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EXHIBIT 13
a shared vision [LOGO]
IDEX CORPORATION
ANNUAL REPORT 2000
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FINANCIAL HIGHLIGHTS
(in thousands except share and per share amounts)
Years ended December 31, 2000 Change 1999 Change 1998
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RESULTS OF
OPERATIONS
Net sales $ 704,276 8% $ 655,041 2% $ 640,131
Operating income 116,516 11 104,677 (4) 109,543
Interest expense 16,521 (8) 18,020 (19) 22,359
Income from
continuing operations 63,445 17 54,428 -- 54,396
Net income 63,445 17 54,428 (12) 62,064
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FINANCIAL
POSITION
Working capital $ 142,355 17% $ 122,081 6% $ 115,635
(excluding short-term debt)
Total assets 758,854 3 738,567 6 695,811
Total debt 241,886 (10) 268,589 (5) 283,410
Shareholders' equity 374,502 14 329,024 15 286,037
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PERFORMANCE
MEASURES
Percent of net sales
Operating income 16.5% 16.0% 17.1%
Income from
continuing operations 9.0 8.3 8.5
Return on average assets(1) 8.5 7.6 8.4
Debt as a percent of
capitalization 39.2 44.9 49.8
Return on average
shareholders' equity(1) 18.0 17.7 20.7
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PER SHARE DATA -
DILUTED
Income from continuing
operations $ 2.07 14% $ 1.81 --% $ 1.81
Income from continuing
operations (excluding goodwill) 2.37 12 2.11 1 2.09
Cash dividends paid .56 -- .56 4 .54
Shareholders' equity 12.38 12 11.10 14 9.71
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OTHER DATA
Employees at year end 3,880 3% 3,773 (1)% 3,803
Shareholders at year end 4,300 (23) 5,600 (20) 7,000
Weighted average
shares outstanding 30,632 2 30,085 -- 30,052
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(1) Ratio computed using income from continuing operations
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IDEX CORPORATION manufactures an extensive array of proprietary, engineered
industrial products sold to customers in a variety of industries around the
world.
Our businesses have leading positions in their niche markets, and we have a
history of achieving high profit margins. IDEX shares are traded on the New York
Stock Exchange and the Chicago Stock Exchange under the symbol IEX.
There are many reasons why IDEX has become a great company - but it is a
shared vision that will make it better, giving even more meaning to its name -
Innovation, Diversity and EXcellence.
Table of Contents
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SHAREHOLDERS' LETTER........................ 2
MAKING A GREAT COMPANY EVEN BETTER.......... 4
MAJOR GROWTH INITIATIVES.................... 6
DISCIPLINED ACQUISITION STRATEGY............ 8
BUSINESS GROUPS............................. 10
BUSINESS PROFILE............................ 12
HISTORICAL DATA............................. 14
MANAGEMENT'S DISCUSSION & ANALYSIS.......... 16
FINANCIAL STATEMENTS........................ 22
BUSINESS UNITS.............................. 35
CORPORATE OFFICERS & DIRECTORS.............. 36
SHAREHOLDER INFORMATION..................... 37
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a shared vision
SIX SIGMA STARTS WITH THE CUSTOMER
TO OUR SHAREHOLDERS
ACHIEVEMENTS BRING MANY RECORDS
I am proud to report that IDEX achieved record performance in 2000 --
record orders of $699 million, record sales of $704 million, record EPS from
continuing operations of $2.07, and the lowest debt-to-total capitalization in
our history.
OPERATING MARGIN IMPROVEMENTS -- Our operating margins increased to 16.5%.
Although not a record, this was 50 basis points above 1999, and was made
possible by our strong market positions and traditional cost management efforts.
The company again outperformed its peer group.
MAINTAINED LEADERSHIP -- IDEX maintained or strengthened its position as
the world's leader in positive displacement pumps, color formulation equipment,
fire truck pumps, rescue tools, and stainless steel band clamping devices. We
did this through innovation in new products, shortened lead times, and a better
focus on our customers' needs.
FOUR ACQUISITIONS -- During the year, we completed the Ismatec and Trebor
acquisitions that opened up growth opportunities in new market segments:
semiconductor and lab/pharmaceutical/biotech. We also completed the due
diligence and negotiations that led to two more acquisitions, which closed in
early January. These two companies, Liquid Controls and Class 1, are great
strategic acquisitions and will allow IDEX to grow faster through expanded
product offerings that meet our customers' needs.
IMPROVED MANAGEMENT STRUCTURE -- In the fall, we realigned the management
team, removing a reporting layer and providing better focus on our three product
families to maximize the opportunity for synergies and sales growth.
In addition, we created several key positions. Our new vice president of
operational excellence will ultimately create the "IDEX operating system". This
will help us improve all our current operations, and allow faster integration
and realization of improvements from our acquisitions. The two other positions
were director of e-business and director of distributor relations. All three of
these people report directly to me, signifying our commitment to these areas.
We ended 2000 in record fashion, with a reinvigorated organization and
several exciting new initiatives underway.
2001 -- YEAR OF TRANSFORMATION
2001 will be a year of transformation for IDEX. We are focused on top-line
growth, bottom-line growth, and cash generation -- and have changed our variable
compensation structure to be consistent with this. We have an expanding "tool
kit" to help our leadership team achieve these objectives. Here are the most
significant elements of our strategy, starting with the two that I believe will
dramatically transform this company: Six Sigma and e-business.
SIX SIGMA -- We began training our first group of Black Belts, or full-time
experts, in the fourth quarter. Our best people were selected for these key
roles -- a difficult decision but a necessary one, because these are the people
who will change the company and be our leaders of tomorrow. Our customers and
our employees already are beginning to feel the change. Six Sigma starts with
customers and what is important to them. We call these CTQs: Critical to
Quality. It may be on-time delivery, or mean-time between failure, or ease of
installation. Then we measure the gap between our performance and their
expectations. Using a comprehensive set of techniques, we change our products
and processes to deliver what our customers want. This translates into both top-
and bottom-line growth, as we deliver a better product, gain share, and do it
all at a lower total cost. We will have all our businesses participating in 2001
- -- and we can't wait!
E-BUSINESS -- This is another vehicle for substantial change in IDEX. To
date, we have created Websites at all our businesses which
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provide product information, and some on-line shopping sites. In 2001, we will
take an aggressive "launch and learn" approach. We are developing projects to
Web-enable what our customers and channel partners want the most -- and
completing these in aggressive 60-90 day periods.
Distribution is our starting point, because we believe it offers great
opportunity to drive growth and to lower transaction costs. Much has been
written about the "disintermediation" of distribution. We don't buy it. In fact,
we have a strong contrarian view. The location and core competencies of a
manufacturer and a distributor are quite different --and very complementary. We
believe the real enemies are inventory, cycle time, complexity and cost. By
Web-enabling processes and tools engineered with Six Sigma techniques, IDEX can
create a more efficient channel to better serve its customers. This will be a
dynamic area of change in 2001 and beyond.
TOP-LINE GROWTH -- In addition to Six Sigma and e-business, we have several
other approaches to drive growth. As a market share leader, sometimes it is
difficult to develop a strategy for sustainable long-term growth -- if you own
the market, where can you go from there? To address this, all our businesses are
redefining their markets so they have less than 10% share. They are doing this
by considering new niche markets, global and adjacent markets, and service. We
are beginning to see results. Our Fluid Management team just received the first
order for 100 machines to precisely formulate hair dye -- a totally new
application and market for this operation. In 2001, we will begin revamping our
strategic planning approach to drive both a short- and a long-term plan. This
process will focus strongly on global growth opportunities and larger served
markets.
In addition to organic growth, we will continue to make acquisitions. Our
historic screen has served us well, and we will continue to use it. In a
reasonable economic environment, we believe the combination of organic growth
and acquisitions will allow us to achieve sustainable double-digit growth.
BOTTOM-LINE GROWTH -- Six Sigma and e-business also will give us benefits
here. However, three other contributors should provide us with additional
opportunities. Some of our experienced people are dedicated to leveraging
company-wide purchases for key commodities through global sourcing. This is a
significant bottom-line opportunity, which will begin to pay off in the second
half of 2001. We also expect to get some benefit from the business realignment
and from the faster integration of new acquisitions. As with the top line, we
expect double-digit growth on the bottom line.
CASH FLOW -- We have established aggressive three-year goals for inventory
and receivables. All our businesses have 2001 targets consistent with these
world-class, long-term objectives. We are confident our plans will generate the
cash to enable additional acquisitions and reduce debt.
COMMITMENT TO EMPLOYEE LEADERSHIP -- Finally, in 2001 we will reinvigorate
our Human Resources process to identify and develop our future leaders. This is
a critical task that will provide the talent to drive our future growth.
RECORD ORDERS, SALES AND EARNINGS ANTICIPATED FOR 2001
We believe IDEX is well positioned for the future, with diversity in
products and markets served and leading positions in its niches. We think the
company will benefit from its emphasis on profitable growth, the margin
improvement initiatives of Six Sigma and global sourcing, the use of strong cash
flow to cut debt and interest expense, and our recently announced acquisitions.
While it is likely that 2001 will get off to a slow start, with reasonable
economic conditions in the U.S. and key foreign economies, we would expect to
have record performance again for the full year.
Late in 2000, one analyst who follows the company observed, "This is not
your father's IDEX." I truly believe this. IDEX is a great company. But with our
new initiatives -- and the support of our customers, vendors, employees and
shareholders -- we can make this great company better!
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a shared vision
MAKING A GREAT COMPANY EVEN BETTER
IDEX HAS GROWN IN STRONG MARKETS AND MAINTAINED PROFITABILITY IN ECONOMIC
DOWNTURNS BECAUSE ITS SHARED VISION CREATED A NUMBER OF COMPETITIVE ADVANTAGES.
MARKET/BRAND LEADERSHIP. IDEX companies have strong brands and hold either
the #1 or strong #2 position in their markets. In addition, we are the world's
leader in positive displacement pumps, the world's leader in color formulation
equipment, the world's leader in fire truck pumps and rescue tools, and the
world's leader in stainless steel banding and clamping devices.
NEW PRODUCT DEVELOPMENT. About 25% of our annual revenues come from
products introduced or totally redesigned in the last four years. This is the
result of a continuing focus on product development, and this year was no
exception. As the photos in this section illustrate, IDEX introduced products
that will help us continue to maintain and grow market share.
SIX SIGMA IMPACT. We have always been committed to developing quality
products,
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but with Six Sigma we will be able to achieve even better results. Six Sigma
starts with customers, identifying what is important to them and improving upon
these Critical to Quality issues (CTQs). By being closer to our customers, we
will gain better insight on new product needs. Design for Six Sigma (DFSS) will
allow us to design and build better products. The combination of more intimate
customer knowledge and a robust set of tools will allow us to introduce more
high quality, innovative products in the future.
A NEW LOOK AT MARKETS. The key to sustainable organic growth is the
continuous drive to identify new market opportunities and products. A new
strategic approach will be used in 2001, defining new markets so we have less
than 10% share of a broader market by expanding service, and global and adjacent
markets. This new approach will become the engine for our organic growth.
-- DIVERSE MARKETS. IDEX's broad product line allows it to reach many
customers and industries around the world. This helps the company reduce its
dependency on a particular market or industry. As a result, no single customer
accounts for more than 2% of our revenue. In addition, we have a broad
distribution network. IDEX has operations in 10 countries, but we sell our
products in more than 100 countries because of our strong distributor
relationships. This helped us generate a healthy 41% of sales outside the U.S.
in 2000, and gives us access to growth opportunities in Europe, Asia and Latin
America.
-- STRONG CASH FLOW. High levels of EBITDA (earnings before interest,
taxes, depreciation and amortization) give IDEX the financial flexibility to
fund growth while reducing debt. In 2000, our $154 million in EBITDA allowed us
to spend $35 million on two acquisitions, continue to fund our dividend, and
reinvest in the business.
The combination of these competitive advantages will allow IDEX to
outperform its peer group and the Value Line Industrial Composite in the future
- - as it has since it went public in 1989:
-- IDEX sales have expanded at a 15% compound annual growth rate, compared
with 9% for its peer group, and
-- IDEX's 2000 operating income margin was 16.5% versus 12.8% for its peers
and 11.4% for the Value Line group.
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a shared vision
MAJOR GROWTH INITIATIVES
IDEX, AS PART OF ITS SHARED VISION, HAS INTRODUCED THREE MAJOR INITIATIVES TO
INCREASE REVENUE GROWTH OPPORTUNITIES AND IMPROVE THE BOTTOM LINE: SIX SIGMA,
GLOBAL SOURCING AND E-BUSINESS.
We began implementing Six Sigma in the last quarter of 2000 and training
was started for process mapping and data collection (Yellow Belt), Project
Leader/Problem Solvers (Black Belts) and Executive Champions at four operations.
The rest of our businesses will begin training in early 2001.
-- SIX SIGMA. Six Sigma is already beginning to change our company - the
way we think and the language we speak. It will give us both top-line and
bottom-line growth. The focus on customer needs is directing our businesses to
process and product improvements that are the most beneficial to the customer.
Our initial focus has been to improve on-time delivery performance -
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a CTQ for all customers. Using the Six Sigma steps of Measure, Analyze, Improve
and Control, our businesses have begun to collect and analyze data. They also
are beginning the process of identifying the cause of defects, which create the
gap between our actual performance and that desired by our customers. Our four
lead businesses already are seeing improvements, which means customers will feel
the difference. As we make significant impact in their CTQs, we believe they
will make IDEX the preferred supplier - a key element in our strategy to grow
our business.
We believe the bottom-line improvements also will be dramatic. Research
indicates the cost of poor quality (COPQ) ranges between 20% and 30% of sales.
Six Sigma's data-driven, problem-solving methodology eliminates the process and
product defects that often are overlooked: premium costs stemming from expedited
delivery, engineering changes, excess inventories, long setup and lead times,
and lost sales. All these hidden costs plus the more traditional warranty, scrap
and rework costs will be addressed by our business units through their use of
Six Sigma problem-solving tools.
-- GLOBAL SOURCING. The reduction of our purchased material cost is another
key bottom-line growth initiative.
We are leveraging the skills and experience of some of our procurement
executives who have globally sourced components. The first phase of our program
consolidated the buying power of all business units to globally source aluminum,
iron, steel and stainless steel castings, in addition to various machined
components. The second phase will focus on motors, printed circuit boards, and
injection molded plastic and elastomer components.
Each business unit has designated a cross-functional team (purchasing,
quality, and engineering) to coordinate technical requirements with the selected
global supplier. In all cases, the product quality from these vendors is equal
to and often exceeds the quality levels of our prior sources.
This global sourcing initiative represents a significant bottom-line
opportunity and we anticipate seeing these benefits beginning in the third
quarter of 2001.
-- E-BUSINESS. We have developed a strategy for Web-enabling various
business processes for our distributors, OEMs and direct end user customers.
This program has two main goals: to make it easier for all to do business with
IDEX, and to attack the main enemies - cost, complexity, cycle time and
inventory.
In 2001, we will focus on a fast 60-90 day implementation cycle for the
functionality most wanted by our customers and channel partners - launch and
learn. We believe this approach will allow us to grow our business, while
lowering transaction cost.
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a shared vision
DISCIPLINED ACQUISITION STRATEGY
ACQUISITIONS HAVE BEEN A GREAT SOURCE OF GROWTH FOR IDEX. WE HAVE ACQUIRED 18
COMPANIES SINCE GOING PUBLIC IN 1989, AND WOULD MAKE EVERY ONE OF THESE AGAIN.
ACQUISITIONS WILL REMAIN AN IMPORTANT PART OF OUR TOP- AND BOTTOM-LINE GROWTH
STRATEGIES.
-- STRINGENT CRITERIA. We are not interested in growth for growth's sake.
We continue to use the strategy that has served the company well over the years.
We look for companies that
produce proprietary products with a strong brand name;
are profitable;
would be accretive to earnings in year one;
have a strong market position;
serve a diverse customer base;
are synergistic with current product lines or provide access to adjacent
markets, and;
have a strong management team.
-- FOUR ACQUISITIONS. These candidates met our criteria during the year.
ISMATEC is a leading manufacturer of peristaltic metering pumps, analytic
process controllers, and sample preparation systems. This $10 million,
Switzerland-based company gave us an entree into scientific R&D markets -
pharmaceutical, medical, biotech and
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institutional laboratory. Ismatec operates as part of Micropump.
TREBOR is a leader in high purity fluid handling products, including
air-operated diaphragm pumps and deionized water-heating systems. Its products
are used in the manufacturing process for semiconductors, disk drives and flat
panel displays - all new markets for IDEX. Trebor, headquartered near Salt Lake
City, Utah, is a $10 million business and operates as part of Warren Rupp.
LIQUID CONTROLS, acquired in January 2001, is a leading manufacturer of
positive displacement flow meters and electronic registration and control
products. Applications for its products include mobile and stationary metering
installations for wholesale and retail distribution of petroleum and LP gas,
aviation refueling, and industrial metering and dispensing of liquids and gas.
Liquid Controls is headquartered in Lake Bluff, Illinois, with annual sales of
about $50 million.
CLASS 1, also acquired in January 2001, is a leading supplier of components
and systems to the fire and rescue vehicle market. Its primary products include
electronic information controls, engine information systems, electronic
multiplexing units, electrical monitoring equipment and systems, and fire truck
mechanical components. Headquartered in Ocala, Florida, Class 1 has annual sales
of around $25 million and will function as part of Hale Products.
-- IMPROVING ACQUIRED OPERATIONS. After acquiring an operation, we improve
its performance through the implementation of proven techniques from IDEX. We
also look for best practices inside the acquired companies that we can use
throughout IDEX. We are enhancing this approach through the use of a full-time
integration leader and believe this will pay off with a faster realization of
benefits.
-- INCREASING INTERNATIONAL SALES. Acquisitions also may fit another growth
initiative, which is to increase international sales. We believe there is
substantial room to grow globally and continue to look for acquisition
opportunities outside the U.S.
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a shared vision
BUSINESS GROUPS
IDEX's BUSINESS UNITS ARE ORGANIZED INTO THREE GROUPS: PUMP PRODUCTS, DISPENSING
EQUIPMENT AND OTHER ENGINEERED PRODUCTS.
These businesses design, manufacture and market an extensive array of
proprietary, highly engineered fluid handling devices and other engineered
equipment to customers in a variety of industries around the world.
Pump Products
-- CORKEN
-- GAST MANUFACTURING
-- LIQUID CONTROLS
-- MICROPUMP
-- PULSAFEEDER
-- VIKING PUMP
-- WARREN RUPP
These seven business units design, produce and distribute some of the most
recognized names in industrial pumps, compressors, flow meters and related
controls. Applications range from pumping and metering chemicals, gas and
lubricants; to moving paints, inks and fuels; to providing clean, quiet sources
of air in medical and industrial applications. The group's complementary lines
of specialized positive displacement pumps and related products include rotary
gear, vane and lobe pumps; air-operated diaphragm pumps; miniature gear pumps;
peristaltic metering pumps and vacuum pumps; air motors and compressors; and
flow meters. These precision-engineered devices give customers an unparalleled
range of choices to meet their needs.
The Pump Products Group accounted for 56% of our sales and 55% of our
profits in 2000, with 33% of sales to customers outside the U.S.
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Dispensing Equipment
-- FAST
-- FLUID MANAGEMENT
-- LUBRIQUIP
This group consists of three business units that produce 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 business units provide engineered equipment and systems as well as
service for applications such as tinting paints and coatings, providing
industrial and automotive refinishing equipment, and the precise lubrication of
machinery and transportation equipment.
The Dispensing Equipment Group contributed 23% of our sales and 24% of our
profits in 2000, and 55% of the group's sales were to international customers.
Other Engineered Products
-- BAND-IT
-- HALE PRODUCTS
The two business units in this group manufacture engineered stainless steel
banding and clamping devices, pumps, rescue tools and other components and
systems for the fire and rescue industry. Our high quality stainless steel
bands, buckles and preformed clamps and related installation tools are used
worldwide in industrial and commercial markets. They are used to secure hoses,
signals, pipes, poles, electrical lines, sign-mounting systems and many other
"hold-together" applications. The group also includes the world's leading
manufacturer of truck-mounted fire pumps, rescue tools, and control devices and
systems, sold under the Hale, Hurst Jaws of Life, Lukasand Class 1 tradenames.
This group represented 21% of both sales and profits in 2000. Sales to
non-U.S. customers accounted for 46% of total group sales.
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BUSINESS PROFILE
Corken Gast Manufacturing Liquid Controls Micropump
Product Positive displacement Vacuum pumps, air motors, Positive displacement, Small, precision-engineered,
offerings rotary vane pumps, vacuum generators, turbine and electromagnetic magnetically and
single and multi-stage regenerative blowers flowmeters. Coriolis mass electromagnetically driven
regenerative turbine and fractional horsepower flowmeters and electronic rotary gear, piston and
pumps, and small compressors. registration and control centrifugal pumps. Precision
horsepower reciprocating systems. peristaltic pumps, devices
piston compressors. and fluid processing systems.
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Brand Corken, Coro-Flo, Gast, Regenair, LC, LCMAG, LCMASS, Micropump, Delta, Integral
names* Coro-Vane, Smart-Air, Roc-R Lectrocount Series, Ismatec, Flowmaster,
Coro-Vac, Sabre MCP Series, Ecoline, Fixo,
Mini Series
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Markets Liquefied petroleum Medical equipment, Petroleum, liquefied petroleum Printing machinery, medical
served gas (LPG), oil and environmental equipment, gas (LPG), chemicals, equipment, chemical
gas, petrochemical, computers and electronics, pharmaceuticals, food processing, pharmaceutical,
pulp and paper, printing machinery, paint products, beverage, water, refining, laboratory,
transportation, mixing machinery, gases, paints and coatings, electronics, food and
marine, food processing packaging machinery, pulp and paper. beverage, pulp and paper,
and general industrial. graphic arts and water treatment and textiles.
industrial manufacturing.
45% of sales outside 20% of sales outside 55% of sales outside the U.S. 60% of sales outside the U.S.
the U.S. the U.S.
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Product Products used for Air motors for industrial Flowmeter and registration Pumps and fluid management
applications transfer and recovery equipment applications, systems used in controlled systems for low-flow
of non-viscous, toxic, and vacuum pumps custody transfer applications, abrasive and corrosive
and hazardous fluids and fractional horsepower process control applications applications such as inks,
in either liquid or compressors for specialty for blending and batching, dyes, solvents and
vapor form, such as pneumatic applications metering into storage chemicals. Precision pumps
LPG, chlorine, high requiring a quiet clean and high-speed diesel and systems used in
temperature water, source of moderate vacuum dispensing. analytical laboratory
fluorocarbons, carbon or pressure. research for drugs and
dioxide, solvents, biotech development.
ammonia, natural gas,
and nitrogen.
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Competitive Market leader for A leading manufacturer of Market leader for high Market and technology leader
strengths pumps and air-moving products with accuracy custody transfer in corrosion-resistant,
compressors used an estimated one-third liquid measurement and magnetically and
in LPG distribution U.S. market share in air control, including aircraft electromagnetically driven,
facilities with an motors, low and medium refueling, fuel oil delivery, miniature pump technology and
estimated 50% U.S. range vacuum pumps, lube oil packaging and precision dispensing
market share. vacuum generators, blending, LPG transport and laboratory equipment with an
regenerative blowers and delivery. Estimated estimated 40% U.S. market
fractional horsepower one-third U.S. market share. share.
compressors.
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Website www.corken.com www.gastmfg.com www.lcmeter.com www.micropump.com
addresses www.gasthk.com www.micropump.co.uk
www.gastltd.com www.ismatec.com
www.yourairstore.com
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Examples High differential New regenerative blowers 6-inch 1000 GPM aluminum Pumps and programmable drives
of recently pressure regenerative for aquaculture and aviation fueling meter, for accurate metering of
introduced turbine pump for autogas material handling. Lectrocount electronic low-flow corrosive, sterile
products* (LPG) dispensing. Redesigned miniature register for aviation and abrasive applications.
Vertical, multi-stage diaphragm pumps for air fueling meters. Lectrocount Customized products for OEMs
side channel pump used sampling and emissions electronic register for LPG in niche markets.
for transferring testing. New compressors delivery, magnetically driven Microprocessor-controlled
non-gaseous liquids. for air beds and glandless pulse output device drives for peristaltic,
Horizontal compressor alternative power for flowmeters and a full gear and piston pumps.
for gas gathering, generation (fuel cell) line of LCMAG electromagnetic
vapor recovery, and technologies. meters for measurement
gas boosting. of conductive liquids.
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Manufacturing Oklahoma City, Oklahoma Benton Harbor, Michigan Lake Bluff, Illinois Vancouver, Washington
locations Bridgman, Michigan Vadodara, India St. Neots, England
High Wycombe, England Lucca, Italy Glattbrugg - Zurich,
Montagnana, Italy Switzerland
Wertheim - Mondfeld, Germany
*Brand names shown are registered trademarks of IDEX and/or its subsidiaries.
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Pulsafeeder Viking Pump Warren Rupp FAST
Metering pumps, special Rotary gear, lobe and metering Double-diaphragm pumps, Precision-designed tinting,
purpose rotary pumps, pumps, strainers and reducers, both air-operated and mixing,measuring and
peristaltic pumps, and related electronic motor-driven, and accessories. dispensing equipment for
electronic controls controls. High-purity double- refinishing, architectural and
and dispensing equipment. diaphragm pumps, surge industrial paints, inks, dyes,
suppressors and pastes and other liquids.
deionized water heaters.
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Pulsafeeder, Knight, Viking, Vican, Viking Mag Warren Rupp, SandPIPER, FAST, Leonardo, Donatello,
PULSAR, PULSAtron, Drive, Viking Flow Manager, Marathon, PoweRupp, RuppTech, Michaelangelo, Giotto,
PULSAtrol, Chem-Tech, Vi-Corr, Duralobe, Classic, Blagdon, Trebor, Maxim, Hercules,Galileo, Top Mix,
Eco, Isochem, Mec-O-Matic, On-Line, SQ, RTP, Lid Ease Champion, Magnum, Vincent, Newton, Unicover,
Eastern, Foster Quantum, IQ Eurocombi, Jonathan, Help 2000
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Water and wastewater Chemical, petroleum, pulp Chemical, paint, food Through architectural,
treatment, power and paper, plastics, paints, processing, semiconductor, refinishing and industrial
generation, pulp and paper, inks, tanker trucks, microelectronics, paint producers, precision
chemical and hydrocarbon compressor, construction, food, industrial maintenance. construction, utilities, mining
processing,swimming pool, beverage, personal care, and equipment is supplied to
industrial and commercial pharmaceutical and biotech. retail and commercial stores,
laundry and dish-washing. home centers, and automotive
body shops.
30% of sales outside the U.S. 30% of sales outside the U.S. 45% of sales outside the U.S. 95% of sales outside the U.S.
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Pumps, controls and Pumps for transferring and Pumps for abrasive and Dispensing, metering and mixing
dispensing equipment for metering thin and viscous semisolid materials as well equipment for precise and
introducing precise amounts liquids, including chemicals, as for applications where reliable reproduction of colors
of fluids into processes to petroleum products, paints, product degradation is a based on paint producers'
manage chemicals, water inks, coatings, adhesives, concern or where electri- formulas.
quality and chemical asphalt, foods, pharmaceuticals, city is not available or
composition. soaps, beverages and shampoos. should not be used. Acid
heating for rinsing and
cleaning.
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A leading manufacturer of Largest internal gear pump A leading double-diaphragm Quality service, strong and
metering pumps, controls producer with an estimated pump producer offering committed customer relation-
and dispensing equipment 40% market share of U.S. products in several materials ships, innovative, components
used in water treatment, rotary gear pump market. including composites, stain- and products for the
process applications and Also a producer of external less steel, aluminum and architectural paint and
warewash institutional gear and rotary lobe pumps. cast iron. Class 1000 clean- refinishing markets. Estimated
applications. Estimated room assembled products, 20% worldwide share of refini-
40% U.S. market share. and patented quartz heating shing and architectural equip-
technology. Estimated one- ment.
quarter U.S. market share.
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www.pulsa.com www.vikingpump.com www.warrenrupp.com www.fast.it
www.pulsatron.com www.johnsonpumpuk.co.uk www.blagdonpump.com
www.knightequip.com www.vikingpumpeurope.com www.treborintl.com
www.vikingpumpcanada.com
www.pumpschool.com
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New series of mechanically New series of gerotor pumps New models of SandPIPER II Automatic dispenser with
actuated diaphragm metering for the food machinery market. metallic pumps in cast iron, maximum flexibility in con-
pumps targeted at water Pumps for higher pressure aluminum and stainless. figurations and sizes. New
conditioning, chemical and flow sizes for heavy-duty New Magnum series chemical stirring machine to reduce
processing, and OEM markets. process industry applications. pump and deionized water space for transportation and
PULSA NET software that Specially designed products for heater using new patented warehousing, and stirring lids
interfaces with the pump metering and locomotive fuel quartz heating technology. to reduce contamination
controller and customer's pumping. risk for water-borne paints.
SCADA system for use in
municipal water treatment
and waste water treatment.
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Rochester, New York Cedar Falls, Iowa Mansfield, Ohio Cinisello Balsamo, Italy
Punta Gorda, Florida Windsor, Ontario, Canada Washington, England
Lake Forest, California Eastbourne, England West Jordan, Utah
Enschede, The Netherlands Shannon, Ireland
13
16
Fluid Management Lubriquip BAND-IT Hale Products
Precision-engineered equipment Centralized oil and grease Stainless steel bands, buckles, Truck-mounted and portable
for dispensing, metering and lubrication systems, force- pre-formed clamps, cable ties, fire pumps, and rescue tool
mixing paints, coatings, feed lubricators, metering installation tools and modular systems. Electronic and
colorants, inks, dyes and devices, related electronic sign-mounting systems. mechanical components
other liquids and pastes. controls and accessories. and systems for the fire
and rescue, and specialty
vehicle markets.
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Fluid Management, Harbil, Miller, Trabon, Manzel, OPCO, Grease BAND-IT, SIGNFIX, BAND-IT Jr, Hale, Godiva, LUKAS, Hurst
Blendorama, Tintmaster, Jockey, TrackMaster, Spindl- Tespa, Junior, Thriftool, Jaws of Life, Class 1,
Accutinter, Eurotinter, ColorPro, Gard, Injecto-Flo, Mill-Gard Tie-Dex, Ultra-Lok, Tri-Lokt, FoamMaster, CAFSMaster,
Prisma, EZ Load, GyroMixer Tie-Lok, Tie-Lok II Tool, Century, Green, Cross, Hurst
Self-Lok, Band-Lok, E-Z Entry Systems, Typhoon, Qflo,
Banner, Infocurve Qmax, Qpak, MaxStream, ES-KEY
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Retail and commercial paint Machine tools, transfer Transportation equipment, oil Public and private fire and
stores, hardware stores, home machines, conveyors, packaging and gas, industrial maintenance, rescue applications.
centers, department stores, machinery, transportation electronics, electrical,
printers, and paint and ink equipment, construction communications, aerospace,
manufacturers. machinery, and food processing traffic and commercial signs.
and paper machinery.
50% of sales outside the U.S. 20% of sales outside the U.S. 55% of sales outside the U.S. 40% of sales outside the U.S.
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Fluid management systems for Lubrication systems engineered Clamps, bands, and ties to Pumps for water or foam to
precise blending of base to dispense lubricants and secure and fasten hose fittings, extinguish fires, rescue
paint, tints and colorants, and precisely lubricate machines signs, pipes, cable bundles, equipment for extricating
inks and dyes in a broad range and mechanical systems to protective boots, shields, etc. accident victims, forcible
of industries from retail point- prolong equipment life, reduce for industrial and commercial entry equipment for law
of-sale equipment to in-plant maintenance costs and increase uses, including process plants, enforcement and disaster
manufacturing systems. productivity. mining, utility, transportation, recovery, and tools for use
automotive, and aerospace in the structural collapse of
industries. buildings and recycling.
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Industry innovator and world- Market leader in centralized World's leading producer of World's leading manufacturer
wide market share leader in oil lubrication systems high-quality stainless steel of truck-mounted fire pumps
automatic and manually operated serving a broad range of bands, buckles and clamping and rescue systems with an
dispensing, metering and mixing industries. Estimated one- systems, with an estimated 45% estimated 50% worldwide
equipment for the paints and quarter U.S. market share. worldwide market share. market share.
coatings market. Estimated
50% worldwide market share.
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www.fluidman.com www.lubriquip.com www.band-it-idex.com www.haleproducts.com
www.fluidman.nl www.signfix.co.uk www.hurstjaws.com
www.fluidman.com.au www.band-it.co.uk www.hurstentry.com
www.lukas.de
www.class1.com
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New series of economical simul- New microprocessor-based IT-9000, a stationary, elec- Qpak, the most compact fully
taneous paint colorant lubrication system controller trically powered, automatic manifolded midship pump in
dispensers for home improvement capable of simultaneously clamp application tool with the market. New mini-size
centers. Enhanced Color Pro monitoring and controlling two computerized controls. A 3/8" Hurst rescue tools for first
graphical software. Eurotinter independent lubrication systems. Tie-Lok tie and power appli- response and rapid deployment
Medium gear pump dispenser using cation tool. Uni-Clamp, a in vehicular accidents. Lukas
proprietary ceramic pumps. A newly universal 5/8" clamp to be backpack power unit for
designed Tintia dispenser for applied with standard hand rescue tools.
the hair-dye industry. tools.
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Wheeling, Illinois Warrensville Heights, Ohio Denver, Colorado Conshohocken, Pennsylvania
Sassenheim, The Netherlands Madison, Wisconsin Bristol, England Shelby, North Carolina
Unanderra, Australia Staveley, England St. Joseph, Tennessee
Tipton, England Warwick, England
Singapore Erlangen, Germany
Ocala, Florida
13a
17
HISTORICAL DATA
(dollars in thousands except per share amounts)
2000 1999 1998
--------- ---------- ----------
RESULTS OF OPERATIONS
Net sales $ 704,276 $ 655,041 $ 640,131
Gross profit 277,952 256,484 252,846
SG&A expenses 149,639 140,495 132,627
Goodwill amortization 11,797 11,312 10,676
Operating income 116,516 104,677 109,543
Other income (expense) -- net 1,031 568 479
Interest expense 16,521 18,020 22,359
Provision for income taxes 37,581 32,797 33,267
Income from continuing operations 63,445 54,428 54,396
Income from discontinued operations -- -- 10,182
Extraordinary items -- -- (2,514)
Net income 63,445 54,428 62,064
Income applicable to common stock 63,445 54,428 62,064
FINANCIAL POSITION
Current assets $ 232,089 $ 213,715 $ 195,900
Current liabilities 177,811(1) 91,634 80,265
Working capital 54,278(1) 122,081 115,635
Current ratio 1.3(1) 2.3 2.4
Capital expenditures 20,739 18,338 20,763
Depreciation and amortization 36,704 34,835 33,575
Total assets 758,854 738,567 695,811
Total debt 241,886 268,589 283,410
Shareholders' equity 374,502 329,024 286,037
PERFORMANCE MEASURES
Percent of net sales
Gross profit 39.5% 39.2% 39.5%
SG&A expenses 21.2 21.4 20.7
Goodwill amortization 1.7 1.7 1.7
Operating income 16.5 16.0 17.1
Income before income taxes 14.3 13.3 13.7
Income from continuing operations 9.0 8.3 8.5
Effective tax rate 37.2 37.6 37.9
Net income return on average assets 8.5 7.6 9.6
Debt as a percent of capitalization 39.2 44.9 49.8
Net income return on average shareholders' equity 18.0 17.7 23.7
PER SHARE DATA
Basic -- income from continuing operations $ 2.13 $ 1.84 $ 1.85
-- net income 2.13 1.84 2.12
Diluted -- income from continuing operations 2.07 1.81 1.81
-- net income 2.07 1.81 2.07
Cash dividends declared .560 .560 .545
Shareholders' equity 12.38 11.10 9.71
Stock price -- high 36 34 1/8 38 3/4
-- low 22 3/4 21 5/8 19 1/2
-- close 33 1/8 30 3/8 24 1/2
Price/earnings ratio at year end 16 17 14
OTHER DATA
Employees at year end 3,880 3,773 3,803
Shareholders at year end 4,300 5,600 7,000
Weighted average shares outstanding -- basic 29,726 29,544 29,332
-- diluted 30,632 30,085 30,052
Shares outstanding at year end 30,258 29,636 29,466
14
18
1997 1996 1995 1994 1993 1992
-------- ---------- --------- ---------- ----------- ----------
RESULTS OF OPERATIONS
Net sales $552,163 $ 474,699 $ 395,480 $ 319,231 $ 239,704 $ 215,778
Gross profit 222,357 187,074 157,677 126,951 96,903 88,312
SG&A expenses 110,588 93,217 78,712 66,743 52,950 49,326
Goodwill amortization 8,174 6,241 4,196 3,025 1,889 1,422
Operating income 103,595 87,616 74,769 57,183 42,064 37,564
Other income (expense)-- net (693) (696) 524 281 728 602
Interest expense 18,398 17,476 14,301 11,939 9,168 9,809
Provision for income taxes 31,029 25,020 21,845 16,181 11,187 9,763
Income from continuing operations 53,475 44,424 39,147 29,344 22,437 18,594
Income from discontinued operations 5,151 5,774 6,178 4,266 2,889 1,552
Extraordinary items -- -- -- -- -- (3,441)
Net income 58,626 50,198 45,325 33,610 25,326 16,705
Income applicable to common stock 58,626 50,198 45,325 33,610 25,326 16,705
FINANCIAL POSITION
Current assets $197,267 $ 191,599 $ 173,889 $ 140,450 $ 106,864 $ 107,958
Current liabilities 77,801 83,286 70,798 58,443 34,038 31,276
Working capital 119,466 108,313 103,091 82,007 72,826 76,682
Current ratio 2.5 2.3 2.5 2.4 3.1 3.5
Capital expenditures 13,562 11,634 8,181 6,818 6,120 5,657
Depreciation and amortization 24,943 21,312 15,277 12,515 10,092 8,758
Total assets 599,193 569,745 450,077 357,980 245,291 240,175
Total debt 258,417 271,709 206,184 168,166 117,464 139,827
Shareholders' equity 238,671 195,509 150,945 116,305 83,686 58,731
PERFORMANCE MEASURES
Percent of net sales
Gross profit 40.3% 39.4% 39.9% 39.8% 40.4% 40.9%
SG&A expenses 20.0 19.6 19.9 20.9 22.1 22.9
Goodwill amortization 1.5 1.3 1.1 1.0 .8 .7
Operating income 18.8 18.5 18.9 17.9 17.5 17.4
Income before income taxes 15.3 14.6 15.4 14.3 14.0 13.1
Income from continuing operations 9.7 9.4 9.9 9.2 9.4 8.6
Effective tax rate 36.7 36.0 35.8 35.5 33.3 34.4
Net income return on average assets 10.0 9.8 11.2 11.1 10.4 8.9
Debt as a percent of capitalization 52.0 58.2 57.7 59.1 58.4 70.4
Net income return on average shareholders' equity 27.0 29.0 33.9 33.6 35.6 34.9
PER SHARE DATA
Basic -- income from continuing operations $ 1.83 $ 1.54 $ 1.37 $ 1.03 $ .79 $ .66
-- net income 2.01 1.74 1.58 1.18 .89 .59
Diluted -- income from continuing operations 1.78 1.49 1.32 1.00 .77 .65
-- net income 1.95 1.69 1.53 1.15 .87 .59
Cash dividends declared .495 .440 .387 .093 -- --
Shareholders' equity 8.16 6.76 5.26 4.06 2.93 2.07
Stock price -- high 36 11/16 27 5/8 29 1/2 19 1/2 16 10 5/8
-- low 23 1/4 19 7/8 18 3/8 15 1/8 9 3/4 7 3/8
-- close 34 7/8 26 5/8 27 1/8 18 3/4 15 7/8 10 5/8
Price/earnings ratio at year end 20 16 18 16 18 18
OTHER DATA
Employees at year end 3,326 3,093 2,680 2,305 1,828 1,864
Shareholders at year end 7,000 6,100 5,300 4,400 4,300 4,200
Weighted average shares outstanding -- basic 29,184 28,818 28,662 28,600 28,396 28,353
-- diluted 29,999 29,779 29,609 29,331 28,976 28,389
Shares outstanding at year end 29,250 28,926 28,695 28,619 28,580 28,353
15
19
1991 1990 1989
--------- ---------- ----------
RESULTS OF OPERATIONS
Net sales $ 166,724 $ 160,605 $ 148,870
Gross profit 67,845 65,712 60,584
SG&A expenses 34,046 29,930 27,391
Goodwill amortization 525 487 487
Operating income 33,274 35,295 32,706
Other income (expense) -- net 587 448 951
Interest expense 10,397 11,795 13,989
Provision for income taxes 8,993 9,221 7,964
Income from continuing operations 14,471 14,727 11,704
Income from discontinued operations 1,446 976 3,404
Extraordinary items 1,214 2,145 2,972
Net income 17,131 17,848 18,080
Income applicable to common stock 17,131 17,848 14,857
FINANCIAL POSITION
Current assets $ 68,671 $ 68,807 $ 66,512
Current liabilities 25,940 23,852 20,198
Working capital 42,731 44,955 46,314
Current ratio 2.6 2.9 3.3
Capital expenditures 2,778 4,025 3,146
Depreciation and amortization 5,750 4,842 4,641
Total assets 137,349 127,466 124,998
Total debt 65,788 103,863 124,942
Shareholders' equity 37,112 (4,287) (23,282)
PERFORMANCE MEASURES
Percent of net sales
Gross profit 40.7% 40.9% 40.7%
SG&A expenses 20.4 18.6 18.4
Goodwill amortization .3 .3 .3
Operating income 20.0 22.0 22.0
Income before income taxes 14.1 14.9 13.2
Income from continuing operations 8.7 9.2 7.9
Effective tax rate 38.3 38.5 40.5
Net income return on average assets 12.9 14.1 12.2
Debt as a percent of capitalization 63.9 104.3 122.9
Net income return on average shareholders' equity 104.4 -- --
PER SHARE DATA
Basic -- income from continuing operations $ .57 $ .61 $ .41
-- net income .68 .73 .72
Diluted -- income from continuing operations .57 .61 .41
-- net income .68 .73 .72
Cash dividends declared -- -- --
Shareholders' equity 1.32 (.18) (.96)
Stock price -- high 8 7/8 7 3/4 7 1/2
-- low 4 1/4 4 5/8 6 1/8
-- close 7 3/8 4 3/4 7 1/2
Price/earnings ratio at year end 11 7 10
OTHER DATA
Employees at year end 1,418 1,367 1,391
Shareholders at year end 3,900 3,700 3,600
Weighted average shares outstanding -- basic 25,367 24,309 20,537
-- diluted 25,367 24,309 20,537
Shares outstanding at year end 28,184 24,303 24,317
o All share and per share data have been restated to reflect the three-for-two
stock splits effected in the form of 50% stock dividends in January 1995 and
1997.
(1) Excluding short-term debt, current liabilities were $89,734, working
capital was $142,355 and the current ratio was 2.6.
15a
20
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATION
[PICTURE]
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 U.S. 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 affected by, among other things, utilization of facilities as sales
volumes change, and including newly acquired businesses that may have lower
margins -- and those margins are normally further reduced by purchase accounting
adjustments.
IDEX achieved record orders, sales, net income and earnings per share for 2000.
New orders totaled $699 million and were lower than shipments by about $5
million. IDEX ended 2000 with a typical backlog of unfilled orders of about 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 section on page 17.
The Company's fourth quarter earnings in 2000 were 3% lower than the fourth
quarter of 1999. The decline in fourth quarter profits was related to lower
sales volumes due to weakening conditions in the U.S. manufacturing sector.
Starting in the third quarter of 2000, IDEX began to see weakness primarily in
the automotive, chemical processing and other industrial markets. These are the
same problems that our peers and customers are facing. The Company is not losing
market share or experiencing any unusual operating issues. Internationally, its
markets remain strong. Looking ahead to the first quarter of 2001, we believe
our sales and earnings will be higher than the fourth quarter 2000. However, we
expect that diluted earnings per share could be about 10% lower than the $.52
earned in the first quarter of 2000. IDEX operates with a very small backlog of
unfilled orders, and our performance will depend upon the strength of the U.S.
and key foreign economies.
16
21
We continue to believe IDEX is well positioned for the future, with diversity in
products and markets served and leading positions in its niches. We think the
Company will benefit from its emphasis on profitable growth, the margin
improvement initiatives of Six Sigma and global sourcing, the use of strong cash
flow to cut debt and interest expense, our recently announced acquisitions, and
the continuing pursuit of additional acquisitions. While it is likely that 2001
will get off to a slow start, with reasonable economic conditions in the U.S.
and foreign economies, we would expect to have record performance again for the
full year. Management is very optimistic about the long-term prospects of the
Company.
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
The preceding paragraphs, the Shareholders' Letter, and the Liquidity and
Capital Resources and Euro Preparations 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. These 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. These
statements are subject to inherent uncertainties and risks that 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 IDEX'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, including Liquid Controls and Class 1; 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.
RESULTS OF OPERATIONS
For purposes of this discussion and analysis section, reference is made to the
table on page 18 and the Company's Statements of Consolidated Operations on page
23.
IDEX consists of three reporting groups: Pump Products, Dispensing Equipment and
Other Engineered Products.
The Pump Products Group designs, produces and distributes a wide range of
engineered industrial pumps, compressors, flow meters and related controls for
process applications, including mixing and metering paints, inks, chemicals,
foods, lubricants and fuels, as well as in medical, pharmaceutical and
semiconductor applications, water treatment, and industrial production
operations. The Dispensing Equipment Group designs, manufactures and distributes
precision-engineered equipment for dispensing, metering and mixing paints and
coatings in retail and commercial markets; refinishing equipment; and
centralized lubrication systems. The Other Engineered Products Group designs,
produces and distributes proprietary engineered products for industrial and
commercial markets including fire and rescue, transportation equipment, oil and
gas, electronics, communications, and traffic and commercial signs.
PERFORMANCE IN 2000 COMPARED TO 1999
IDEX achieved record orders, sales, net income and earnings per share in 2000.
Incoming orders totaled $699 million, 7% higher than in 1999. Recent
acquisitions (FAST-June 1999, Ismatec-April 2000 and Trebor-May 2000) added 5%
to full-year orders and base business orders increased by 5%, while foreign
currency translation had a 3% negative effect. All three groups showed
year-over-year improvements.
Net sales for 2000 reached $704.3 million and increased $49.3 million, or 8%,
over 1999. Base business sales were up 6% and acquisitions added 5%, while
foreign currency translation had a 3% negative effect. Sales to customers
outside the U.S. were 41% of total sales in 2000, up from 39% in 1999.
International sales increased by 12% for 2000, while domestic sales increased by
4%. Excluding the recent acquisitions and foreign currency translation,
international sales increased by 11%, reflecting higher sales volume in all
international markets.
Pump Products Group sales of $395.0 million in 2000 increased by $22.6 million,
or 6%, from 1999 principally reflecting 3% higher base business sales and the
Ismatec and Trebor acquisitions, which added 4% to the sales growth. Foreign
currency translation had a 1% negative effect on the group's sales comparison to
1999. International sales grew by 13%, 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 31% in 1999, principally due to higher sales in Europe.
Dispensing Equipment Group sales of $166.4 million increased by $25.4 million,
or 18%, compared with 1999. Overall base business increased by 13% and the FAST
acquisition added 11%, while foreign currency translation had a 6% negative
effect. International sales grew by 34%, while domestic sales increased by 3%.
The increase in international sales reflected FAST in 2000 for a full year and
higher base business volume. Sales to customers outside the U.S. were 55% of
total group sales in 2000, up from 48% in 1999, resulting primarily from the
additional international sales from the FAST acquisition.
Other Engineered Products sales of $145.8 million increased by $1.3 million, or
1%, compared with 1999. Overall base business increased by 5% and foreign
currency translation had a 4% negative effect. Domestic sales increased by 10%
and international sales were 8% lower (1% excluding foreign currency
translation). Sales to customers outside the U.S. were 46% of total group sales
in 2000, down from 51% in 1999, reflecting a change in sales mix and the effects
of foreign currency translation.
Gross profit of $278.0 million in 2000 increased by $21.5 million, or 8%, from
1999. Gross profit as a percent of sales was 39.5% in 2000, up slightly from
39.2% in 1999. Selling, general and administrative expenses increased to $149.6
million in 2000 from $140.5 million in 1999, and as a percent of net sales,
decreased to 21.2% from 21.4% in 1999. Goodwill amortization increased by 4% to
$11.8 million in 2000 from $11.3 million in 1999. As a percent of sales,
goodwill amortization remained flat at about 1.7% for both years.
17
22
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATION
COMPANY AND BUSINESS GROUP FINANCIAL INFORMATION
(in thousands)
For the years ended December 31, (1) 2000 1999 1998
- ------------------------------------ --------- ---------- ---------
PUMP PRODUCTS GROUP
Net sales (2) $ 394,999 $ 372,440 $ 375,692
Operating income (3) 73,557 65,673 74,812
Operating margin 18.6% 17.6% 19.9%
Identifiable assets $ 391,831 $ 355,983 $ 370,578
Depreciation and amortization 19,658 19,327 19,326
Capital expenditures 10,656 8,616 8,652
DISPENSING EQUIPMENT GROUP
Net sales (2) $ 166,362 $ 140,996 $ 122,844
Operating income (3) 32,496 25,614 22,483
Operating margin 19.5% 18.2% 18.3%
Identifiable assets $ 204,891 $ 216,273 $ 151,380
Depreciation and amortization 8,845 8,124 7,132
Capital expenditures 5,175 5,896 4,000
OTHER ENGINEERED PRODUCTS GROUP
Net sales (2) $ 145,823 $ 144,486 $ 144,004
Operating income (3) 27,437 26,660 24,596
Operating margin 18.8% 18.5% 17.1%
Identifiable assets $ 148,753 $ 154,490 $ 158,930
Depreciation and amortization 6,474 6,769 6,275
Capital expenditures 4,796 3,739 5,328
COMPANY
Net sales $ 704,276 $ 655,041 $ 640,131
Operating income 116,516 104,677 109,543
Operating margin 16.5% 16.0% 17.1%
Income before interest expense and income taxes $ 117,547 $ 105,245 $ 110,022
Total assets 758,854 738,567 695,811
Depreciation and amortization (4) 36,480 34,464 32,935
Capital expenditures 20,739 18,338 20,763
(1) Includes acquisition of Ismatec SA (April 17, 2000), Trebor International
(May 31, 2000) and Gast Manufacturing (January 21, 1998) in the Pump
Products Group, and FAST S.p.A. (June 4, 1999) in the Dispensing 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.
Operating income increased by $11.8 million, or 11%, to $116.5 million in 2000
from $104.7 million in 1999. Operating income as a percent of sales increased to
16.5% 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 $73.6 million and operating margin of
18.6% in 2000 compared to the $65.7 million and 17.6% recorded in 1999. In the
Dispensing Equipment Group, operating income of $32.5 million and operating
margin of 19.5% in 2000, increased from the $25.6 million and the 18.2% recorded
in 1999. Operating income in the Other Engineered Products Group of $27.4
million and operating margin of 18.8% in 2000, increased from $26.7 million and
18.5% achieved in 1999.
Interest expense decreased to $16.5 million in 2000 from $18.0 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 $37.6 million in 2000 from $32.8
million in 1999 reflecting higher income. The effective tax rate decreased to
37.2% in 2000 from the 37.6% in 1999.
18
23
Net income of $63.4 million in 2000 was 17% higher than the $54.4 million
recorded in 1999. Diluted earnings per share were $2.07 per share in 2000, an
increase of $.26 per share, or 14%, from the $1.81 per share achieved in 1999.
PERFORMANCE IN 1999 COMPARED TO 1998
Orders and sales from continuing operations exceeded the levels achieved in all
prior years, and income and earnings per share from continuing operations were
equal to the previous record levels achieved in 1998. Incoming orders were 5%
higher than in 1998, with the acquisitions of Gast Manufacturing (January 1998)
and FAST S.p.A. (June 1999) contributing a majority of the growth. Orders in the
base businesses increased by 2% in 1999 compared to 1998.
Net sales for 1999 reached $655.0 million and increased by $14.9 million, or 2%,
over 1998. The acquisitions of Gast and FAST businesses added 3% to sales
volume. However, base business sales were flat with 1998, and foreign currency
translation had a 1% negative effect. In 1999, total domestic sales increased by
3% and total international sales were up 2%. Base business shipments to the Asia
Pacific region increased by 14%, while Europe was down 8% and Latin America
declined 14%. Sales to customers outside the U.S. were 39% of total sales in
both 1999 and 1998.
Pump Products Group sales of $372.4 million in 1999 decreased by $3.3 million,
or 1%, from 1998. The inclusion of Gast, acquired on January 21, 1998, for a
full year in 1999 added 2% to the sales growth, but was offset by a 3% decline
in base business activity of the Pump Products Group. This was caused by sales
declines at business units serving the process industries. Sales to customers
outside the U.S. declined to 31% of total group sales in 1999 from 32% in 1998
principally due to lower sales in Europe.
Dispensing Equipment Group sales of $141.0 million increased by $18.2 million,
or 15%, compared with 1998, mainly due to the inclusion of the recently acquired
FAST business. Overall base business increased by 5% and foreign currency
translation had a 2% negative effect on this Group's sales volume. Sales to
customers outside the U.S. were 48% of total group sales in 1999, up from 46% in
1998, as the additional international sales from FAST were partially offset by
lower sales from the rest of the group.
Other Engineered Products Group sales of $144.5 million were essentially equal
to 1998, as higher sales volume in the fire and rescue equipment markets was
offset by a 1% negative effect in foreign currency translation. Sales to
customers outside the U.S. were 51% of total group sales in 1999, down from 53%
in 1998 due to lower sales activity in Europe.
Gross profit of $256.5 million in 1999 increased by $3.6 million, or 1%, from
1998. Gross profit as a percent of sales was 39.2% in 1999, down slightly from
39.5% in 1998. Selling, general and administrative expenses increased to $140.5
million in 1999 from $132.6 million in 1998, and as a percent of net sales,
increased to 21.4% from 20.7% in 1998. Goodwill amortization increased by 6% to
$11.3 million in 1999 from $10.7 million in 1998. As a percent of sales,
goodwill amortization remained flat at about 1.7% for both years. The
year-over-year increases in gross profit and goodwill amortization primarily
were due to including recently acquired businesses. The increase in selling,
general and administrative expenses was attributable to including acquisitions,
and market development initiatives.
Operating income decreased by $4.9 million, or 4%, to $104.7 million in 1999
from $109.5 million in 1998. Operating income as a percent of sales decreased to
16.0% in 1999 from 17.1% in 1998. In the Pump Products Group, operating income
of $65.7 million and operating margin of 17.6% in 1999 compared with the $74.8
million and 19.9% recorded in 1998. The declines in operating income and margins
for the Company and the Pump Products Group primarily were caused by lower sales
from high margin business units in the Pump Products Group that serve the
chemical processing, oil and gas, and pulp and paper markets. Operating income
of $25.6 million in the Dispensing Equipment Group increased by $3.1 million
from 1998, principally reflecting improved conditions in the paints and coatings
markets, inclusion of the FAST acquisition in 1999, and a one-time charge
recorded in 1998 for a plant closing. Operating margins in the Dispensing
Equipment Group of 18.2% decreased slightly from the 18.3% achieved in 1998.
Operating income in the Other Engineered Products Group of $26.7 million and
operating margin of 18.5% in 1999 increased from $24.6 million and 17.1%
achieved in 1998, principally due to improved efficiencies and cost reduction
programs.
Interest expense decreased to $18.0 million in 1999 from $22.4 million in 1998.
The decrease in interest was due to lower interest rates, debt reductions from
operating cash flow and the proceeds from the sales of discontinued businesses
during 1998, partially offset by additional debt required for the FAST
acquisition.
The provision for income taxes decreased to $32.8 million in 1999 from $33.3
million in 1998. The effective tax rate declined to 37.6% in 1999 from 37.9% in
1998.
Income from continuing operations of $54.4 million in 1999 matched 1998's total.
Diluted earnings per share from continuing operations amounted to $1.81 in 1999,
equaling the $1.81 achieved in 1998.
During 1998, the Company recorded income from discontinued operations of $10.2
million, or 34 cents per share. This included a net gain of $9.0 million related
to the sale of discontinued business units completed during 1998. The Company
completed the sale of Vibratech on June 9, 1998, and the sale of Strippit on
August 25, 1998.
In the first quarter of 1998, the Company retired, at a premium, its 9-3/4% $75
million Senior Subordinated Notes due in 2002. The transaction resulted in an
extraordinary charge of $2.5 million, net of an income tax benefit.
Total net income of $54.4 million in 1999 was 12% lower than the net income of
$62.1 million recorded in 1998. Diluted earnings per share on a net income basis
were $1.81 per share in 1999, a decrease of $.26 per share, or 13%, from the
$2.07 per share achieved in 1998.
19
24
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATION
[PICTURE]
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2000, excluding short-term debt, working capital was $142
million and the current ratio was 2.6 to 1. Cash flow from continuing operations
of $92.7 million in 2000 remained strong, but decreased by $3.4 million from
1999. The decline principally reflected higher working capital requirements due
to higher sales volume, partially offset by higher income.
Cash flow provided from operations was more than adequate to fund capital
expenditures of $20.7 million, $18.3 million and $20.8 million in 2000, 1999 and
1998, respectively. Capital expenditures were generally for machinery and
equipment that 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 $35 million. The
acquisitions were accounted for using the purchase method and were financed
under the U.S. Credit Facility. Interest is payable at rates ranging from 3.4%
to 7.0%.
At December 31, 2000, the maximum amount available under the U.S. Credit
Facility was $235 million, of which $71.4 million was borrowed, all in European
currencies. The European currency borrowings provide an economic hedge against
the net investment in Fluid Management's Netherlands operation, FAST's Italian
operation and Ismatec's Switzerland operation, respectively. Any amount
outstanding at July 1, 2001, becomes due at that date. Accordingly, the Company
classified the borrowings under the U.S. Credit Facility, along with accrued
interest, as short-term debt at December 31, 2000. The Company anticipates
renewing this credit facility or 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.
20
25
At December 31, 2000, the applicable margin was 25 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 December 31, 2000, the
Company had $2 million borrowed under this short-term line of credit.
At December 31, 2000, the maximum amount available under the German Facility was
37 million marks ($17.8 million), of which 16.5 million marks ($7.9 million) was
being used, which provides an economic hedge against the net investment in the
Lukas (Hale Products) operation. Any amount outstanding at November 1, 2001,
becomes due at that date. Accordingly, the Company classified the borrowings
under the German Facility, along with accrued interest, as short-term debt at
December 31, 2000. The Company anticipates renewing this credit facility or
securing a similar credit facility prior to November 1, 2001. Interest is
payable quarterly on the outstanding balance at LIBOR plus an applicable margin.
At December 31, 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 share repurchases would be funded with
borrowings under the existing credit facilities. At December 31, 2000, IDEX had
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 2000.
IDEX believes it will generate sufficient cash flow from operations in 2001 to
meet its operating requirements, interest, the demand line of credit and the
German Facility, interest payments on the Senior Notes, any share repurchases,
approximately $30 million of planned capital expenditures, and approximately $17
million of annual dividend payments to holders of common stock. The Company also
expects to renew its U.S. Credit Facility and German Facility or will secure
similar credit facilities prior to their expiration in 2001. From commencement
of operations in January 1988 to December 31, 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 $601
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.
EURO PREPARATIONS
During 1998, 1999 and 2000, IDEX 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 also are expected to be immaterial to the Company's results of
operations, financial position or liquidity.
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
$242 million of total debt outstanding at December 31, 2000. Approximately 35%
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 $.4 million annualized increase or decrease in interest expense and
cash flows. The remaining debt is fixed rate debt. 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, IDEX 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 outstanding
long-term debt. IDEX's exposure related to such derivative instruments is, in
the aggregate, not material to its 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. IDEX manages its foreign exchange risk
principally through the invoicing of its customers in the same currency as the
source of the products. The implementation of the euro currency as of January 1,
1999, did not materially affect IDEX's foreign currency exchange risk profile,
although some customers may require the Company to invoice or pay in euros
rather than the functional currency of the manufacturing entity.
21
26
IDEX CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share amounts)
As of December 31, 2000 1999
- ------------------ --------- ----------
ASSETS
Current assets
Cash and cash equivalents $ 8,415 $ 2,895
Receivables -- net 104,950 100,805
Inventories 113,052 106,141
Other current assets 5,672 3,874
-------- --------
Total current assets 232,089 213,715
Property, plant and equipment -- net 128,283 129,917
Intangible assets -- net 388,163 385,061
Other noncurrent assets 10,319 9,874
-------- --------
Total assets $758,854 $738,567
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt $ 88,077 $ --
Trade accounts payable 43,342 44,289
Dividends payable 4,236 4,153
Accrued expenses 42,156 43,192
-------- --------
Total current liabilities 177,811 91,634
Long-term debt 153,809 268,589
Other noncurrent liabilities 52,732 49,320
-------- --------
Total liabilities 384,352 409,543
-------- --------
Commitments and contingencies (Note 4)
Shareholders' equity
Common stock, par value $.01 per share
Shares authorized 2000 and 1999 -- 75,000,000
Shares issued and outstanding:
2000 -- 30,258,231; 1999 -- 29,635,576 303 296
Additional paid-in capital 115,280 99,802
Retained earnings 279,907 233,326
Minimum pension liability adjustment (2,127) (1,759)
Accumulated translation adjustment (10,489) (2,543)
Treasury stock (144) (98)
Unearned compensation on restricted stock (8,228) --
-------- --------
Total shareholders' equity 374,502 329,024
-------- --------
Total liabilities and shareholders' equity $758,854 $738,567
======== ========
See Notes to Consolidated Financial Statements.
22
27
IDEX CORPORATION & SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(in thousands except per share amounts)
For the years ended December 31, 2000 1999 1998
---------- --------- ----------
Net sales $704,276 $655,041 $640,131
Cost of sales 426,324 398,557 387,285
-------- -------- --------
Gross profit 277,952 256,484 252,846
Selling, general and administrative expenses 149,639 140,495 132,627
Goodwill amortization 11,797 11,312 10,676
-------- -------- --------
Operating income 116,516 104,677 109,543
Other income -- net 1,031 568 479
-------- -------- --------
Income before interest expense and income taxes 117,547 105,245 110,022
Interest expense 16,521 18,020 22,359
-------- -------- --------
Income before income taxes 101,026 87,225 87,663
Provision for income taxes 37,581 32,797 33,267
-------- -------- --------
Income from continuing operations before extraordinary item 63,445 54,428 54,396
-------- -------- --------
Discontinued operations
Income from discontinued operations, net of taxes -- -- 1,202
Gain on sale of discontinued operations, net of taxes -- -- 8,980
-------- -------- --------
Income from discontinued operations -- -- 10,182
-------- -------- --------
Extraordinary loss from early extinguishment of debt,
net of taxes -- -- (2,514)
-------- -------- --------
Net income $ 63,445 $ 54,428 $ 62,064
======== ======== ========
EARNINGS PER COMMON SHARE -- BASIC
Continuing operations $ 2.13 $ 1.84 $ 1.85
Discontinued operations -- -- .36
Extraordinary loss from early extinguishment of debt -- -- (.09)
-------- -------- --------
Net income $ 2.13 $ 1.84 $ 2.12
======== ======== ========
EARNINGS PER COMMON SHARE DILUTED
Continuing operations $ 2.07 $ 1.81 $ 1.81
Discontinued operations -- -- .34
Extraordinary loss from early extinguishment of debt -- -- (.08)
-------- -------- --------
Net income $ 2.07 $ 1.81 $ 2.07
======== ======== ========
SHARE DATA
Weighted average common shares outstanding 29,726 29,544 29,332
======== ======== ========
Weighted average common shares outstanding
assuming full dilution 30,632 30,085 30,052
======== ======== ========
See Notes to Consolidated Financial Statements.
23
28
IDEX CORPORATION & SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(in thousands except share and per share amounts)
Common Stock
and Minimum Unearned
Additional Pension Accumulated Compensation Total
Paid-in Retained Liability Translation Treasury on Restricted Shareholders'
Capital Earnings Adjustment Adjustment Stock Stock Equity
---------- --------- ---------- ----------- ---------- --------------- -------------
Balance, December 31, 1997 $ 90,798 $ 149,403 $ (756) $ (774) $ -- $ -- $ 238,671
-------- --------- ------- -------- ------- -------- ---------
Net income 62,064 62,064
-------- --------- ------- -------- ------- -------- ---------
Other comprehensive income, net of taxes
Unrealized translation adjustment (3,524) (3,524)
Minimum pension adjustment (733) (733)
-------- --------- ------- -------- ------- -------- ---------
Other comprehensive income (733) (3,524) (4,257)
-------- --------- ------- -------- ------- -------- ---------
Comprehensive income 62,064 (733) (3,524) 57,807
-------- --------- ------- -------- ------- -------- ---------
Issuance of 216,808 shares of common
stock from exercise of stock options,
net of those surrendered, and earned
compensation 5,561 5,561
Cash dividends declared -- $.545 per
common share outstanding (16,002) (16,002)
-------- --------- ------- -------- ------- -------- ---------
Balance, December 31, 1998 96,359 195,465 (1,489) (4,298) -- -- 286,037
-------- --------- ------- -------- ------- -------- ---------
Net income 54,428 54,428
-------- --------- ------- -------- ------- -------- ---------
Other comprehensive income, net of taxes
Unrealized translation adjustment 1,755 1,755
Minimum pension adjustment (270) (270)
-------- --------- ------- -------- ------- -------- ---------
Other comprehensive income (270) 1,755 1,485
-------- --------- ------- -------- ------- -------- ---------
Comprehensive income 54,428 (270) 1,755 55,913
-------- --------- ------- -------- ------- -------- ---------
Issuance of 173,660 shares of common
stock from exercise of stock options,
and deferred compensation plans 3,739 3,739
Purchase of common stock (98) (98)
Cash dividends declared -- $.56 per
common share outstanding (16,567) (16,567)
-------- --------- ------- -------- ------- -------- ---------
Balance, December 31, 1999 100,098 233,326 (1,759) (2,543) (98) -- 329,024
-------- --------- ------- -------- ------- -------- ---------
Net income 63,445 63,445
Other comprehensive income, net of taxes
Unrealized translation adjustment (7,946) (7,946)
Minimum pension adjustment (368) (368)
-------- --------- ------- -------- ------- -------- ---------
Other comprehensive income (368) (7,946) (8,314)
-------- --------- ------- -------- ------- -------- ---------
Comprehensive income 63,445 (368) (7,946) 55,131
-------- --------- ------- -------- ------- -------- ---------
Issuance of 274,655 shares of common
stock from exercise of stock options,
and deferred compensation plans 5,991 5,991
Issuance of 350,000 shares of
restricted common stock 9,494 (9,494) --
Purchase of common stock (46) (46)
Amortization of restricted
common stock award 1,266 1,266
Cash dividends declared -- $.56 per
common share outstanding (16,864) (16,864)
-------- --------- ------- -------- ------- -------- ---------
Balance, December 31, 2000 $115,583 $279,907 $(2,127) $(10,489) $(144) $(8,228) $ 374,502
======== ========= ======= ======== ======= ======== =========
See Notes to Consolidated Financial Statements.
24
29
IDEX CORPORATION & SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(in thousands)
For the years ended December 31, 2000 1999 1998
- -------------------------------- --------- --------- ----------
Cash flows from operating activities
Income from continuing operations $ 63,445 $ 54,428 $ 54,396
Adjustments to reconcile to net cash
provided by continuing operations:
Depreciation and amortization 21,873 21,619 20,747
Amortization of intangibles 13,341 12,845 12,188
Amortization of unearned compensation 1,266 -- --
Amortization of debt issuance expenses 224 371 640
Deferred income taxes 1,081 3,742 3,445
(Increase) decrease in receivables (109) (867) 7,360
(Increase) decrease in inventories (2,410) 4,797 1,199
(Decrease) increase in trade accounts payable (1,600) (3,057) 10
(Decrease) increase in accrued expenses (1,970) 3,363 (11,224)
Other -- net (2,413) (1,085) (3,867)
--------- --------- ----------
Net cash provided by continuing operations 92,728 96,156 84,894
Net cash provided by discontinued operations -- -- 4,159
--------- --------- ----------
Net cash flows from operating activities 92,728 96,156 89,053
--------- --------- ----------
Cash flows from investing activities
Additions to property, plant and equipment (20,739) (18,338) (20,763)
Acquisition of businesses (net of cash acquired) (34,513) (48,497) (118,088)
Proceeds from sale of businesses -- -- 39,695
--------- --------- ----------
Net cash flows from investing activities (55,252) (66,835) (99,156)
--------- --------- ----------
Cash flows from financing activities
Net repayments under credit facilities (48,186) (55,718) (166,314)
Borrowings under credit facilities for acquisitions 34,513 48,497 118,088
Repayments of other long-term debt (4,151) (7,455) (9,962)
Proceeds from issuance of 6.875% Senior Notes -- -- 150,000
Repayment of 9.75% Senior Subordinated Notes -- -- (75,000)
Financing payments -- -- (5,031)
(Decrease) increase in accrued interest (167) (772) 1,769
Dividends paid (16,781) (16,539) (15,826)
Proceeds from stock option exercises 2,862 2,938 3,329
Purchase of common stock (46) (98) --
--------- --------- ----------
Net cash flows from financing activities (31,956) (29,147) 1,053
--------- --------- ----------
Net increase (decrease) in cash 5,520 174 (9,050)
Cash and cash equivalents at beginning of year 2,895 2,721 11,771
--------- --------- ----------
Cash and cash equivalents at end of year $ 8,415 $ 2,895 $ 2,721
========= ========= ==========
Supplemental cash flow information
Cash paid for:
Interest $ 16,912 $ 18,420 $ 20,070
Income taxes 35,534 25,297 36,568
Significant non-cash activities:
Debt acquired with acquisition of business -- 13,065 --
See Notes to Consolidated Financial Statements.
25
30
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, dispensing equipment, and other engineered products
sold to a diverse customer base in a variety of industries in the U.S. and
internationally. Its products include industrial pumps, compressors and related
controls for use in a wide variety of process applications; precision-engineered
equipment for dispensing, metering and mixing paints, refinishing equipment, and
centralized lubrication systems; and proprietary engineered products for
industrial and commercial markets including fire and rescue, transportation
equipment, oil and gas, electronics, communications, and traffic and commercial
signs. These activities are grouped into three business segments: Pump Products,
Dispensing Equipment and Other Engineered Products.
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 accounting principles
generally accepted in the United States of America 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
IDEX 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
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 total debt are amortized over the life
of the related debt.
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 and unvested restricted shares (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.
Basic weighted average shares reconciles to diluted weighted average shares as
follows:
2000 1999 1998
------- ------- --------
Basic weighted average
common shares
outstanding 29,726 29,544 29,332
Dilutive effect of
stock options and
unvested restricted shares 906 541 720
------ ------ ------
Weighted average common
shares outstanding
assuming full dilution 30,632 30,085 30,052
====== ====== ======
Depreciation and Amortization
Depreciation is recorded using the straight-line method. The estimated useful
lives used in the computation of depreciation are as follows:
Land improvements . . . . . . . . . . . . . . . . . . . . 10 to 12
years
Buildings and improvements. . . . . . . . . . . . . . . . 3 to 30
years
Machinery and equipment
and engineering drawings. . . . . . . . . . . . . . . . . 3 to 12
years
Office and transportation equipment . . . . . . . . . . . 3 to 10 years
Identifiable intangible assets are amortized over their estimated useful lives
using the straight-line method. 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. This 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 included in cost of sales, except for software development
capitalized under Statement of
26
31
Financial Accounting Standards (SFAS) No. 86. Research and development expenses,
which include costs associated with the development of new products and major
improvements to existing products, were $7.5 million, $6.8 million and $6.3
million in 2000, 1999 and 1998, respectively.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The statement, as amended by SFAS No. 137 and No. 138, will
be effective for the Company's fiscal 2001 first quarter financial statements.
In January 2001, IDEX recorded an immaterial cumulative transition adjustment to
earnings, primarily related to interest rate swaps.
2. ACQUISITIONS
The Company completed the acquisitions of Liquid Controls L.L.C. and Class 1,
Inc. in January 2001, for an aggregate cash purchase price of approximately $110
million, with financing provided by borrowings under the U.S. Credit Facility.
Liquid Controls, headquartered in Lake Bluff, Illinois, is a leading
manufacturer of positive displacement flow meters, electronic registration and
process control systems. Class 1, headquartered in Ocala, Florida, is a leading
manufacturer of electronic and mechanical components and systems for the fire
and rescue market. Liquid Controls will be operated as part of the Pump Products
Group, and Class 1 will be operated as part of Hale Products in the Other
Engineered Products Group.
The Company acquired Ismatec SA on April 17, 2000, and Trebor International,
Inc. on May 31, 2000, at a total cost of approximately $35 million with
borrowings under the U.S. Credit Facility. 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, Utah, 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 U.S. Credit Facility 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 the 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.
3. DISCONTINUED OPERATIONS
In December 1997, IDEX announced its intention to divest its Strippit and
Vibratech businesses. The Company completed the sale of Vibratech on June 9,
1998, for $23.0 million in cash, and the sale of Strippit on August 25, 1998,
for $19.5 million in cash and notes. The sale of Vibratech generated a gain on
disposition, while the Strippit sale resulted in a small loss. The proceeds were
used to repay borrowings under the U.S. Credit Facility. In 1998, these two
businesses contributed net income of $10.2 million, including a net gain of $9.0
million (net of taxes of $3.1 million) from the sale of these business units.
Revenues from discontinued operations amounted to $42.1 million in 1998. Income
from discontinued operations was net of taxes of $0.7 million in 1998. Interest
expense of $0.1 million for 1998 has been allocated to these operations based on
their acquisition debt, less repayments generated from operating cash flows that
can be specifically attributed to these operations.
4. COMMITMENTS AND CONTINGENCIES
At December 31, 2000, total minimum rental payments under non-cancelable
operating leases, primarily for office facilities, warehouses and data
processing equipment, were $27.7 million. The minimum rental commitments for
each of the next five years are as follows: 2001 - $6.4 million; 2002 - $4.2
million; 2003 - $3.1 million; 2004 - $2.5 million; 2005 - $2.1 million;
thereafter - $9.4 million.
Rental expense totaled $8.5 million, $9.0 million and $8.7 million for the years
ended December 31, 2000, 1999 and 1998, respectively.
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 affect on
the Company's financial position, liquidity, 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.
27
32
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except share and per share amounts)
5. BALANCE SHEET COMPONENTS
The components of inventories at December 31, 2000 and 1999 were:
2000 1999
---------- --------
Raw materials $ 32,020 $ 28,930
Work in process 13,852 12,722
Finished goods 67,180 64,489
---------- --------
Total $ 113,052 $106,141
========== ========
Those inventories, which were carried on a LIFO basis, amounted to $91,532 and
$86,587 at December 31, 2000 and 1999, respectively. The excess of current cost
over LIFO inventory value and the impact of using the LIFO method on earnings
are not material.
The components of certain other balance sheet accounts at December 31, 2000 and
1999 were:
2000 1999
---------- -----------
Receivables
Customers $ 103,952 $ 101,990
Other 4,340 1,949
---------- -----------
Total 108,292 103,939
Less allowance for doubtful accounts 3,342 3,134
---------- -----------
Receivables - net $ 104,950 $ 100,805
========== ===========
Property, plant and equipment, at cost
Land and improvements $ 8,374 $ 9,068
Buildings and improvements 63,795 61,710
Machinery and equipment 161,814 157,872
Engineering drawings 3,200 3,248
Office and transportation equipment 44,024 38,583
Construction in progress 5,046 3,248
---------- -----------
Total 286,253 273,729
========== ===========
Less accumulated depreciation
and amortization 157,970 143,812
---------- -----------
Property, plant and equipment - net $ 128,283 $ 129,917
========== ===========
Intangible assets
Cost in excess of net assets acquired $ 435,408 $ 419,917
Other 28,187 28,345
---------- -----------
Total 463,595 448,262
Less accumulated amortization 75,432 63,201
---------- -----------
Intangible assets - net $ 388,163 $ 385,061
========== ===========
Accrued expenses
Accrued payroll and related items $ 23,800 $ 21,421
Accrued taxes 5,969 9,165
Accrued insurance 3,729 4,037
Other 8,658 8,569
---------- -----------
Total $ 42,156 $ 43,192
========== ===========
Other noncurrent liabilities
Pension and retiree medical reserves $ 28,618 $ 26,887
Deferred income taxes 18,726 15,824
Other 5,388 6,609
---------- -----------
Total $ 52,732 $ 49,320
========== ===========
6. COMPREHENSIVE INCOME
The tax effects of the components of other comprehensive income for 2000, 1999
and 1998 were:
2000 1999 1998
------- ------- ---------
Unrealized translation
adjustment:
Pretax amount $(7,946) $ 1,755 $ (3,524)
Income tax -- -- --
------- ------- ---------
Aftertax amount $(7,946) $ 1,755 $ (3,524)
------- ------- ---------
Minimum pension
adjustment:
Pretax amount $ (585) $ (570) $ (1,109)
Tax benefit 217 300 376
------- ------- ---------
Aftertax amount $ (368) $ (270) $ (733)
======= ======= =========
7. STOCK OPTIONS
The Company has stock option plans for outside directors, executives and certain
key employees. These options are accounted for using the intrinsic value method
and, accordingly, no compensation cost has been recognized. Had compensation
cost been determined using the fair value method in 2000, 1999 and 1998, the
Company's pro forma net income and EPS would have been as follows:
2000 1999 1998
--------- --------- --------
Net income
As reported $ 63,445 $ 54,428 $ 62,064
Pro forma 59,991 51,675 59,602
Basic EPS
As reported 2.13 1.84 2.12
Pro forma 2.02 1.75 2.03
Diluted EPS
As reported 2.07 1.81 2.07
Pro forma 1.96 1.72 1.98
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 2000, 1999
and 1998, respectively: dividend yield of 2.02%, 2.29% and 1.55%; volatility of
34.3%, 32.5% and 27.7%; risk-free interest rates of 6.4%, 5.2% and 5.6%; 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
.6 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.
28
33
The following table summarizes option activity under the plans:
Average
Number Option Price
of Options Per Share
---------- ------------
Outstanding at December 31, 1997 2,129,214 18.87
Granted 605,000 34.86
Exercised (227,376) 14.01
Forfeited (111,730) 28.07
---------
Outstanding at December 31, 1998 2,395,108 22.89
Granted 647,039 24.79
Exercised (170,715) 16.75
Forfeited (107,010) 28.83
---------
Outstanding at December 31, 1999 2,764,422 23.54
Granted 835,500 27.71
Exercised (269,753) 16.26
Forfeited (76,710) 28.42
---------
Outstanding at December 31, 2000 3,253,459 25.10
=========
Exercisable at December 31, 1998 1,124,197 16.43
=========
Exercisable at December 31, 1999 1,485,426 19.98
=========
Exercisable at December 31, 2000 1,706,976 22.56
=========
The following table summarizes information about options outstanding at December
31, 2000:
Options Outstanding Options Exercisable
---------------------------------------------- -------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Life of Exercise Number Exercise
Prices Outstanding Contract Price Exercisable Price
- -------- ------------ ---------- -------- ------------- --------
$ 5 to 13 309,180 1.8 years $11.64 309,180 $11.64
14 to 25 1,306,572 5.1 years 22.60 876,280 21.58
26 to 35 1,637,707 7.4 years 29.64 521,516 30.68
--------- ---------
Total 3,253,459 6.0 years 25.10 1,706,976 22.56
========= =========
8. DEBT
Debt at December 31, 2000 and 1999 consisted of the following:
2000 1999
---------- ----------
Short-term debt:
Bank credit facilities,
including accrued interest $ 88,077 $ --
Long-term debt:
Bank credit facilities,
including accrued interest -- 108,753
6.875% Senior Notes 150,000 150,000
Other long-term debt 3,809 9,836
---------- ----------
Total long-term debt 153,809 268,589
---------- ----------
Total debt $ 241,886 $ 268,589
========== ==========
The Company has a $235 million domestic multi-currency bank revolving credit
facility (U.S. Credit Facility), which expires July 1, 2001. At December 31,
2000, approximately $159.6 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 borrowings outstanding under the U.S. Credit
Facility was 4.03% at December 31, 2000. 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 has an $8 million demand line of credit (Short-Term Facility), which
expires March 31, 2001. 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, 2000, there was $2 million borrowed under the Short-Term
Facility at an interest rate of 6.88% per annum.
The Company's DM 37.0 million ($17.8 million) credit facility (German Facility)
expires November 1, 2001. At December 31, 2000, DM 16.5 million ($7.9 million)
was outstanding. Interest is payable quarterly on the outstanding balance at
LIBOR plus 62.5 basis points per annum. The weighted average interest rate on
borrowings outstanding under the German Facility was 5.22% at December 31, 2000.
Since the U.S. Credit Facility, the Short-Term Facility, and the German Facility
expire in 2001, the borrowings thereunder, along with accrued interest, have
been classified as short-term debt at December 31, 2000. The Company anticipates
securing similar credit facilities to replace these prior to their expiration
dates.
Total debt outstanding at December 31, 2000 and 1999 includes accrued interest
of $4.2 million and $4.4 million, respectively.
In February 1998, the Company sold $150 million of Senior Notes due February 15,
2008, with a coupon interest rate of 6.875% and an effective rate of 6.919% to
maturity. Interest is payable semiannually. The Senior Notes are redeemable at
any time at the option of the Company in whole or in part. At December 31, 2000,
the fair market value of the Senior Notes was approximately $140 million, based
on the quoted market price. Proceeds from the Senior Note offering were used to
reduce bank debt, and to repay in March 1998 the $75 million principal amount of
the 9.75% Senior Subordinated Notes originally due in 2002. After related
expenses and fees, this redemption resulted in an extraordinary loss of $2.5
million, or 8 cents per diluted share, net of an income tax benefit of $1.5
million.
At December 31, 2000, other long-term debt included $3.8 million of debt
acquired in connection with the acquisition of FAST. Interest is payable on the
outstanding balances at rates ranging from 2.8% to 6.7% per annum.
The U.S. Credit Facility and the Indenture for the Senior 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, 2000, under the most restrictive of these provisions,
the Company has available approximately $110.6 million for the payment of cash
dividends in 2001.
29
34
IDEX CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except share and per share amounts)
A December 31, 2000, the Company had borrowings of $79.3 million in European
currencies under its U.S. Credit Facility and German Facility. The European
currency borrowings provide an economic hedge against the net investment in
Fluid Management's Netherlands operation, FAST's Italian operation, Micropump's
Switzerland operation and Hale Products' German operation. IDEX 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. At December 31, 2000, the Company had entered into two interest rate
swaps, expiring between June 2001 and August 2001, which effectively have
converted approximately $39 million of floating rate debt into fixed rate debt
at rates approximating 3.5%.
9. COMMON AND PREFERRED STOCK
During 2000, the Company issued 350,000 shares of restricted stock as
compensation to a key employee. These shares carry dividend and voting rights.
Sale of these shares is restricted prior to the date of vesting occurring
annually from one to five years after the grant date. The restricted shares were
recorded at their fair market value on the date of the grant with a
corresponding charge to shareholders' equity. The unearned portion is being
amortized as compensation expense on a straight-line basis over the related
vesting period.
On October 20, 1998, IDEX's Board of Directors authorized the repurchase of up
to 1.5 million shares of its common stock either at market prices or on a
negotiated basis as market conditions warrant. At December 31, 2000, IDEX had
purchased a total of 6,500 shares under the program at a cost of approximately
$144,000, including 2,000 shares of common stock at a cost of approximately
$46,000 during 2000.
At December 31, 2000 and 1999, the Company had 5 million shares of preferred
stock with a par value of $.01 per share authorized but unissued.
10. BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION
IDEX's operations have been aggregated (primarily on the basis of products,
production processes, distribution methods and management organizations) into
three reportable segments: Pump Products Group, Dispensing Equipment Group and
Other Engineered Products Group. The Pump Products Group designs, produces and
distributes a wide range of engineered industrial pumps, compressors and related
controls for process applications. The Dispensing Equipment Group designs,
manufactures and markets precision-engineered equipment for dispensing, metering
and mixing paints; refinishing equipment; and centralized lubrication systems.
The Other Engineered Products Group designs, produces and distributes
proprietary engineered equipment for industrial and commercial markets including
fire and rescue, transportation equipment, oil and gas, electronics,
communications, and traffic and commercial signs. No single customer accounted
for more than 2% of net sales in 2000.
Information on IDEX's business segments is presented below, based on the nature
of products and services offered. IDEX evaluates performance based on several
factors, of which operating income is the primary financial measure. The
accounting policies of the business segments are described in Note 1.
Intersegment sales are accounted for at fair value as if the sales were to third
parties.
2000 1999 1998
--------- --------- ---------
Net sales
Pump Products
From external customers $ 392,109 $ 369,568 $ 373,333
Intersegment sales 2,890 2,872 2,359
--------- --------- ---------
Total group sales 394,999 372,440 375,692
--------- --------- ---------
Dispensing Equipment
From external customers 166,360 140,989 122,796
Intersegment sales 2 7 48
--------- --------- ---------
Total group sales 166,362 140,996 122,844
--------- --------- ---------
Other Engineered Products
From external customers 145,807 144,484 144,002
Intersegment sales 16 2 2
--------- --------- ---------
Total group sales 145,823 144,486 144,004
--------- --------- ---------
Intersegment elimination (2,908) (2,881) (2,409)
--------- --------- ---------
Total net sales $ 704,276 $ 655,041 $ 640,131
========= ========= =========
Operating income (1)
Pump Products $ 73,557 $ 65,673 $ 74,812
Dispensing Equipment 32,496 25,614 22,483
Other Engineered Products 27,437 26,660 24,596
Corporate office & other (16,974) (13,270) (12,348)
--------- --------- ---------
Total operating income $ 116,516 $ 104,677 $ 109,543
========= ========= =========
Assets
Pump Products $ 391,831 $ 355,983 $ 370,578
Dispensing Equipment 204,891 216,273 151,380
Other Engineered Products 148,753 154,490 158,930
Corporate office & other 13,379 11,821 14,923
--------- --------- ---------
Total assets $ 758,854 $ 738,567 $ 695,811
========= ========= =========
Depreciation and
amortization (2)
Pump Products $ 19,658 $ 19,327 $ 19,326
Dispensing Equipment 8,845 8,124 7,132
Other Engineered Products 6,474 6,769 6,275
Corporate office & other 1,503 244 202
--------- --------- ---------
Total depreciation
and amortization $ 36,480 $ 34,464 $ 32,935
========= ========= =========
Capital expenditures
Pump Products $ 10,656 $ 8,616 $ 8,652
Dispensing Equipment 5,175 5,896 4,000
Other Engineered Products 4,796 3,739 5,328
Corporate office & other 112 87 2,783
--------- --------- ---------
Total capital
expenditures $ 20,739 $ 18,338 $ 20,763
========= ========= =========
(1) Represents business segment operating income after noncash amortization of
intangible assets.
(2) Includes amortization relating to all business combinations accounted for
by the purchase method, but excludes amortization of debt issuance
expenses.
30
35
Information about the Company's operations in different geographical regions for
the years ended December 31, 2000, 1999 and 1998 is shown below. Net sales were
attributed to geographic areas based on location of the customer, and no country
outside the U.S. was deemed material.
2000 1999 1998
--------- --------- ---------
Net sales
U.S. $ 416,557 $ 399,286 $ 389,185
Europe 173,870 154,907 153,988
Other countries 113,849 100,848 96,958
--------- --------- ---------
Total net sales $ 704,276 $ 655,041 $ 640,131
========= ========= =========
Long-lived assets
U.S. $ 394,547 $ 384,389 $ 396,826
Europe 128,233 135,942 98,667
Other countries 3,985 4,521 4,418
--------- --------- ---------
Total long-lived assets $ 526,765 $ 524,852 $ 499,911
========= ========= =========
11. INCOME TAXES
Pretax income for the years ended December 31, 2000, 1999 and 1998 was taxed
under the following jurisdictions:
2000 1999 1998
---------- ---------- --------
Domestic $ 67,170 $ 59,042 $ 61,139
Foreign 33,856 28,183 26,524
---------- ---------- --------
Total $ 101,026 $ 87,225 $ 87,663
========== ========== ========
The provision for income taxes for the years ended December 31, 2000, 1999 and
1998 was as follows:
2000 1999 1998
-------- ---------- ---------
Current
U.S. $ 23,906 $ 17,329 $ 21,899
State and local 2,099 2,334 1,476
Foreign 10,495 9,392 6,447
-------- ---------- ---------
Total current 36,500 29,055 29,822
======== ========== =========
Deferred
U.S. (286) 2,983 800
State and local - 321 400
Foreign 1,367 438 2,245
-------- ---------- ---------
Total deferred 1,081 3,742 3,445
-------- ---------- ---------
Total provision for
income taxes $ 37,581 $ 32,797 $ 33,267
======== ========== =========
Deferred (prepaid) income taxes resulted from the following:
2000 1999 1998
------- --------- --------
Employee and retiree
benefit plans $(1,829) $ (349) $ 959
Depreciation and
amortization 4,005 1,578 2,848
Inventories 184 1,260 (895)
Allowances and accruals (707) 624 79
Other (572) 629 454
------- --------- --------
Total deferred $ 1,081 $ 3,742 $ 3,445
======= ========= ========
Deferred tax assets (liabilities) related to the following at December 31, 2000
and 1999:
2000 1999
--------- ---------
Employee and retiree benefit plans $ 8,498 $ 6,741
Depreciation and amortization (29,425) (25,424)
Inventories (6,386) (5,757)
Allowances and accruals 4,990 4,437
Other 2,230 1,792
--------- ---------
Total $ (20,093) $ (18,211)
========= =========
The consolidated balance sheet at December 31, 2000, included a current deferred
tax liability of $1,367 in "Accrued expenses" and a noncurrent deferred tax
liability of $18,726 in "Other noncurrent liabilities." The consolidated balance
sheet at December 31, 1999, included a current deferred tax liability of $2,387
in "Accrued expenses" and a noncurrent deferred tax liability of $15,824 in
"Other noncurrent liabilities."
The provision for income taxes 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, 2000, 1999 and 1998 were as
follows:
2000 1999 1998
-------- --------- -------
Pretax income $101,026 $ 87,225 $87,663
======== ========= =======
Provision for income taxes:
Computed amount at
statutory rate of 35% $ 35,359 $ 30,529 $30,682
State and local
income tax (net of
federal tax benefit) 1,364 1,726 1,219
Amortization of cost
in excess of net
assets acquired 1,825 1,643 1,583
Foreign sales
corporation (910) (1,074) (1,031)
Other (57) (27) 814
-------- --------- -------
Total provision for
income taxes $ 37,581 $ 32,797 $33,267
======== ========= =======
No provision has been made for U.S. or additional foreign taxes on $44,785
million of undistributed earnings of foreign subsidiaries, which are permanently
reinvested. It is not practical to estimate the amount of additional tax that
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.
31
36
12. RETIREMENT BENEFITS
The Company sponsors several qualified and nonqualified pension plans and other
postretirement plans for its employees. The following table provides a
reconciliation of the changes in the benefit obligations and fair value of plan
assets over the two-year period ended December 31, 2000, and a statement of the
funded status at December 31 for both years:
Pension Benefits Other Benefits
-------------------- ---------------------
2000 1999 2000 1999
--------- ---------- --------- ----------
Change in benefit obligation
Obligation at January 1 $ 55,104 $ 58,842 $ 11,646 $ 11,186
Service cost 3,168 3,017 349 395
Interest cost 3,853 3,707 867 752
Plan amendments -- 968 -- --
Benefits paid (5,377) (9,337) (730) (536)
Other (2,477) (2,093) 2,810 (151)
-------- ---------- --------- ----------
Obligation at December 31 $ 54,271 $ 55,104 $ 14,942 $ 11,646
======== ========== ========= ==========
Change in plan assets
Fair value of plan assets at January 1 $ 51,990 $ 46,504 $ -- $ --
Actual return on plan assets (1,998) 8,548 -- --
Employer contributions 3,087 6,275 730 536
Benefits paid (5,377) (9,337) (730) (536)
Other (430) -- -- --
-------- ---------- --------- ----------
Fair value of plan assets at December 31 $ 47,272 $ 51,990 $ -- $ --
======== ========== ========= ==========
Funded status
Funded status at December 31 $ (6,999) $ (3,114) $ (14,942) $ (11,646)
Unrecognized loss (gain) 2,881 (1,210) 2,693 (169)
Unrecognized transition obligation 386 392 -- --
Unrecognized prior service cost 2,950 3,278 (651) (747)
-------- ---------- --------- ----------
Net amount recognized at December 31 $ (782) $ (654) $ (12,900) $ (12,562)
======== ========== ========= ==========
The following table provides the amounts recognized in the consolidated balance
sheets at December 31 for both years:
Prepaid benefit cost $ 4,397 $ 4,577 $ -- $ --
Accrued benefit liability (10,362) (10,154) (12,900) (12,562)
Intangible asset 1,738 2,063 -- --
Accumulated other comprehensive income 3,445 2,860 -- --
-------- -------- -------- ---------
Net amount recognized $ (782) $ (654) $(12,900) $ (12,562)
======== ======== ======== =========
The Company's nonqualified retirement plans and the retirement plan at a German
subsidiary are not funded. The accumulated benefit obligation for these plans
was $9,711 and $9,118 at December 31, 2000 and 1999, respectively. The Company's
plans for postretirement benefits other than pensions also have no plan assets.
The accumulated benefit obligation for these plans was $14,942 and $11,646 at
December 31, 2000 and 1999, respectively.
The assumptions used in the measurement of the Company's benefit obligation at
December 31, 2000 and 1999 were as follows:
U.S. Plans Non-U.S. Plans
---------------- ---------------
2000 1999 2000 1999
------ ----- ----- ------
Weighted-averaged assumptions
Discount rate 8.00% 7.50% 6.0% 6.0%
Expected return on plan assets 9.00% 9.00% 7.0% 7.5%
Rate of compensation increase 4.00% 4.00% 4.5% 4.5%
The discount rate assumption for benefits other than pension benefit plans was
8.00% and 7.50% at December 31, 2000 and 1999, respectively.
32
37
The following table provides the components of net periodic benefit cost for the
plans in 2000, 1999 and 1998:
Pension Benefits Other Benefits
------------------------------- --------------------------
2000 1999 1998 2000 1999 1998
--------- ---------- -------- ------- ------ -------
Service cost $ 3,168 $ 3,017 $ 3,056 $ 349 $ 395 $ 367
Interest cost 3,853 3,707 3,398 867 752 698
Expected return on plan assets (4,655) (4,219) (3,697) -- -- --
Net amortization 445 282 295 (148) (91) (148)
--------- ---------- -------- ------- ------ -------
Net periodic benefit cost $ 2,811 $ 2,787 $ 3,052 $ 1,068 $1,056 $ 917
========= ========== ======== ======= ====== =======
The amounts included in other comprehensive income arising from a change in the
minimum pension liability was $(368) and $(270) at December 31, 2000 and 1999,
respectively.
Prior service costs are amortized on a straight-line basis over the average
remaining service period of active participants. Gains and losses in excess of
10% of the greater of the benefit obligation and the market value of assets are
amortized over the average remaining service period of active participants.
Contributions to bargaining unit-sponsored multiemployer plan and defined
contribution plans were $6,122, $6,166 and $5,272 for 2000, 1999 and 1998,
respectively.
For measurement purposes, a 10% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 2000. The rate was assumed to
decrease gradually each year to a rate of 6% for 2008, and remain at that level
thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A 1% change in assumed health care cost
trend rates would have the following effects:
1% Increase 1% Decrease
----------- -----------
Effect on the service and interest cost components of the
net periodic benefit cost $ 153 $ (123)
Effect on the health care component of the accumulated
postretirement benefit obligation $ 1,744 $(1,475)
13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations for
the years ended December 31, 2000 and 1999:
2000 Quarters 1999 Quarters
------------------------------------------ -------------------------------------------
First Second Third Fourth First Second Third Fourth
-------- -------- -------- -------- -------- -------- -------- --------
Net sales $176,662 $185,258 $176,218 $166,138 $156,488 $161,484 $169,892 $167,177
Gross profit 70,555 72,931 70,177 64,289 61,320 64,730 65,827 64,607
Operating income 29,963 31,756 30,578 24,219 23,625 27,008 27,505 26,539
Net income 15,813 17,532 16,565 13,535 11,921 14,121 14,451 13,935
Basic EPS $ .53 $ .58 $ .56 $ .45 $ .40 $ .48 $ .49 $ .47
Weighted average shares outstanding 29,663 29,989 29,740 29,803 29,464 29,484 29,594 29,633
Diluted EPS $ .52 $ .57 $ .54 $ .44 $ .40 $ .47 $ .48 $ .46
Weighted average shares outstanding 30,188 30,808 30,899 30,875 29,880 30,109 30,301 30,176
33
38
REPORTS
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, 2000 and 1999 and the related statements
of consolidated operations, consolidated shareholders' equity, and consolidated
cash flows for each of the three years in the period ended December 31, 2000.
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 auditing standards generally accepted
in the United States of America. 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, 2000 and 1999 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Chicago, Illinois
January 16, 2001
MANAGEMENT REPORT
IDEX Corporation's management is responsible for the fair presentation and
consistency of all financial data included in this Annual Report in accordance
with accounting principles generally accepted in the United States of America.
Where necessary, the data reflect management's best estimates and judgments.
Management also is responsible for maintaining a system of internal control with
the objectives of providing reasonable assurance that IDEX's assets are
safeguarded against material loss from unauthorized use or disposition, and that
authorized transactions are properly recorded to permit the preparation of
accurate financial data. Cost benefit judgments are an important consideration
in this regard. The effectiveness of internal control is maintained by personnel
selection and training, division of responsibilities, establishment and
communication of policies, and ongoing internal review programs and audits.
Management believes that IDEX's system of internal control as of December 31,
2000, is effective and adequate to accomplish the above described objectives.
/s/ Dennis K. Williams
Dennis K. Williams
Chairman of the Board, President and Chief Executive Officer
/s/ Wayne P. Sayatovic
Wayne P. Sayatovic
Senior Vice President - Finance and Chief Financial Officer
Northbrook, Illinois
January 16, 2001
34
39
BUSINESS UNITS
BAND-IT-IDEX, INC. FAST S.r.l. LUBRIQUIP, INC.
4799 Dahlia St. Via Pelizza da Volpedo, 109 18901 Cranwood Pkwy.
Denver, CO 80216 20092 Cinisello Balsamo, Italy Warrensville Heights, OH 44128
(303) 320-4555 011-39-02-66091-432 (216) 581-2000
Robert J. Johnson A. Reza Arabnia Steven E. Semmler
President President President
Age: 48 Age: 45 Age: 45
Years of Service: 13 Years of Service: 13 Years of Service: 21
- -------------------------------------------------------------------------------------------------------------------------
CORKEN, INC. GAST MANUFACTURING, INC. MICROPUMP, INC.
3805 N.W. 36th St. 2300 Highway M-139 1402 N.E. 136th Ave.
Oklahoma City, OK 73112 Benton Harbor, MI 49023 Vancouver, WA 98684
(405) 946-5576 (616) 926-6171 (360) 253-2008
Steven C. Fairbanks Donald D. Rimes Jeffrey L. Hohman
President President President
Age: 41 Age: 55 Age: 47
Years of Service: 5 Years of Service: 30 Years of Service: 10
- -------------------------------------------------------------------------------------------------------------------------
FLUID MANAGEMENT, INC. HALE PRODUCTS, INC. PULSAFEEDER, INC.
1023 S. Wheeling Rd. 700 Spring Mill Ave. 2883 Brighton-Henrietta Town Line Rd.
Wheeling, IL 60090 Conshohocken, PA 19428 Rochester, NY 14623
(847) 537-0880 (610) 825-6300 (716) 292-8000
John P. Snow William D. Kysor Andrew W. Molodetz
President - Americas President President
Age: 56 Age: 53 Age: 44
Years of Service: 24 Years of Service: 4 Years of Service: 6
- -------------------------------------------------------------------------------------------------------------------------
FLUID MANAGEMENT EUROPE B.V. LIQUID CONTROLS, INC. VIKING PUMP, INC.
Hub van Doorneweg 31 105 Albrecht Drive 406 State St.
2171 KZ Sassenheim Lake Bluff, IL 60044 Cedar Falls, IA 50613
The Netherlands (847) 295-1050 (319) 266-1741
011-31-252-230604
Leendert Hellenberg Frederick G. Wacker III Glen C. Springer
President - Europe/Asia President President
Age: 55 Age: 40 Age: 58
Years of Service: 16 Years of Service: 19 Years of Service: 11
------------------------------------
WARREN RUPP, INC.
800 North Main St.
Mansfield, OH 44902
(419) 524-8388
Jeffery F. Fehr
President
Age: 49
Years of Service: 9
NOTE: Years of service include periods prior to acquisition by IDEX.
35
40
CORPORATE OFFICERS & DIRECTORS
CORPORATE OFFICERS DIRECTORS Member of:
Dennis K. Williams Dennis K. Williams (1) (1) Executive Committee
Chairman of the Board, Chairman of the Board, (2) Audit Committee
President and Chief Executive Officer President and Chief Executive Officer (3) Compensation Committee
Age: 54 IDEX Corporation
Years of Service: 1 Northbrook, Illinois
Age: 54
Years of Service: 1
Wayne P. Sayatovic Richard E. Heath
Senior Vice President - Finance Partner
and Chief Financial Officer Hodgson, Russ, Andrews, Woods & Goodyear
Age: 54 Buffalo, New York
Years of Service: 28 Age: 70
Years of Service: 12
Jerry N. Derck Henry R. Kravis
Vice President - Human Resources Member
Age: 53 Kohlberg Kravis Roberts & Co., L.L.C.
Years of Service: 8 New York, New York
Age: 56
Years of Service: 13
James R. Fluharty William H. Luers (2)(3)
Vice President - Group Executive Chairman, Chief Executive Officer and
Age: 57 President
Years of Service: 10 United Nations Association of the
United States of America
New York, New York
Age: 71
Years of Service: 12
Clinton L. Kooman Paul E. Raether
Vice President - Controller Member
Age: 57 Kohlberg Kravis Roberts & Co., L.L.C.
Years of Service: 36 New York, New York
Age: 54
Douglas C. Lennox Years of Service: 13
Vice President - Treasurer
Age: 48 George R. Roberts
Years of Service: 21 Member
Kohlberg Kravis Roberts & Co., L.L.C.
John L. McMurray San Francisco, California
Vice President - Operational Excellence Age: 57
Age: 50 Years of Service: 13
Years of Service: 8
Neil A. Springer (1)(2)(3)
Dennis L. Metcalf Managing Director
Vice President - Corporate Development Springer Souder & Assoc. L.L.C.
Age: 53 Chicago, Illinois
Years of Service: 27 Age: 62
Years of Service: 11
Frank J. Notaro
Vice President - General Counsel Michael T. Tokarz (3)
and Secretary Member
Age: 37 Kohlberg Kravis Roberts & Co., L.L.C.
Years of Service: 3 New York, New York
Age: 51
Rodney L. Usher Years of Service: 13
Vice President - Group Executive
Age: 55
Years of Service: 20
David T. Windmuller
Vice President - Group Executive
Age: 43
Years of Service: 20
NOTE: Years of service for corporate officers includes periods with predecessor
to IDEX.
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41
SHAREHOLDER INFORMATION
Corporate Executive Office
IDEX Corporation
630 Dundee Road
Northbrook, Illinois 60062
(847) 498-7070
Investor Information
Shareholders and prospective investors are welcome to call or write with
questions or requests for additional information. Please direct inquiries to:
Wayne P. Sayatovic, Senior Vice President - Finance and Chief Financial Officer.
Further information on IDEX can be found at www.idexcorp.com on the Internet.
Registrar and Transfer Agent
Inquiries about stock transfers, address changes or IDEX's dividend reinvestment
program should be directed to:
Computershare Investor Services
2 North LaSalle Street
Chicago, Illinois 60602
(312) 360-5366
Independent Auditors
Deloitte & Touche LLP
Two Prudential Plaza
180 North Stetson Avenue
Chicago, Illinois 60601
Dividend Policy
IDEX paid a quarterly dividend on its common stock on January 31, 2001, of $0.14
per share, which is unchanged from last year's quarterly dividend rate. The
declaration of future dividends, subject to certain limitations, is within the
discretion of the Board of Directors and will depend upon, among other things,
business conditions, earnings, and IDEX's financial condition. See Note 8 of the
Notes to Consolidated Financial Statements.
Stock Market Information
IDEX common stock was held by an estimated 4,300 shareholders at December 31,
2000, and is traded on the New York Stock Exchange and the Chicago Stock
Exchange under the ticker symbol IEX.
Form 10-K
Shareholders may obtain a copy of the Form 10-K filed with the Securities and
Exchange Commission by directing a request to IDEX or through its Website at
www.idexcorp.com.
Annual Meeting
The Annual Meeting of IDEX Shareholders will be held on Tuesday, March 27, 2001,
at 10:00 a.m. in the:
Shareholders Room
Bank of America NT&SA
231 South LaSalle Street
Chicago, Illinois 60697
37