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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 JUNE 30, 1997
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, NORTHBROOK, ILLINOIS 60062
(Address of principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (847) 498-7070
Former name, former address and former fiscal year, if changes 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 outstanding as of July
28, 1997: 29,217,748 shares.
DOCUMENTS INCORPORATED BY REFERENCE: None.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents................................. $ 5,408 $ 5,295
Receivables -- net........................................ 94,291 91,200
Inventories............................................... 96,794 97,516
Other current assets...................................... 6,223 7,159
-------- --------
Total current assets................................... 202,716 201,170
Property, plant and equipment -- net........................ 100,521 102,383
Intangible assets -- net.................................... 274,179 274,511
Other noncurrent assets..................................... 6,654 5,709
-------- --------
Total assets........................................... $584,070 $583,773
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable.................................... $ 41,571 $ 40,670
Dividends payable......................................... 3,503 3,471
Accrued expenses.......................................... 49,533 48,716
-------- --------
Total current liabilities.............................. 94,607 92,857
Long-term debt.............................................. 247,997 271,709
Other noncurrent liabilities................................ 26,054 23,698
-------- --------
Total liabilities...................................... 368,658 388,264
-------- --------
Shareholders' equity
Common stock, par value $.01 per share
Shares authorized: 1997 and 1996 -- 75,000,000
Shares issued and outstanding: 1997 -- 29,194,693; 1996
-- 28,925,867......................................... 292 289
Additional paid-in capital................................ 89,481 89,657
Retained earnings......................................... 126,625 105,238
Minimum pension liability adjustment...................... (632)
Accumulated translation adjustment........................ (354) 325
-------- --------
Total shareholders' equity............................. 215,412 195,509
-------- --------
Total liabilities and shareholders' equity............. $584,070 $583,773
======== ========
See Notes to Consolidated Financial Statements.
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IDEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
SECOND QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
Net sales......................................... $165,174 $131,169 $317,013 $265,055
Cost of sales..................................... 100,148 80,116 193,076 162,338
-------- -------- -------- --------
Gross profit...................................... 65,026 51,053 123,937 102,717
Selling, general and administrative expenses...... 33,999 26,084 64,738 53,100
Goodwill amortization............................. 2,159 1,232 4,069 2,464
-------- -------- -------- --------
Income from operations............................ 28,868 23,737 55,130 47,153
Other expense -- net.............................. 19 96 156 53
-------- -------- -------- --------
Income before interest expense and income taxes... 28,849 23,641 54,974 47,100
Interest expense.................................. 4,901 4,066 9,911 8,291
-------- -------- -------- --------
Income before income taxes........................ 23,948 19,575 45,063 38,809
Provision for income taxes........................ 8,953 6,913 16,673 13,933
-------- -------- -------- --------
Net income........................................ $ 14,995 $ 12,662 $ 28,390 $ 24,876
======== ======== ======== ========
Earnings per common share......................... $ .50 $ .43 $ .95 $ .84
======== ======== ======== ========
Weighted average common shares outstanding........ 30,028 29,735 29,902 29,706
======== ======== ======== ========
See Notes to Consolidated Financial Statements.
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IDEX CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
COMMON STOCK MINIMUM
& ADDITIONAL PENSION ACCUMULATED TOTAL
PAID-IN RETAINED LIABILITY TRANSLATION SHAREHOLDERS'
CAPITAL EARNINGS ADJUSTMENT ADJUSTMENT EQUITY
------------ -------- ---------- ----------- -------------
Balance, December 31, 1996......... $89,946 $105,238 $ 325 $ 195,509
Issuance of 268,827 shares of
common stock from exercise of
stock options, net of stock
options surrendered.............. (173) (173)
Minimum pension liability
adjustment....................... $ (632) (632)
Unrealized translation
adjustment....................... (679) (679)
Cash dividends declared on common
stock ($.24 per share)........... (7,003) (7,003)
Net income......................... 28,390 28,390
------- -------- ------- ----- ---------
Balance, June 30, 1997
(unaudited)...................... $89,773 $126,625 $ (632) $(354) $ 215,412
======= ======== ======= ===== =========
See Notes to Consolidated Financial Statements.
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IDEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
SIX MONTHS ENDED
JUNE 30,
--------------------
1997 1996
-------- --------
(UNAUDITED)
Cash flows from operating activities:
Net income................................................ $ 28,390 $ 24,876
Adjustments to reconcile net income to net cash flows from
operating activities:
Depreciation........................................... 8,550 6,865
Amortization of intangibles............................ 4,979 3,371
Amortization of debt issuance expenses................. 324 312
Deferred income taxes.................................. 3,014 587
Increase in receivables................................ (1,634) (202)
Decrease in inventories................................ 3,162 7,188
Decrease in trade accounts payable..................... (884) (4,515)
Decrease in accrued expenses........................... (223) (5,546)
Other transactions -- net.............................. 4,226 957
-------- --------
Net cash flows from operating activities............... 49,904 33,893
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment................ (7,237) (6,405)
Acquisition of business (net of cash acquired)............ (11,871)
-------- --------
Net cash flows from investing activities............... (19,108) (6,405)
-------- --------
Cash flows from financing activities:
Dividends paid............................................ (6,971) (6,125)
Borrowing under notes payable for acquisition of
business............................................... 9,909
Borrowing under U.S. credit agreement for acquisition of
business............................................... 3,073
Net repayments under the credit agreements................ (36,404) (20,138)
Decrease in accrued interest.............................. (290) (396)
-------- --------
Net cash flows from financing activities............... (30,683) (26,659)
-------- --------
Net increase in cash........................................ 113 829
Cash and cash equivalents at beginning of period............ 5,295 5,937
-------- --------
Cash and cash equivalents at end of period.................. $ 5,408 $ 6,766
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ 9,757 $ 8,254
Income taxes.............................................. 6,218 13,354
See Notes to Consolidated Financial Statements.
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IDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS
IDEX Corporation ("IDEX" or the "Company") is a manufacturer of a wide
array of proprietary, engineered industrial products sold to a diverse customer
base in a variety of industries in the U.S. and internationally. Its products
include industrial pumps and controls; fire-fighting pumps and rescue equipment;
dispensing and mixing equipment; stainless steel banding, clamping and
sign-mounting devices; sheet metal fabricating equipment and tooling; automatic
lubrication systems; small-horsepower compressors; and energy absorption
equipment. These activities are grouped into two business segments; Fluid
Handling and Industrial Products.
2. SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the unaudited information presented as of
June 30, 1997 and for the six months ended June 30, 1997 and 1996 reflects all
adjustments necessary, which consist only of normal recurring adjustments, for a
fair presentation of the interim periods. Certain previously reported amounts
have been reclassified to conform to the current presentation format.
Earnings per common share (EPS) are 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 and deferred compensation units, have been included in the calculation
of weighted average shares outstanding using the treasury stock method. All
share and per share data have been restated for the three-for-two stock split
effected in the form of a 50% stock dividend in January 1997.
In February 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share,"
effective for interim and annual periods ending after December 15, 1997 which
superseded Accounting Principles Board Opinion No. 15. This statement replaces
primary EPS with basic EPS. Basic EPS is computed by dividing net income by the
weighted average number of shares of common stock outstanding during the period.
Diluted EPS, formerly fully diluted EPS, must be presented in all cases with
basic EPS. Had SFAS No. 128 been effective for the six-month periods ending June
30, 1997 and 1996, EPS for the Company would have been as follows (in thousands
except per share amounts):
1997 1996
---- ----
(UNAUDITED)
Net income............................................... $28,390 $24,876
Weighted average common shares outstanding............... 29,140 28,736
Basic EPS................................................ $ .97 $ .87
Weighted average common shares outstanding............... 29,140 28,736
Weighted average common stock equivalents outstanding.... 762 971
------- -------
Total weighted average shares outstanding................ 29,902 29,706
Diluted EPS.............................................. $ .95 $ .84
In June 1997 the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information", both of which are effective for
fiscal years beginning after December 15, 1997. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components.
SFAS No. 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
related disclosures about products and services, geographic areas and major
customers. The requirements of both statements impact financial statement
disclosure only. Accordingly, SFAS No. 130 and 131, when adopted, will not have
a material impact on the Company's financial position or the results of its
operations.
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IDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. INVENTORIES
The components of inventories as of June 30, 1997 and December 31, 1996
were (in thousands):
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(UNAUDITED)
Raw materials and supplies.......................... $18,608 $18,351
Work in process..................................... 17,449 14,909
Finished goods...................................... 60,737 64,256
------- -------
Total.......................................... $96,794 $97,516
======= =======
Those inventories which were carried on a LIFO basis amounted to $61,822
and $62,068 at June 30, 1997 and December 31, 1996, respectively. The excess of
current cost over LIFO inventory value and the impact on earnings of using the
LIFO method are not material.
4. COMMON AND PREFERRED STOCK
The Company had five million shares of preferred stock authorized but
unissued at June 30, 1997 and December 31, 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Historical Overview and Outlook
IDEX sells a broad range of proprietary fluid handling and industrial
products to a diverse customer base in the U.S. and, to an increasing extent,
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 affect the demand for IDEX's products are
interest rates, levels of capital spending in certain industries, currency
exchange rate fluctuations, and overall industrial growth.
IDEX has a history of strong operating margins. The Company's operating
margins are impacted by, among other things, utilization of facilities as sales
volumes change, and inclusion of newly acquired businesses which may have lower
margins that could be further affected by purchase accounting adjustments.
IDEX's orders, sales, net income and earnings per share in the second
quarter of 1997 were the highest of any quarter in its history. Sales in the
second quarter were $165.2 million and slightly exceeded orders of $164.6
million. Second quarter orders increased by about 3% from the 1997 first quarter
rate, and excluding orders at recent acquisitions, were 5% higher than the
second quarter 1996 rate. Backlogs of unfilled orders remain at IDEX's typical
operating level of about 1.5 months' sales.
The following forward-looking statements are qualified by the cautionary
statement under the Private Securities Litigation Reform Act set forth below.
The pace of incoming orders has been steady, IDEX's recent acquisitions are
contributing nicely to earnings and the Company's prospects remain good. IDEX
expects earnings in the next two quarters to exceed those of the corresponding
1996 quarters and second half results to at least match, if not exceed, first
half results. That would enable the Company to again report new records in net
income before extraordinary charges for every year since IDEX went public in
1989. For the longer term, management remains confident of IDEX's prospects
given its strong market positions, new product and international emphasis and
use of the Company's fine cash flow to cut debt and interest expense or make
acquisitions following its disciplined approach.
Cautionary Statement Under the Private Securities Litigation Reform Act
Demand for IDEX's products is cyclical in nature and subject to changes in
general market conditions that affect demand. The Company's customers operate
primarily in industries that are rapidly impacted by changes in economic
conditions, which in turn can influence orders. IDEX operates without
significant order backlogs. As a result, economic slowdowns could quickly have
an adverse effect on its performance. In addition, the Company's operating
forecasts and budgets are based upon detailed assumptions which it believes are
reasonable, but inherent difficulties in predicting the impact of certain
factors may cause actual results to differ materially from the forward-looking
statements set forth in this discussion and analysis section. These factors
include but are not limited to the following: the Company's utilization of its
capacity and the impact of capacity utilization on costs; developments with
respect to contingencies such as environmental matters and litigation; labor
market conditions and raw materials costs; levels of industrial activity and
economic conditions in the U.S. and other countries around the world; and levels
of capital spending in certain industries, all of which have a material
influence on order rates; the relationship of the U.S. dollar to other
currencies; interest rates; the Company's ability to integrate and operate
acquired businesses on a profitable basis; and other risks detailed from time to
time in IDEX's filings with the Securities and Exchange Commission.
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IDEX CORPORATION AND SUBSIDIARIES
COMPANY AND BUSINESS GROUP FINANCIAL INFORMATION
(IN THOUSANDS)
SECOND QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997(1) 1996 1997(1) 1996
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
Fluid Handling Group
Net sales(2)...................................... $127,604 $ 96,513 $245,303 $193,130
Income from operations(3)......................... 25,422 20,580 48,537 40,373
Operating margin.................................. 19.9% 21.3% 19.8% 20.9%
Depreciation and amortization..................... $ 5,987 $ 4,179 $ 11,595 $ 8,482
Capital expenditures.............................. 3,029 2,468 5,298 3,798
Industrial Products Group
Net sales(2)...................................... $ 37,720 $ 34,712 $ 71,945 $ 72,040
Income from operations(3)......................... 6,240 5,143 11,808 11,023
Operating margin.................................. 16.5% 14.8% 16.4% 15.3%
Depreciation and amortization..................... $ 925 $ 829 $ 1,839 $ 1,680
Capital expenditures.............................. 933 1,248 1,660 2,588
Company
Net sales......................................... $165,174 $131,169 $317,013 $265,055
Income from operations............................ 28,868 23,737 55,130 47,153
Operating margin.................................. 17.5% 18.1% 17.4% 17.8%
Depreciation and amortization(4).................. $ 6,962 $ 5,046 $ 13,529 $ 10,236
Capital expenditures.............................. 4,236 3,716 7,237 6,405
- -------------------------
(1) Includes acquisition of Blagdon Pumps (April 4, 1997) and Fluid Management
(July 29, 1996) in the Fluid Handling Group.
(2) Group net sales include intersegment sales.
(3) Group income from operations excludes net unallocated corporate operating
expenses.
(4) Excludes amortization of debt issuance expenses.
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RESULTS OF OPERATIONS
For purposes of this discussion and analysis section, reference is made to
the table on the preceding page and the Company's Statements of Consolidated
Operations included in the Financial Statements section. IDEX consists of two
business segments: Fluid Handling and Industrial Products.
All share and per share data have been restated to reflect the
three-for-two stock split effected in the form of a 50% stock dividend paid on
January 31, 1997.
PERFORMANCE IN THE SECOND QUARTER ENDED JUNE 30, 1997 COMPARED TO 1996
Net sales of $165.2 million for the three months ended June 30, 1997
increased by 26% over $131.2 million in the same period last year. Sales in the
base businesses were up about 5% in the second quarter of 1997, with
acquisitions (Fluid Management on July 29, 1996 and Blagdon Pumps on April 4,
1997) contributing 21% of the rise in sales. Net income of $15.0 million in the
second quarter of 1997 rose by 18% over the $12.7 million in 1996's second
quarter. Earnings per share of $.50 in this year's second quarter improved by
$.07 over the $.43 earned in the same quarter of last year.
In the second quarter of 1997, the Fluid Handling Group generated 77% of
sales and 80% of profits, and the Industrial Products Group contributed 23% of
sales and 20% of profits. International sales accounted for 41% of total sales
in the 1997 period, versus 38% in the corresponding quarter of 1996.
Fluid Handling Group sales of $127.6 million increased by $31.1 million, or
32%, most of which was due to the inclusion of the Fluid Management and Blagdon
operations in this year's second quarter results. Sales outside the U.S.
increased to 41% of total Fluid Handling Group sales in the second quarter of
1997 from 38% in the comparable 1996 period. Second quarter 1997 sales of $37.7
million in the Industrial Products Group increased $3.0 million, or 9%, from
$34.7 million recorded in the same period of last year. Shipments outside the
U.S. were 38% of total sales in the Industrial Products Group in the second
quarter of 1997, down slightly from 39% in the comparable 1996 period.
Gross profit of $65.0 million in the second quarter of 1997 increased $14.0
million, or 27%, from the comparable period of 1996. Gross profit as a percent
to sales was 39.4% in the 1997 period, up slightly from 38.9% in last year's
second quarter. Selling, general and administrative (SG&A) expenses of $34.0
million in 1997's second quarter increased 30% from $26.1 million in the same
three months of 1996. As a percentage of sales, these expenses increased
slightly to 20.6% in 1997 from 19.9% in 1996. Goodwill amortization increased
75% to $2.2 million in the second quarter of 1997 from $1.2 million in the
comparable prior year period and, as a percent of sales, increased to 1.3% from
.9%. The year over year increases in gross profit, SG&A expenses and goodwill
amortization were largely attributable to the inclusion of recent acquisitions.
Income from operations increased $5.2 million, or 22%, to $28.9 million in
the three months ended June 30, 1997 from $23.7 million in 1996's second
quarter. Operating margins at 17.5% of sales also were very strong and improved
slightly from the immediately preceding quarter. However, margins were off by
about 6/10ths of 1% from last year's second quarter, with inclusion of acquired
companies having a slight negative effect. Nevertheless, the acquired companies
have good margins which are improving.
Interest expense increased to $4.9 million in the second quarter of 1997
from $4.1 million in the same period of 1996 because of additional long-term
debt incurred to complete the acquisitions of Fluid Management and Blagdon Pumps
offset by cash flow from operations.
The provision for income taxes increased to $9.0 million in the three
months ended June 30, 1997, from $6.9 million in the comparable 1996 period. The
effective tax rate increased to 37.4% in the 1997 period from 35.3% in 1996's
second quarter due to the changing mix of international earnings and state
franchise tax factors.
Net income of $15.0 million in the second quarter of 1997 was 18% higher
than the net income of $12.7 million in the same period of 1996. Earnings per
share amounted to $.50 in this year's second quarter, which was 16% higher than
the $.43 recorded in the second quarter of 1996.
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PERFORMANCE IN THE SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO 1996
In the six months ended June 30, 1997, IDEX had record sales of $317.0
million, up 20% from last year's record of $265.1 million and net income of
$28.4 million, up 14% from last year's $24.9 million. Earnings per share of $.95
in this year's first half compared with $.84 in the year-ago period. Incoming
orders in the first six months of 1997 totaled $323.8 million, slightly in
excess of sales, indicating that business pace continues to be good. The Company
ended the period with a typical backlog of approximately 1.5 months' sales.
In the first half of 1997, the Fluid Handling Group generated 77% of sales
and 80% of profits, and the Industrial Products Group contributed 23% of sales
and 20% of profits. International sales accounted for 40% of total sales in the
1997 first half, up from 38% last year.
Fluid Handling Group sales of $245.3 million increased $52.2 million, or
27%, due to the inclusion of the Fluid Management and Blagdon Pumps operations
in this year's results. Sales outside the U.S. increased to 40% of total Fluid
Handling Group sales in the first six months of 1997 from 38% in the comparable
1996 period due to the inclusion of Blagdon Pumps, based in the U.K., the
international operations of Fluid Management, and stronger worldwide demand for
industrial pumps and certain other products of the Group's base businesses.
First half 1997 sales of $71.9 million in the Industrial Products Group
were essentially equal to the $72.0 million recorded in the same period of last
year due to higher customer demand for banding and clamping devices and sign
mounting systems, offset by lower activity levels in the capital goods-related
businesses. Shipments outside the U.S. were 38% of total sales in the Industrial
Products Group in the six-month 1997 period, the same percentage as in the
comparable 1996 period.
Gross profit of $123.9 million in the first half of 1997 increased $21.2
million, or 21%, from the comparable period of 1996. Gross profit as a percent
to sales was 39.1% in the 1997 period, up slightly from 38.8% in last year's
first half. Selling, general and administrative (SG&A) expenses of $64.7 million
in 1997's first six months increased 22% from $53.1 million in the same period
of 1996. As a percentage of sales, these expenses increased slightly to 20.4% in
1997 from 20.0% in 1996. Goodwill amortization increased 65% to $4.1 million in
the first half of 1997 from $2.5 million in the comparable prior year period
and, as a percent of sales, increased to 1.3% from .9%. The year over year
increases in gross profit dollars, SG&A expenses as a percent of sales and
goodwill amortization resulted from the acquisitions of Fluid Management and
Blagdon Pumps.
Income from operations increased $7.9 million, or 17%, to $55.1 million in
the six months ended June 30, 1997 from $47.2 million in 1996's first half.
Operating profit margins in this year's first half were 17.4% of sales versus
17.8% in the same period last year, with the slight decline caused by including
acquired companies in this year's results. Margins in the Company's base
businesses actually improved somewhat. In the Fluid Handling Group, income from
operations of $48.5 million and operating margin of 19.8% in the first six
months of 1997 compare to the $40.4 million and 20.9% recorded in 1996. The
slight operating margin decline resulted from the inclusion of recent
acquisitions in this year's results. Income from operations in the Industrial
Products Group of $11.8 million in the six-month 1997 period was up $.8 million
from the $11.0 million in 1996. Operating margin of 16.4% in the 1997 first half
compares favorably to the 15.3% achieved in 1996.
Interest expense increased to $9.9 million in the first half of 1997 from
$8.3 million in the 1996 period because of additional long-term debt incurred to
complete the acquisitions of Fluid Management and Blagdon Pumps offset by cash
flow from operations.
The provision for income taxes increased to $16.7 million in the six months
ended June 30, 1997 from $13.9 million in the comparable 1996 period. The
effective tax rate increased to 37.0% in 1997 from 35.9% in 1996 due to the
changing mix of international earnings and state franchise tax factors.
Record net income of $28.4 million in the first six months of 1997 was 14%
higher than the net income of $24.9 million in the same period of 1996. Earnings
per share amounted to $.95 in 1997's first half, a new all-time high, which was
13% higher than the $.84 recorded in the year-ago period.
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LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, IDEX's working capital was $108.1 million and its current
ratio was 2.1 to 1. Internally generated funds were adequate to fund capital
expenditures of $7.2 million and $6.4 million, and dividends on common stock of
$7.0 million and $6.1 million, for the six months ended June 30, 1997 and 1996,
respectively. The capital expenditures were generally for machinery and
equipment which improved productivity, although a portion was for repair and
replacement of equipment and facilities. Management believes that IDEX has ample
capacity in its plant and equipment to meet any intermediate and long-term needs
for future growth. During the six months ended June 30, 1997 and 1996,
depreciation and amortization expense, excluding amortization of debt issuance
expenses, was $13.5 million and $10.2 million, respectively.
At June 30, 1997, the maximum amount available under the multi-currency
amended U.S. credit agreement was $250 million, of which $128.7 million was
borrowed, including a Netherlands guilder borrowing of NGL 82.0 million ($42.7
million) which provides an economic hedge against the net investment in Fluid
Management's Netherlands operation. The availability under this facility
declines in stages commencing July 1, 1999, to $200 million on July 1, 2000. Any
amount outstanding at July 1, 2001 becomes due at that date. Interest is payable
quarterly on the outstanding balance at the bank agent's reference rate or at
LIBOR plus an applicable margin. At June 30, 1997, the applicable margin was 50
basis points. The Company also has a $10 million demand line of credit available
for short-term borrowing requirements at the bank agent's reference rate or at
an optional rate based on the bank's cost of funds. At June 30, 1997, there was
$2.0 million borrowed under this short-term line of credit. The U.S. dollar
equivalent of the notes payable at June 30, 1997 issued to the seller in the
April 1997 acquisition of Blagdon Pumps was $9.9 million with interest payable
quarterly at LIBOR plus an applicable margin.
On May 23, 1997, the Company's Lukas subsidiary entered into an amended
German credit agreement improving the interest rate structure and eliminating
certain reductions in availability. At June 30, 1997, the maximum amount
available under the German credit agreement was DM 52.5 million ($30.8 million),
of which DM 52.0 ($30.5 million) was being used. The borrowing provides an
economic hedge against the net investment in the Lukas operation. The
availability under this agreement declines in stages commencing November 1,
1999, to DM 31.3 million at November 1, 2000. Any amount outstanding at November
1, 2001, becomes due at that date. Interest is payable quarterly on the
outstanding balance at LIBOR plus an applicable margin. At June 30, 1997, the
applicable margin was 77.5 basis points.
IDEX believes it will generate sufficient cash flow from operations in 1997
to meet its operating requirements, interest and scheduled amortization payments
under both the amended U.S. and German credit agreements, interest and principal
payments on the Senior Subordinated Notes, approximately $23 million of planned
capital expenditures and approximately $14 million of annual dividend payments
to holders of common stock. From commencement of operations in January 1988
until June 30, 1997, IDEX has borrowed $422 million under its credit agreements
to complete eleven acquisitions. During this same period, IDEX generated,
principally from operations, cash flow of $343 million to reduce its
indebtedness. 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.
11
13
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
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits listed in the accompanying "Exhibit Index" are
filed as part of this report.
(b) Reports on Form 8-K
There have been no reports on Form 8-K filed during the
quarter for which this report is filed.
12
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized in the capacity and on the date
indicated.
IDEX CORPORATION
/s/ WAYNE P. SAYATOVIC
--------------------------------------
Wayne P. Sayatovic
Senior Vice President -- Finance,
Chief Financial Officer and Secretary
(Duly Authorized and Principal
Financial Officer)
July 29, 1997
13
15
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
3.1 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).
3.1(a) Amendment to Restated Certificate of Incorporation of IDEX
(formerly HI, Inc.), as amended (incorporated by reference
to Exhibit No. 3.1(a) to the Quarterly Report of IDEX on
Form 10-Q for the quarter ended March 31, 1996, Commission
File No. 1-10235).
3.2 Amended and Restated By-Laws of IDEX (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).
3.2(a) Amended and Restated Article III, Section 13 of the Amended
and Restated By-Laws 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).
4.1 Restated Certificate of Incorporation and By-Laws of IDEX
(filed as Exhibits No. 3.1 through No. 3.2(a)).
4.2 Indenture, dated as of September 15, 1992, among IDEX, the
Subsidiaries and Fleet National Bank of Connecticut, a
national banking association, as Trustee, relating to the
9 3/4% Senior Subordinated Notes of IDEX due 2002
(incorporated by reference to Exhibit No. 4.2 to the Annual
Report of IDEX on Form 10-K for the year ending December 31,
1992, Commission File No. 1-10235).
4.2(a) First Supplemental Indenture dated as of December 22, 1995,
among IDEX and the Subsidiaries named therein and Fleet
National Bank of Connecticut, a national banking
association, as Trustee (incorporated by reference to
Exhibit No. 4.2(a) to the Annual Report of IDEX on Form 10-K
for the year ending December 31, 1995, Commission File No.
1-10235).
4.2(b) Second Supplemental Indenture dated as of July 29, 1996,
among IDEX and the Subsidiaries named therein and Fleet
National Bank of Connecticut, a national banking
association, as Trustee (incorporated by reference to
Exhibit No. 4.2(b) to the Quarterly Report of IDEX on Form
10-Q for the quarter ended June 30, 1996, Commission File
No. 1-10235).
4.3 Specimen Senior Subordinated Note of IDEX (including
specimen Guarantee) (incorporated by reference to Exhibit
No. 4.3 to the Annual Report of IDEX on Form 10-K for the
year ending December 31, 1992, Commission File No.1-10235).
4.4 Specimen Certificate of Common Stock (incorporated by
reference to Exhibit No. 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).
4.5 Third Amended and Restated Credit Agreement dated as of July
17, 1996, among IDEX, Bank of America Illinois, as Agent,
and other financial institutions named therein (the "Banks")
(incorporated by reference to Exhibit No. 4.5 to the
Quarterly Report of IDEX on Form 10-Q for the quarter ended
June 30, 1996, Commission File No. 1-10235).
4.5(a) First Amendment to the Third Amended and Restated Credit
Agreement dated as of April 15, 1997, among IDEX, Bank of
America Illinois, as Agent, and the Banks (incorporated by
reference to Exhibit 4.5(a) to the Quarterly Report of IDEX
on Form 10-Q for the quarter ended March 31, 1997,
Commission File No. 1-10235).
14
16
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
4.6 Amended and Restated Pledge Agreement dated as of July 17,
1996, by IDEX in favor of the Agent and the Banks
(incorporated by reference to Exhibit No. 4.6 to the
Quarterly Report of IDEX on Form 10-Q for the quarter ended
June 30, 1996, Commission File No. 1-10235).
4.6(a) Supplement No. 1 to the Amended and Restated Pledge
Agreement dated as of August 5, 1996, by IDEX in favor of
the Agent and the Banks (incorporated by reference to
Exhibit No. 4.6(a) to the Quarterly Report of IDEX on Form
10-Q for the quarter ended June 30, 1996, Commission File
No. 1-10235).
4.7 Amended and Restated Subsidiary Guaranty Agreement dated as
of July 17, 1996, by the Subsidiaries named therein in favor
of the Agent and the Banks (incorporated by reference to
Exhibit No. 4.7 to the Quarterly Report of IDEX on Form 10-Q
for the quarter ended June 30, 1996, Commission File No.
1-10235).
4.7(a) Supplement No. 1 to the Amended and Restated Subsidiary
Guaranty Agreement dated as of August 5, 1996, by FMI
Management Company in favor of the Agent and the Banks
(incorporated by reference to Exhibit No. 4.7(a) to the
Quarterly Report of IDEX on Form 10-Q for the quarter ended
June 30, 1996, Commission File No. 1-10235).
4.7(b) Supplement No. 2 to the Amended and Restated Subsidiary
Guaranty Agreement dated as of August 5, 1996, by Fluid
Management, Inc. in favor of the Agent and the Banks
(incorporated by reference to Exhibit No. 4.7(b) to the
Quarterly Report of IDEX on Form 10-Q for the quarter ended
June 30, 1996, Commission File No. 1-10235).
4.8 Registration Rights Agreement dated as of July 26, 1996,
between IDEX and Mitchell H. Saranow (incorporated by
reference to Exhibit No. 4.8 to the Quarterly Report of IDEX
on Form 10-Q for the quarter ended June 30, 1996, Commission
File No. 1-10235).
**10.1 Amended and Restated Employment Agreement between IDEX
Corporation and Donald N. Boyce, dated as of November 22,
1996.
**10.2 Amended and Restated Employment Agreement between IDEX
Corporation and Wayne P. Sayatovic, dated as of November 22,
1996.
**10.3 Amended and Restated Employment Agreement between IDEX
Corporation and Frank J. Hansen, dated as of November 22,
1996.
**10.4 Amended and Restated Employment Agreement between IDEX
Corporation and Jerry N. Derck, dated as of November 22,
1996.
**10.5 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).
**10.5(a) Amended Management Incentive Compensation Plan (incorporated
by reference to Exhibit No. 10.9(a) to the Quarterly Report
of IDEX on Form 10-Q for the quarter ended March 31, 1996,
Commission File No. 1-10235).
**10.6 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).
**10.7 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).
15
17
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
**10.8 Revised Form of IDEX Corporation Stock Option Plan for
Outside Directors (incorporated by reference to Exhibit No.
10.22 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).
**10.9 Amendment to the IDEX Corporation Stock Option Plan for
Outside Directors adopted by resolution to the Board of
Directors dated as of January 28, 1992 (incorporated by
reference to Exhibit No. 10.21(a) of the Annual Report of
IDEX on Form 10-K for the year ended December 31, 1992,
Commission File No. 1-10235).
**10.10 Non-Qualified Stock Option Plan for Non-Officer Key
Employees of IDEX Corporation (incorporated by reference to
Exhibit No. 10.15 to the Annual Report of IDEX on Form 10-K
for the year ended December 31, 1992, Commission File No.
1-10235).
**10.10(a) 1996 Stock Plan for Non-Officer Key Employees of IDEX
Corporation (incorporated by reference to Exhibit No. 4.5 to
the Registration Statement on Form S-8 of IDEX Corporation,
et al., Registration No. 333-18643, as filed on December 23,
1996).
**10.11 Non-Qualified Stock Option Plan for Officers of IDEX
Corporation (incorporated by reference to Exhibit No. 10.16
to the Annual Report of IDEX on Form 10-K for the year ended
December 31, 1992, Commission File No. 1-10235).
**10.12 IDEX Corporation Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit No. 10.17 to the
Annual Report of IDEX on Form 10-K for the year ended
December 31, 1992, Commission File No. 1-10235).
**10.13 1996 Stock Plan for Officers of IDEX Corporation
(incorporated by reference to Exhibit No. 4.4 to the
Registration Statement on Form S-8 of IDEX Corporation, et
al., Registration No. 333-18643, as filed on December 23,
1996).
**10.14 Amended and Restated IDEX Corporation Directors Deferred
Compensation Plan, as amended (incorporated by reference to
Exhibit No. 4.6 to the Registration Statement on Form S-8 of
IDEX Corporation, et al., Registration No. 333-18643, as
filed on December 23, 1996).
**10.15 IDEX Corporation 1996 Deferred Compensation Plan for
Officers, as amended (incorporated by reference to Exhibit
No. 4.8 to the Registration Statement on Form S-8 of IDEX
Corporation, et al., Registration No. 333-18643, as filed on
December 23, 1996).
**10.16 IDEX Corporation 1996 Deferred Compensation Plan for
Non-Officer Presidents, as amended (incorporated by
reference to Exhibit No. 4.7 to the Registration Statement
on Form S-8 of IDEX Corporation, et al., Registration No.
333-18643, as filed on December 23, 1996).
10.17 Asset Purchase Agreement dated July 26, 1996 between IDEX
and Fluid Management Limited Partnership, Fluid Management
U.S. LLC, Fluid Management Services, Inc., Fluid Management
Canada LLC, Fluid Management France SNC, FM International,
Inc., Fluid Management Europe B.V. (incorporated by
reference to Exhibit No. 2.1 to the Quarterly Report on IDEX
Form 10-Q for the quarter ended June 30, 1996, Commission
File No. 1-10235).
*27 Financial Data Schedule.
Revolving Credit Facility dated as of September 29, 1995, as
amended, between Dunja Verwaltungsgesellschaft GmbH and Bank
of America NT & SA, Frankfurt Branch (a copy of the
agreement will be furnished to the Commission upon request).
- -------------------------
* Filed herewith.
** Management contract or compensatory plan or arrangement.
16
5
6-MOS
DEC-31-1996
JUN-30-1997
5,408
0
96,968
2,677
96,794
202,716
246,099
145,578
584,070
94,607
247,997
0
0
292
215,120
584,070
317,013
317,013
193,076
261,883
156
283
9,911
45,063
16,673
28,390
0
0
0
28,390
0.50
0
