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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
------------------------------- TO
-------------------------------
COMMISSION FILE NUMBER 1-10235
IDEX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 36-3555336
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
630 DUNDEE ROAD,
NORTHBROOK, ILLINOIS 60062
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (847) 498-7070
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
CHICAGO STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
IDEX Corporation as of December 31, 2001 was $731,491,356.
The number of shares outstanding of IDEX Corporation's common stock, par
value $.01 per share (the "Common Stock"), as of October 31, 2002 was 32,458,881
(net of treasury shares).
DOCUMENTS INCORPORATED BY REFERENCE
None
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EXPLANATORY NOTE
This Form 10-K/A is being filed as an amendment to our Annual Report on Form
10-K for the fiscal year ended December 31, 2001 to amend Part II, Item 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations, to add data from several charts included in our 2001 Annual Report
that were not included on Exhibit 13 to our Form 10-K.
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
HISTORICAL OVERVIEW AND OUTLOOK
IDEX sells a broad range of proprietary pumps, metering devices, dispensing
equipment and other engineered products to a diverse customer base in the United
States and internationally. Accordingly, IDEX's businesses are affected by
levels of industrial activity and economic conditions in the U.S. and in other
countries where its products are sold, and by the relationship of the U.S.
dollar to other currencies. Among the factors that influence the demand for
IDEX's products are interest rates, levels of capacity utilization and capital
spending in certain industries, and overall industrial activity.
IDEX has a history of above-average operating margins. The Company's
operating margins are affected by, among other things, utilization of facilities
as sales volumes change and including newly acquired businesses, which may have
lower margins and whose margins are normally further reduced by purchase
accounting adjustments.
Beginning in 2002, purchase accounting adjustments will not significantly
affect IDEX's margins, since the Company will no longer amortize goodwill and
intangible assets with indefinite lives to earnings, in accordance with new
accounting rules. Instead, IDEX will periodically review these assets for
impairment as explained under the "New Accounting Pronouncement" section on page
21.
For 2001, IDEX reported record orders and sales, while recording lower net
income and earnings per share compared with the prior year. New orders in 2001
totaled $713.4 million, 2% above the prior year. Excluding the impact of foreign
currency and the five acquisitions made since the beginning of 2000
(Ismatec -- April 2000, Trebor -- May 2000, Class 1 -- January 2001, Liquid
Controls -- January 2001 and Versa-Matic -- June 2001), orders were 9% lower
than 2000. The Company's order declines were associated with the weaknesses in
the North American and European manufacturing sectors and the aftermath of the
September 11 terrorist attacks. At December 31, 2001, IDEX had an unfilled order
backlog of slightly over one month's sales, consistent with recent periods.
The year 2001 was a very difficult one for the country and for IDEX as a
manufacturer of industrial products. The slowdown in IDEX's business that
started in the second half of 2000, lingered into the first half of 2001, and
then deteriorated further in the third quarter even before the tragic events of
September 11. Business activity levels for the fourth quarter dropped even more
in the aftermath of the terrorist attacks and the onset of the war against
terrorism. In 2001, IDEX wrote $190 million of orders in the first quarter, $191
million in the second, $171 million in the third, and only $161 million in the
last quarter. Since IDEX operates with a very small backlog of unfilled orders,
reductions in order activity very quickly will reduce sales and profitability.
These order declines were associated with continuing weaknesses in
virtually all worldwide manufacturing sectors. The most significant impact has
been felt in the Dispensing Equipment Group -- which serves the paints and
coatings, automotive and general industrial markets -- where sales comparisons
with the prior year were down 27% for the fourth quarter and 17% for the full
year. All three businesses in this Group were affected, as fourth quarter
operations were below breakeven levels and full-year profits were down 57% from
2000.
As a direct result of the depressed business environment, the Company's
management took aggressive actions in the first and fourth quarters to further
downsize operations to be consistent with reduced business
1
activity levels. A total restructuring charge of $11.2 million ($7.1 million
after tax, or 23 cents per diluted share) was taken that affected all three
business groups. During the year, the workforce at IDEX was reduced by 15
percent, affecting almost 600 employees. These actions were necessary to
appropriately size IDEX's businesses, lower costs and improve efficiencies. The
annual savings from these actions will exceed the total charge recorded. Despite
the very difficult economic environment, IDEX continued to generate excellent
cash flow. The Company's free cash flow (cash flow from operations minus capital
expenditures) has exceeded net income every year since IDEX was formed in 1988.
Free cash flow in 2001 was a record $86 million, which was more than double its
net income before restructuring.
Looking ahead to 2002, the Company's performance will depend on the pace of
incoming business. It is exceedingly difficult to project what orders will be
given the current economic and political environment. IDEX operates with a very
small backlog of unfilled orders, and it is not able to assess how long the
softness in several of its end-markets is likely to last. The Company's
performance will depend upon the strength of the U.S. and key international
economies. The Company believes IDEX is well positioned for a strong recovery
once economic conditions improve. This is based on its reduced cost structures;
the margin improvement initiatives of Six Sigma, global sourcing and eBusiness;
and the use of strong cash flow to cut debt and interest expense. In addition,
IDEX continues to pursue acquisitions to drive its longer term profitable
growth.
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
The "Historical Overview and Outlook" and the "Liquidity and Capital
Resources" sections of this "Management's Discussion and Analysis" of IDEX's
financial condition and results of 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. The 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: economic and political
consequences resulting from the September 11, 2001 terrorist actions; levels of
industrial activity and economic conditions in the U.S. and other countries
around the world, pricing pressures and other competitive factors, and levels of
capital spending in certain industries, all of which could have a material
impact on order rates and the Company's results, particularly in light of the
low levels of order backlogs it typically maintains; IDEX's ability to integrate
and operate acquired businesses on a profitable basis; the relationship of the
U.S. dollar to other currencies and its impact on pricing and cost
competitiveness; interest rates; utilization of IDEX's capacity and the affect
of capacity utilization on costs; labor market conditions and raw material
costs; developments with respect to contingencies, such as litigation and
environmental matters; and other risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission.
Investors also should be aware that while IDEX does, from time to time,
communicate with securities analysts, it is against IDEX's policy to disclose to
them any material non-public information or other confidential commercial
information. Accordingly, shareholders should not assume that IDEX agrees with
any statement or report issued by any analyst regardless of the content of the
statement or report. In addition, IDEX has a policy against issuing or
confirming their financial forecasts, projections, or opinions and these reports
are not developed by, nor are they the responsibility of, IDEX.
RESULTS OF OPERATIONS
For purposes of this "Management's 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 markets 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
2
applications, water treatment and industrial production operations. The
Dispensing Equipment Group designs, manufactures and distributes
precision-engineered equipment for dispensing, metering and mixing paints;
refinishing equipment; and automatic 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 2001 COMPARED WITH 2000
IDEX achieved record orders and sales, but reported lower net income and
earnings per share in 2001 compared with the prior year. New orders in 2001
totaled $713.4 million and were 2% above the prior year. Excluding the impact of
foreign currency and the five acquisitions made since the beginning of 2000,
orders were 9% lower.
Sales for 2001 increased by 3% to $726.9 million from $704.3 million.
Acquisitions accounted for a 13% improvement, which was partially offset by a 9%
decline in base business sales and a 1% unfavorable currency translation. Net
income was $32.7 million, which was 48% lower than the $63.4 million earned in
2000. Diluted earnings per share decreased by $1.02 to $1.05, down 49% compared
with 2000. Excluding the restructuring charge, net income was $39.8 million, 37%
lower than the $63.4 million earned in the prior year, and diluted earnings per
share were $1.28, down 38% from $2.07.
INTERNATIONAL SALES
PERCENT OF NET SALES AMOUNT IN MILLIONS
-------------------- ------------------
2001................................................ 42% $305
2000................................................ 41% $288
1999................................................ 39% $256
1998................................................ 39% $251
1997................................................ 44% $245
1996................................................ 43% $206
1995................................................ 37% $146
1994................................................ 34% $109
1993................................................ 29% $ 70
1992................................................ 31% $ 66
1991................................................ 31% $ 52
1990................................................ 28% $ 44
1989................................................ 27% $ 40
International growth continues to be a key factor in IDEX's success.
3
EBITDA(1) (EXCLUDING RESTRUCTURING) AND INTEREST EXPENSE
(IN THOUSANDS)
EBITDA
(EXCLUDING RESTRUCTURING) INTEREST EXPENSE
------------------------- ----------------
2001.............................................. $129,328 $20,738
2000.............................................. $154,027 $16,521
1999.............................................. $139,709 $18,020
1998.............................................. $142,957 $22,359
1997.............................................. $127,195 $18,398
1996.............................................. $107,592 $17,476
1995.............................................. $ 89,946 $14,301
1994.............................................. $ 69,360 $11,939
1993.............................................. $ 52,244 $ 9,168
1992.............................................. $ 46,045 $ 9,809
1991.............................................. $ 38,723 $10,397
1990.............................................. $ 39,581 $11,795
1989.............................................. $ 37,284 $13,989
IDEX's cash flow coverage of interest expense has improved significantly.
---------------
(1) EBITDA means earnings before interest, income taxes, depreciation and
amortization. EBITDA is commonly used as an analytical indicator and also
serves as a measure of leverage capacity and debt servicing ability. EBITDA
should not be considered as an alternative to net income, cash flows or any
other items calculated in accordance with generally accepted accounting
principles or as an indicator of our operating performance. The definition
of EBITDA used herein may differ from the definition used by other
companies.
ASSETS AND TOTAL DEBT
(IN THOUSANDS)
ASSETS TOTAL DEBT
-------- ----------
2001........................................................ $838,804 $291,820
2000........................................................ $758,854 $241,886
1999........................................................ $738,567 $268,589
1998........................................................ $695,811 $283,410
1997........................................................ $599,193 $258,417
1996........................................................ $569,745 $271,709
1995........................................................ $450,077 $206,184
1994........................................................ $357,980 $168,166
1993........................................................ $245,291 $117,464
1992........................................................ $240,175 $139,827
1991........................................................ $137,349 $ 65,788
1990........................................................ $127,466 $103,863
1989........................................................ $124,998 $124,942
IDEX's balance sheet has strengthened considerably.
4
COMPANY AND BUSINESS GROUP FINANCIAL INFORMATION
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,(1) 2001 2000 1999
----------------------------------- -------- -------- --------
Pump Products Group
Net sales(2)................................................ $427,037 $394,999 $372,440
Operating income(3)......................................... 61,758 73,557 65,673
Operating margin............................................ 14.5% 18.6% 17.6%
Identifiable assets......................................... $462,275 $391,831 $355,983
Depreciation and amortization............................... 24,124 19,658 19,327
Capital expenditures........................................ 10,251 10,656 8,616
Dispensing Equipment Group
Net sales (2)............................................... $137,407 $166,362 $140,996
Operating income(3)......................................... 13,957 32,496 25,614
Operating margin............................................ 10.2% 19.5% 18.2%
Identifiable assets......................................... $180,361 $204,891 $216,273
Depreciation and amortization............................... 9,719 8,845 8,124
Capital expenditures........................................ 5,129 5,175 5,896
Other Engineered Products Group
Net sales(2)................................................ $164,815 $145,823 $144,486
Operating income(3)......................................... 25,032 27,437 26,660
Operating margin............................................ 15.2% 18.8% 18.5%
Identifiable assets......................................... $181,032 $148,753 $154,490
Depreciation and amortization............................... 7,920 6,474 6,769
Capital expenditures........................................ 5,987 4,796 3,739
Company
Net sales................................................... $726,947 $704,276 $655,041
Before restructuring:
Operating income.......................................... 84,664 116,516 104,677
Operating margin.......................................... 11.6% 16.5% 16.0%
After restructuring:
Operating income.......................................... $ 73,438 $116,516 $104,677
Operating margin.......................................... 10.1% 16.5% 16.0%
Total assets................................................ 838,804 758,854 738,567
Depreciation and amortization(4)............................ 43,933 36,480 34,464
Capital expenditures........................................ 21,639 20,739 18,338
---------------
(1) Includes acquisition of Versa-Matic Tool, Inc. (June 2001), Liquid Controls
L.L.C. (January 2001), Trebor International, Inc. (May 2000) and Ismatec
S.A. (April 2000) in the Pump Products Group; FAST S.p.A. (June 1999) in the
Dispensing Equipment Group; and Class 1, Inc. (January 2001) in the Other
Engineered Products Group from dates of acquisition.
(2) Group net sales include intersegment sales.
(3) Group operating income excludes net unallocated corporate operating expenses
for all years and the restructuring charge in 2001. The restructuring charge
of $11,226 was not assigned to the individual groups. Had the Company
allocated the restructuring charge, it would have been assigned to the
groups as follows: Pump Products ($7,769), Dispensing Equipment ($1,894) and
Other Engineered Products ($1,563). Excluding the restructuring charge,
IDEX's fully diluted earnings per share would have been $1.28 for the year
ended December 31, 2001.
(4) Excludes amortization of debt issuance expenses.
For 2001, the Pump Products Group contributed 59% of sales and 61% of
operating income, the Dispensing Equipment Group accounted for 19% of sales and
14% of operating income, and the Other Engineered Products Group represented 22%
of sales and 25% of operating income. In 2001, international
5
sales were up 6% and domestic sales increased by 1% compared with 2000.
International sales were 42% of total sales, up from 41% in the prior year.
Pump Products Group sales of $427.0 million increased by $32.0 million, or
8%, in 2001 compared with 2000, principally reflecting the Ismatec, Trebor,
Liquid Controls and Versa-Matic acquisitions, which added 17% to sales in 2001.
Compared to 2000, base business sales volume was down 8% and foreign currency
had a 1% negative effect. In 2001, international sales grew 22% and domestic
sales increased by 1%, principally reflecting the recent acquisitions. As a
result, sales to customers outside the U.S. increased to 37% of total group
sales in 2001 from 33% in 2000. Excluding acquisitions and foreign currency,
base international sales were down 3% from the prior year and base U.S. sales
volume decreased by 10%, with the lower sales principally caused by continuing
weakness in the North American and European manufacturing sectors.
Dispensing Equipment Group sales of $137.4 million decreased by $29.0
million, or 17%, in 2001 compared with 2000. Base business sales were down 16%
and foreign currency translation had a 1% negative effect. Excluding foreign
currency, international sales were down 10% in 2001 from the prior year and
domestic sales decreased by 22% due to continuing weak conditions in the North
American and European end-markets, which caused significant year-over-year
volume declines at all three businesses in this group. Sales to customers
outside the U.S. were 57% of total group sales in 2001, up from 55% in 2000.
Other Engineered Products Group sales of $164.8 million increased by $19.0
million, or 13%, in 2001 compared with 2000, principally reflecting the Class 1
acquisition, which added 18% to sales in 2001. Overall base business sales
decreased by 3% and foreign currency translation had a 2% negative effect. In
2001, domestic sales increased by 23% and international sales increased by 1%.
Sales to customers outside the U.S. were 41% of total group sales in 2001, down
from 46% in 2000, principally reflecting the change in sales mix due to the
Class 1 acquisition. Excluding foreign currency and acquisitions, base
international sales in 2001 increased by 4% compared with the prior year, while
the base U.S. sales volume decreased by 9%, due to the soft conditions in most
U.S. end-markets.
Gross profit of $263.7 million in 2001 decreased by $14.2 million, or 5%,
from 2000. Gross profit as a percent of sales was 36.3% in 2001 and decreased
from 39.5% in 2000. The decline in gross profit and gross margins was
attributable to significantly lower base business sales volumes, production
inefficiencies and under-absorption of manufacturing expenses related to lower
volumes and planned inventory reductions, and the addition of lower margin
acquisitions. Selling, general and administrative (SG&A) expenses increased to
$164.9 million in 2001 from $149.6 million in 2000 due to including
acquisitions. As a percent of net sales, SG&A expenses were 22.7%, up from 21.2%
in 2000. The increase principally reflected significantly lower base business
sales volumes and incremental up-front costs associated with implementing the
Company's Six Sigma and eBusiness initiatives. Goodwill amortization increased
by $2.4 million to $14.2 million in 2001, reflecting the recent acquisitions. As
a percent of sales, goodwill amortization remained flat at about 2% for both
years.
Operating income decreased by $43.1 million, or 37%, to $73.4 million in
2001 from $116.5 million in 2000. Excluding the restructuring charge, operating
income as a percent of sales decreased to 11.6% in 2001 from 16.5% in 2000. The
decreases in operating income and operating margin were reflected at all three
business groups. They were attributable to significantly lower base business
sales volumes, production inefficiencies and under-absorption of manufacturing
expenses related to lower volumes and planned inventory reductions, addition of
lower margin acquisitions and incremental costs associated with implementing the
company initiatives. In the Pump Products Group, operating income of $61.8
million and operating margin of 14.5% in 2001 compared with the $73.6 million
and 18.6% recorded in 2000. With a 17% year-over-year sales decline,
profitability of the Dispensing Equipment Group had the most significant
decrease of the Company's three groups, as operating income of $14.0 million and
operating margin of 10.2% decreased from $32.5 million and 19.5% in 2000.
Operating income in the Other Engineered Products Group of $25.0 million and
operating margin of 15.2% in 2001 decreased from $27.4 million and 18.8%
recorded in 2000. During 2001, IDEX recorded a restructuring charge totaling
$11.2 million ($7.1 million after tax, or $.23 per share), to properly size the
Company's operations to the then current business conditions. The restructuring
affected
6
all three business groups and reduced the workforce, lowered costs, improved
efficiencies and addressed excess capacity that resulted from lower demand and
more efficient processes at the Gast and Hale business units.
Interest expense increased to $20.7 million in 2001 from $16.5 million in
2000. The increase principally was due to the additional debt incurred to
acquire the Ismatec, Trebor, Liquid Controls, Class 1 and Versa-Matic
businesses, which was partially offset by lower interest rates.
The provision for income taxes decreased to $20.7 million in 2001 from
$37.6 million in 2000, reflecting lower income. The effective tax rate increased
to 38.8% in 2001 from 37.2% in 2000, primarily due to the lower income combined
with the relative impact of certain nondeductible goodwill amortization
expenses.
Net income of $32.7 million in 2001 was 48% lower than the $63.4 million
recorded in 2000. Diluted earnings per share were $1.05 in 2001, a decrease of
$1.02, or 49%, from the $2.07 achieved in 2000. Net income before the
restructuring charge was $39.8 million, 37% lower than the $63.4 million earned
in the prior year, and diluted earnings per share were $1.28, down 38% from
$2.07.
PERFORMANCE IN 2000 COMPARED WITH 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 the prior year.
International sales increased by 12% for 2000, while domestic sales rose 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 the prior year. Overall base business sales
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
including 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 Group sales of $145.8 million increased by $1.3
million, or 1%, compared with 1999. Overall base business sales increased by 5%
and foreign currency translation had a 4% negative effect. Domestic sales
increased by 10%, while 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. SG&A expenses increased to $149.6 million in 2000 from
$140.5 million in the prior year, but as a percent of net sales, decreased to
21.2% from 21.4%. 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 2% for both years.
Operating income increased by $11.8 million, or 11%, to $116.5 million in
2000 from $104.7 million in the prior year, and as a percent of sales, improved
to 16.5% from 16.0%. These increases reflected
7
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% compared
with 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%,
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%, increased from the $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 change was due to debt reductions from operating cash flow, partially
offset by additional debt incurred to acquire 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.
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, an increase of $.26, or
14%, from the $1.81 achieved in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2001, IDEX's working capital was $127.6 million and its
current ratio was 2.5 to 1. The Company's cash flow provided from operations
increased by $14.6 million to $107.3 million in 2001, principally due to
reductions in receivables and inventories, which were partially offset by lower
income.
Cash flow from operations was more than adequate to fund capital
expenditures of $21.6 million, $20.7 million and $18.3 million in 2001, 2000 and
1999, respectively. Capital expenditures generally were used for machinery and
equipment to improve productivity, although a portion was for business system
technology and 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 completed the acquisitions of Liquid Controls, Class 1 and
Versa-Matic during 2001 for a cash purchase price of $132.3 million. The
acquisitions were accounted for using the purchase method and were financed
under the Company's U.S. bank credit facilities.
During June 2001, IDEX signed a new, five-year multi-currency Credit
Agreement replacing the former Credit Facility, which was to expire on July 1,
2001, and the German Facility, which was to expire on November 1, 2001. At
December 31, 2001, the maximum amount available under the Credit Agreement was
$300 million, of which $112.3 million was borrowed, including $59.3 million in
western European currencies. These borrowings provide an economic hedge against
the net investment in the four operations located in Europe. Interest is payable
quarterly on the outstanding balance at the agent bank's reference rate, or at
LIBOR plus an applicable margin, and a utilization fee if the total borrowings
exceed certain levels. The applicable margin is based on IDEX's debt rating and
can range from 25 basis points to 100 basis points. The utilization fee can
range from zero to 25 basis points. At December 31, 2001, the applicable margin
was 80 basis points plus a utilization fee of 12.5 basis points since the
borrowings exceeded 33% of the total available. The Company pays an annual fee
of 20 basis points on the total facility.
The Company and certain of its subsidiaries entered into an agreement in
December 2001 with a financial institution under which it collateralized certain
receivables for the borrowings (Receivables Facility). The Receivables Facility
provides for borrowings of up to $50 million depending upon the level of
eligible receivables. At December 31, 2001, $25 million was borrowed and
included in long-term debt at an annual interest rate of approximately 3.4%.
The Company has a $20 million demand line of credit (Short-Term Facility),
which expires December 1, 2002. Borrowings under the Short-Term Facility are at
the bank's reference rate, or based on LIBOR plus 80 basis points per annum. At
December 31, 2001, there were no borrowings under the Short-Term Facility.
IDEX believes it will generate sufficient cash flow from operations in 2002
to meet its operating requirements, interest on all borrowings outstanding in
long-term debt, any authorized share repurchases, restructuring expenses,
approximately $27 million of planned capital expenditures and $17 million of
annual
8
dividend payments to holders of common stock. Since it began operations in
January 1988 through December 31, 2001, IDEX has borrowed $809 million under its
various credit agreements to complete 19 acquisitions. During this period IDEX
generated, principally from operations, cash flow of $682 million to reduce its
indebtedness. In the event that suitable businesses are available for
acquisition upon terms acceptable to the Board of Directors, IDEX may obtain all
or a portion of the financing for the acquisitions through incurring additional
long-term debt. The Credit Agreement contains a covenant that limits total debt
outstanding to three-times operating cash flow. At December 31, 2001, IDEX was
limited to $377 million of total debt outstanding. IDEX's contractual
obligations and commercial commitments include rental payments under operating
leases, payments under capital leases, long-term debt obligations and other
long-term obligations arising in the ordinary course of business. The Company
has no off-balance sheet arrangements or material long-term purchase
obligations. There are no identifiable events or uncertainties, including the
lowering of IDEX's credit rating, that would accelerate payment or maturity of
any of these commitments or obligations.
NEW ACCOUNTING PRONOUNCEMENT
IDEX historically accounted for all business combinations using the
purchase method and will continue to use this method for all prospective
business combinations. At December 31, 2001, goodwill totaled $454.6 million,
which is subject to periodic review for impairment under SFAS No. 142. After
reviewing the estimated fair market values, both in the aggregate and at
individual business units, IDEX recorded no impairment to goodwill on January 1,
2002. If future operating performance at its business units would fall
significantly below current levels, the Company would reflect a non-cash charge
for goodwill impairment to its results of operations in that period.
The pronouncement also requires that goodwill and certain intangible assets
with indefinite lives no longer be amortized to earnings. Had the new accounting
pronouncement been adopted on January 1, 2001, IDEX's reported diluted earnings
per share in 2001 would have increased by $.37 from $1.05 to $1.42.
EURO PREPARATIONS
Beginning in 1998, the Company upgraded its business systems to accommodate
the euro currency. The cost of this upgrade was immaterial to the Company's
financial results. Although difficult to predict, any competitive implications
and any impact on existing financial instruments resulting from the euro
implementation 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 $291.8 million of total debt outstanding at December 31, 2001. Approximately
47% 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 $686,000 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 treasury risk management policy,
adopted by the Board of Directors, describes the procedures and controls over
derivative financial and commodity instruments, including interest rate swaps.
Under the policy, the Company does not use derivative financial or commodity
instruments for trading purposes, and the use of these instruments is subject to
strict approvals by senior officers. Typically, the use of derivative
instruments is limited to interest rate swaps on the Company's outstanding
long-term debt. IDEX's exposure related to 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 and British pound. IDEX manages its foreign exchange risk principally
through invoicing its customers in the same currency as the source of the
products.
9
NET SALES BY GROUP
(IN THOUSANDS)
OTHER
DISPENSING ENGINEERED
PUMP PRODUCTS EQUIPMENT PRODUCTS COMBINED
------------- ---------- ---------- --------
2001........................................... $427,037 $137,407 $164,815 $729,259
2000........................................... $394,999 $166,362 $145,823 $707,184
1999........................................... $372,440 $140,996 $144,486 $657,922
1998........................................... $375,692 $122,844 $144,004 $642,540
1997........................................... $265,918 $138,202 $150,455 $554,575
1996........................................... $245,620 $ 80,169 $149,949 $475,738
1995........................................... $228,909 $ 42,007 $125,118 $396,034
1994........................................... $197,013 $ 37,890 $ 84,784 $319,687
1993........................................... $180,906 $ 31,944 $ 27,364 $240,214
1992........................................... $156,172 $ 31,200 $ 28,856 $216,228
1991........................................... $109,938 $ 29,646 $ 27,574 $167,158
1990........................................... $103,323 $ 30,947 $ 26,883 $161,153
1989........................................... $ 98,298 $ 26,976 $ 24,341 $149,615
OPERATING INCOME BY GROUP
(IN THOUSANDS)
OTHER
DISPENSING ENGINEERED
PUMP PRODUCTS EQUIPMENT PRODUCTS COMBINED
------------- ---------- ---------- --------
2001........................................... $61,758 $13,957 $25,032 $100,747
2000........................................... $73,726 $32,566 $27,498 $133,790
1999........................................... $65,673 $25,614 $26,660 $117,947
1998........................................... $74,812 $22,483 $24,596 $121,891
1997........................................... $61,443 $25,636 $26,426 $113,505
1996........................................... $55,129 $14,370 $26,595 $ 96,094
1995........................................... $48,365 $11,739 $22,889 $ 82,993
1994........................................... $40,303 $ 9,736 $14,954 $ 64,993
1993........................................... $34,501 $ 6,761 $ 7,585 $ 48,847
1992........................................... $31,252 $ 6,251 $ 7,887 $ 45,390
1991........................................... $26,583 $ 5,322 $ 7,850 $ 39,755
1990........................................... $26,175 $ 6,258 $ 7,733 $ 40,166
1989........................................... $24,440 $ 6,813 $ 6,072 $ 37,325
2001 SALES BY REGION
- 58% United States
- 24% Europe
- 10% Asia/Rest of World
- 8% Canada/Latin America
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IDEX CORPORATION
By /s/ WAYNE P. SAYATOVIC
------------------------------------
Wayne P. Sayatovic
Senior Vice President -- Finance
and Chief Financial Officer
Date: December 19, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ DENNIS K. WILLIAMS Chairman of the Board, President, Chief
------------------------------------ Executive Officer (Principal Executive
Dennis K. Williams Officer) and Director December 19, 2002
/s/ WAYNE P. SAYATOVIC Senior Vice President -- Finance and Chief
------------------------------------ Financial Officer (Principal Financial and
Wayne P. Sayatovic Accounting Officer) December 19, 2002
/s/ BRADLEY J. BELL Director
------------------------------------
Bradley J. Bell December 19, 2002
/s/ GREGORY B. KENNY Director
------------------------------------
Gregory B. Kenny December 19, 2002
/s/ WILLIAM H. LUERS Director
------------------------------------
William H. Luers December 19, 2002
/s/ PAUL E. RAETHER Director
------------------------------------
Paul E. Raether December 19, 2002
/s/ NEIL A. SPRINGER Director
------------------------------------
Neil A. Springer December 19, 2002
/s/ MICHAEL T. TOKARZ Director
------------------------------------
Michael T. Tokarz December 19, 2002
11
CERTIFICATIONS
I, Dennis K. Williams, certify that:
1. I have reviewed this annual report on Form 10-K/A of IDEX Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
Date: December 19, 2002
/s/ DENNIS K. WILLIAMS
--------------------------------------
Dennis K. Williams
Chairman, President and
Chief Executive Officer
12
I, Wayne P. Sayatovic, certify that:
1. I have reviewed this annual report on Form 10-K/A of IDEX Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
Date: December 19, 2002
/s/ WAYNE P. SAYATOVIC
--------------------------------------
Wayne P. Sayatovic
Senior Vice President -- Finance and
Chief Financial Officer
13