1988)
3.1(a) Amendment to Restated Certificate of Incorporation of IDEX
Corporation (formerly HI, Inc.), (incorporated by reference
to Exhibit No. 3.1(a) to the Quarterly Report of IDEX on
Form 10-Q for the quarter ended March 31, 1996, Commission
File No. 1-10235)
3.2 Amended and Restated By-Laws of IDEX Corporation
(incorporated by reference to Exhibit No. 3.2 to
Post-Effective Amendment No. 2 to the Registration Statement
on Form S-1 of IDEX, et al., Registration No. 33-21205, as
filed on July 17, 1989)
3.2(a) Amended and Restated Article III, Section 13 of the Amended
and Restated By-Laws of IDEX Corporation (incorporated by
reference to Exhibit No. 3.2(a) to Post-Effective Amendment
No. 3 to the Registration Statement on Form S-1 of IDEX, et
al., Registration No. 33-21205, as filed on February 12,
1990)
4.1 Restated Certificate of Incorporation and By-Laws of IDEX
Corporation (filed as Exhibits No. 3.1 through 3.2(a))
4.2 Indenture, dated as of February 23, 1998, between IDEX
Corporation, and Norwest Bank Minnesota, National
Association, as Trustee, relating to the 6 7/8% Senior Notes
of IDEX Corporation due February 15, 2008 (incorporated by
reference to Exhibit No. 4.1 to the Current Report of IDEX
on Form 8-K dated February 23, 1998, Commission File No.
1-10235)
4.3 Specimen Senior Note of IDEX Corporation (incorporated by
reference to Exhibit No. 4.1 to the Current Report of IDEX
on Form 8-K dated February 23, 1998, Commission File No.
1-10235)
4.4 Specimen Certificate of Common Stock of IDEX Corporation
(incorporated by reference to Exhibit No. 4.3 to the
Registration Statement on Form S-2 of IDEX, et al.,
Registration No. 33-42208, as filed on September 16, 1991)
4.5 Third Amended and Restated Credit Agreement dated as of July
17, 1996, among IDEX Corporation, Bank of America NT&SA, as
Agent, and other financial institutions named therein (the
"Banks") (incorporated by reference to Exhibit No. 4.5 to
the Quarterly Report of IDEX on Form 10-Q for the quarter
ended June 30, 1996, Commission File No. 1-10235)
4.5(a) First Amendment to the Third Amended and Restated Credit
Agreement dated as of April 11, 1997 (incorporated by
reference to Exhibit No. 4.5(a) to the Quarterly Report of
IDEX on Form 10-Q for the quarter ended June 30, 1998,
Commission File No. 1-10235)
4.5(b) Second Amendment to the Third Amended and Restated Credit
Agreement dated as of January 20, 1998 (incorporated by
reference to Exhibit No. 4.5(b) to the Quarterly Report of
IDEX on Form 10-Q for the quarter ended June 30, 1998,
Commission File No. 1-10235)
4.5(c) Third Amendment to the Third Amended and Restated Credit
Agreement dated as of February 9, 1998 (incorporated by
reference to Exhibit No. 4.5(c) to the Quarterly Report of
IDEX on Form 10-Q for the quarter ended June 30, 1998,
Commission File No. 1-10235)
4.5(d) Fourth Amendment to the Third Amended and Restated Credit
Agreement dated as of April 3, 1998 (incorporated by
reference to Exhibit No. 4.5(d) to the Quarterly Report of
IDEX on Form 10-Q for the quarter ended June 30, 1998,
Commission File No. 1-10235)
4.5(e) Fifth Amendment to the Third Amended and Restated Credit
Agreement dated as of June 8, 1999 (incorporated by
reference to Exhibit No. 4.5(e) to the Quarterly Report of
IDEX on Form 10-Q for the quarter ended June 30, 1999,
Commission File No. 1-10235)
10.1 IDEX Corporation Amended and Restated Stock Option Plan for
Outside Directors
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.2 Amended and Restated Employment Agreement between IDEX
Corporation and Wayne P. Sayatovic, dated March 31, 2000
10.3 First Amendment to the Letter Agreement between IDEX
Corporation and Wayne P. Sayatovic, dated March 15, 2000
10.4 First Amendment to the Letter Agreement between IDEX
Corporation and James R. Fluharty, dated March 15, 2000
10.5 First Amendment to the Letter Agreement between IDEX
Corporation and Rodney L. Usher, dated March 15, 2000
10.6 Employment Agreement between IDEX Corporation and Dennis K.
Williams dated April 14, 2000
10.7 Employment Agreement between IDEX Corporation and Wayne P.
Sayatovic, dated April 24, 2000
10.8 Employment Agreement between IDEX Corporation and James R.
Fluharty, dated April 24, 2000
10.9 Employment Agreement between IDEX Corporation and David T.
Windmuller, dated April 24, 2000
10.10 Employment Agreement between IDEX Corporation and Rodney L.
Usher, dated April 24, 2000
27* Financial Data Schedule
</TABLE>
-------------------------
* Filed herewith
19
