1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------- --------
Commission file number 1-10235
-------
IDEX Corporation
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3555336
- - ----------------------------------- -----------------------------------
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
630 Dundee Road, Suite 400
Northbrook Illinois 60062
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 498-7070
--------------
- - -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Number of shares of common stock of IDEX Corporation ("IDEX" or the "Company")
outstanding as of November 4, 1994: 12,716,386 shares.
Documents Incorporated by Reference: None.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
IDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
1994 1993
------------ -----------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 3,715 $ 3,513
Receivables - net . . . . . . . . . . . . . . . . . . . . . . 59,968 43,318
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 80,117 60,973
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . 5,675 6,602
Other current assets . . . . . . . . . . . . . . . . . . . . 1,638 1,060
-------- --------
Total Current Assets . . . . . . . . . . . . . . . . . . . 151,113 115,466
Property, Plant and Equipment - net . . . . . . . . . . . . . . 66,434 53,525
Intangible Assets - net . . . . . . . . . . . . . . . . . . . . 148,134 84,772
Other Noncurrent Assets . . . . . . . . . . . . . . . . . . . . 4,865 5,204
-------- --------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . $370,546 $258,967
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable . . . . . . . . . . . . . . . . . . . $ 30,537 $ 21,405
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . 28,723 21,235
-------- --------
Total Current Liabilities . . . . . . . . . . . . . . . . 59,260 42,640
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . 184,502 117,464
Other Noncurrent Liabilities . . . . . . . . . . . . . . . . . 17,613 15,177
-------- --------
Total Liabilities . . . . . . . . . . . . . . . . . . . . 261,375 175,281
-------- --------
Shareholders' Equity
Common stock, par value $.01 per share;
Shares authorized: 50,000,000
Shares issued and outstanding:
1994: 12,715,001
1993: 12,701,588 . . . . . . . . . . . . . . . . . . . . . 127 127
Additional paid-in capital . . . . . . . . . . . . . . . . . 84,936 84,713
Retained earnings . . . . . . . . . . . . . . . . . . . . . . 26,926 2,551
Accumulated translation adjustment . . . . . . . . . . . . . (2,818) (3,705)
-------- --------
Total Shareholders' Equity . . . . . . . . . . . . . . . . 109,171 83,686
-------- --------
Total Liabilities and Shareholders'
Equity . . . . . . . . . . . . . . . . . . . . . . . . . $370,546 $258,967
======== ========
_________________________
See Notes to Consolidated Financial Statements
1
3
IDEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(In thousands, except per share amounts)
For the Third Quarter Ended September 30, 1994 1993
---- ----
(unaudited)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $106,975 $77,726
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . 66,340 48,048
-------- -------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . 40,635 29,678
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,020 16,910
-------- -------
Income from operations . . . . . . . . . . . . . . . . . . . . . 18,615 12,768
Other expense - net . . . . . . . . . . . . . . . . . . . . . . . 744 54
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 3,982 2,675
-------- -------
Income before income taxes . . . . . . . . . . . . . . . . . . . 13,889 10,039
Provision for income taxes . . . . . . . . . . . . . . . . . . . 5,039 3,272
-------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,850 $ 6,767
======== =======
Earnings per common share . . . . . . . . . . . . . . . . . . . . $ .68 $ .52
======== =======
Weighted average common shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 13,055 12,981
======== =======
_________________________
See Notes to Consolidated Financial Statements.
2
4
IDEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(In thousands, except per share amounts)
For the Nine Months Ended September 30, 1994 1993
---- ----
(unaudited)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $286,408 $229,329
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . 176,226 141,771
-------- --------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . 110,182 87,558
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,801 51,351
-------- --------
Income from operations . . . . . . . . . . . . . . . . . . . . . 49,381 36,207
Other expense - net . . . . . . . . . . . . . . . . . . . . . . . 1,773 431
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 9,728 8,343
-------- --------
Income before income taxes . . . . . . . . . . . . . . . . . . . 37,880 27,433
Provision for income taxes . . . . . . . . . . . . . . . . . . . 13,505 9,327
-------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,375 $ 18,106
======== ========
Earnings per common share . . . . . . . . . . . . . . . . . . . . $ 1.87 $ 1.40
======== ========
Weighted average common shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 13,034 12,943
======== ========
_________________________
See Notes to Consolidated Financial Statements.
3
5
IDEX CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In thousands)
Shareholders' Equity
-----------------------------------------------------------
Additional Accumulated
Common Paid-In Retained Translation
Stock Capital Earnings Adjustment
----- ------- -------- -----------
Balance:
December 31, 1993 . . . . . . . . . . . . . . . $127 $84,713 $ 2,551 $(3,705)
Stock options exercised . . . . . . . . . . . . . 223
Unrealized trans-
lation adjustment . . . . . . . . . . . . . . . 887
Net income . . . . . . . . . . . . . . . . . . . 24,375
---- ------- ------- -------
Balance:
September 30, 1994 . . . . . . . . . . . . . . $127 $84,936 $26,926 $(2,818)
==== ======= ======= =======
(unaudited)
_________________________
See Notes to Consolidated Financial Statements.
4
6
IDEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In thousands)
For the Nine Months Ended September 30, 1994 1993
---- ----
(unaudited)
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,375 $18,106
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . 7,390 6,644
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . 2,830 2,096
Amortization of debt issuance expenses . . . . . . . . . . . . . . . . . . . . 478 474
Increase in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,186) ( 1,549)
(Increase) decrease in inventories . . . . . . . . . . . . . . . . . . . . . ( 269) 3,620
Increase (decrease) in trade accounts payable. . . . . . . . . . . . . . . . . 4,123 ( 789)
Decrease in accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . (1,710) ( 1,009)
Decrease in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 1,663 2,418
Other transactions - net . . . . . . . . . . . . . . . . . . . . . . . . . . . 933 2,066
-------- --------
Net cash flows from operating activities . . . . . . . . . . . . . . . . . . 31,627 32,077
-------- --------
Cash Flows From Investing Activities:
Additions to property, plant and equipment . . . . . . . . . . . . . . . . . . (6,910) (5,358)
Acquisition of businesses (net of cash
acquired) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (91,553)
-------- --------
Net cash flows from investing activities . . . . . . . . . . . . . . . . . . (98,463) ( 5,358)
-------- --------
Cash Flows From Financing Activities:
Net borrowings (repayments) of long-term debt . . . . . . . . . . . . . . . . . 68,000 (22,500)
Decrease in accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . ( 962) ( 638)
Payment of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . ( 1,645)
-------- --------
Net cash flows from financing activities . . . . . . . . . . . . . . . . . . . 67,038 (24,783)
-------- --------
Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 1,936
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . 3,513 2,370
-------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . $ 3,715 $ 4,306
======== ========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,022 $ 9,339
Taxes (including foreign) . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,926 4,329
_________________________
See Notes to Consolidated Financial Statements.
5
7
IDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Acquisition
Pursuant to the requirements of the Securities and Exchange
Commission, the January 22, 1988 Acquisition of the initial six businesses
comprising IDEX Corporation ("IDEX" or the "Company") was not accounted for as
a purchase transaction. Consequently, the accounting for the acquisition does
not reflect any adjustment of the carrying value of the assets and liabilities
to their fair values at the time of the acquisition. Accordingly, the
shareholders' equity of IDEX at September 30, 1994 and December 31, 1993
includes a charge of $96.5 million which represents the excess of the purchase
price over the book value of the subsidiaries purchased at the date of the
acquisition.
2. Acquisition of Hale Products, Inc.
On May 26, 1994, IDEX purchased all of the outstanding shares of
common stock of Hale Products, Inc. ("Hale"), a leading manufacturer of
fire-fighting pumps and rescue tools. The purchase price for the acquisition
including stock purchase, debt assumption and transaction fees was
approximately $91.5 million net of cash acquired. The purchase was financed
through borrowings under the Company's bank revolving credit facility which was
amended to provide an additional $50 million of availability ($150 million of
total availability) and improvement to the interest rate structure. The excess
of the purchase price over the fair value of the net assets acquired of $61.5
million is being amortized over 40 years. The acquisition was accounted for by
the purchase method of accounting.
Hale's financial performance for the period January 1 to May 25, 1994,
prior to acquisition by IDEX, was adversely affected by several factors.
Customarily, Hale's shipments are stronger in the second half of a calendar
year than the first half due to the purchasing practices of customers in
industries that it serves. In 1994, shipments were further reduced by
production curtailments at the Conshohocken facilities because of severe winter
weather and unexpected facility repairs at its foundry. In addition, Hale was
in the process of moving production of certain products between its
Conshohocken, Pennsylvania and St. Joseph, Tennessee facilities during this
period, which created certain temporary inefficiencies and loss of overhead
absorption. Higher than normal selling, general and administrative expenses
were incurred during this period due to Hale's participation in a major
international fire and rescue trade show which is held every six years in
Germany. During the period January 1 through May 25, 1994 order activity
remained strong as sales backlogs increased by $5.5 million.
6
8
The unaudited pro forma consolidated results of operations of IDEX for
the nine months ended September 30, 1994 and 1993 reflecting the allocation of
the purchase price and related financing of the transactions, would have been
as follows (in thousands except per share amounts), assuming that the Hale
acquisition had occurred at the beginning of each of the respective periods.
Nine Months
Ended September 30,
------------------------
1994 1993
---- ----
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $308,994 $278,567
Income before extraordinary item and
cumulative effect of change in
accounting for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 22,060 18,058
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,060 17,463
Earnings per common share:
Income before extraordinary item and
cumulative effect of change in
accounting for income tax . . . . . . . . . . . . . . . . . . . . . . . . . . 1.69 1.40
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.69 1.35
3.(a) Significant Accounting Policies
In the opinion of management, the unaudited information presented as
of September 30, 1994 and for the nine-month periods ended September 30, 1994
and 1993 reflects all adjustments necessary, which consist only of normal
recurring adjustments, for a fair presentation of the interim periods.
(b) Earnings Per Share
Earnings per share is computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period. Common stock equivalents, in the form of stock
options, have been included in the calculation of weighted average shares
outstanding under the treasury stock method.
4. Inventory
The components of inventories as of September 30, 1994 and December
31, 1993 were (000's omitted):
September 30, December 31,
1994 1993
------------- ------------
Inventories
Raw materials and supplies $ 9,254 $ 8,498
Work in process 11,021 7,018
Finished goods 59,842 45,457
------- -------
Totals $80,117 $60,973
======= =======
The inventories on a LIFO basis amounted to $44,459 and $25,874 at
September 30, 1994 and December 31, 1993, respectively. The excess of current
cost over LIFO inventory value and the impact on earnings of using the LIFO
method are not material.
5. Preferred Stock
The Company had five million shares of preferred stock authorized but
unissued at September 30, 1994 and December 31, 1993.
7
9
Company and Business Group Financial Information
(000's omitted)
For the Third Quarter Ended September 30, 1994(1) 1993
---- ----
(unaudited)
Fluid Handling Group (2)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,433 $53,912
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,864 11,160
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.5% 20.7%
Depreciation and amortization (4) . . . . . . . . . . . . . . . . . . . . . . . $ 3,149 $ 2,237
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,258 1,404
Industrial Products Group (2)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,594 $23,859
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,709 3,362
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.9% 14.1%
Depreciation and amortization (4) . . . . . . . . . . . . . . . . . . . . . . . $ 784 $ 627
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,447 463
Company (3)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $106,975 $77,726
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,615 12,768
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.4% 16.4%
Depreciation and amortization (4) . . . . . . . . . . . . . . . . . . . . . . . $ 3,949 $ 2,877
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,716 1,876
(1) Includes the operations of Signfix from January 1, 1994, which are not
material to the Company, and Hale from May 26, 1994.
(2) Income from operations excludes unallocated corporate operating
expenses.
(3) Includes the operations of the two business groups in addition to
corporate operating expenses and inter-group eliminations.
(4) Excludes amortization of debt issuance expenses.
8
10
Company and Business Group Financial Information
(000's omitted)
For the Nine Months Ended September 30, 1994(1) 1993
---- ----
(unaudited)
Fluid Handling Group (2)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $197,251 $158,625
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,499 31,379
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.0% 19.8
Depreciation and amortization (4) . . . . . . . . . . . . . . . . . . . . . . . $ 7,902 $ 6,790
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,522 4,076
Industrial Products Group (2)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 89,379 S 70,887
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,601 9,772
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.2% 13.8%
Depreciation and amortization (4) . . . . . . . . . . . . . . . . . . . . . . . $ 2,276 $ 1,914
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,327 1,244
Company (3)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $286,408 $229,329
Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,381 36,207
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.2% 15.8%
Depreciation and amortization (4) . . . . . . . . . . . . . . . . . . . . . . . $ 10,220 $ 8,740
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,910 5,358
(1) Includes the operations of Signfix from January 1, 1994, which are not
material to the Company, and Hale from May 26, 1994.
(2) Income from operations excludes unallocated corporate operating
expenses.
(3) Includes the operations of the two business groups in addition to
corporate operating expenses and inter-group eliminations.
(4) Excludes amortization of debt issuance expenses.
9
11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Historical Overview and Outlook
IDEX sells a broad range of fluid handling and industrial products to
a diverse customer base in the United States and internationally. Accordingly,
IDEX's businesses are generally affected by levels of industrial activity and
economic conditions in the United States and in those foreign countries where
its products are sold, and to some extent, by the relationship of the dollar to
other currencies. Among the factors that affect the demand for IDEX's products
are interest rates, levels of capital spending by industry and overall
industrial growth.
New orders exceeded shipments in the third quarter of 1994. While
shipments were up 38% from last year's third quarter, new orders were up 42%
and represented a new record for orders written in a quarter. Orders in our
base businesses improved by 16%, and the Signfix and Hale acquisitions in
November 1993 and May 1994 added another 26%. As a result, backlogs are
somewhat stronger. However, the Company continues to operate with low order
backlogs, typically about 1-1/2 months' sales, in order to provide superior
customer service. Therefore, any decline in orders would have an immediate
effect on sales and profits.
IDEX achieved record quarterly sales, net income and earnings per
common share in the third quarter of 1994. Sales increased 38%, net income was
up 31% and earnings per share rose 30% in the third quarter of 1994 compared to
the third quarter of 1993. The higher quarterly results stemmed from improved
economic conditions which enabled the Company's base businesses to report
stronger operating results, and by inclusion of the recent acquisitions of
Signfix and Hale.
Both the near-term and long-term prospects for IDEX remain bright.
Given the strong incoming order rate, results for the fourth quarter are
expected to be in a range near or above the third quarter, and an exceptionally
strong, record year in sales and earnings is expected in 1994. With strong
market positions, a continuing flow of new and redesigned products, and
opportunities for international expansion, the long-range outlook for the
Company is excellent.
Results of Operations
For purposes of this discussion and analysis section, reference is
made to the tables set forth on pages 8 and 9 and the Company's Statements of
Consolidated Operations included in the Financial Statement section. IDEX
consists of two business segments: Fluid Handling and Industrial Products.
10
12
Performance in the Third Quarter
Ended September 30, 1994 Compared to 1993
Sales, net income and earnings per common share were at record levels
in the three months ended September 30, 1994 versus the same period in 1993.
Incoming orders, also at record levels, rose 16% in the Company's base
businesses and the acquisition of Signfix and Hale added another 26% to the
prior year's third quarter order rate.
Third quarter 1994 consolidated net sales of $107.0 million increased
$29.3 million or 38% from the comparable period in 1993. Fluid Handling Group
sales of $77.4 million increased $23.5 million or 44% due to stronger volume
resulting from improved economic conditions and inclusion of Hale in the 1994
third quarter. Sales in the Industrial Products Group of $29.6 million
increased $5.7 million or 24% with increased sales in the base businesses in
this group, and inclusion of Signfix in the 1994 third quarter.
Gross profit of $40.6 million in the third quarter of 1994 increased
$11.0 million or 37% from the corresponding 1993 period. Gross profit as a
percentage of sales was 38.0% and was approximately equivalent to 1993.
Selling, general and administrative expenses increased to $22.0 million in the
third quarter of 1994 from $16.9 million in the third quarter of 1993, but as a
percentage of sales, decreased to 20.6% in 1994 from 21.8% in 1993 due to
expense control and inclusion of Hale and Signfix which have lower selling,
general and administrative expenses, as a percent of sales, than the core
businesses.
Income from operations increased $5.8 million or 46% to $18.6 million
in the third quarter of 1994 from $12.8 million in the third quarter of 1993
and operating margin as a percent of sales increased to 17.4% from 16.4% in the
prior year. In the Fluid Handling Group, income from operations of $15.9
million increased $4.7 million or 42% in the third quarter of 1994 from $11.2
million in 1993. Operating margin of 20.5% in the third quarter of 1994
decreased slightly from 20.7% in 1993 as volume-related gains at the core
businesses were offset by inclusion of results of recently acquired Hale, which
has lower margins than the rest of the Group. Income from operations in the
Industrial Products Group of $4.7 million and operating margin of 15.9% in the
third quarter of 1994 were higher than the $3.4 million and 14.1% in the third
quarter of 1993 due to volume-related improvements at all the base businesses
and inclusion of Signfix in this Group.
Interest expense increased to $4.0 million in the third quarter of
1994 from $2.7 million in the comparable 1993 period due to additional
borrowings for the acquisitions of Signfix and Hale, and higher interest rates.
The provision for income taxes increased to $5.0 million in the third
quarter of 1994 from $3.3 million in the third quarter of 1993. The effective
tax rate of 36.3% in the third quarter of 1994 increased from the 1993 rate of
32.6%. The 1993 tax rate was impacted by tax code revisions related to the
deductibility of goodwill amortization. The 1994 tax rate reflects the
non-deductibility of goodwill amortization associated with the purchase of
Hale's common stock. Net income was $8.9 million in the third quarter of 1994
and was 31% higher than the $6.8 million recorded in the 1993 period. Earnings
per common share amounted to $.68 in the third quarter of 1994 which was 30%
higher than the $.52 recorded in the third quarter of 1993.
11
13
Performance in the Nine Months
Ended September 30, 1994 Compared to 1993
Sales, net income and earnings per common share were also at record
levels in the nine months ended September 30, 1994. Approximately half of the
27% rise in order activity for this period versus last year was attributable to
stronger business conditions in the markets served by the company's base
business with the other half resulting from inclusion of Hale and Signfix
activity.
Nine-month 1994 net sales of $286.4 million increased $57.1 million or
25% from 1993. Fluid Handling Group sales of $197.3 million increased $38.6
million or 24% due to stronger volume from improved market conditions and the
inclusion of Hale activity from its May 1994 acquisition. Sales in the
Industrial Products Group of $89.4 million increased $18.5 million or 26% due
to improved demand for products of the base business units in this group, and
inclusion of Signfix in the first nine months of 1994.
Gross profit of $110.2 million in the first nine months of 1994
increased $22.6 million or 26% from the corresponding 1993 period, and gross
profit as a percentage of sales of 38.5% in 1994 increased slightly from 38.2%
in 1993. Selling, general and administrative expenses increased to $60.8
million in the first nine months of 1994 from $51.4 million in the first nine
months of 1993, but as a percentage of sales, decreased to 21.2% in 1994 from
22.4% in 1993 due to expense control and inclusion of Hale and Signfix which
have lower selling, general and administrative expenses as a percent of sales,
than the core businesses.
Income from operations increased $13.2 million or 36% to $49.4 million
for the nine months ended September 30, 1994 from $36.2 million in the same
period of 1993 and operating margin as a percent of sales increased to 17.2%
from 15.8% in the nine-month comparison. In the Fluid Handling Group, income
from operations of $41.5 million and operating margin of 21.0% for the nine
months ended September 30, 1994 were higher than income from operations of
$31.4 million and operating margin of 19.8% in the same period of 1993 due to
volume-related gains with improving business conditions and inclusion of Hale.
Income from operations in the Industrial Products Group of $13.6 million and
operating margin of 15.2% in the first nine months of 1994 were higher than
income from operations of $9.8 million and operating margin of 13.8% in the
comparable 1993 period due to volume-related improvements at the core
businesses and inclusion of Signfix in this Group.
Interest expense increased to $9.7 million in the first nine months of
1994 from $8.3 million in the comparable 1993 period due to additional
borrowings for the acquisitions of Signfix and Hale, and higher interest rates.
The provision for income taxes increased to $13.5 million in the first
nine months of 1994 from $9.3 million in the first nine months of 1993. The
1994 effective tax rate of 35.7% increased from the 1993 rate of 34.0%. The
1993 tax rate was impacted by tax code revisions related to the deductibility
of goodwill amortization. The 1994 tax rate reflects the non-deductibility of
goodwill amortization associated with the purchase of Hale's common stock. Net
income was $24.4 million in the first nine months of 1994, up 35% from $18.1
million in the 1993 period. Earnings per common share amounted to $1.87 in the
first nine months of 1994 which was 34% higher than the $1.40 recorded in the
first nine months of 1993.
12
14
Liquidity and Capital Resources
On September 30, 1994 IDEX's working capital was $91.9 million and its
current ratio was 2.6 to 1. Internally generated funds were adequate to fund
capital expenditures of $6.9 million and $5.4 million for the nine months ended
September 30, 1994 and 1993, respectively. These expenditures were generally
for machinery and equipment which improved productivity, although a portion was
for repair and replacement of equipment and facilities. Management believes
that IDEX has ample capacity in its plant and equipment to meet expected needs
for future growth in the intermediate term. During the nine months ended
September 30, 1994 and 1993, depreciation and amortization expense, excluding
amortization of debt issuance expenses, was $10.2 million and $8.7 million,
respectively.
In connection with the acquisition of Hale, the Credit Agreement was
amended on May 23, 1994 to provide for an additional $50 million of
availability and improved interest rate structure. IDEX borrowed approximately
$92 million under the Credit Agreement to finance the acquisition of Hale. At
September 30, 1994, the maximum amount available under the Credit Agreement was
$150 million, of which $108 million was being used. The availability under the
Credit Agreement declines in stages commencing December 31, 1995 to $100
million on December 31, 1997. Any amount outstanding at June 30, 1999 becomes
due at that date. Interest is payable quarterly on the outstanding balance at
the Bank Agent's reference rate plus 25 basis points, or at rates applicable to
certain dollar deposits in the interbank Eurodollar market plus 125 basis
points.
IDEX believes it will generate sufficient cash flow from operations to
meet its operating requirements, scheduled amortization payments under the
Credit Agreement, interest and principal payments on the Senior Subordinated
Notes and approximately $11 million of planned capital expenditures in 1994.
From commencement of operations in January, 1988 until September 30, 1994, IDEX
borrowed $207 million to complete seven acquisitions and during this same
period generated, principally from operation, cash flow of $189 million to
reduce its indebtedness. IDEX intends to consider additional acquisitions in
the future. In the event that suitable businesses or assets 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.
13
15
Part II. Other Information
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. Not Applicable.
Item 3. Defaults upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the accompanying "Exhibit Index" are filed as part of this report.
(b) Reports on Form 8-K
On June 6, 1994, the Company filed a current report on Form 8-K (Item 2 and 7) stating that the Company
purchased for cash all of the outstanding shares of common stock of Hale Products, Inc., on May 26, 1994.
On August 9, under Item 5, Other Information, of the June 30, 1994 Form 10-Q, the Company provided
information in response to items 7(a) and 7(b) to Form 8-K with respect to audited financial statements
of Hale Products, Inc. for the years ended December 31, 1993, 1992 and 1991, unaudited interim financial
statements of Hale products, Inc. for the period January 1 to May 25, 1994 and for the six months ended
June 30, 1993, and unaudited pro forma financial statements of IDEX Corporation for the twelve months
ended December 31, 1993 and for the six months ended June 30, 1994, giving effect to the Hale Products,
Inc. acquisition as provided therein.
14
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized in the capacity and on the date
indicated.
IDEX CORPORATION
November 4, 1994 /s/ Wayne P. Sayatovic
------------------------
Wayne P. Sayatovic
Senior Vice President-
Finance, Chief Financial
Officer and Secretary
(Duly Authorized and Principal
Financial Officer)
15
17
EXHIBIT INDEX
Exhibit
Number Description Page
- - ------- ----------- ----
4.1 Restated Certificate of Incorporation of IDEX (formerly HI,
Inc.) (incorporated by reference to Exhibit No. 3.1 to the
Registration Statement on Form S-1 of IDEX Corporation, et
al., Registration No. 33-21205, as filed on April 21, 1988).
4.1(a) Amendment to Restated Certificate of Incorporation of IDEX
(incorporated by reference to Exhibit No. 3.2 to Amendment
No. 1 to the Registration Statement on Form S-1 of IDEX
Corporation, Registration No. 33-28317, as filed on June 1,
1989).
4.2 Amended and Restated Bylaws of IDEX (incorporated by
reference to Exhibit No. 3.2 to Post-Effective Amendment No.
2 to the Registration Statement on Form S-1 of IDEX
Corporation, et al., Registration No. 33-21205, as filed on
July 17, 1989).
4.2(a) Amended and Restated Article III, Section 13 of the Amended
and Restated Bylaws of IDEX (incorporated by reference to
Exhibit No. 3.2(a) to Post-Effective Amendment No. 3 to the
Registration Statement on Form S-1 of IDEX Corporation, et
al., Registration No. 33-21205, as filed on February 12,
1990).
4.3 Indenture, dated as of September 15, 1992, among IDEX, the
Subsidiaries and the Connecticut National Bank, as Trustee,
relating to the 9-3/4% Senior Subordinated Notes of IDEX due
2002 (incorporated by reference to Exhibit No. 4.2 of the
Annual Report of IDEX Corporation on Form 10-K for the fiscal
year ended December 31, 1992, Commission File No. 1-10235).
4.4 Specimen Senior Subordinated Note including specimen
guarantee (incorporated by reference to Exhibit No. 4.3 of
the Annual Report of IDEX Corporation on Form 10-K for the
fiscal year ended December 31, 1992, Commission File No.
1-10235).
4.5 Specimen certificate of Common Stock (incorporated by
reference to Exhibit 4.3 to the Registration Statement on
Form S-2 of IDEX Corporation, et al., Registration No.
33-42208, as filed on September 16, 1991).
10.1 Second Amended and Restated Credit Agreement dated as of
January 29, 1993 among IDEX, various banks named therein and
Continental Bank N.A., as Agent (incorporated by reference to
Exhibit 10.1 to the Annual Report of IDEX on Form 10-K for
the fiscal year ending December 31, 1992, Commission File No.
1-10235).
10.2 Pledge Agreement, dated January 22, 1988, between IDEX and
the Bank Agent (incorporated by reference to Exhibit No. 10.3
to the Registration Statement on Form S-1 of IDEX
Corporation, et al., Registration No. 33-21205, as filed on
April 21, 1988).
10.3 Guaranty Agreement, dated January 22, 1988, between each of
the Guarantors named therein and the Bank Agent (incorporated
by reference to Exhibit No. 10.4 to the Registration
Statement on Form S-1 of IDEX Corporation, et al.,
Registration No. 33-21205, as filed on April 21, 1988).
16
18
10.3(a) Guaranty Agreement, dated May 7, 1991, by CIC Acquisition
Corporation in favor of the Bank Agent (incorporated by
reference to Exhibit No. 10.3(a) to the Registration
Statement on Form S-1 of IDEX Corporation, et al.,
Registration No. 33-50220, as filed on July 29, 1992).
10.3(b) Guaranty Agreement, dated May 4, 1992, by PLF Acquisition
Corporation and MCL Acquisition Corporation in favor of the
Bank Agent (incorporated by reference to Exhibit No. 10.3(b)
to the Registration Statement on Form S-1 of IDEX
Corporation, et al., Registration No. 33-50220, as filed on
July 29, 1992).
10.4 Inter-Guarantor Agreement, dated as of January 22, 1988,
among the Subsidiaries named therein and the Bank Agent
(incorporated by reference to Exhibit 4.8 to the Registration
Statement on Form S-1 of IDEX Corporation, et al.,
Registration No. 33-21205, as filed on April 21, 1988).
10.4(a) First Amendment to Inter-Guarantor Agreement, dated as of
May 7, 1991, among IDEX Corporation and the Subsidiaries named
therein (incorporated by reference to Exhibit No. 10.6(a) to
the Registration Statement on Form S-1 of IDEX Corporation,
et al., Registration No. 33-50220, as filed on July 29, 1992).
10.5 Amended and Restated Employment Agreement between IDEX
Corporation and Donald N. Boyce, dated as of January 22, 1988
(incorporated by reference to Exhibit No. 10.15 to Amendment
No. 1 to the Registration Statement on Form S-1 of IDEX
Corporation, Registration No. 33-28317, as filed on
June 1, 1989).
10.5(a) First Amendment to the Amended and Restated Employment
Agreement between IDEX Corporation and Donald N. Boyce, dated
as of January 13, 1993 (incorporated by reference to Exhibit
10.5(a) to the Annual Report of IDEX on Form 10-K for the
fiscal year ending December 31, 1992, Commission File
No. 1-10235).
10.6 Amended and Restated Employment Agreement between IDEX
Corporation and Wayne P. Sayatovic, dated as of
January 22, 1988 (incorporated by reference to Exhibit
No. 10.17 to Amendment No. 1 to the Registration Statement
on Form S-1 of IDEX Corporation, Registration No. 33-28317,
as filed on June 1, 1989).
10.6(a) First Amendment to the Amended and Restated Employment
Agreement between IDEX Corporation and Wayne P. Sayatovic,
dated as of January 13, 1993 (incorporated by reference to
Exhibit 10.7(a) to the Annual Report of IDEX on Form 10-K for
the fiscal year ending December 31, 1992, Commission File
No. 1-10235).
*10.7 Employment Agreement between IDEX Corporation and
Frank J. Hansen dated as of August 1, 1994.
10.8 Management Incentive Compensation Plan (incorporated by
reference to Exhibit No. 10.21 to Amendment No. 1 to the
Registration Statement on Form S-1 of IDEX Corporation,
Registration No. 33-28317, as filed on June 1, 1989).
17
19
10.9 Form of Indemnification Agreement (incorporated by reference
to Exhibit No. 10.23 to the Registration Statement on
Form S-1 of IDEX Corporation, Registration No. 33-28317,
as filed on April 26, 1989).
10.10 Form of Shareholder Purchase and Sale Agreement (incorporated
by reference to Exhibit No. 10.24 to Amendment No. 1 to the
Registration Statement on Form S-1 of IDEX Corporation,
Registration No. 33-28317, as filed on June 1, 1989).
10.11 Revised Form of IDEX Corporation Stock Option Plan for
Outside Directors (incorporated by reference to Exhibit
No. 10.22(a) to Post-Effective Amendment No. 4 to the
Registration Statement on Form S-1 of IDEX Corporation, et
al., Registration No. 33-21205, as filed on March 2, 1990).
10.12 Amendment to the IDEX Corporation Stock Option Plan for
Outside Directors, adopted by resolution of the Board of
Directors dated as of January 28, 1992 (incorporated by
reference to Exhibit 10.21(a) of the Annual Report of IDEX on
Form 10-K for the fiscal year ended December 31, 1991,
Commission File No. 1-10235).
10.13 Non-Qualified Stock Option Plan for Non-Officer Key Employees
of IDEX Corporation (incorporated by reference to Exhibit
10.15 to the Annual Report of IDEX on Form 10-K for the
fiscal year ending December 31, 1992, Commission File
No. 1-10235).
10.14 Non-Qualified Stock Option Plan for Officers of IDEX
Corporation (incorporated by reference to Exhibit 10.16 to
the Annual Report of IDEX on Form 10-K for the fiscal year
ending December 31, 1992, Commission File No. 1-10235).
10.15 IDEX Corporation Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.17 to the Annual
Report of IDEX on Form 10-K for the fiscal year ending
December 31, 1992, Commission File No. 1-10235).
10.16 Stock Purchase Agreement, dated as of May 6, 1994 by and
among HPI Acquisition Corp., HFP Partners, L.P., HMTC
Partners L.P., the persons listed on Schedule A and Hale
Products, Inc. (incorporated by reference to Exhibit 10.17 to
the Quarterly Report of IDEX on Form 10-Q for the quarter
ended June 30, 1994, Commission File No. 1-10235).
10.17 First Amendment dated as of May 23, 1994 to Second Amended
and restated Credit Agreement dated as of January 29, 1993 by
and among IDEX Corporation, various banks named therein and
Continental Bank N.A., as agent (incorporated by reference to
Exhibit 10.18 to the Quarterly Report of IDEX on Form 10-Q
for the quarter ended June 30, 1994, Commission File
No. 1-10235).
_______________
*Filed herewith
18
1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
between
IDEX CORPORATION
and
FRANK J. HANSEN
2
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of August, 1994 (the
"Effective Date"), between IDEX CORPORATION, a Delaware corporation with its
executive offices at 630 Dundee Road, Suite 400, Northbrook, Illinois 60062
("IDEX"), and FRANK J. HANSEN, 8020 Beaver Hills Lane, Cedar Falls, Iowa
50613-9392 (the "Executive").
IDEX and the Executive agree as follows:
1. Introductory statement. The Executive has previously served as
President of Viking Pump, Inc., a business unit of IDEX Corporation, and as
Vice President - Group Executive of IDEX Corporation ("IDEX"). IDEX desires to
secure the full-time services of the Executive as Senior Vice President -
Operations until at least the third anniversary of the Effective Date, as
defined below, on the terms and conditions as provided in this Agreement. The
Executive is willing to execute this Agreement with respect to his employment
upon the terms and conditions set forth in this Agreement.
2. Agreement of employment. IDEX agrees to, and hereby does, employ
the Executive, and the Executive agrees to, and hereby does accept, employment
by IDEX, or one of its subsidiaries, as the case may be (hereafter in the
aggregate, the "Corporation"), as an executive of the Corporation, subject to
the provisions of the by-laws of the Corporation in respect of the duties and
responsibilities assigned from time to time by the
3
3
Chief Executive Officer of the Corporation and subject also at all times to
the control of the Board of Directors of the Corporation.
The Executive agrees to relocate his residence within the continental
United States upon the request of the Corporation with reimbursement by the
Corporation in accordance with its relocation policy in effect from time to
time.
3. Executive's obligations; vacations, automobile. During the period of
his full-time service under this Agreement, the Executive shall devote
substantially all of his time and energies during business hours to the
supervision and conduct, faithfully and to the best of his ability, of the
business and affairs of the Corporation, and to the furtherance of its
interests, and shall not accept other gainful employment except with the prior
consent of the Chief Executive Officer of the Corporation. With the approval
of the Chief Executive Officer of the Corporation, however, the Executive may
become a director, trustee or other fiduciary of other corporations, trusts or
entities. The Executive may take four weeks vacation each year with pay. The
Corporation shall furnish and maintain an automobile for the use of the
Executive consistent with the policy of the Corporation in effect at any time;
provided, however, that at no time shall the policy of the Corporation be
materially less generous than that in effect as of August 1, 1994.
4
4
4. Annual salary. The Corporation shall pay to the Executive for his
services under this Agreement a salary at the rate of $185,000 per year, in
equal monthly installments, during the period of his full-time service
hereunder; provided, however, that the Corporation shall in good faith review
the salary of the Executive, on an annual basis, with a view to consideration
of appropriate increases in such salary. If the Executive dies during the
period of his full-time service hereunder, service for any part of the month of
his death shall be considered service for the entire month.
5. Period of service and benefits.
5(a). Period of full-time service. The period of full-time
service of the Executive under this agreement shall continue to the third
anniversary of the Effective Date, and for successive 12 month periods
thereafter; provided, however, that the Corporation may terminate at any time
the full-time service of the Executive hereunder by delivering written notice
of termination to the Executive, or the Executive may resign and terminate his
full-time service hereunder at any time after the third anniversary of the
Effective Date, by delivering written notice of his intention to resign to the
Corporation at least 3 months prior to the effective date of such resignation.
5
5
In the event of termination of the Executive by the Corporation, the
Executive shall be entitled to receive his full annual salary and fringe
benefits in effect on the date of receipt of the notice of termination for a
continuing period of 24 months beginning with that month next following the
month during which he ceases to be actively employed.
In the event of resignation by the Executive as permitted by this
Agreement, the Executive shall be entitled to receive his full annual salary
and fringe benefits in effect on the date of receipt of the notice of
resignation for a continuing period to the effective date of his resignation
but not longer than three months. Continuing fringe benefits under this
Section 5(a) shall be reduced to the extent of any fringe benefits provided by
and available to the Executive from any subsequent employer but shall not be
limited by the terms of any such fringe benefit of a subsequent employer.
In the event of termination of the Executive by the Corporation or the
Executive's death or disability, the Executive or his estate shall receive a
cash bonus for the entire fiscal year in which such termination or death occurs
or disability commences. Such bonus shall be calculated in accordance with the
management incentive compensation program of the Corporation in effect from
time to time. The bonus shall be payable in one lump sum in accordance with
and at the time prescribed by the Corporation's policy for payment of annual
bonuses to its
6
6
executive employees for the year in which the Executive's termination or death
occurs or his disability commences. If no policy of the Corporation exists
with regard to calculation and payment of bonuses, the bonus shall be
calculated and paid in accordance with the policy of IDEX in effect as of
August 1, 1994.
In addition, in the event of either termination (including, without
limitation, because of the Executive's death or disability) of employment or
resignation, the Executive shall receive payment for accrued but unused
vacation, which payment shall be equitably prorated based on the period of
active employment for that portion of the fiscal year in which the termination
or resignation becomes effective, death occurs, or disability commences, plus
payment for accrued but unused vacation for the prior fiscal year. Payment for
accrued but unused vacation shall be payable in one lump sum on the effective
date of termination or resignation, the date of death (or as soon thereafter as
practicable) or the date disability commences.
In the event of termination of the Executive by the Corporation within
24 months following an "Acquisition" of the Corporation (as hereinafter
defined), the benefits to be provided to the Executive upon such termination,
regardless of the continued effectiveness of this Agreement or of the
provisions of this Section 5(a), shall be in an amount and character not less
generous than the benefits payable upon a termination of the
7
7
Executive by the Corporation as set forth in this Section 5(a). An
"Acquisition" means (I) any transaction or series of transactions which within
a 12-month period constitute a change of management or control where (i) at
least 51 percent of the then outstanding common shares of the Corporation are
(for cash, property (including, without limitation, stock in any corporation),
or indebtedness, or any combination thereof), redeemed by the Corporation or
purchased by an person(s), firm(s) or entity(ies), or exchanged for shares in
any other corporation whether or not affiliated with the Corporation, or any
combination of such redemption, purchase or exchange, or (ii) at least 51
percent of the Corporation's assets are purchased by any person(s), firm(s) or
entity(ies) whether or not affiliated with the Corporation for cash, property
(including, without limitation, stock in any corporation) or indebtedness or
any combination thereof, or (iii) the Corporation is merged or consolidated
with another corporation regardless of whether the Corporation is the survivor,
or (II) any substantial equivalent of any such redemption, purchase, exchange,
change, transaction or series of transactions, merger or consolidation,
constituting such change of management or control. For purposes of this
paragraph, the term "control" shall have the meaning ascribed thereto under the
Securities Exchange Act of 1934, as amended, and the regulations thereunder,
and the term "management" shall mean the chief executive officer of the
Corporation. For
8
8
purposes of clause (I)(ii) above or as appropriate for purposes of clause (II)
above, the Corporation shall be deemed to include on a consolidated basis all
subsidiaries and other affiliated corporations or other entities with the same
effect as if they were divisions.
The benefits provided for under this section shall be in lieu of, and
not in addition to, any and all benefits to which the Executive may be entitled
under any bonus or severance program or policy adopted by the Corporation from
time to time unless otherwise expressly stated therein.
5(b). Death benefit. If the Executive dies during the period of
his full-time service hereunder, his wife, if surviving, or if not, his estate
shall be entitled to receive his full annual salary in effect on the date of
his death for a continuing period of nine months commencing on the first day of
the month immediately following the date of his death.
5(c)(1). Retirement compensation and obligations. Upon the retirement
or resignation of the Executive or upon his termination from full-time service
with the Corporation, in either case pursuant to the provisions of this Section
5 hereof, the full-time service obligations of the Executive and the
Corporation to each other under Sections 2, 3 and 4 hereof shall cease, and the
Executive shall be entitled to receive benefits and compensation as specified
in this Section 5 hereof.
9
9
5(c)(2). Guarantee of pension benefits. In addition to the
compensation otherwise provided herein, the Executive and his beneficiaries
shall be entitled to receive the retirement and death benefits they would
receive at the times and under such optional arrangements as the Executive is
entitled to under the terms of any retirement or pension plan adopted and
implemented by the Corporation for its employees in effect at the date of the
Executive's retirement, resignation or termination (for whatever reason) from
full-time service with the Corporation (the "Plan") (such Plan shall include a
lump sum option) pursuant to the Plan provisions as in effect at the point in
time during the Executive's employment at which the plan would provide the
greatest benefits for the Executive and his beneficiaries and, in addition, the
greatest latitude in choice of options (including, but not limited to, a lump
sum option), but in any event computed without reference to (i) any
restrictions in the Plan upon payments to the Executive, as described in
Section 1.401(a)(4)-5(b) of the Treasury Regulations; (ii) any restrictions in
the Plan upon the maximum contributions to the Plan or upon the maximum
benefits payable under the Plan, as the case may be, pursuant to Section 415 of
the Internal Revenue Code of 1986, as in effect at such point in time (the
"Code"); (iii) any limitations on the amount of the Executive's compensation
that may be taken into account under the Plan pursuant to Section 401(a)(17) of
the Code or any successor section; (iv) the
10
10
limitations on compensation that would exclude any income attributable to the
exercise of the nonqualified stock options granted in replacement of Equity
Appreciation Rights granted under the First Restatement of the Amended and
Restated 1988 Equity Appreciation Rights Plan; or (v) any other restriction on
the Executive's benefits as determined under the Plan pursuant to the Code, to
the Employee Retirement Income Security Act of 1974, as in effect at such point
in time ("ERISA") or to any other law affecting the determination of such
benefits. However, all calculations pursuant to this Section 5(c)(2) of
benefits shall be made on the basis of the actual years of service to the
Corporation and actual compensation of the Executive taken into account under
the applicable Plan provisions. To the extent that the benefits to which the
Executive or his beneficiaries are entitled under this Section 5(c)(2) are not
paid from the Trust under the Plan or from the IDEX Corporation Supplemental
Executive Retirement Plan, the Corporation shall pay such benefits directly
from its general assets.
If payments are being made, pursuant to this Section 5(c)(2), in the
form of an annuity or other periodic form of distribution, and the portion of
the total amount to be paid from the Trust under the Plan shall thereafter be
reduced after the date such payments have been determined pursuant to the
preceding paragraph, by virtue of the operation of restrictions in the Plan
upon payments to the Executive, as described in Section
11
11
1.401(a)(4)-5(b) of the Treasury Regulations, or by virtue of the termination
of the Plan (including the operation of Section 4045 of ERISA or any successor
section) or for any other reason other than the operation of the provisions of
the optional form selected under the Plan, the Corporation shall increase, in
an amount equal to any such reduction, the amount of the benefit under this
Section 5(c)(2) which is to be paid directly from its general assets, and such
increase shall be prorated over the remaining payments or used to recalculate
the annuity payments, as the case may be.
If payments are being made or have been made in full, pursuant to this
Section 5(c)(2), but the Executive or any or his beneficiaries is required to
make a payment to the Trustee under the Plan (whether in the form of a loss of
collateral, interest on such collateral or otherwise) as the result of the
application of the restrictions in the Plan upon payments to the Executive, as
described in Section 1.401(a)(4)-5(b) of the Treasury Regulations, or by virtue
of the termination of the Plan (including the operation of Section 4045 of
ERISA or any successor section) or for any other reason, the Corporation shall
reimburse the Executive or his beneficiaries, as the case may be, directly from
its general assets, for each such payment to the Trustee and if the Executive
or any of his beneficiaries does not receive a deduction for Federal income tax
purposes for such a payment or incurs any penalty tax because of such
repayment, the
12
12
amount of the reimbursements shall be increased to an amount such that after
the application of the Federal income tax to the reimbursements the Executive
or the beneficiary shall have received an amount from the Corporation
approximately equal to the amount repaid to the Trustee.
5(c)(3). Medical benefits. At all times while the Executive is
employed by the Corporation and thereafter for the remainder of his life if the
Executive continues in the employ of the Corporation until his 60th year or if
the Executive before such 60th year dies or becomes disabled while employed by
the Corporation, the Executive and/or his wife, as the case may be, shall be
entitled to prompt reimbursement for all medical, dental, hospitalization,
convalescent, nursing, extended care facilities and similar health and welfare
expenses incurred by the Executive (or by his wife in the event of the
Executive's death or disability) for the Executive or for the benefit of his
wife or other dependents. If the Executive continues in the employ of the
Corporation until his 60th year or if the Executive becomes disabled before
such 60th year while employed by the Corporation, such benefits shall continue
for the life of the Executive or the life of his wife, whichever shall be the
longer time. If the Executive dies before such 60th year while employed by the
Corporation, such benefits shall continue for the life of his wife. The
Corporation may, in its discretion, insure such benefits.
13
13
Such benefits shall not be affected by the existence or non-existence of any
available insurance from any source and shall not be limited by the terms of
any such insurance or the failure of any insurer to meet its obligations
thereunder. For purposes of this Agreement, the term "medical expenses" shall
include, but not be limited to, prescription drugs, prosthetics, optical care
(including corrective lenses) and travel and lodging associated with medical
expenses.
5(d). Confidentiality agreement. During the course of his
employment, the Executive has had and will have access to confidential
information relating to the lines of business of the Corporation, its trade
secrets, marketing techniques, technical and cost data, information concerning
customers and suppliers, information relating to product lines, and other
valuable and confidential information relating to the business operations of
the Corporation not generally available to the public (the "Confidential
Information"). The parties hereby acknowledge that any unauthorized disclosure
or misuse of the Confidential Information could cause irreparable damage to the
Corporation. The parties also agree that covenants by the Executive not to
make unauthorized use or disclosures of the Confidential Information are
essential to the growth and stability of the business of the Corporation.
Accordingly, the Executive agrees to the confidentiality covenants set forth in
this section.
14
14
The Executive agrees that, except as required by his duties with
the Corporation or as authorized by the Corporation in writing, he will not use
or disclose to anyone at any time, regardless of whether before or after the
Executive ceases to be employed by the Corporation, any of the Confidential
information obtained by him in the course of his employment with the
Corporation.
The Executive agrees that since irreparable damage could result from
his breach of the covenants in this Section 5(d) of this Agreement, in
addition to any and all other remedies available to the Corporation, the
Corporation shall have the remedies of a restraining order, injunction or other
equitable relief to enforce the provisions thereof. The Employee consents to
jurisdiction in Lake County, Illinois on the date of the commencement of any
action for purposes of any claims under this Section 5(d). In addition, the
Executive agrees that the issues in any action brought under this section will
be limited to claims under this section, and all other claims or counterclaims
under other provisions of this Agreement will be excluded.
6. Compensation under this Agreement not exclusive. Except as
expressly stated to the contrary in this Agreement, the compensation and
benefits payable by the Corporation to the Executive under the provisions of
this Agreement shall be in addition to and separate and apart from such
additional compensation or incentives and such retirement, disability or other
benefits as the Executive may be entitled to under any present or future
15
15
extra compensation or bonus plan, stock option plan, share purchase
agreement, pension plan, disability insurance plan, medical insurance plan,
life insurance program, or other plan or arrangement of the Corporation
established for its executives or employees, and the provisions of this
Agreement shall not affect any such compensation, incentives or benefits. The
Board of Directors of the Corporation, in its discretion, may award the
Executive such additional compensation, incentives or benefits, pursuant to
such plans or otherwise, as it may from time to time determine.
7. Termination of this Agreement. This Agreement shall terminate
when the Corporation has made the last payment provided for hereunder;
provided, however, that the obligations set forth under Section 5(d) of this
Agreement shall survive any such termination and shall remain in full force and
effect. Without the written consent of the Executive, the Corporation shall
have no right to terminate this Agreement prior thereto.
8. Additional payments by Corporation.
(a) Notwithstanding anything in this Agreement or any other
agreement to the contrary, in the event it shall be determined that any payment
or distribution by the Corporation or any affiliate (as defined under the
Securities Act of 1933, as amended, and the regulations thereunder) thereof or
any other
16
16
person to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement, pursuant
to that certain shareholder purchase and sale agreement between Executive and
the Corporation made as of January 22, 1988, as amended and restated, pursuant
to any and all equity appreciation rights plans of the Corporation now or
hereafter in effect, or pursuant to any other agreement or arrangement with the
Corporation or any affiliate thereof now or hereafter in effect (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the Code, or any
successor statute thereto, or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise tax", then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes (including,
without limitation, any interest or penalties imposed with respect to such
taxes and any Excise Tax) imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) The Executive and/or the Corporation shall notify each other in
writing as soon as practicable of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Corporation of the
Gross-Up Payment. Such notification shall state the nature of such claim and
the date on which such claim is requested to be paid. Neither the Executive
nor
17
17
the Corporation shall pay such claim for taxes prior to the expiration of
the thirty-day period following the date on which the notice is given (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Executive or Corporation notifies the other party
in writing prior to the expiration of such period that it desires to contest
such claim, such other party shall take such action, in connection with
contesting such claim as the Executive or Corporation shall reasonably request
in writing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney selected by the
Executive or Corporation and approved by the other party, provided, however,
that the Corporation shall bear and pay directly all costs and expenses
(including additional interest and penalties and counsel fees as submitted)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax,
including interest and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses. Furthermore, the
Corporation's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
18
18
9. Definitions. For purposes of this Agreement, the term "year"
shall mean fiscal year, the term "dependents" shall have the same meaning as
pursuant to Section 152 of the Code and the term "his 60th year" shall mean
immediately following the Executive's 59th birthday. For purposes of this
Agreement, disability shall mean a disability which is, or has the potential to
be, total and permanent and because of which the Executive is or may become
physically or mentally unable to substantially perform his regular duties as an
Executive of the Corporation. Any question as to the existence, extent or
potentiality of disability of the Executive upon which the Executive and the
Corporation cannot agree shall be determined by a qualified independent
physician selected by the Executive and reasonably acceptable to the
Corporation (or, if the Executive is unable to make such selection, it shall be
made by any adult member of his immediate family). The determination of such
physician made in writing to the Corporation and to the Executive shall be
final and conclusive for all purposes of this Agreement.
10. Amendments. This Agreement may not be amended or modified
orally, and no provision hereof may be waived, except in a writing signed by
the parties hereto, and specifically the agreement of any beneficiary, wife,
dependents or other potential or actual third party beneficiary shall not be
required.
19
19
11. Assignment. This Agreement cannot be assigned by either party
hereto except with the written consent of the other.
12. Binding effect. This Agreement shall be binding upon and inure
to the benefit of the personal representatives and successors in interest of
the Executive and any successors in interest of the Corporation. Sections 5(a)
and 5(b) are intended to inure to the benefit of the Executive's beneficiaries,
Section 5(c)(2) is intended to inure to the benefit of the Executive's
beneficiaries, to the extent contemplated in that provision, and Section (c)(3)
is intended to inure to the benefit of the Executive's wife and his dependents;
such provisions shall be enforceable by the aforesaid beneficiaries, wife
and/or dependents, as the case may be, who upon the Executive's death shall be
deemed successors in interest.
13. Choice of law. This agreement shall be governed by the law of
the State of Illinois (excluding the law of the State of Illinois with regard
to conflicts of law) as to all matters, including but not limited to matters of
validity, construction, effect and performance.
14. Notice. Except as otherwise provided in this Agreement, all
notices and other communications given pursuant to this Agreement shall be
deemed to have been properly given if
20
20
personally delivered or mailed, addressed to the appropriate party at the
address of such party as shown at the beginning of this Agreement, postage
prepaid, by certified mail or by Federal Express or similar overnight courier
service. A copy of any notice sent pursuant to this section shall also be sent
to Hodgson, Russ, Andrews, Woods & Goodyear, 1800 One M & T Plaza, Buffalo, New
York, 14203, Attention: Richard E. Heath, Esq. and Dianne Bennett, Esq. Any
party may from time to time designate by written notice given in accordance
with the provisions of this paragraph any other address or party to which such
notice or communication or copies thereof shall be sent.
15. Severability of provisions. In case any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be effected or
impaired thereby and this Agreement shall be interpreted as if such invalid,
illegal or unenforceable provision was not contained herein.
16. Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.
21
21
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Corporation has caused this Agreement to be executed in its name and on its
behalf as of the date first above written.
/s/ Frank J. Hansen
--------------------------------
Frank J. Hansen
DATE OF EXECUTION: July 13, 1994
-------------
IDEX CORPORATION
By: /s/ Donald N. Boyce
----------------------------
Donald N. Boyce, President
DATE OF EXECUTION: July 12, 1994
-------------
