IDEX CORP /DE/
10-Qs and 10-Ks
PROXIES
Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
FOR ANNUAL AND TRANSITION
REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the Fiscal Year Ended December 31, 2009 | ||
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the Transition Period From to |
Commission file number 1-10235
IDEX CORPORATION
(Exact Name of Registrant as
Specified in its Charter)
|
Delaware
(State or other jurisdiction of incorporation or organization) |
36-3555336
(I.R.S. Employer Identification No.) |
|
|
630 Dundee Road, Northbrook, Illinois
(Address of principal executive offices) |
60062
(Zip Code) |
Registrant’s
telephone number:
(847) 498-7070
Securities
Registered Pursuant to Section 12(b) of the Act:
|
Title of Each Class
|
Name of Each Exchange on Which Registered
|
|
|
Common Stock, par value $.01 per share
|
New York Stock Exchange
and Chicago Stock Exchange |
Securities
Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
þ
No
o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
o
No
þ
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
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes
o
No
o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule
12b-2
of the
Exchange Act. (Check one):
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes
o
No
þ
The aggregate market value of the voting stock (based on the
June 30, 2009 closing price of $36.84) held by
non-affiliates of IDEX Corporation was $1,953,103,845.
The number of shares outstanding of IDEX Corporation’s
common stock, par value $.01 per share (the “Common
Stock”), as of February 18, 2010 was 81,000,451 (net
of treasury shares).
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the 2009 Annual Report to stockholders of IDEX
Corporation (“the 2009 Annual Report”) are
incorporated by reference in Part II of this
Form 10-K
and portions of the Proxy Statement of IDEX Corporation (the
“2010 Proxy Statement”) with respect to the 2010
annual meeting of stockholders are incorporated by reference
into Part III of this
Form 10-K.
Table of
Contents
Table of Contents
PART I
| Item 1. | Business. |
IDEX Corporation (“IDEX” or the “Company”)
is a Delaware Corporation incorporated on September 24,
1987. The Company is an applied solutions business that sells an
extensive array of pumps, flow meters and other fluidics systems
and components and engineered products to customers in a variety
of markets around the world. All of the Company’s business
activities are carried out through wholly-owned subsidiaries.
IDEX has four reportable business segments: Fluid &
Metering Technologies, Health & Science Technologies,
Dispensing Equipment, and Fire & Safety/Diversified
Products. Reporting units in the Fluid & Metering
Technologies segment include Banjo, Energy (Corken, Faure
Herman, Liquid Controls, S.A.M.P.I., Sponsler and Toptech
products), Industrial Process Technology, (IDEX AODD (Pumper
Parts, Versa-Matic and Warren Rupp products), Richter, Sanitary
(Knight, Quadro and Wright Flow products), and Viking (Blagdon
and Viking products)) and Water (ADS, IETG, iPEK, and
Pulsafeeder products). Reporting units in the Health &
Science Technologies segment include Health & Science
Technologies (“HST”) Core (Eastern Plastics,
Innovadyne, Isolation Technologies, Rheodyne, Sapphire
Engineering, Semrock, Systec and Upchurch Scientific products),
Gast (Gast and Jun-Air products), and Micropump (Ismatec,
Micropump and Trebor products). The Dispensing Equipment segment
is a reporting unit and includes FAST & Fluid
Management and Fluid Management products. Reporting units in the
Fire & Safety/Diversified Products segment include
Fire Suppression (Class 1, Godiva and Hale products),
Rescue Tools (Dinglee, Hurst, Lukas and Vetter products) and
Band-It.
IDEX believes that each of its reporting units is a leader in
its product and service areas. The Company also believes that
its strong financial performance has been attributable to its
ability to design and engineer specialized quality products,
coupled with its ability to identify and successfully consummate
and integrate strategic acquisitions.
FLUID &
METERING TECHNOLOGIES SEGMENT
The Fluid & Metering Technologies segment designs,
produces and distributes positive displacement pumps, flow
meters, injectors, and other fluid-handling pump modules and
systems and provides flow monitoring and other services for
water and wastewater. Fluid & Metering Technologies
application-specific pump and metering solutions serve a diverse
range of end markets, including industrial infrastructure
(fossil fuels, refined & alternative fuels, and
water & wastewater), chemical processing,
agricultural, food & beverage, pulp & paper,
transportation, plastics & resins,
electronics & electrical, construction &
mining, pharmaceutical & bio-pharmaceutical, machinery
and numerous other specialty niche markets. Fluid &
Metering Technologies accounted for 48% of IDEX’s sales and
44% of IDEX’s operating income in 2009, with approximately
46% of its sales to customers outside the U.S.
Banjo.
Banjo is a provider of special purpose,
severe-duty pumps, valves, fittings and systems used in liquid
handling. Banjo is based in Crawfordsville, Indiana and its
products are used in agricultural and industrial applications.
Approximately 11% of Banjo’s 2009 sales were to customers
outside the U.S.
Energy.
Energy includes the Company’s
Corken, Faure Herman, Liquid Controls, S.A.M.P.I., Sponsler and
Toptech businesses. Energy is a leading supplier of flow meters,
electronic registration and control products, rotary vane and
turbine pumps, reciprocating piston compressors, and terminal
automation control systems. Headquartered in Lake Bluff,
Illinois (Liquid Controls and Sponsler products), Energy has
additional facilities in Longwood, Florida and Zwijndrech
Belgium (Toptech products); Oklahoma City, Oklahoma (Corken
products); La Ferté Bernard, France and Houston, Texas
(Faure Herman products); Vadodara, Gujarat, India (Liquid
Controls products); and Altopascio, Italy (S.A.M.P.I. products).
Applications for Liquid Controls and S.A.M.P.I. positive
displacement flow meters, electronic, registration and control
products include mobile and stationary metering installations
for wholesale and retail distribution of petroleum and liquefied
petroleum gas, aviation refueling, and industrial metering and
dispensing of liquids and gases. Corken products consist of
positive-displacement rotary vane pumps, single and multistage
regenerative turbine pumps, and small horsepower reciprocating
piston compressors, while Sponsler products consist of precision
turbine flow meters to meet all flow applications, including
low-flow applications where viscosity, corrosive media, extreme
temperature or hazardous materials are
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Table of Contents
factors. Toptech supplies terminal automation hardware and
software to control and manage inventories, as well as
transactional data and invoicing, to customers in the oil, gas
and refined-fuels markets. In February 2007, IDEX acquired Faure
Herman, a leading supplier of ultrasonic and helical turbine
flow meters used in the custody transfer and control of high
value fluids and gases. Approximately 54% of Energy’s 2009
sales were to customers outside the U.S.
Industrial Process Technologies.
Industrial
Process Technologies (“IPT”) includes the
Company’s IDEX AODD, Richter, Sanitary and Viking
businesses. IPT is a leading producer of air-operated and
motor-driven double-diaphragm pumps and replacement parts; a
leading provider of premium quality lined pumps, valves and
control equipment for the chemical, fine chemical and
pharmaceutical industries; a leading manufacturer of pumps and
dispensing equipment for industrial laundries, commercial
dishwashing and chemical metering; and a leading provider of
particle control solutions for the pharmaceutical &
bio-pharmaceutical markets. IDEX AODD products (which include
Pumper Parts, Versa-Matic and Warren Rupp products) are used for
abrasive and semisolid materials as well as for applications
where product degradation is a concern or where electricity is
not available or should not be used. Market’s served by
IDEX AODD products include chemical, paint, food processing,
electronics, construction, utilities, mining and industrial
maintenance. Richter’s corrosion resistant fluoroplastic
lined products offer superior solutions for demanding
applications in the process industry. Sanitary’s products
(which include Knight, Quadro and Wright Flow products) consist
of rotary lobe pumps, stainless-steel centrifugal and positive
displacement pumps and pump replacement parts for the beverage,
food processing, pharmaceutical, cosmetics and other industries
that require sanitary processing as well as products for fine
milling, emulsification and special handling of liquid and solid
particulates for laboratory, pilot phase and production scale
processing. Viking’s products consist of external gear
pumps, strainers and reducers, and related controls used for
transferring and metering thin and viscous liquids sold under
the
Viking
®
brand and air-operated double-diaphragm pumps sold under the
Blagdon
®
brand. Markets served by Viking products include chemical,
petroleum, pulp & paper, plastics, paints, inks,
tanker trucks, compressor, construction, food &
beverage, personal care, pharmaceutical and biotech. IPT
maintains operations in Mansfield, Ohio (IDEX AODD); Kampen,
Germany, Nanjing, China, and Coimbatore, India (Richter); Lake
Forest, California, Unanderra, New South Wales, Australia,
Mississauga, Ontario, Canada, Eastbourne, East Sussex, England,
Muskego, Wisconsin and Windsor, Ontario, Canada (Sanitary); and
Cedar Falls, Iowa (Richter, Sanitary and Viking). IPT uses
primarily independent distributors to sell and market its
products. Approximately 53% of IPT’s 2009 sales were to
customers outside the U.S.
Water and Waste Water
(“Water”).
Water includes the
Company’s ADS, IETG, iPEK and Pulsafeeder businesses. Water
is a leading provider of metering technology & flow
monitoring products and underground surveillance services for
water and wastewater markets as well a leading manufacturer of
metering pumps, special-purpose rotary pumps, peristaltic pumps,
fully integrated pump and metering systems, custom chemical-feed
systems, electronic controls and dispensing equipment. ADS
products and services provide comprehensive integrated solutions
that enable industry, municipalities and government agencies to
analyze and measure the capacity, quality and integrity of
wastewater collection systems. IETG products and services enable
water companies to effectively manage their water distribution
and sewerage networks, while its surveillance service
specializes in underground asset detection and mapping for
utilities and other private companies. iPEK supplies remote
controlled systems used for infrastructure inspection.
Pulsafeeder products are used to introduce precise amounts of
fluids into processes to manage water quality and chemical
composition, and its markets include water &
wastewater treatment, power generation, pulp & paper,
chemical & hydrocarbon processing, and swimming pools.
Water maintains operations in Huntsville, Alabama, Sydney, New
South Wales, Australia, Melbourne, Victoria, Australia, and
Auckland, New Zealand (ADS), Leeds, England (IETG), Hirschegg,
Austria (iPEK) and Rochester, New York, and Punta Gorda, Florida
(Pulsafeeder). Approximately 37% of Water’s 2009 sales were
to customers outside the U.S.
HEALTH &
SCIENCE TECHNOLOGIES SEGMENT
The Health & Science Technologies Segment designs,
produces and distributes a wide range of precision fluidics
solutions, including very high precision, low-flow rate pumping
solutions required in analytical instrumentation, clinical
diagnostics and drug discovery, high performance molded and
extruded, biocompatible medical devices and implantables, air
compressors used in medical, dental and industrial applications,
and precision gear
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Table of Contents
and peristaltic pump technologies that meet exacting OEM
specifications. The segment accounted for 23% of both
IDEX’s sales and operating income in 2009, with
approximately 39% of its sales to customers outside the U.S.
HST Core.
HST Core consists of the IDEX
Health & Science (“IHS”) and Semrock
business units. IHS is a consolidation of the Company’s
Eastern Plastics, Innovadyne, Isolation Technologies, Rheodyne,
Sapphire Engineering, Systec and Upchurch Scientific businesses
and has facilities in Rohnert Park, California (Innovadyne,
Rheodyne and Systec products); Bristol, Connecticut (Eastern
Plastics products); Middleboro, Massachusetts (Isolation
Technologies and Sapphire Engineering products); and Oak Harbor,
Washington (Upchurch Scientific products). Rheodyne and Systec
products include injectors, valves, fittings and accessories for
the analytical instrumentation market. Rheodyne and Systec
products are used by manufacturers of high pressure liquid
chromatography equipment servicing the pharmaceutical, biotech,
life science, food & beverage, and chemical markets.
Sapphire Engineering and Upchurch Scientific products include
fluidic components and systems for the analytical, biotech and
diagnostic instrumentation markets, such as fittings,
precision-dispensing pumps and valves, tubing and integrated
tubing assemblies, filter sensors and other micro-fluidic and
nano-fluidic components. Markets for Sapphire Engineering and
Upchurch Scientific products include pharmaceutical, drug
discovery, chemical, biochemical processing, genomics/proteomics
research, environmental labs, food/agriculture, medical lab,
personal care, and plastics/polymer/rubber production. Eastern
Plastics products, which consist of high-precision integrated
fluidics and associated engineered plastics solutions. Eastern
Plastics products are used in a broad set of end markets
including medical diagnostics, analytical instrumentation, and
laboratory automation. In October 2007, the Company acquired
Isolation Technologies, a leading developer of advanced column
hardware and accessories for the High Performance Liquid
Chromatography (HPLC) market. HPLC instruments are used in a
variety of analytical chemistry applications, with primary
commercial applications including drug discovery and quality
control measurements for pharmaceutical and food/beverage
testing. Semrock, which was acquired in October 2008, is a
provider of optical filters for biotech and analytical
instrumentation in the life sciences markets. Semrock’s
optical filters are produced using
state-of-the-art
manufacturing processes which enable it to offer its customers
significant improvements in instrument performance and
reliability. Semrock is located in Rochester, New York.
Approximately 35% of HST Core’s 2009 sales were to
customers outside the U.S.
Gast.
Gast includes the Company’s Gast
and Jun-Air businesses. The Gast business is a leading
manufacturer of air-moving products, including air motors,
low-range and medium-range vacuum pumps, vacuum generators,
regenerative blowers and fractional horsepower compressors. Gast
products are used in a variety of long-life applications
requiring a quiet, clean source of moderate vacuum or pressure.
Markets served by Gast products include medical equipment,
environmental equipment, computers & electronics,
printing machinery, paint mixing machinery, packaging machinery,
graphic arts, and industrial manufacturing. Based in Benton
Harbor, Michigan, Gast also has a facility in Redditch, England.
Jun-Air is a provider of low-decibel, ultra-quiet vacuum
compressors suitable for medical, dental and laboratory
applications. Based in Norresundby, Denmark, Jun-Air has
additional operations in Lyon, France, and Dankeryd, The
Netherlands. Approximately 32% of Gast’s 2009 sales were to
customers outside the U.S.
Micropump.
Micropump includes the
Company’s Ismatec, Micropump and Trebor businesses.
Micropump, headquartered in Vancouver, Washington, is a leader
in small, precision-engineered, magnetically and
electromagnetically driven rotary gear, piston and centrifugal
pumps. Micropump products are used in low-flow abrasive and
corrosive applications. Markets served by Micropump products
include printing machinery, medical equipment,
paints & inks, chemical processing, pharmaceutical,
refining, laboratory, electronics, pulp & paper, water
treatment, textiles, peristaltic metering pumps, analytical
process controllers and sample preparation systems. Ismatec, a
leading manufacturer of peristaltic metering pumps, analytical
process controllers, and sample preparation systems, has
facilities in Glattbrugg, Switzerland and Wertheim-Mondfeld,
Germany. Located in Salt Lake City, Utah, the Trebor business is
a leader in high-purity fluid handling products, including
air-operated diaphragm pumps and deionized water-heating
systems. Trebor products are used in manufacturing of
semiconductors, disk drives and flat panel displays.
Approximately 67% of Micropump’s 2009 sales were to
customers outside the U.S.
DISPENSING
EQUIPMENT SEGMENT
The Dispensing Equipment Segment produces precision equipment
for dispensing, metering and mixing colorants, paints, and hair
colorants and other personal care products used in a variety of
retail and commercial
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Table of Contents
businesses around the world. The segment accounted for 9% of
IDEX’s sales and 7% of IDEX’s operating income in
2009, with approximately 64% of its sales to customers outside
the U.S.
Dispensing Equipment is a leading American, European and Asian
supplier of precision-designed tinting, mixing, dispensing and
measuring equipment for auto refinishing, architectural paints
and personal care products. Dispensing Equipment equipment is
used in retail and commercial stores, hardware stores, home
centers, department stores, automotive body shops as well as
point-of-purchase
dispensers and mixing equipment for the personal care and health
and beauty industry. Dispensing Equipment is currently pursuing
opportunities to use its precision mixing, dispensing and
measuring expertise in the food and beverage areas. Dispensing
Equipment is headquartered in Wheeling, Illinois, with
additional operations in Sassenheim, The Netherlands, Unanderra,
Australia; Gennevilliers, France; Milan, Italy; Torun, Poland;
Barcelona, Spain; and Scarborough, Ontario, Canada.
Approximately 64% of Dispensing Equipment’s 2009 sales were
to customers outside the U.S.
FIRE &
SAFETY/DIVERSIFIED PRODUCTS SEGMENT
The Fire & Safety/Diversified Products Segment
produces firefighting pumps and controls, rescue tools, lifting
bags and other components and systems for the fire and rescue
industry, and engineered stainless steel banding and clamping
devices used in a variety of industrial and commercial
applications. The segment accounted for 20% of IDEX’s sales
and 26% of IDEX’s operating income in 2009, with
approximately 53% of its sales to customers outside the U.S.
Fire Suppression.
Fire Suppression includes
the Company’s Class 1, Hale and Godiva businesses,
which produce truck-mounted and portable fire pumps, stainless
steel valves, foam and compressed air foam systems, pump modules
and pump kits, electronic controls and information systems,
conventional and networked electrical systems, and mechanical
components for the fire, rescue and specialty vehicle markets.
Fire Suppression’s customers are primarily OEMs. Fire
Suppression is headquartered in Ocala, Florida (Class 1
products), with additional facilities located in Conshohocken,
Pennsylvania (Hale products); Neenah, Wisconsin (Class 1
products); and Warwick, England (Godiva products). Approximately
34% of Fire Suppression’s 2009 sales were to customers
outside the U.S.
Rescue Tools.
Rescue tools includes the
Company’s Dinglee, Hurst, Lukas and Vetter businesses,
which produce hydraulic, battery, gas and electric-operated
rescue equipment, hydraulic re-railing equipment, hydraulic
tools for industrial applications, recycling cutters, pneumatic
lifting and sealing bags for vehicle and aircraft rescue,
environmental protection and disaster control, and shoring
equipment for vehicular or structural collapse. Markets served
by Rescue Tools products include public and private fire and
rescue organizations. Rescue Tools has facilities in Shelby,
North Carolina (Hurst products); Tianjin, China (Dinglee
products); Erlangen, Germany (Lukas products); and Zulpich,
Germany (Vetter products). Approximately 77% of Rescue
Tools’s 2009 sales were to customers outside the U.S.
Band-It.
Band-It is a leading producer of
high-quality stainless steel banding, buckles and clamping
systems. The
BAND-IT
®
brand is highly recognized worldwide. Band-It products are used
for securing exhaust system heat and sound shields, industrial
hose fittings, traffic signs and signals, electrical cable
shielding, identification and bundling, and numerous other
industrial and commercial applications. Markets for Band-It
products include transportation equipment, oil & gas,
general industrial maintenance, electronics, electrical,
communications, aerospace, utility, municipal and subsea marine.
Band-It is based in Denver, Colorado, with additional operations
in Staveley Near Chesterfield, Derbyshire, England, and
Singapore. Approximately 42% of Band-It’s 2009 sales were
to customers outside the U.S.
GENERAL
ASPECTS APPLICABLE TO THE COMPANY’S BUSINESS
SEGMENTS
Competitors
The Company’s businesses participate in highly competitive
markets. IDEX believes that the principal points of competition
are product quality, price, design and engineering capabilities,
product development, conformity to customer specifications,
quality of post-sale support, timeliness of delivery, and
effectiveness of our distribution channels.
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Table of Contents
Principal competitors of the Fluid & Metering
Technologies Segment are the Pump Solutions Group (Blackmer and
Wilden products) of Dover Corporation (with respect to pumps and
small horsepower compressors used in liquified petroleum gas
distribution facilities, rotary gear pumps, and air-operated
double-diaphragm pumps); the Milton Roy unit of United
Technologies Corporation (with respect to metering pumps and
controls); and Tuthill Corporation (with respect to rotary gear
pumps).
Principal competitors of the Health & Science
Technologies Segment are the Thomas division of Gardner Denver,
Inc. (with respect to vacuum pumps and compressors); and Valco
Instruments Co., Inc. (with respect to fluid injectors and
valves).
The principal competitor of the Dispensing Equipment Segment is
CPS Color Group Oy, which is owned by Nordic Capital (with
respect to dispensing and mixing equipment for the paint
industry).
The principal competitors of the Fire &
Safety/Diversified Products Segment are Waterous Company, a unit
of American Cast Iron Pipe Company (with respect to
truck-mounted firefighting pumps), Holmatro, Inc. (with respect
to rescue tools), and Panduit Corporation (with respect to
stainless steel bands, buckles and tools).
Employees
At December 31, 2009, the Company had approximately
5,300 employees. Approximately 8% were represented by labor
unions with various contracts expiring through February 2012.
Management believes that the Company’s relationship with
their employees is good. The Company historically has been able
to satisfactorily renegotiate its collective bargaining
agreements, with its last work stoppage in March 1993.
Suppliers
The Company manufactures many of the parts and components used
in its products. Substantially all materials, parts and
components purchased by the Company are available from multiple
sources.
Inventory
and Backlog
The Company regularly and systematically adjusts production
schedules and quantities based on the flow of incoming orders.
Backlogs typically are limited to 1 to
1
1
/
2
months of production. While total inventory levels also may be
affected by changes in orders, the Company generally tries to
maintain relatively stable inventory levels based on its
assessment of the requirements of the various industries served.
Shared
Services
The Company has two production facilities in Suzhou, China, that
support multiple IDEX business units. IDEX also has personnel in
China, India and Singapore that provide sales and marketing,
product design and engineering, and sourcing support to IDEX
business units, as well as personnel in various locations in
Europe, South America, the Middle East and Japan to support
sales and marketing efforts of IDEX businesses in those regions.
Segment
Information
For segment financial information for the years 2009, 2008, and
2007, see the table titled “Company and Business Segment
Financial Information” presented on page 17 in
Part II. Item 7. “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” and Note 13 of the “Notes to
Consolidated Financial Statements” on page 48 in
Part II. Item 8. Financial Statements and
Supplementary Data.
5
Table of Contents
Executive
Officers of the Registrant
The following table sets forth the names of the executive
officers of the Company, their ages, years of service, the
positions held by them, and their business experience during the
past 5 years.
|
Years of
|
||||||||||
|
Name
|
Age
|
Service
|
Position
|
|||||||
|
Lawrence D. Kingsley
|
47 | 5 | Chairman of the Board and Chief Executive Officer | |||||||
|
Dominic A. Romeo
|
50 | 6 | Vice President and Chief Financial Officer | |||||||
|
Harold Morgan
|
52 | 2 | Vice President-Human Resources | |||||||
|
John L. McMurray
|
59 | 17 | Vice President-Group Executive Process Technologies | |||||||
|
Heath A. Mitts
|
39 | 4 | Vice President-Corporate Finance | |||||||
|
Frank J. Notaro
|
46 | 12 | Vice President-General Counsel and Secretary | |||||||
|
Daniel J. Salliotte
|
43 | 5 | Vice President-Strategy and Business Development | |||||||
|
Michael J. Yates
|
44 | 4 | Vice President and Chief Accounting Officer | |||||||
|
Kevin G. Hostetler
|
41 | 4 | Vice President, Group Executive Fluid and Metering Technologies | |||||||
|
Andrew K. Silvernail
|
38 | 1 | Vice President, Group Executive Health and Science Technologies and Global Dispensing | |||||||
Mr. Kingsley has been Chairman of the Board since
April 2006. He was appointed to the position of President
and Chief Executive Officer in March 2005. Mr. Kingsley was
hired as Chief Operating Officer in August 2004.
Mr. Romeo has been Vice President and Chief Financial
Officer of the Company since January 2004.
Mr. Morgan has been Vice President-Human Resources of the
Company since June 2008. From February 2003 to June 2008,
Mr. Morgan was Senior Vice President and Chief
Administrative Officer for Bally Total Fitness Corporation.
Mr. McMurray has been Vice President-Group Executive
Process Technologies since August 2003. In February 2010,
IDEX announced that Mr. McMurray will be retiring in April
2011. He will remain a corporate officer through his retirement
with responsibilities for operational excellence, supply chain
and environment, health and safety through his retirement date.
Mr. Mitts has been Vice President-Corporate Finance since
September 2005. Prior to joining IDEX, Mr. Mitts was Chief
Financial Officer of PerkinElmer’s Asia operations, based
out of Singapore, from February 2002 to September 2005.
Mr. Notaro has served as Vice President-General Counsel and
Secretary since March 1998.
Mr. Salliotte has been Vice President-Strategy and Business
Development of the Company since October 2004.
Mr. Yates was appointed Vice-President and Chief Accounting
Officer in February 2010. Mr. Yates was hired as Vice
President-Controller in October 2005. Prior to joining IDEX,
Mr. Yates was a Senior Manager at PricewaterhouseCoopers
LLP from November 1999 to October 2005.
Mr. Hostetler was appointed Vice President, Group Executive
Fluid and Metering Technologies in February 2010.
Mr. Hostetler joined IDEX in July 2005 as President of the
Liquid Controls Group and was then appointed Vice President,
Group Executive and President Energy and Water and IDEX Asia in
December 2008. Prior to joining IDEX, Mr. Hostetler was
General Manager, Assembly Solutions at Ingersoll-Rand.
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Mr. Silvernail was appointed Vice President, Group
Executive Health and Science Technologies and Global Dispensing
in February 2010. From January 2009 to February 2010,
Mr. Silvernail was Vice President, Group Executive Health
and Science Technologies. Prior to joining IDEX,
Mr. Silvernail served as Group President at Rexnord
Industries from April 2005 to August 2008 and Group Vice
President of Business Development at Newell Rubbermaid from
September 2002 to February 2005.
The Company’s executive officers are elected at a meeting
of the Board of Directors immediately following the annual
meeting of stockholders, and they serve until the next annual
meeting of the Board, or until their successors are duly elected.
Public
Filings
Copies of the Company’s annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports are made available free of
charge at www.idexcorp.com as soon as reasonably practicable
after being filed electronically with the SEC. Our reports are
also available free of charge on the SEC’s website,
www.sec.gov.
| Item 1A. | Risk Factors. |
For an enterprise as diverse and complex as the Company, a wide
range of factors could materially affect future developments and
performance. In addition to the factors affecting specific
business operations identified in connection with the
description of these operations and the financial results of
these operations elsewhere in this report, the most significant
factors affecting our operations include the following:
THE
RECENT FINANCIAL CRISIS AND CURRENT UNCERTAINTY IN GLOBAL
ECONOMIC CONDITIONS COULD NEGATIVELY AFFECT OUR BUSINESS,
RESULTS OF OPERATIONS, FINANCIAL CONDITION OR CASH
FLOWS.
The recent financial crisis affecting the banking system and
financial markets and the current uncertainty in global economic
conditions have resulted in a tightening in the credit markets,
a low level of liquidity in many financial markets, and extreme
volatility in credit, equity and fixed income markets. There
could be a number of follow-on effects from these economic
developments on our business, including insolvency of key
suppliers resulting in product delays; inability of customers to
obtain credit to finance purchases of our products
and/or
customer insolvencies; decreased customer confidence; and
decreased customer demand, including order delays or
cancellations.
CHANGES
IN U.S. OR INTERNATIONAL ECONOMIC CONDITIONS COULD ADVERSELY
AFFECT THE PROFITABILITY OF ANY OF OUR BUSINESSES.
In 2009, 53% of the Company’s revenue was derived from
domestic operations while 47% was international. The
Company’s largest markets include life sciences &
medical technologies, fire and rescue, petroleum LPG, paint and
coatings, chemical processing and water & wastewater
treatment. A slowdown in the economy and in particular any of
these specific end markets could directly affect the
Company’s revenue stream and profitability.
POLITICAL
CONDITIONS IN FOREIGN COUNTRIES IN WHICH WE OPERATE COULD
ADVERSELY AFFECT OUR BUSINESS.
In 2009, approximately 47% of our total sales were to customers
outside the U.S. We expect international operations and
export sales to continue to contribute to earnings for the
foreseeable future. Both the sales from international operations
and export sales are subject in varying degrees to risks
inherent in doing business outside the United States. Such risks
include the following:
• possibility of unfavorable circumstances arising
from host country laws or regulations;
• risks of economic instability;
• currency exchange rate fluctuations and restrictions
on currency repatriation;
7
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• potential negative consequences from changes to
taxation policies;
• the disruption of operations from labor and
political disturbances;
• changes in tariff and trade barriers and import or
export licensing requirements; and,
• insurrection or war.
We cannot predict the impact such future, largely unforeseeable
events might have on the Company’s operations.
AN
INABILITY TO CONTINUE TO DEVELOP NEW PRODUCTS CAN LIMIT THE
COMPANY’S REVENUE AND PROFITABILITY.
The Company’s organic growth was down 14% in 2009 and flat
in 2008. Approximately 20% of our revenue was derived from new
products developed over the past three years. Our ability to
continue to grow organically is tied to our ability to continue
to develop new products.
OUR
GROWTH STRATEGY INCLUDES ACQUISITIONS AND WE MAY NOT BE ABLE TO
MAKE ACQUISITIONS OF SUITABLE CANDIDATES OR INTEGRATE
ACQUISITIONS SUCCESSFULLY.
Our historical growth has included, and our future growth is
likely to continue to include, in large part our acquisition
strategy and the successful integration of acquired businesses
into our existing operations.
We intend to continue to seek additional acquisition
opportunities both to expand into new markets and to enhance our
position in existing markets throughout the world. We cannot be
assured, however, that we will be able to successfully identify
suitable candidates, negotiate appropriate acquisition terms,
obtain financing which may be needed to consummate such
acquisitions, complete proposed acquisitions, successfully
integrate acquired businesses into our existing operations or
expand into new markets. In addition, we cannot assure you that
any acquisition, once successfully integrated, will perform as
planned, be accretive to earnings, or prove to be beneficial to
our operations and cash flow.
Acquisitions involve numerous risks, including difficulties in
the assimilation of the operations, technologies, services and
products of the acquired companies and the diversion of
management’s attention from other business concerns. In
addition, prior acquisitions have resulted, and future
acquisitions could result, in the incurrence of substantial
additional indebtedness and other expenses. Once integrated,
acquired operations may not achieve levels of revenues,
profitability or productivity comparable with those achieved by
our existing operations, or otherwise perform as expected.
THE
MARKETS WE SERVE ARE HIGHLY COMPETITIVE. THIS COMPETITION COULD
LIMIT THE VOLUME OF PRODUCTS THAT WE SELL AND REDUCE OUR
OPERATING MARGINS.
Most of our products are sold in competitive markets. We believe
that the principal points of competition in our markets are
product quality, price, design and engineering capabilities,
product development, conformity to customer specifications,
quality of post-sale support, timeliness of delivery, and
effectiveness of our distribution channels. Maintaining and
improving our competitive position will require continued
investment by us in manufacturing, engineering, quality
standards, marketing, customer service and support, and our
distribution networks. We cannot be assured that we will be
successful in maintaining our competitive position. Our
competitors may develop products that are superior to our
products, or may develop methods of more efficiently and
effectively providing products and services or may adapt more
quickly than us to new technologies or evolving customer
requirements. Pricing pressures also could cause us to adjust
the prices of certain of our products to stay competitive. We
cannot be assured that we will be able to compete successfully
with our existing competitors or with new competitors. Failure
to continue competing successfully could adversely affect our
business, financial condition, results of operations and cash
flow.
8
Table of Contents
WE ARE
DEPENDENT ON THE AVAILABILITY OF RAW MATERIALS, PARTS AND
COMPONENTS USED IN OUR PRODUCTS.
While we manufacture many of the parts and components used in
our products, we require substantial amounts of raw materials
and purchase some parts and components from suppliers. The
availability and prices for raw materials, parts and components
may be subject to curtailment or change due to, among other
things, suppliers’ allocations to other purchasers,
interruptions in production by suppliers, changes in exchange
rates and prevailing price levels. Any change in the supply of,
or price for, these raw materials or parts and components could
materially affect our business, financial condition, results of
operations and cash flow.
SIGNIFICANT
MOVEMENTS IN FOREIGN CURRENCY EXCHANGE RATES MAY HARM OUR
FINANCIAL RESULTS.
We are exposed to fluctuations in foreign currency exchange
rates, particularly with respect to the Euro, Canadian Dollar,
British Pound and Chinese Renminbi. Any significant change in
the value of the currencies of the countries in which we do
business against the U.S. Dollar could affect our ability
to sell products competitively and control our cost structure,
which could have a material adverse effect on our business,
financial condition, results of operations and cash flow. For
additional detail related to this risk, see Part II.
Item 7A. Quantitative and Qualitative Disclosure About
Market Risk.
AN
UNFAVORABLE OUTCOME WITH REGARDS TO ANY OF OUR PENDING
CONTINGENCIES OR LITIGATION COULD ADVERSELY AFFECT OUR BUSINESS,
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH
FLOW.
We currently are involved in certain legal and regulatory
proceedings. Where it is reasonably possible to do so, we accrue
estimates of the probable costs for the resolution of these
matters. These estimates are developed in consultation with
outside counsel and are based upon an analysis of potential
results, assuming a combination of litigation and settlement
strategies. It is possible, however, that future operating
results for any particular quarter or annual period could be
materially affected by changes in our assumptions or the
effectiveness of our strategies related to these proceedings.
For additional detail related to this risk, see Item 3.
Legal Proceedings.
WE
COULD BE ADVERSELY AFFECTED BY RAPID CHANGES IN INTEREST
RATES.
Our profitability may be adversely affected during any period of
an unexpected or rapid increase in interest rates. The
Company’s interest rate exposure was primarily related to
the $400.1 million of total debt outstanding at
December 31, 2009. The majority of the debt is priced at
interest rates that float with the market. In order to mitigate
this interest exposure, the Company entered into interest rate
exchange agreements that effectively converted
$345.0 million of our floating-rate debt to a fixed rate. A
50 basis point movement in the interest rate on the
remaining $55.1 million floating-rate debt would result in
an approximate $0.3 million annualized increase or decrease
in interest expense and cash flow. For additional detail related
to this risk, see Part II. Item 7A. Quantitative and
Qualitative Disclosure About Market Risk.
OUR
INTANGIBLE ASSETS ARE A SIGNIFICANT PORTION OF OUR TOTAL ASSETS
AND A WRITE-OFF OF OUR INTANGIBLE ASSETS COULD CAUSE A MAJOR
IMPACT ON THE COMPANY’S NET WORTH.
Our total assets reflect substantial intangible assets,
primarily goodwill and identifiable intangible assets. At
December 31, 2009, goodwill and intangible assets totaled
$1,180.4 million and $281.4 million, respectively.
These goodwill and intangible assets result from our
acquisitions, representing the excess of cost over the fair
value of the tangible assets we have acquired. Annually, or when
certain events occur that require a more current valuation, we
assess whether there has been an impairment in the value of our
goodwill or intangible assets. If future operating performance
at one or more of our reporting units were to fall significantly
below forecast levels, we could reflect, under current
applicable accounting rules, a non-cash charge to operating
income for an impairment. Any determination requiring the
write-off of a significant portion of the goodwill or intangible
assets could have a material negative effect on our results of
operations and total capitalization. In accordance with
Accounting
9
Table of Contents
Standards Codification (“ASC”), 350,
“Intangibles — Goodwill and Other”, the
Company concluded that events had occurred and circumstances had
changed in 2008 which required the Company to record a goodwill
impairment of $30.1 million at Fluid Management, a
reporting unit within the Company’s Dispensing Equipment
Segment. See Note 5 in Part II. Item 8. Financial
Statements and Supplementary Data for further discussion on
goodwill and intangible assets.
| Item 1B. | Unresolved Staff Comments. |
The Company has received no written comments regarding its
periodic or current reports from the staff of the Securities and
Exchange Commission that were issued 180 days or more
preceding the end of its 2009 calendar year and that remain
unresolved.
| Item 2. | Properties. |
The Company’s principal plants and offices have an
aggregate floor space area of approximately 4.0 million
square feet, of which 2.5 million square feet (62%) is
located in the U.S. and approximately 1.5 million
square feet (38%) is located outside the U.S., primarily in
Germany (8%), Italy (7%), the U.K. (6%) and Australia (4%).
These facilities are considered to be suitable and adequate for
their operations. Management believes we can meet the expected
demand increase over the near term with our existing facilities,
especially given our operational improvement initiatives that
usually increase capacity. The Company’s executive office
occupies approximately 26,000 square feet of leased space
in Northbrook, Illinois.
Approximately 2.8 million square feet (69%) of the
principal plant and office floor area is owned by the Company,
and the balance is held under lease. Approximately
1.8 million square feet (44%) of the principal plant and
office floor area is held by business units in the
Fluid & Metering Technologies Segment;
0.8 million square feet (19%) is held by business units in
the Health & Science Technologies Segment;
0.6 million square feet (16%) is held by business units in
the Dispensing Equipment Segment; and 0.7 million square
feet (18%) is held by business units in the Fire &
Safety/Diversified Products Segment.
| Item 3. | Legal Proceedings. |
The Company and six of its subsidiaries are presently named as
defendants in a number of lawsuits claiming various
asbestos-related personal injuries, allegedly as a result of
exposure to products manufactured with components that contained
asbestos. Such components were acquired from third party
suppliers, and were not manufactured by any of the subsidiaries.
To date, the majority of the Company’s settlements and
legal costs, except for costs of coordination, administration,
insurance investigation and a portion of defense costs, have
been covered in full by insurance subject to applicable
deductibles. However, the Company cannot predict whether and to
what extent insurance will be available to continue to cover
such settlements and legal costs, or how insurers may respond to
claims that are tendered to them.
Claims have been filed in jurisdictions throughout the United
States. Most of the claims resolved to date have been dismissed
without payment. The balance have been settled for various
insignificant amounts. Only one case has been tried, resulting
in a verdict for the Company’s business unit.
No provision has been made in the financial statements of the
Company, other than for insurance deductibles in the ordinary
course, and the Company does not currently believe the
asbestos-related claims will have a material adverse effect on
the Company’s business, financial position, results of
operations or cash flow.
The Company is also party to various other legal proceedings
arising in the ordinary course of business, none of which is
expected to have a material adverse effect on its business,
financial condition, results of operations or cash flow.
| Item 4. | Reserved. |
10
Table of Contents
PART II
| Item 5. | Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities. |
Information regarding the prices of, and dividends on, the
Common Stock, and certain related matters, is incorporated
herein by reference to “Shareholder Information” on
the inner back cover of the 2009 Annual Report.
The principal market for the Common Stock is the New York Stock
Exchange, but the Common Stock is also listed on the Chicago
Stock Exchange. As of February 18, 2010, Common Stock was
held by approximately 7,000 shareholders and there were
81,000,451 shares of Common Stock outstanding, net of
treasury shares.
For information pertaining to issuable securities under equity
compensation plans and the related weighted average exercise
price, see Part III, Item 12, “Security Ownership of
Certain Beneficial Owners and Management and Related Shareholder
Matters”.
The following table provides information about Company purchases
of equity securities that are registered by the Company pursuant
to Section 12 of the Exchange Act during the quarter ended
December 31, 2009:
|
Total Number of
|
Maximum Dollar
|
|||||||||||||||
|
Shares Purchased as
|
Value that May Yet
|
|||||||||||||||
|
Part of Publicly
|
be Purchased Under
|
|||||||||||||||
|
Total Number of
|
Average Price
|
Announced Plans
|
the Plans
|
|||||||||||||
|
Period
|
Shares Purchased | Paid per Share | or Programs(1) | or Programs(1) | ||||||||||||
|
October 1, 2009 to
October 31, 2009 |
— | — | — | $ | 75,000,020 | |||||||||||
|
November 1, 2009 to
November 30, 2009 |
— | — | — | $ | 75,000,020 | |||||||||||
|
December 1, 2009 to
December 31, 2009 |
— | — | — | $ | 75,000,020 | |||||||||||
|
Total
|
— | — | — | $ | 75,000,020 | |||||||||||
| (1) | On April 21, 2008, IDEX’s Board of Directors authorized the repurchase of up to $125.0 million of its outstanding common shares either in the open market or through private transactions. |
11
Table of Contents
The following table compares total shareholder returns over the
last five years to the Standard & Poor’s (the
“S&P”) 500 Index, the S&P 600 Small Cap
Industrial Machinery Index and the Russell 2000 Index assuming
the value of the investment in IDEX Common Stock and each index
was $100 on December 31, 2004. Total return values for IDEX
Common Stock, the S&P 500 Index, S&P 600 Small Cap
Industrial Machinery Index and the Russell 2000 Index were
calculated on cumulative total return values assuming
reinvestment of dividends. The shareholder return shown on the
graph below is not necessarily indicative of future performance.
| 12/04 | 12/05 | 12/06 | 12/07 | 12/08 | 12/09 | |||||||||||||||||||||||||
|
IDEX Corporation
|
$ | 100.00 | $ | 101.48 | $ | 117.04 | $ | 133.81 | $ | 89.44 | $ | 115.37 | ||||||||||||||||||
|
S&P 500 Index
|
100.00 | 103.00 | 117.03 | 121.16 | 74.53 | 92.01 | ||||||||||||||||||||||||
|
S&P Industrial Machinery Index
|
100.00 | 107.84 | 128.76 | 142.85 | 94.67 | 110.77 | ||||||||||||||||||||||||
|
Russell 2000 Index
|
100.00 | 103.32 | 120.89 | 117.57 | 76.65 | 95.98 | ||||||||||||||||||||||||
12
Table of Contents
| Item 6. | Selected Financial Data. (1) |
| (dollars in thousands, except per share data) | 2009 | 2008(2) | 2007(2) | 2006(2) | 2005(2) | |||||||||||||||
|
RESULTS OF OPERATIONS
|
||||||||||||||||||||
|
Net sales
|
$ | 1,329,661 | $ | 1,489,471 | $ | 1,358,631 | $ | 1,154,940 | $ | 1,011,253 | ||||||||||
|
Gross profit
|
522,386 | 597,433 | 566,161 | 474,172 | 415,625 | |||||||||||||||
|
Selling, general and administrative expenses
|
325,453 | 343,392 | 313,366 | 260,201 | 232,935 | |||||||||||||||
|
Goodwill impairment
|
— | 30,090 | — | — | — | |||||||||||||||
|
Restructuring expenses
|
12,079 | 17,995 | — | — | — | |||||||||||||||
|
Operating income
|
184,854 | 205,956 | 252,795 | 213,971 | 182,690 | |||||||||||||||
|
Other income — net
|
1,151 | 5,123 | 3,434 | 1,040 | 557 | |||||||||||||||
|
Interest expense
|
17,178 | 18,852 | 23,353 | 16,353 | 14,370 | |||||||||||||||
|
Provision for income taxes
|
55,436 | 65,201 | 78,457 | 67,038 | 59,215 | |||||||||||||||
|
Income from continuing operations
|
113,391 | 127,026 | 154,419 | 131,620 | 109,662 | |||||||||||||||
|
Income/(loss) from discontinued
operations-net
of tax
|
— | — | (719 | ) | 12,949 | 1,228 | ||||||||||||||
|
Net income
|
113,391 | 127,026 | 153,700 | 144,569 | 110,890 | |||||||||||||||
|
FINANCIAL POSITION
|
||||||||||||||||||||
|
Current assets
|
$ | 451,712 | $ | 480,688 | $ | 617,622 | $ | 400,724 | $ | 336,250 | ||||||||||
|
Current liabilities
|
189,682 | 219,869 | 198,953 | 187,252 | 153,296 | |||||||||||||||
|
Working capital
|
262,030 | 260,819 | 418,669 | 213,472 | 182,954 | |||||||||||||||
|
Current ratio
|
2.4 | 2.2 | 3.1 | 2.1 | 2.2 | |||||||||||||||
|
Capital expenditures
|
25,525 | 28,358 | 26,496 | 21,198 | 22,532 | |||||||||||||||
|
Depreciation and amortization
|
56,346 | 48,599 | 38,038 | 29,956 | 26,254 | |||||||||||||||
|
Total assets
|
2,098,157 | 2,151,800 | 1,970,078 | 1,653,637 | 1,229,459 | |||||||||||||||
|
Total borrowings
|
400,100 | 554,000 | 454,731 | 361,980 | 160,043 | |||||||||||||||
|
Shareholders’ equity
|
1,268,104 | 1,144,783 | 1,143,207 | 962,088 | 808,289 | |||||||||||||||
|
PERFORMANCE MEASURES
|
||||||||||||||||||||
|
Percent of net sales:
|
||||||||||||||||||||
|
Gross profit
|
39.3 | % | 40.1 | % | 41.7 | % | 41.0 | % | 41.1 | % | ||||||||||
|
SG&A expenses
|
24.5 | 23.1 | 23.1 | 22.5 | 23.0 | |||||||||||||||
|
Operating income
|
13.9 | 13.8 | 18.6 | 18.5 | 18.1 | |||||||||||||||
|
Income before income taxes
|
12.7 | 12.9 | 17.1 | 17.2 | 16.7 | |||||||||||||||
|
Income from continuing operations
|
8.5 | 8.5 | 11.4 | 11.4 | 10.8 | |||||||||||||||
|
Effective tax rate
|
32.8 | 33.9 | 33.7 | 33.7 | 35.1 | |||||||||||||||
|
Return on average assets(3)
|
5.3 | 6.2 | 8.5 | 9.1 | 9.1 | |||||||||||||||
|
Borrowings as a percent of capitalization
|
24.0 | 32.6 | 28.5 | 27.3 | 16.5 | |||||||||||||||
|
Return on average shareholders’ equity(3)
|
9.4 | 11.1 | 14.7 | 14.9 | 14.6 | |||||||||||||||
|
PER SHARE DATA(4)(5)
|
||||||||||||||||||||
|
Basic
|
||||||||||||||||||||
|
— income from continuing operations
|
$ | 1.41 | $ | 1.55 | $ | 1.90 | $ | 1.65 | $ | 1.41 | ||||||||||
|
— net income
|
1.41 | 1.55 | 1.89 | 1.81 | 1.43 | |||||||||||||||
|
Diluted
|
||||||||||||||||||||
|
— income from continuing operations
|
1.40 | 1.53 | 1.88 | 1.62 | 1.39 | |||||||||||||||
|
— net income
|
1.40 | 1.53 | 1.87 | 1.78 | 1.40 | |||||||||||||||
|
Cash dividends declared
|
.48 | .48 | .48 | .40 | .32 | |||||||||||||||
|
Shareholders’ equity
|
15.66 | 14.26 | 14.01 | 11.94 | 10.21 | |||||||||||||||
|
Stock price
|
||||||||||||||||||||
|
— high
|
32.85 | 40.75 | 44.99 | 35.65 | 30.22 | |||||||||||||||
|
— low
|
16.67 | 17.70 | 30.41 | 26.00 | 24.33 | |||||||||||||||
|
— close
|
31.15 | 24.15 | 36.13 | 31.61 | 27.41 | |||||||||||||||
|
Price/earnings ratio at year end
|
22 | 16 | 19 | 20 | 20 | |||||||||||||||
|
Other Data
|
||||||||||||||||||||
|
Employees at year end
|
5,300 | 5,813 | 5,009 | 4,863 | 4,263 | |||||||||||||||
|
Shareholders at year end
|
7,000 | 7,000 | 7,000 | 6,700 | 6,700 | |||||||||||||||
|
Shares outstanding (in 000s)(4):
|
||||||||||||||||||||
|
Weighted average
|
||||||||||||||||||||
|
— basic
|
79,716 | 81,123 | 80,666 | 79,527 | 77,088 | |||||||||||||||
|
— diluted
|
80,727 | 82,320 | 82,086 | 80,976 | 79,080 | |||||||||||||||
|
At year end (net of treasury)
|
80,970 | 80,302 | 81,579 | 80,546 | 79,191 | |||||||||||||||
| (1) | For additional detail, see Notes to Consolidated Financial Statements in Part II. Item 8. Financial Statements and Supplementary Data. | |
| (2) | Certain prior year amounts have been restated to reflect the Last-In-First-Out (LIFO) to First-In-First-Out (FIFO) inventory costing change. | |
| (3) | Return calculated based on income from continuing operations. | |
| (4) | All share and per share data has been restated to reflect the three-for-two stock splits effected in the form of a 50% stock dividend in May of 2007. | |
| (5) | Adjusted to reflect the accounting guidance provided in ASC 260, “Earnings Per Share”. |
13
Table of Contents
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Cautionary
Statement Under the Private Securities Litigation Reform
Act
The “Liquidity and Capital Resources” section of this
management’s discussion and analysis of our operations
contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act of 1934, as amended. These
statements may relate to, among other things, capital
expenditures, cost reductions, cash flow, and operating
improvements and are indicated by words or phrases such as
“anticipate,” “estimate,” “plans,”
“expects,” “projects,” “should,”
“will,” “management believes,” “the
Company believes,” “we believe,” “the
Company intends” and similar words or phrases. These
statements are subject to inherent uncertainties and risks that
could cause actual results to differ materially from those
anticipated at the date of this filing. The risks and
uncertainties include, but are not limited to, the following:
economic and political consequences resulting from terrorist
attacks and wars; levels of industrial activity and economic
conditions in the U.S. and other countries around the
world; pricing pressures and other competitive factors, and
levels of capital spending in certain industries — all
of which could have a material impact on our order rates and
results, particularly in light of the low levels of order
backlogs we typically maintain; our ability to make acquisitions
and to integrate and operate acquired businesses on a profitable
basis; the relationship of the U.S. dollar to other
currencies and its impact on pricing and cost competitiveness;
political and economic conditions in foreign countries in which
we operate; interest rates; capacity utilization and the effect
this has on costs; labor markets; market conditions and material
costs; and developments with respect to contingencies, such as
litigation and environmental matters. The forward-looking
statements included here are only made as of the date of this
report, and we undertake no obligation to publicly update them
to reflect subsequent events or circumstances. Investors are
cautioned not to rely unduly on forward-looking statements when
evaluating the information presented here.
Historical
Overview
IDEX Corporation is an applied solutions company specializing in
fluid and metering technologies, health and science
technologies, dispensing equipment, and fire, safety and other
diversified products built to its customers’
specifications. Our products are sold in niche markets to a wide
range of industries throughout the world. Accordingly, our
businesses are affected by levels of industrial activity and
economic conditions in the U.S. and in other countries
where we do business and by the relationship of the
U.S. dollar to other currencies. Levels of capacity
utilization and capital spending in certain industries and
overall industrial activity are among the factors that influence
the demand for our products.
The Company consists of four reporting
segments: Fluid & Metering Technologies,
Health & Science Technologies, Dispensing Equipment
and Fire & Safety/Diversified Products.
The Fluid & Metering Technologies Segment designs,
produces and distributes positive displacement pumps, flow
meters, injectors, and other fluid-handling pump modules and
systems and provides flow monitoring and other services for
water and wastewater. The Health & Science
Technologies Segment designs, produces and distributes a wide
range of precision fluidics solutions, including very high
precision, low-flow rate pumping solutions required in
analytical instrumentation, clinical diagnostics and drug
discovery, high performance molded and extruded, biocompatible
medical devices and implantables, air compressors used in
medical, dental and industrial applications, and precision gear
and peristaltic pump technologies that meet exacting OEM
specifications. The Dispensing Equipment Segment produces
precision equipment for dispensing, metering and mixing
colorants, paints, and hair colorants and other personal care
products used in a variety of retail and commercial businesses
around the world. The Fire & Safety/Diversified
Products Segment produces firefighting pumps and controls,
rescue tools, lifting bags and other components and systems for
the fire and rescue industry, and engineered stainless steel
banding and clamping devices used in a variety of industrial and
commercial applications.
Results
of Operations
On July 1, 2009 the Financial Accounting Standards Board
(“FASB”) ASC became the authoritative source of
accounting principals to be applied to financial statements
prepared in accordance with accounting principles generally
accepted in the U.S. In accordance with the ASC, citations
to accounting literature in this report are to the relevant
topic of the ASC or are presented in plain English.
14
Table of Contents
The following is a discussion and analysis of our financial
position and results of operations for each of the three years
in the period ended December 31, 2009. For purposes of this
discussion and analysis section, reference is made to the table
on page 17 and the Consolidated Statements of Operations in
Part II. Item 8. Financial Statements and
Supplementary Data on page 28. We changed our method of
accounting for inventory from the LIFO method to the FIFO method
effective January 1, 2009 and applied this change in
accounting principle retrospectively to all prior periods
presented herein (see Note 2 in Part II. Item 8.
Financial Statements and Supplementary Data).
Performance
in 2009 Compared with 2008
Sales in 2009 of $1,329.7 million were 11% lower than the
$1,489.5 million recorded a year ago. This decrease
reflects a 14% decrease in organic sales and 2% unfavorable
foreign currency translation, partially offset by a 5% increase
from four acquisitions (Richter — October 2008,
iPEK — October 2008, IETG — October 2008 and
Semrock — October 2008). Organic sales decreased in
all four of the Company’s reporting segments. Domestic
organic sales were down 13% versus the prior year, while
international organic sales were down 15% in 2009. Sales to
customers outside the U.S. represented 47% of total sales
in both 2009 and 2008.
In 2009, Fluid & Metering Technologies contributed 48%
of sales and 44% of operating income; Health & Science
Technologies accounted for 23% of both sales and operating
income; Dispensing Equipment accounted for 9% of sales and 7% of
operating income; and Fire & Safety/Diversified
Products represented 20% of sales and 26% of operating income.
Fluid & Metering Technologies sales of
$641.1 million in 2009 decreased $56.6 million, or 8%,
compared with 2008. This reflects a 16% decline in organic sales
and 1% of unfavorable foreign currency translation, partially
offset by a 9% increase for acquisitions (Richter, iPEK and
IETG). The decrease in organic growth was driven by weakness in
chemical, energy, water and wastewater markets. In 2009, organic
sales declined approximately 16% both domestically and
internationally. Sales to customers outside the U.S. were
approximately 46% of total segment sales in 2009 and 41% in 2008.
Health & Science Technologies sales of
$304.3 million decreased $27.3 million, or 8%, in 2009
compared with last year. This change represents a 12% decrease
in organic volume and 1% unfavorable foreign currency
translation, partially offset by a 5% increase from the
acquisition of Semrock. The decrease in organic sales reflects
market softness in both core and non-core Health &
Science Technologies businesses. In 2009, organic sales
decreased 13% domestically and 10% internationally. Sales to
customers outside the U.S. were approximately 39% of total
segment sales in both 2009 and 2008.
Dispensing Equipment sales of $127.3 million decreased
$36.6 million, or 22%, in 2009 compared with the prior
year. Organic sales decreased 18%, while foreign currency
translation accounted for 4% of the decrease. The decrease in
organic growth was due to continued deterioration in capital
spending in the European and North American markets.
Organic domestic sales increased 8% compared with 2008, while
organic international sales decreased 27%. Sales to customers
outside the U.S. were 64% of total segment sales in 2009,
down from 74% in 2008.
Fire & Safety/Diversified Products sales of
$262.8 million decreased $37.7 million, or 13%, in
2009 compared with 2008. Organic sales activity decreased 9%,
while foreign currency translation accounted for 4% of the
decrease. The decrease in organic business growth was driven by
lower demand for engineered band clamping systems and lower
levels of municipal spending. In 2009, organic sales decreased
12% domestically and 7% internationally. Sales to customers
outside the U.S. were 53% of total segment sales in 2009
and 54% in 2008.
Gross profit of $522.4 million in 2009 was
$75.0 million, or 13%, lower than 2008. As a percent of
sales, gross profit was 39.3% in 2009, which represented an 80
basis-point decrease from 40.1% in 2008. The decrease in gross
margin primarily reflects lower volume and product mix.
Selling, general and administrative (SG&A) expenses
decreased to $325.5 million in 2009 from
$343.4 million in 2008. The $17.9 million decrease
reflects approximately $40.7 million for restructuring
related savings and volume related expenses, partially offset by
a $22.8 million increase for incremental costs associated
with recently acquired businesses. As a percent of net sales,
SG&A expenses were 24.5% for 2009 and 23.1% in 2008.
15
Table of Contents
In 2009, the Company concluded that the fair value of each of
its reporting units was in excess of its carrying value as of
October 31, 2009, and thus no goodwill impairment was
identified. However, a 10% decrease in fair value of the Banjo
or the Water reporting units within the Fluid &
Metering Technologies Segment could potentially result in a
goodwill impairment charge at these reporting units. The total
goodwill balance for these two reporting units as of
October 31, 2009 was $288.7 million. In 2008, the
Company recorded a goodwill impairment charge of
$30.1 million. The Company concluded in accordance with ASC
350 that events had occurred and circumstances had changed which
required the Company to perform an interim period goodwill
impairment test at Fluid Management, a reporting unit within the
Company’s Dispensing Equipment Segment. Fluid Management
had experienced a downturn in capital spending by its customer
base and the loss of market share. The Company performed an
impairment test and compared the fair value of the reporting
unit to its carrying value. It was determined that the fair
value of Fluid Management was less than the carrying value of
the net assets. The excess of the fair value of the reporting
unit over the amounts assigned to its assets and liabilities is
the implied fair value of goodwill. The Company’s analysis
resulted in an implied fair value of goodwill of
$21.2 million.
In 2009 and 2008, the Company recorded pre-tax restructuring
expenses totaling $12.1 million and $18.0 million,
respectively, for employee severance related to employee
reductions across various functional areas and facility closures
resulting from the Company’s cost savings initiatives.
These initiatives included severance benefits for
478 employees in 2009 and 380 in 2008. The Company is
anticipating the employee reductions to be completed by mid 2010
with an expected additional total cost of $4.0 —
$5.0 million in 2010, with severance payments expected to
be fully paid by the end of 2011 using cash from operations.
Operating income decreased $21.1 million, or 10%, to
$184.9 million in 2009 from $206.0 million in 2008.
This decrease primarily reflects a decrease in volume, partially
offset by the goodwill impairment charge in 2008 and the impact
from acquisitions. Operating margins in 2009 were 13.9% of sales
compared with 13.8% recorded in 2008.
In the Fluid & Metering Technologies Segment,
operating income of $100.3 million and operating margins of
15.6% in 2009 were down from the $123.8 million and 17.7%
recorded in 2008 principally due to lower sales. In the
Health & Science Technologies Segment, operating
income of $51.7 million and operating margins of 17.0% in
2009 were down from the $58.3 million and 17.6% recorded in
2008 due to lower volume. In the Dispensing Equipment Segment,
operating income of $15.1 million and operating margins of
11.9% in 2009 were up from the $10.7 million of operating
loss recorded in 2008, due to the goodwill impairment charge in
2008, partially offset by continued deterioration in the North
American and European markets. Operating income and operating
margins in the Fire & Safety/Diversified Products
Segment of $59.9 million and 22.8%, respectively, were
lower than the $74.3 million and 24.7% recorded in 2008,
due primarily to lower volume and unfavorable product mix.
16
Table of Contents
Company
and Business Segment Financial Information
| For the Years Ended December 31,(1) | ||||||||||||
| 2009 | 2008(6) | 2007(6) | ||||||||||
| (In thousands) | ||||||||||||
|
Fluid & Metering Technologies
|
||||||||||||
|
Net sales(2)
|
$ | 641,108 | $ | 697,702 | $ | 570,307 | ||||||
|
Operating income(3)
|
100,289 | 123,801 | 119,060 | |||||||||
|
Operating margin(3)
|
15.6 | % | 17.7 | % | 20.9 | % | ||||||
|
Identifiable assets
|
$ | 1,043,082 | $ | 1,070,348 | $ | 698,286 | ||||||
|
Depreciation and amortization
|
32,584 | 26,276 | 16,797 | |||||||||
|
Capital expenditures
|
12,867 | 13,859 | 11,407 | |||||||||
|
Health & Science Technologies
|
||||||||||||
|
Net sales(2)
|
$ | 304,329 | $ | 331,591 | $ | 327,170 | ||||||
|
Operating income(3)
|
51,712 | 58,297 | 61,473 | |||||||||
|
Operating margin(3)
|
17.0 | % | 17.6 | % | 18.8 | % | ||||||
|
Identifiable assets
|
$ | 567,096 | $ | 594,459 | $ | 542,427 | ||||||
|
Depreciation and amortization
|
14,293 | 11,806 | 11,156 | |||||||||
|
Capital expenditures
|
6,365 | 5,365 | 5,342 | |||||||||
|
Dispensing Equipment
|
||||||||||||
|
Net sales(2)
|
$ | 127,279 | $ | 163,861 | $ | 177,948 | ||||||
|
Operating income (loss)(3)(4)
|
15,147 | (10,748 | ) | 39,179 | ||||||||
|
Operating margin(3)(4)
|
11.9 | % | (6.6 | )% | 22.0 | % | ||||||
|
Identifiable assets
|
$ | 164,979 | $ | 179,800 | $ | 236,751 | ||||||
|
Depreciation and amortization
|
3,124 | 3,986 | 3,151 | |||||||||
|
Capital expenditures
|
864 | 2,528 | 2,832 | |||||||||
|
Fire & Safety/Diversified Products
|
||||||||||||
|
Net sales(2)
|
$ | 262,809 | $ | 300,462 | $ | 288,424 | ||||||
|
Operating income(3)
|
59,884 | 74,310 | 66,287 | |||||||||
|
Operating margin(3)
|
22.8 | % | 24.7 | % | 23.0 | % | ||||||
|
Identifiable assets
|
$ | 285,893 | $ | 286,482 | $ | 312,603 | ||||||
|
Depreciation and amortization
|
5,328 | 5,288 | 5,676 | |||||||||
|
Capital expenditures
|
3,686 | 4,743 | 3,532 | |||||||||
|
Company
|
||||||||||||
|
Net sales
|
$ | 1,329,661 | $ | 1,489,471 | $ | 1,358,631 | ||||||
|
Operating income
|
184,854 | 205,956 | 252,795 | |||||||||
|
Operating margin
|
13.9 | % | 13.8 | % | 18.6 | % | ||||||
|
Total assets
|
$ | 2,098,157 | $ | 2,151,800 | $ | 1,970,078 | ||||||
|
Depreciation and amortization(5)
|
56,346 | 48,599 | 38,038 | |||||||||
|
Capital expenditures
|
25,525 | 28,358 | 26,496 | |||||||||
| (1) | Data includes acquisition of IETG (October 2008), iPEK (October 2008), Richter (October 2008), ADS (January 2008), Quadro (June 2007), Faure Herman (February 2007), in the Fluid & Metering Technologies Segment and Semrock (October 2008), Isolation Technologies (October 2007), in the Health & Science Technologies Segment from the date of acquisition. | |
| (2) | Segment net sales include intersegment sales. | |
| (3) | Segment operating income excludes unallocated corporate operating expenses. | |
| (4) | Segment operating income includes $30.1 million goodwill impairment charge in 2008 for Fluid Management. | |
| (5) | Excludes amortization of debt issuance expenses. | |
| (6) | Certain prior year amounts have been restated to reflect the LIFO to FIFO inventory costing change. |
17
Table of Contents
Other income of $1.2 million in 2009 was $3.9 million
lower than the $5.1 million in 2008, due to unfavorable
foreign currency translation and lower interest income.
Interest expense decreased to $17.2 million in 2009 from
$18.9 million in 2008. The decrease was due to a lower
interest rate environment, the retirement of the
$150.0 million senior notes to a lower interest rate in
February 2008 and the conversion of $350.0 million
floating-rate debt into fixed-rates.
The provision for income taxes decreased to $55.4 million
in 2009 from $65.2 million in 2008. The effective tax rate
decreased to 32.8% in 2009 from 33.9% in 2008, due to changes in
the mix of global pre-tax income among taxing jurisdictions.
Net income for 2009 was $113.4 million, 11% lower than the
$127.0 million earned in the same period of 2008. Diluted
earnings per share in 2009 of $1.40 decreased $0.13, or 8%,
compared with the same period last year.
Performance
in 2008 Compared with 2007
Sales in 2008 of $1,489.5 million were 10% higher than the
$1,358.6 million recorded in 2007. Seven acquisitions
(Quadro — June 2007, Isolation
Technologies — October 2007, ADS — January
2008, Richter — October 2008, iPEK — October
2008, IETG — October 2008 and Semrock —
October 2008) completed since 2007 accounted for an
improvement of 9%, foreign currency translation accounted for
1%, while organic sales were flat. Organic sales increased in
the Fluid & Metering Technologies and Fire &
Safety/Diversified Products segments, but were down in the
Health & Science Technologies and Dispensing Equipment
segments. Domestic organic sales were down 3% versus the prior
year, while international organic sales were up 4% over the
prior year. Sales to customers outside the U.S. represented
47% of total sales in 2008 and 46% in 2007.
In 2008, Fluid & Metering Technologies contributed 47%
of sales and 50% of operating income; Health & Science
Technologies accounted for 22% of sales and 24% of operating
income; Dispensing Equipment accounted for 11% of sales and (4)%
of operating income; and Fire & Safety/Diversified
Products represented 20% of sales and 30% of operating income.
Fluid & Metering Technologies sales of
$697.7 million in 2008 rose $127.4 million, or 22%,
compared with 2007. The acquisition of Quadro, ADS, Richter,
iPEK and IETG accounted for 18% of the increase, while organic
growth increased 4%. In 2008, organic sales grew approximately
2% domestically and 6% internationally. Sales to customers
outside the U.S. were approximately 41% of total segment
sales in 2008 and 42% in 2007.
Health & Science Technologies sales of
$331.6 million increased $4.4 million, or 1%, in 2008
compared with last year. The acquisition of Isolation
Technologies and Semrock accounted for 4% of the increase
partially offset by a 3% decrease in organic volume. In 2008,
organic sales decreased 2% domestically and 5% internationally.
Sales to customers outside the U.S. were approximately 39%
of total segment sales in 2008 and 2007.
Dispensing Equipment sales of $163.9 million decreased
$14.1 million, or 8%, in 2008 compared with the prior year.
Organic sales decreased 13%, while foreign currency translation
accounted for an increase of 5%. Organic domestic sales
decreased 35% compared with 2007, while organic international
sales were essentially flat. Sales to customers outside the
U.S. were 74% of total segment sales in 2008, up from 63%
in 2007.
Fire & Safety/Diversified Products sales of
$300.5 million increased $12.0 million, or 4%, in 2008
compared with 2007. Organic sales activity increased 3%, while
foreign currency translation accounted for 1%. In 2008, organic
sales decreased 4% domestically, while organic international
sales increased 11%. Sales to customers outside the
U.S. were 54% of total segment sales in 2008 and 49% in
2007.
Gross profit of $597.4 million in 2008 was
$31.3 million, or 6%, higher than 2007. As a percent of
sales, gross profit was 40.1% in 2008, which represented a 160
basis-point decrease from 41.7% in 2007. The decrease in gross
margin primarily reflects product mix, inventory fair value
expense, higher material costs and the effect from recent
acquisitions.
SG&A expenses increased to $343.4 million in 2008 from
$313.4 million in 2007. This increase primarily relates to
our recent acquisitions. As a percent of net sales, SG&A
expenses were 23.1% for both 2008 and 2007.
18
Table of Contents
In 2008 the Company recorded a goodwill impairment charge of
$30.1 million. The Company concluded in accordance with ASC
350 that events had occurred and circumstances had changed which
required the Company to perform an interim period goodwill
impairment test at Fluid Management, a reporting unit within the
Company’s Dispensing Equipment Segment. Fluid Management
had experienced a downturn in capital spending by its customer
base and the loss of market share. The Company performed an
impairment test and compared the fair value of the reporting
unit to its carrying value. It was determined that the fair
value of Fluid Management was less than the carrying value of
the net assets. The excess of the fair value of the reporting
unit over the amounts assigned to its assets and liabilities is
the implied fair value of goodwill. The Company’s analysis
resulted in an implied fair value of goodwill of
$21.2 million.
In October 2008, the date of our annual impairment test, the
Company updated certain forecasts to reflect, among other
things, the global economic downturn and other considerations.
Because of these changes in circumstances, as of
December 31, 2008 the Company reassessed the likelihood of
any further impairment of our reporting units. No goodwill
impairments were identified. However, further changes in our
forecasts or changes in key assumptions could cause book values
of certain reporting units to exceed their fair values which
could have resulted in goodwill impairment charges in future
periods. Except for two of our reporting units within the
Fluid & Metering Technologies segment, a 10% decrease
in the fair value of our reporting units did not result in
goodwill impairment based on carrying values at
December 31, 2008. The two reporting units which could have
potentially resulted in a goodwill impairment if a 10% decrease
in fair value were realized had a total goodwill balance of
$204.2 million.
In 2008, the Company recorded pre-tax restructuring expenses
totaling $18.0 million. These restructuring expenses were
related to the Company’s restructuring program, which
includes the previously announced cessation of manufacturing
operations in its Dispensing Equipment segment’s Milan,
Italy facility. The expenses recorded in 2008 included costs
related to involuntary terminations and other direct costs
associated with implementing these initiatives.
Operating income decreased $46.8 million, or 19%, to
$206.0 million in 2008 from $252.8 million in 2007.
This decrease consists of $18.0 million for
restructuring-related charges, $30.1 million for a goodwill
impairment charge, $10.6 million from the effect of the
2008 acquisitions and $4.1 million for the acquisition
related inventory fair value expense, partially offset by
$16.0 million in savings attributable to strategic sourcing
and other operational excellence initiatives. Operating margins
in 2008 were 13.8% of sales compared with 18.6% in 2007. The
decrease in operating margins was primarily due to the impact of
the restructuring-related and goodwill impairment charges, as
well as expenses associated with recent acquisitions, partially
offset by an increase in volume.
In the Fluid & Metering Technologies Segment,
operating income of $123.8 million in 2008 was up from the
$119.1 million recorded in 2007 principally due to
increased volume, partially offset by the restructuring-related
charges. Operating margins for Fluid & Metering
Technologies of 17.7% in 2008 were down from 20.9% in 2007,
primarily due to the impact of acquisitions and the
restructuring-related charges. In the Health & Science
Technologies Segment, operating income of $58.3 million and
operating margins of 17.6% in 2008 were down from the
$61.5 million and 18.8% recorded in 2007, principally due
to recent acquisitions and the restructuring-related charges. In
the Dispensing Equipment Segment, an operating loss of
$10.7 million and operating margins of (6.6)% in 2008 were
down from the $39.2 million and 22.0% recorded in 2007, due
to lower volume as a result of continued deterioration in
capital spending for both North American and European markets,
the restructuring-related and goodwill impairment charges and
selective material cost increases. Operating income and
operating margins in the Fire & Safety/Diversified
Products Segment of $74.3 million and 24.7%, respectively,
were higher than the $66.3 million and 23.0% recorded in
2007, due primarily to favorable product mix, partially offset
by restructuring-related charges.
Other income of $5.1 million in 2008 was $1.7 million
higher than the $3.4 million in 2007, due to favorable
foreign currency translation and higher interest income.
Interest expense decreased to $18.9 million in 2008 from
$23.4 million in 2007. The decrease was due to a lower
interest rate environment, the retirement of the
$150.0 million senior notes to a lower interest rate and
the conversion of floating-rate debt into fixed-rate debt.
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Table of Contents
The provision for income taxes decreased to $65.2 million
in 2008 from $78.5 million in 2007. The effective tax rate
increased to 33.9% in 2008 from 33.7% in 2007, due to changes in
the mix of global pre-tax income among taxing jurisdictions.
Income from continuing operations in 2008 was
$127.0 million, 18% lower than the $154.4 million
earned in 2007. Diluted earnings per share from continuing
operations in 2008 of $1.53 decreased $0.35, or 19%, compared
with the same period of 2007.
Loss from discontinued operations in 2007 was $0.7 million
or $0.01 per share, which resulted from the operations for
Halox. The 2007 loss includes $0.7 million loss from
operations and a $0.1 million loss from the sale of Halox,
offset by a $0.1 million income adjustment from the sale of
Lubriquip.
Net income for 2008 was $127.0 million, 17% lower than the
$153.7 million earned in the same period of 2007. Diluted
earnings per share in 2008 of $1.53 decreased $0.34, or 18%,
compared with the same period last year.
Liquidity
and Capital Resources
At December 31, 2009, working capital was
$262.0 million and the Company’s current ratio was 2.4
to 1. Cash flows from operating activities decreased
$10.5 million, or 5%, to $212.5 million in 2009.
Cash flows from operations were more than adequate to fund
capital expenditures of $25.5 million and
$28.4 million in 2009 and 2008, respectively. Capital
expenditures were generally for machinery and equipment that
improved productivity and tooling to support the global sourcing
initiatives, although a portion was for business system
technology and replacement of equipment and facilities.
Management believes that the Company has ample capacity in its
plants and equipment to meet expected needs for future growth in
the intermediate term.
The Company acquired ADS in January 2008 for cash consideration
of $156.1 million, Richter in October 2008 for cash
consideration of $93.3 million and the assumption of
approximately $8.7 million in debt related items, iPEK in
October 2008 for cash consideration of $43.1 million and
the assumption of approximately $1.4 million in debt
related items, IETG in October 2008 for cash consideration of
$35.0 million and the assumption of approximately
$1.9 million in debt related items, Semrock in October 2008
for cash consideration of $60.6 million and Innovadyne
Technologies, Inc (“Innovadyne”) for cash
consideration of $3.3 million. Approximately
$155.0 million of the cash payment for ADS was financed by
borrowings under the Company’s credit facility, of which
$140.0 million was reflected as restricted cash at
December 31, 2007. Approximately $63.7 million,
$33.2 million, $20.5 million, $60.0 million and
$3.3 million of the cash payments for the acquisitions of
Richter, iPEK, IETG, Semrock and Innovadyne, respectively, were
financed by borrowings under the Company’s credit facility.
The Company maintains a $600.0 million unsecured domestic,
multi-currency bank revolving credit facility (“Credit
Facility”), which expires on December 21, 2011. At
December 31, 2009 there was $298.7 million outstanding
under the Credit Facility and outstanding letters of credit
totaled approximately $7.1 million. The net available
borrowing under the Credit Facility as of December 31,
2009, was approximately $294.2 million. Interest is payable
quarterly on the outstanding borrowings at the bank agent’s
reference rate. Interest on borrowings based on LIBOR plus an
applicable margin is payable on the maturity date of the
borrowing, or quarterly from the effective date for borrowings
exceeding three months. The applicable margin is based on the
Company’s senior, unsecured, long-term debt rating and can
range from 24 basis points to 50 basis points. Based
on the Company’s BBB rating at December 31, 2009, the
applicable margin was 40 basis points. An annual Credit
Facility fee, also based on the Company’s credit rating, is
currently 10 basis points and is payable quarterly.
At December 31, 2009 the Company had one interest rate
exchange agreement related to the Credit Facility. The interest
rate exchange agreement, expiring in January 2011, effectively
converted $250.0 million of floating-rate debt into
fixed-rate debt at an interest rate of 3.25%. The fixed rate
noted above is comprised of the fixed rate on the interest rate
exchange agreement and the Company’s current margin of
40 basis points on the Credit Facility.
There are two financial covenants that the Company is required
to maintain in connection with the Credit Facility and Term
Loan. As defined in the agreement, the minimum interest coverage
ratio (operating cash flow to
20
Table of Contents
interest) is 3.0 to 1 and the maximum leverage ratio
(outstanding debt to operating cash flow) is 3.25 to 1. At
December 31, 2009, the Company was in compliance with both
of these financial covenants.
On April 18, 2008, the Company completed a
$100.0 million unsecured senior bank term loan agreement
(“Term Loan”), with covenants consistent with the
existing Credit Facility and a maturity on December 21,
2011. At December 31, 2009, there was $95.0 million
outstanding under the Term Loan with $5.0 million included
within short term borrowings. Interest under the Term Loan is
based on the bank agent’s reference rate or LIBOR plus an
applicable margin and is payable at the end of the selected
interest period, but at least quarterly. The applicable margin
is based on the Company’s senior, unsecured, long-term debt
rating and can range from 45 to 100 basis points. Based on
the Company’s current debt rating, the applicable margin is
80 basis points. The Term Loan requires repayments of
$5.0 million and $7.5 million in April of 2010 and
2011, respectively, with the remaining balance due on
December 21, 2011. The Company used the proceeds from the
Term Loan to pay down existing debt outstanding under the Credit
Facility. The Company currently maintains an interest rate
exchange agreement related to the Term Loan which expires in
December 2011. With a current notional amount of
$95.0 million, the agreement effectively converted
$100.0 million of floating-rate debt into fixed-rate debt
at an interest rate of 4.00%. The fixed rate is comprised of the
fixed rate on the interest rate exchange agreement and the
Company’s current margin of 80 basis points on the
Term Loan.
On April 21, 2008, the Company’s Board of Directors
authorized the repurchase of up to $125.0 million of its
outstanding common shares. Repurchases under the new program
will be funded with cash flow generation, and made from time to
time in either the open market or through private transactions.
The timing, volume, and nature of share repurchases will be at
the discretion of management, dependent on market conditions,
other priorities for cash investment, applicable securities
laws, and other factors, and may be suspended or discontinued at
any time. In 2008, 2.3 million shares were purchased at a
cost of $50.0 million; no shares were purchased in 2009.
Despite the downturn in global financial markets during 2008 and
2009, the Company has not experienced any liquidity issues and
we continue to expect that our current liquidity,
notwithstanding these adverse market conditions, will be
sufficient to meet our operating requirements, interest on all
borrowings, required debt repayments, any authorized share
repurchases, planned capital expenditures, and annual dividend
payments to holders of common stock during the next twelve
months. In the event that suitable businesses are available for
acquisition upon terms acceptable to the Board of Directors, we
may obtain all or a portion of the financing for the
acquisitions through the incurrence of additional long-term
borrowings. However, in light of recent adverse events in global
financial and economic conditions, we cannot be certain that
additional financing will be available on satisfactory terms, if
at all.
Contractual
Obligations, Commitments and Off-Balance Sheet
Arrangements
Our contractual obligations and commercial commitments include
pension and postretirement medical benefit plans, rental
payments under operating leases, payments under capital leases,
and other long-term obligations arising in the ordinary course
of business. There are no identifiable events or uncertainties,
including the lowering of our credit rating that would
accelerate payment or maturity of any of these commitments or
obligations.
The following table summarizes our significant contractual
obligations and commercial commitments at December 31,
2009, and the future periods in which such obligations are
expected to be settled in cash. In addition, the table reflects
the timing of principal and interest payments on outstanding
borrowings. Additional detail
21
Table of Contents
regarding these obligations is provided in the Notes to
Consolidated Financial Statements in Part II. Item 8.
Financial Statements and Supplementary Data, as referenced in
the table:
|
Less
|
More
|
|||||||||||||||||||
|
Than
|
1-3
|
3-5
|
Than
|
|||||||||||||||||
|
Payments Due by Period
|
Total | 1 Year | Years | Years | 5 Years | |||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Borrowings (Note 6)(1)
|
$ | 415,918 | $ | 20,949 | $ | 394,969 | $ | — | $ | — | ||||||||||
|
Interest rate exchange agreements
|
10,497 | — | 10,497 | — | — | |||||||||||||||
|
Operating lease commitments (Note 9)
|
33,181 | 8,582 | 10,458 | 5,273 | 8,868 | |||||||||||||||
|
Capital lease obligations(2)
|
3,965 | 587 | 780 | 780 | 1,818 | |||||||||||||||
|
Purchase obligations(3)
|
71,404 | 66,070 | 5,221 | 113 | — | |||||||||||||||
|
Pension obligations
|
91,600 | 7,700 | 16,700 | 18,500 | 48,700 | |||||||||||||||
|
Income tax obligations (ASC 740)(4)
|
5,285 | 283 | 2,949 | 389 | 1,664 | |||||||||||||||
|
Total contractual obligations(5)
|
$ | 631,850 | $ | 104,171 | $ | 441,574 | $ | 25,055 | $ | 61,050 | ||||||||||
| (1) | Includes interest payments based on contractual terms and current interest rates for variable debt. | |
| (2) | Comprised primarily of property leases. | |
| (3) | Comprised primarily of inventory commitments. | |
| (4) | Excludes interest and penalties. | |
| (5) | Comprised of liabilities recorded on the balance sheet of $477,236, and obligations not recorded on the balance sheet of $154,614. |
Critical
Accounting Policies
We believe that the application of the following accounting
policies, which are important to our financial position and
results of operations, requires significant judgments and
estimates on the part of management. For a summary of all of our
accounting policies, including the accounting policies discussed
below, see Note 1 of the Notes to Consolidated Financial
Statements in Part II. Item 8. Financial Statements
and Supplementary Data.
Revenue recognition
— The Company
recognizes revenue when persuasive evidence of an arrangement
exists, delivery has occurred, the sales price is fixed or
determinable, and collectibility of the sales price is
reasonably assured. For product sales, delivery does not occur
until the products have been shipped and risk of loss has been
transferred to the customer. Revenue from services is recognized
when the services are provided or ratably over the contract
term. Some arrangements with customers may include multiple
deliverables, including the combination of products and
services. In such cases, the Company has identified these as
separate elements in accordance with ASC
985-65-25
“Revenue Recognition-Multiple-Element
Arrangements-Recognition” and recognizes revenue consistent
with the policy for each separate element based on the fair
value of each accounting unit. Revenues from certain long-term
contracts are recognized on the
percentage-of-completion
method.
Percentage-of-completion
is measured principally by the percentage of costs incurred to
date for each contract to the estimated total costs for such
contract at completion. Provisions for estimated losses on
uncompleted long-term contracts are made in the period in which
such losses are determined. Due to uncertainties inherent in the
estimation process, it is reasonably possible that completion
costs, including those arising from contract penalty provisions
and final contract settlements, will be revised in the
near-term. Such revisions to costs and income are recognized in
the period in which the revisions are determined.
The Company records allowances for discounts, product returns
and customer incentives at the time of sale as a reduction of
revenue as such allowances can be reliably estimated based on
historical experience and known trends. The Company also offers
product warranties and accrues its estimated exposure for
warranty claims at the time of sale based upon the length of the
warranty period, warranty costs incurred and any other related
information known to the Company.
Share-based compensation
— The Company
accounts for stock-based employee compensation under the fair
value recognition and measurement provisions of ASC Topic 718
“Compensation — Stock Compensation” and
22
Table of Contents
applies the Binomial lattice option-pricing model to determine
the fair value of options. The Binomial lattice option-pricing
model incorporates certain assumptions, such as the expected
volatility, risk-free interest rate, expected dividend yield,
expected forfeiture rate and expected life of options, in order
to arrive at a fair value estimate. As a result, share-based
compensation expense, as calculated and recorded under ASC 718
could have been impacted if other assumptions were used.
Furthermore, if the Company used different assumptions in future
periods, share-based compensation expense could be impacted in
future periods. See Note 16 of the Notes to Consolidated
Financial Statements in Part II. Item 8. Financial
Statements and Supplementary Data for additional information.
Inventory
— The Company states inventories
at the lower of cost or market. Cost, which includes material,
labor, and factory overhead, is determined on a FIFO basis. We
changed our method of accounting for inventory from the LIFO
method to the FIFO method effective January 1, 2009 and
applied this change in accounting principle retrospectively to
all prior periods presented herein (see Note 2 of the Notes
to Consolidated Financial Statements in Part II.
Item 8. Financial Statements and Supplementary Data). We
make adjustments to reduce the cost of inventory to its net
realizable value, if required, for estimated excess,
obsolescence or impaired balances. Factors influencing these
adjustments include changes in market demand, product life cycle
and engineering changes.
Goodwill, long-lived and intangible
assets
— The Company evaluates the
recoverability of certain noncurrent assets utilizing various
estimation processes. An impairment of a long-lived asset exists
when the asset’s carrying amount exceeds its fair value,
and is recorded when the carrying amount is not recoverable
through future operations. An intangible asset or goodwill
impairment exists when the carrying amount of intangible assets
and goodwill exceeds its fair value. Assessments of possible
impairments of goodwill, long-lived or intangible assets are
made when events or changes in circumstances indicate that the
carrying value of the asset may not be recoverable through
future operations. Additionally, testing for possible impairment
of recorded goodwill and indefinite-lived intangible asset
balances is performed annually. The amount and timing of
impairment charges for these assets require the estimation of
future cash flows and the fair value of the related assets.
The Company’s business acquisitions result in recording
goodwill and other intangible assets, which affect the amount of
amortization expense and possible impairment expense that the
Company will incur in future periods. The Company follows the
guidance prescribed in ASC 350, “Goodwill and Other
Intangible Assets” to test goodwill and intangible assets
for impairment. Annually, on October 31st, or more
frequently if triggering events occur, the Company compares the
fair value of their reporting units to the carrying value of
each reporting unit to determine if a goodwill impairment exists.
The Company determines the fair value of each reporting unit
utilizing an income approach (discounted cash flows) weighted
50% and a market approach consisting of a comparable public
company EBITDA multiples methodology weighted 50%. To determine
the reasonableness of the calculated fair values, the Company
reviews the assumptions to ensure that neither the income
approach nor the market approach yielded significantly different
valuations.
The key assumptions are updated each year for each reporting
unit for the income and market methodology used to determine
fair value. Various assumptions are utilized including
forecasted operating results, annual operating plans, strategic
plans, economic projections, anticipated future cash flows, the
weighted average cost of capital, comparable transactions,
market data and EBITDA multiples. The assumptions that have the
most significant effect on the fair value calculation are the
weighted average cost of capital, the EBITDA multiples and
terminal growth rates. The 2009 and 2008 ranges for these three
assumptions utilized by the Company are as follows:
|
2009 Range
|
2008 Range
|
|||
|
Assumptions
|
||||
|
Weighted average cost of capital
|
11.0% to 13.7% | 12.6% to 13.9% | ||
|
EBITDA multiples
|
9.0x to 11.0x | 5.8x to 9.0x | ||
|
Terminal growth rates
|
3.0% to 3.5% | 3.0% to 3.5% |
The Company concluded that the fair value of each of its
reporting units was in excess of its carrying value as of
October 31, 2009, and thus no goodwill impairment was
identified. However, a 10% decrease in fair value of the
23
Table of Contents
Banjo or the Water reporting units within the Fluid &
Metering Technologies Segment could potentially result in a
goodwill impairment charge at these reporting units. The total
goodwill balance for these two reporting units as of
October 31, 2009 was $288.7 million.
Income taxes
— The Company accounts for
income taxes in accordance with ASC 740 — “Income
Taxes”. Under ASC 740, deferred income tax assets and
liabilities are determined based on the estimated future tax
effects of differences between the financial statement and tax
bases of assets and liabilities based on currently enacted tax
laws. The Company’s tax balances are based on
management’s interpretation of the tax regulations and
rulings in numerous taxing jurisdictions. Future tax authority
rulings and changes in tax laws and future tax planning
strategies could affect the actual effective tax rate and tax
balances recorded by the Company.
Contingencies and litigation —
We are currently
involved in certain legal and regulatory proceedings and, as
required and where it is reasonably possible to do so, we accrue
estimates of the probable costs for the resolution of these
matters. These estimates are developed in consultation with
outside counsel and are based upon an analysis of potential
results, assuming a combination of litigation and settlement
strategies. It is possible, however, that future operating
results for any particular quarterly or annual period could be
materially affected by changes in our assumptions or the
effectiveness of our strategies related to these proceedings.
Defined benefit retirement plans
— The
plan obligations and related assets of the defined benefit
retirement plans are presented in Note 17 of the Notes to
Consolidated Financial Statements in Part II. Item 8.
Financial Statements and Supplementary Data. Plan assets, which
consist primarily of marketable equity and debt instruments, are
valued using market quotations. Plan obligations and the annual
pension expense are determined by consulting with actuaries
using a number of assumptions provided by the Company. Key
assumptions in the determination of the annual pension expense
include the discount rate, the rate of salary increases, and the
estimated future return on plan assets. To the extent actual
amounts differ from these assumptions and estimated amounts,
results could be adversely affected.
Recently
Adopted Accounting Pronouncements
In August 2009, the FASB issued ASU
2009-05,
“Fair Value Measurements and Disclosures (Topic
820) — Measuring Liabilities at Fair Value”. ASU
2009-05
provides clarification regarding valuation techniques when a
quoted price in an active market for an identical liability is
not available in addition to treatment of the existence of
restrictions that prevent the transfer of a liability. ASU
2009-05
also
clarifies that both a quoted price in an active market for an
identical liability at the measurement date and the quoted price
for an identical liability when traded as an asset in an active
market (when no adjustments to the quoted price of the asset are
required) are Level 1 fair value measurements. This
standard is effective for the first reporting period, including
interim periods, beginning after issuance. Adoption of ASU
2009-05
did
not have a material effect on the consolidated financial
position, results of operations or cash flows of the Company.
In July 2009, the ASC became the authoritative source of
accounting principals to be applied to financial statements
prepared in accordance with principles generally accepted in the
U.S. In accordance with the ASC, citations to accounting
literature in this report are to the relevant topic of the ASC
or are presented in plain English. This standard is effective
for financial statements issued for interim and annual periods
ending after September 15, 2009. The Company adopted this
standard on its effective date.
In May 2009, the FASB issued an update to ASC 855
“Subsequent Events.” This standard establishes general
standards of accounting for and disclosure of events that occur
after the balance sheet date, but before the financial
statements are issued or available to be issued
(“subsequent events”). This standard requires
disclosure of the date through which the entity has evaluated
subsequent events and the basis for that date. For public
entities, this is the date the financial statements are issued.
This standard does not apply to subsequent events or
transactions that are within the scope of other principles
generally accepted in the U.S. and will not result in
significant changes in the subsequent events reported by the
Company. This standard is effective for interim or annual
periods ending after June 15, 2009. The Company adopted
this standard on its effective date.
In April 2009, the FASB issued an update to ASC 820 “Fair
Value Measurements and Disclosures” and ASC 270
“Interim Reporting.” This standard requires
disclosures about fair value of financial instruments in interim
and
24
Table of Contents
annual financial statements. This standard is effective for
periods ending after June 15, 2009. The Company adopted
this standard on its effective date.
In December 2008, the FASB issued ASC 715
“Compensation-Retirement Benefits.” This standard
provides additional guidance on employers’ disclosures
about the plan assets of defined benefit pension or other
postretirement plans. ASC 715 requires disclosures about how
investment allocation decisions are made, the fair value of each
major category of plan assets, valuation techniques used to
develop fair value measurements of plan assets, the impact of
measurements on changes in plan assets when using significant
unobservable inputs and significant concentrations of risk in
the plan assets. These disclosures are required for fiscal years
ending after December 15, 2009. The Company adopted this
standard on its effective date.
In June 2008, the FASB issued an update to ASC 260
“Earnings Per Share.” This standard addresses whether
instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore, need
to be included in the allocation in computing earnings per share
under the two-class method described in ASC 260. The FASB
concluded that all outstanding unvested share-based payment
awards that contain rights to nonforfeitable dividends
participate in undistributed earnings with common shareholders.
If awards are considered participating securities, the Company
is required to apply the two-class method of computing basic and
diluted earnings per share. The Company determined that its
outstanding unvested shares are participating securities.
Accordingly, effective January 1, 2009, earnings per common
share are computed using the two-class method prescribed by ASC
260. All previously reported earnings per common share data has
been retrospectively adjusted to conform to the new computation
method (see EPS in Note 1).
In December 2007, the FASB issued an update to ASC 805
“Business Combinations.” The objective of the standard
is to establish principles and requirements for how an acquirer
in a business combination recognizes and measures in its
financial statements, the identifiable assets acquired, the
liabilities assumed, and any controlling interest; recognizes
and measures the goodwill acquired in the business combination
or a gain from a bargain purchase; and determines what
information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the
business combination. This standard is to be applied
prospectively to business combinations for which the acquisition
date is on or after an entity’s fiscal year that begins
after December 15, 2008. Upon adoption, ASC 805 did not
have a significant impact on the Company’s consolidated
results of operations, financial position or cash flows.
However, depending on the nature of an acquisition or the
quantity of acquisitions entered into after the adoption, ASC
805 may significantly impact the Company’s
consolidated results of operations, financial position or cash
flows when compared to acquisitions accounted for under prior
U.S. Generally Accepted Accounting Principles
(“GAAP”) and result in more earnings volatility and
generally lower earnings due to, among other items, the
expensing of deal costs and restructuring costs of acquired
companies.
New
Accounting Pronouncements
In October 2009, the FASB issued ASU
No. 2009-13,
“Revenue Recognition (Topic 605) —
Multiple-Deliverable Revenue Arrangements.” ASU
No. 2009-13
addresses the accounting for multiple-deliverable arrangements
to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit. This
guidance establishes a selling price hierarchy for determining
the selling price of a deliverable, which is based on:
(a) vendor-specific objective evidence;
(b) third-party evidence; or (c) estimates. This
guidance also eliminates the residual method of allocation and
requires that arrangement consideration be allocated at the
inception of the arrangement to all deliverables using the
relative selling price method. In addition, this guidance
significantly expands required disclosures related to a
vendor’s multiple-deliverable revenue arrangements. ASU
No. 2009-13
is effective prospectively for revenue arrangements entered into
or materially modified in fiscal years beginning on or after
June 15, 2010 and early adoption is permitted. A company
may elect, but will not be required, to adopt the amendments in
ASU
No. 2009-13
retrospectively for all prior periods. Management is currently
evaluating the requirements of ASU
No. 2009-13
and has not yet determined the impact on the Company’s
consolidated financial statements.
25
Table of Contents
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
The Company is subject to market risk associated with changes in
foreign currency exchange rates and interest rates. We may, from
time to time, enter into foreign currency forward contracts and
interest rate exchange agreements on our debt when we believe
there is a financial advantage in doing so. A treasury risk
management policy, adopted by the Board of Directors, describes
the procedures and controls over derivative financial and
commodity instruments, including foreign currency forward
contracts and interest rate swaps. Under the policy, we do not
use derivative financial or commodity instruments for trading
purposes, and the use of these instruments is subject to strict
approvals by senior officers. Typically, the use of derivative
instruments is limited to foreign currency forward contracts and
interest rate exchange agreements on the Company’s
outstanding long-term debt. The Company’s exposure related
to derivative instruments is, in the aggregate, not material to
its financial position, results of operations or cash flows.
The Company’s foreign currency exchange rate risk is
limited principally to the Euro, Canadian Dollar, British Pound
and Chinese Renminbi. We manage our foreign exchange risk
principally through invoicing our customers in the same currency
as the source of our products. The effect of transaction gains
and losses is reported within “Other
income-net”
on the Consolidated Statements of Operations.
The Company’s interest rate exposure is primarily related
to the $400.1 million of total debt outstanding at
December 31, 2009. The majority of the debt is priced at
interest rates that float with the market. In order to mitigate
this interest exposure, the Company entered into interest rate
exchange agreements that effectively converted
$345.0 million of our floating-rate debt outstanding at
December 31, 2009 to a fixed-rate. A 50-basis point
movement in the interest rate on the remaining
$55.1 million floating-rate debt would result in an
approximate $0.3 million annualized increase or decrease in
interest expense and cash flows.
26
Table of Contents
| Item 8. | Financial Statements and Supplementary Data. |
IDEX
CORPORATION
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
| As of December 31, | ||||||||
| 2009 | 2008 | |||||||
| (In thousands except share and per share amounts) | ||||||||
|
ASSETS
|
||||||||
|
Current assets
|
||||||||
|
Cash and cash equivalents
|
$ | 73,526 | $ | 61,353 | ||||
|
Receivables — net
|
183,178 | 205,269 | ||||||
|
Inventories
|
159,463 | 181,200 | ||||||
|
Other current assets
|
35,545 | 32,866 | ||||||
|
Total current assets
|
451,712 | 480,688 | ||||||
|
Property, plant and equipment — net
|
178,283 | 186,283 | ||||||
|
Goodwill
|
1,180,445 | 1,167,063 | ||||||
|
Intangible assets — net
|
281,354 | 303,226 | ||||||
|
Other noncurrent assets
|
6,363 | 14,540 | ||||||
|
Total assets
|
$ | 2,098,157 | $ | 2,151,800 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
|
Current liabilities
|
||||||||
|
Trade accounts payable
|
$ | 73,020 | $ | 87,304 | ||||
|
Accrued expenses
|
98,730 | 117,186 | ||||||
|
Short-term borrowings
|
8,346 | 5,856 | ||||||
|
Dividends payable
|
9,586 | 9,523 | ||||||
|
Total current liabilities
|
189,682 | 219,869 | ||||||
|
Long-term borrowings
|
391,754 | 548,144 | ||||||
|
Deferred income taxes
|
148,806 | 141,984 | ||||||
|
Other noncurrent liabilities
|
99,811 | 97,020 | ||||||
|
Total liabilities
|
830,053 | 1,007,017 | ||||||
|
Commitments and contingencies (Note 9)
|
||||||||
|
Shareholders’ equity
|
||||||||
|
Preferred stock:
|
||||||||
|
Authorized: 5,000,000 shares, $.01 per share par value;
Issued: none
|
— | — | ||||||
|
Common stock:
|
||||||||
|
Authorized: 150,000,000 shares, $.01 per share par value;
Issued: 83,510,320 shares at December 31, 2009 and
82,786,045 shares at December 31, 2008
|
835 | 828 | ||||||
|
Additional paid-in capital
|
401,570 | 377,154 | ||||||
|
Retained earnings
|
896,977 | 822,286 | ||||||
|
Treasury stock at cost: 2,540,052 shares at
December 31, 2009 and 2,483,955 shares at
December 31, 2008
|
(56,706 | ) | (55,393 | ) | ||||
|
Accumulated other comprehensive income (loss)
|
25,428 | (92 | ) | |||||
|
Total shareholders’ equity
|
1,268,104 | 1,144,783 | ||||||
|
Total liabilities and shareholders’ equity
|
$ | 2,098,157 | $ | 2,151,800 | ||||
See Notes to Consolidated Financial Statements.
27
Table of Contents
IDEX
CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands except per share amounts) | ||||||||||||
|
Net sales
|
$ | 1,329,661 | $ | 1,489,471 | $ | 1,358,631 | ||||||
|
Cost of sales
|
807,275 | 892,038 | 792,470 | |||||||||
|
Gross profit
|
522,386 | 597,433 | 566,161 | |||||||||
|
Selling, general and administrative expenses
|
325,453 | 343,392 | 313,366 | |||||||||
|
Goodwill impairment
|
— | 30,090 | — | |||||||||
|
Restructuring expenses
|
12,079 | 17,995 | — | |||||||||
|
Operating income
|
184,854 | 205,956 | 252,795 | |||||||||
|
Other income — net
|
1,151 | 5,123 | 3,434 | |||||||||
|
Interest expense
|
17,178 | 18,852 | 23,353 | |||||||||
|
Income from continuing operations before income taxes
|
168,827 | 192,227 | 232,876 | |||||||||
|
Provision for income taxes
|
55,436 | 65,201 | 78,457 | |||||||||
|
Income from continuing operations
|
113,391 | 127,026 | 154,419 | |||||||||
|
Net loss from discontinued operations, net of tax
|
— | — | (719 | ) | ||||||||
|
Net income
|
$ | 113,391 | $ | 127,026 | $ | 153,700 | ||||||
|
Basic earnings per common share:
|
||||||||||||
|
Continuing operations
|
$ | 1.41 | $ | 1.55 | $ | 1.90 | ||||||
|
Discontinued operations
|
— | — | (0.01 | ) | ||||||||
|
Net income
|
$ | 1.41 | $ | 1.55 | $ | 1.89 | ||||||
|
Diluted earnings per common share:
|
||||||||||||
|
Continuing operations
|
$ | 1.40 | $ | 1.53 | $ | 1.88 | ||||||
|
Discontinued operations
|
— | — | (0.01 | ) | ||||||||
|
Net income
|
$ | 1.40 | $ | 1.53 | $ | 1.87 | ||||||
|
Share data:
|
||||||||||||
|
Basic weighted average common shares outstanding
|
79,716 | 81,123 | 80,666 | |||||||||
|
Diluted weighted average common shares outstanding
|
80,727 | 82,320 | 82,086 | |||||||||
See Notes to Consolidated Financial Statements.
28
Table of Contents
IDEX
CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
| Accumulated Other Comprehensive Income (Loss) | ||||||||||||||||||||||||||||
|
Net Actuarial
|
||||||||||||||||||||||||||||
|
Losses and
|
Cumulative
|
|||||||||||||||||||||||||||
|
Prior Service
|
Unrealized
|
|||||||||||||||||||||||||||
|
Costs on
|
Loss
|
|||||||||||||||||||||||||||
|
Pensions
|
on
|
|||||||||||||||||||||||||||
|
and Other
|
Derivatives
|
|||||||||||||||||||||||||||
|
Common
|
Post-
|
Designated
|
||||||||||||||||||||||||||
|
Stock and
|
Cumulative
|
Retirement
|
as Cash
|
Total
|
||||||||||||||||||||||||
|
Additional
|
Retained
|
Translation
|
Benefit
|
Flow
|
Treasury
|
Shareholders’
|
||||||||||||||||||||||
| Paid-In Capital | Earnings | Adjustment | Plans | Hedges | Stock | Equity | ||||||||||||||||||||||
| (In thousands except share and per share amounts) | ||||||||||||||||||||||||||||
|
Balance, December 31, 2006, as previously stated
|
$ | 317,955 | $ | 638,579 | $ | 52,295 | $ | (26,309 | ) | $ | — | $ | (3,248 | ) | $ | 979,272 | ||||||||||||
|
Impact of adopting change in accounting related to inventory
(see Note 2)
|
— | (17,331 | ) | 147 | — | — | — | (17,184 | ) | |||||||||||||||||||
|
Balance, December 31, 2006, as restated
|
$ | 317,955 | $ | 621,248 | $ | 52,442 | $ | (26,309 | ) | $ | — | $ | (3,248 | ) | $ | 962,088 | ||||||||||||
|
Net income
|
— | 153,700 | — | — | — | — | 153,700 | |||||||||||||||||||||
|
Other comprehensive income, net of tax:
|
||||||||||||||||||||||||||||
|
Cumulative translation adjustment
|
— | — | 33,573 | — | — | — | 33,573 | |||||||||||||||||||||
|
Adjustment to pension and other benefit liabilities
|
— | — | — | 5,934 | — | — | 5,934 | |||||||||||||||||||||
|
Other comprehensive income
|
— | — | — | — | — | — | 39,507 | |||||||||||||||||||||
|
Comprehensive income
|
— | — | — | — | — | — | 193,207 | |||||||||||||||||||||
|
Cumulative effect of change in accounting for uncertainties in
income taxes (ASC 740 — See Note 11)
|
— | (1,204 | ) | — | — | — | — | (1,204 | ) | |||||||||||||||||||
|
Issuance of 892,438 shares of common stock from exercise of
stock options and deferred compensation plans
|
16,742 | — | — | — | — | — | 16,742 | |||||||||||||||||||||
|
Share-based compensation
|
12,570 | — | — | — | — | — | 12,570 | |||||||||||||||||||||
|
Unvested shares surrendered for tax withholding
|
— | — | — | — | — | (1,195 | ) | (1,195 | ) | |||||||||||||||||||
|
Cash dividends declared-$.48 per common share outstanding
|
— | (39,001 | ) | — | — | — | — | (39,001 | ) | |||||||||||||||||||
|
Balance, December 31, 2007
|
$ | 347,267 | $ | 734,743 | $ | 86,015 | $ | (20,375 | ) | $ | — | $ | (4,443 | ) | $ | 1,143,207 | ||||||||||||
|
Net income
|
— | 127,026 | — | — | — | — | 127,026 | |||||||||||||||||||||
|
Other comprehensive income, net of tax:
|
||||||||||||||||||||||||||||
|
Cumulative translation adjustment
|
— | — | (45,863 | ) | — | — | — | (45,863 | ) | |||||||||||||||||||
|
Adjustment to pension and other benefit liabilities
|
— | — | — | (13,279 | ) | — | — | (13,279 | ) | |||||||||||||||||||
|
Unrealized derivative losses
|
— | — | — | — | (6,642 | ) | — | (6,642 | ) | |||||||||||||||||||
|
Other comprehensive income
|
— | — | — | — | — | — | (65,784 | ) | ||||||||||||||||||||
|
Comprehensive income
|
— | — | — | — | — | — | 61,242 | |||||||||||||||||||||
|
Cumulative effect of change in measurement date of foreign plans
under ASC 715
|
— | (351 | ) | 52 | — | — | — | (299 | ) | |||||||||||||||||||
|
Issuance of 597,863 shares of common stock from exercise of
stock options and deferred compensation plans
|
15,701 | — | — | — | — | — | 15,701 | |||||||||||||||||||||
|
Share-based compensation
|
15,014 | — | — | — | — | — | 15,014 | |||||||||||||||||||||
|
Repurchase of 2.3 million shares of common stock
|
— | — | — | — | — | (50,000 | ) | (50,000 | ) | |||||||||||||||||||
|
Unvested shares surrendered for tax withholding
|
— | — | — | — | — | (950 | ) | (950 | ) | |||||||||||||||||||
|
Cash dividends declared — $.48 per common share
outstanding
|
— | (39,132 | ) | — | — | — | — | (39,132 | ) | |||||||||||||||||||
|
Balance, December 31, 2008
|
$ | 377,982 | $ | 822,286 | $ | 40,204 | $ | (33,654 | ) | $ | (6,642 | ) | $ | (55,393 | ) | $ | 1,144,783 | |||||||||||
|
Net income
|
— | 113,391 | — | — | — | — | 113,391 | |||||||||||||||||||||
|
Other comprehensive income, net of tax:
|
||||||||||||||||||||||||||||
|
Cumulative translation adjustment
|
— | — | 19,195 | — | — | — | 19,195 | |||||||||||||||||||||
|
Amortization of retirement obligations
|
— | — | — | 6,396 | — | — | 6,396 | |||||||||||||||||||||
|
Unrealized loss on derivatives designated as cash flow hedges
|
— | — | — | — | (71 | ) | — | (71 | ) | |||||||||||||||||||
|
Other comprehensive income
|
— | — | — | — | — | — | 25,520 | |||||||||||||||||||||
|
Comprehensive income
|
— | — | — | — | — | — | 138,911 | |||||||||||||||||||||
|
Issuance of 744,827 shares of common stock from issuance of
unvested shares, exercise of stock options and deferred
compensation plans
|
8,713 | — | — | — | — | — | 8,713 | |||||||||||||||||||||
|
Share-based compensation
|
15,710 | — | — | — | — | — | 15,710 | |||||||||||||||||||||
|
Unvested shares surrendered for tax withholding
|
— | — | — | — | — | (1,313 | ) | (1,313 | ) | |||||||||||||||||||
|
Cash dividends declared — $.48 per common share
outstanding
|
— | (38,700 | ) | — | — | — | — | (38,700 | ) | |||||||||||||||||||
|
Balance, December 31, 2009
|
$ | 402,405 | $ | 896,977 | $ | 59,399 | $ | (27,258 | ) | $ | (6,713 | ) | $ | (56,706 | ) | $ | 1,268,104 | |||||||||||
See Notes to Consolidated Financial Statements.
29
Table of Contents
IDEX
CORPORATION
CONSOLIDATED
STATEMENTS OF CASH FLOWS
| For the Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Cash flows from operating activities of continuing operations
|
||||||||||||
|
Net income
|
$ | 113,391 | $ | 127,026 | $ | 153,700 | ||||||
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||||||
|
Loss from discontinued operations
|
— | — | 719 | |||||||||
|
Loss (gain) on sale of fixed assets
|
447 | — | (371 | ) | ||||||||
|
Goodwill impairment
|
— | 30,090 | — | |||||||||
|
Depreciation and amortization
|
31,850 | 30,989 | 28,316 | |||||||||
|
Amortization of intangible assets
|
24,496 | 17,610 | 9,722 | |||||||||
|
Amortization of debt issuance expenses
|
308 | 288 | 460 | |||||||||
|
Share-based compensation expense
|
15,710 | 15,014 | 12,570 | |||||||||
|
Deferred income taxes
|
1,081 | (10,817 | ) | 1,470 | ||||||||
|
Excess tax benefit from share-based compensation
|
(2,762 | ) | (3,134 | ) | (5,390 | ) | ||||||
|
Changes in (net of the effect from acquisitions):
|
||||||||||||
|
Receivables
|
26,069 | 19,667 | (8,714 | ) | ||||||||
|
Inventories
|
23,149 | (4,389 | ) | (191 | ) | |||||||
|
Trade accounts payable
|
(16,310 | ) | (6,385 | ) | 808 | |||||||
|
Accrued expenses
|
(14,294 | ) | 1,215 | 4,141 | ||||||||
|
Other — net
|
9,397 | 5,886 | 1,754 | |||||||||
|
Net cash flows provided by operating activities of continuing
operations
|
212,532 | 223,060 | 198,994 | |||||||||
|
Cash flows from investing activities of continuing operations
|
||||||||||||
|
Purchases of property, plant and equipment
|
(25,059 | ) | (27,837 | ) | (24,498 | ) | ||||||
|
Acquisition of businesses, net of cash acquired
|
— | (392,825 | ) | (86,207 | ) | |||||||
|
Proceeds from the sale of discontinued businesses
|
— | — | 326 | |||||||||
|
Proceeds from fixed assets disposals
|
3,582 | — | 288 | |||||||||
|
Changes in restricted cash
|
— | 140,005 | (140,005 | ) | ||||||||
|
Other — net
|
1,860 | — | 1,500 | |||||||||
|
Net cash flows used in investing activities of continuing
operations
|
(19,617 | ) | (280,657 | ) | (248,596 | ) | ||||||
|
Cash flows from financing activities of continuing operations
|
||||||||||||
|
Borrowings under credit facilities for acquisitions
|
— | 180,665 | 209,132 | |||||||||
|
Borrowings under credit facilities and term loan
|
70,114 | 483,044 | 46,947 | |||||||||
|
Payments under credit facilities and term loan
|
(225,604 | ) | (413,207 | ) | (166,423 | ) | ||||||
|
Payment of senior notes
|
— | (150,000 | ) | — | ||||||||
|
Dividends paid
|
(38,637 | ) | (39,398 | ) | (37,267 | ) | ||||||
|
Distributions to discontinued operations
|
— | — | (664 | ) | ||||||||
|
Proceeds from stock option exercises
|
7,694 | 10,421 | 13,996 | |||||||||
|
Excess tax benefit from share-based compensation
|
2,762 | 3,134 | 5,390 | |||||||||
|
Purchase of common stock
|
— | (50,000 | ) | — | ||||||||
|
Other — net
|
(1,313 | ) | (1,980 | ) | (241 | ) | ||||||
|
Net cash flows (used in) provided by financing activities of
continuing operations
|
(184,984 | ) | 22,679 | 70,870 | ||||||||
|
Cash flows from discontinued operations
|
||||||||||||
|
Net cash used in operating activities of discontinued operations
|
— | — | (869 | ) | ||||||||
|
Net cash used in investing activities of discontinued operations
|
— | — | — | |||||||||
|
Net cash provided by financing activities of discontinued
operations
|
— | — | 867 | |||||||||
|
Net cash flows used in discontinued operations
|
— | — | (2 | ) | ||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
4,242 | (6,486 | ) | 3,548 | ||||||||
|
Net increase (decrease) in cash
|
12,173 | (41,404 | ) | 24,814 | ||||||||
|
Cash and cash equivalents at beginning of year
|
61,353 | 102,757 | 77,943 | |||||||||
|
Cash and cash equivalents at end of period
|
$ | 73,526 | $ | 61,353 | $ | 102,757 | ||||||
|
Supplemental cash flow information
|
||||||||||||
|
Cash paid for:
|
||||||||||||
|
Interest
|
$ | 17,311 | $ | 20,139 | $ | 22,974 | ||||||
|
Income taxes
|
50,796 | 72,074 | 78,052 | |||||||||
|
Significant non-cash activities:
|
||||||||||||
|
Debt acquired with acquisition of business
|
— | — | 1,571 | |||||||||
|
Capital expenditures included in accounts payable
|
466 | 521 | 561 | |||||||||
|
Issuance of unvested shares
|
5,131 | — | — | |||||||||
|
Non-cash capital expenditures
|
— | — | 1,437 | |||||||||
See Notes to Consolidated Financial Statements.
30
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Significant Accounting Policies |
Business
IDEX Corporation is an applied solutions company specializing in
fluid and metering technologies, health and science
technologies, dispensing equipment, and fire, safety and other
diversified products built to its customers’
specifications. Its products are sold in niche markets to a wide
range of industries throughout the world. The Company’s
products include industrial pumps, compressors, flow meters,
injectors and valves, and related controls for use in a wide
variety of process applications; precision fluidics solutions,
including pumps, valves, degassing equipment, corrective tubing,
fittings, and complex manifolds, as well as specialty medical
equipment and devices used in life science applications;
precision-engineered equipment for dispensing, metering and
mixing paints, and personal care products; refinishing
equipment; and engineered products for industrial and commercial
markets, including fire and rescue, transportation equipment,
oil and gas, electronics, and communications. These activities
are grouped into four reportable segments: Fluid &
Metering Technologies, Health & Science Technologies,
Dispensing Equipment, and Fire & Safety/Diversified
Products.
Principles
of Consolidation
The consolidated financial statements include the Company and
its subsidiaries. All intercompany transactions and accounts
have been eliminated.
Use of
Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and judgments that
affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, and reported
amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates. The principal
areas of estimation reflected in the financial statements are
sales returns and allowances, allowance for doubtful accounts,
inventory valuation, recoverability of long-lived assets,
performing annual goodwill and intangible and long lived asset
impairment analyses, income taxes, product warranties,
derivatives, contingencies and litigation, insurance-related
items, share-based compensation and defined benefit retirement
plans.
Revenue
Recognition
The Company recognizes revenue when persuasive evidence of an
arrangement exists, delivery has occurred, the sales price is
fixed or determinable, and collectibility of the sales price is
reasonably assured. For product sales, delivery does not occur
until the products have been shipped and risk of loss has been
transferred to the customer. Revenue from services is recognized
when the services are provided or ratably over the contract
term. Some arrangements with customers may include multiple
deliverables, including the combination of products and
services. In such cases the Company has identified these as
separate elements in accordance with ASC 985 and recognizes
revenue consistent with the policy for each separate element
based on the fair value of each accounting unit. Revenues from
certain long-term contracts are recognized on the
percentage-of-completion
method.
Percentage-of-completion
is measured principally by the percentage of costs incurred to
date for each contract to the estimated total costs for such
contract at completion. Provisions for estimated losses on
uncompleted long-term contracts are made in the period in which
such losses are determined. Due to uncertainties inherent in the
estimation process, it is reasonably possible that completion
costs, including those arising from contract penalty provisions
and final contract settlements, will be revised in the
near-term. Such revisions to costs and income are recognized in
the period in which the revisions are determined.
The Company records allowances for discounts, product returns
and customer incentives at the time of sale as a reduction of
revenue as such allowances can be reliably estimated based on
historical experience and known trends. The Company also offers
product warranties and accrues its estimated exposure for
warranty claims at the time of sale based upon the length of the
warranty period, warranty costs incurred and any other related
information known to the Company.
31
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Cash and
Cash Equivalents
The Company considers all highly liquid debt instruments
purchased with an original maturity of three or fewer months to
be cash and cash equivalents.
Inventories
The Company states inventories at the lower of cost or market.
Cost, which includes material, labor, and factory overhead, is
determined on a FIFO basis. We changed our method of accounting
for inventory from the LIFO method to the FIFO method effective
January 1, 2009 and applied this change in accounting
principle retrospectively to all prior periods presented herein
(see Note 2). We make adjustments to reduce the cost of
inventory to its net realizable value, if required, at the
business unit level for estimated excess, obsolescence or
impaired balances. Factors influencing these adjustments include
changes in market demand, product life cycle and engineering
changes.
Impairment
of Long-Lived Assets
Long-lived assets are reviewed for impairment upon the
occurrence of events or changes in circumstances that indicate
that the carrying value of the assets may not be recoverable, as
measured by comparing their net book value to the projected
undiscounted future cash flows generated by their use. Impaired
assets are recorded at their estimated fair value using a
discounted cash flow analysis.
Goodwill
and Indefinite-Lived Intangible Assets
The Company reviews the carrying value of goodwill and
indefinite-lived intangible assets annually on
October 31st, or upon the occurrence of events or changes
in circumstances that indicate that the carrying value of the
goodwill or intangible assets may not be recoverable, in
accordance with ASC 350. The Company evaluates the
recoverability of each of these assets based on the estimated
fair value of each of the eleven reporting units and
indefinite-lived intangible asset. See Note 5 for a further
discussion on goodwill and intangible assets.
Borrowing
Expenses
Expenses incurred in securing and issuing debt are amortized
over the life of the related borrowing and are included in
Interest expense in the Consolidated Statements of Operations.
Earnings
per Common Share
Earnings per common share (“EPS”) is computed by
dividing net income by the weighted average number of shares of
common stock (basic) plus common stock equivalents and unvested
shares (diluted) outstanding during the year. Common stock
equivalents consist of stock options and deferred compensation
units (“DCUs”) and have been included in the
calculation of weighted average shares outstanding using the
treasury stock method.
ASC 260 concludes that all outstanding unvested share-based
payment awards that contain rights to nonforfeitable dividends
participate in undistributed earnings with common shareholders.
If awards are considered participating securities, the Company
is required to apply the two-class method of computing basic and
diluted earnings per share. The Company has determined that its
outstanding unvested shares are participating securities.
Accordingly, effective January 1, 2009, earnings per common
share were computed using the two-class method prescribed by ASC
260. All previously reported earnings per common share data has
been retrospectively adjusted to conform to the new computation
method. Net income attributable to common shareholders was
reduced by $0.8 million, $0.9 million and
$0.8 million in December 31, 2009, 2008 and 2007,
respectively.
32
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Basic weighted average shares outstanding reconciles to diluted
weighted average shares outstanding as follows:
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Basic weighted average common shares outstanding
|
79,716 | 81,123 | 80,666 | |||||||||
|
Dilutive effect of stock options, DCUs and unvested shares
|
1,011 | 1,197 | 1,420 | |||||||||
|
Diluted weighted average common shares outstanding
|
80,727 | 82,320 | 82,086 | |||||||||
Options to purchase approximately 2.2 million,
3.3 million and 1.7 million shares of common stock as
of December 31, 2009, 2008 and 2007, respectively, were not
included in the computation of diluted EPS because the exercise
price was greater than the average market price of the
Company’s common stock and, therefore, the effect of their
inclusion would have been antidilutive.
Share-Based
Compensation
The Company accounts for share-based payments in accordance with
ASC 718. Accordingly, the Company expenses the fair value of
awards made under its share-based plans. That cost is recognized
in the consolidated financial statements over the requisite
service period of the grants. See Note 16 for further
discussion on share-based compensation.
Depreciation
and Amortization
Property and equipment are stated at cost, with depreciation and
amortization provided using the straight-line method over the
following estimated useful lives:
|
Land improvements
|
8 to 12 years | |||
|
Buildings and improvements
|
8 to 30 years | |||
|
Machinery and equipment and engineering drawings
|
3 to 12 years | |||
|
Office and transportation equipment
|
3 to 10 years |
Certain identifiable intangible assets are amortized over their
estimated useful lives using the straight-line method. The
estimated useful lives used in the computation of amortization
of identifiable intangible assets are as follows:
|
Patents
|
5 to 17 years | |||
|
Trade names
|
3 to 20 years | |||
|
Customer relationships
|
3 to 20 years | |||
|
Non-compete agreements
|
2 to 5 years | |||
|
Unpatented technology and other
|
5 to 20 years |
Research
and Development Expenditures
Costs associated with research and development are expensed in
the period incurred and are included in “Cost of
sales” within the Consolidated Statements of Operations.
Research and development expenses, which include costs
associated with developing new products and major improvements
to existing products were $29.6 million, $29.5 million
and $28.1 million in 2009, 2008 and 2007, respectively.
Foreign
Currency Translation
The functional currency of substantially all operations outside
the United States is the respective local currency. Accordingly,
those foreign currency balance sheet accounts have been
translated using the exchange rates in effect as of the balance
sheet date. Income statement amounts have been translated using
the average exchange rate for the year. The gains and losses
resulting from changes in exchange rates from year to year have
been reported
33
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
in “Accumulated other comprehensive income (loss)” in
the Consolidated Balance Sheets. The effect of transaction gains
and losses is reported within “Other
income-net”
on the Consolidated Statements of Operations.
Income
Taxes
Income tax expense includes United States, state, local and
international income taxes. Deferred tax assets and liabilities
are recognized for the tax consequences of temporary differences
between the financial reporting and the tax basis of existing
assets and liabilities. The tax rate used to determine the
deferred tax assets and liabilities is the enacted tax rate for
the year and manner in which the differences are expected to
reverse. Valuation allowances are recorded to reduce deferred
tax assets to the amount that will more likely than not be
realized.
Concentration
of Credit Risk
The Company is not dependent on a single customer, the largest
of which accounted for less than 3% of net sales for all years
presented.
Recently
Adopted Accounting Pronouncements
In August 2009, the FASB issued ASU
2009-05,
“Fair Value Measurements and Disclosures (Topic
820) — Measuring Liabilities at Fair Value”. ASU
2009-05
provides clarification regarding valuation techniques when a
quoted price in an active market for an identical liability is
not available in addition to treatment of the existence of
restrictions that prevent the transfer of a liability. ASU
2009-05
also
clarifies that both a quoted price in an active market for an
identical liability at the measurement date and the quoted price
for an identical liability when traded as an asset in an active
market (when no adjustments to the quoted price of the asset are
required) are Level 1 fair value measurements. This
standard is effective for the first reporting period, including
interim periods, beginning after issuance. Adoption of ASU
2009-05
did
not have a material effect on the consolidated financial
position, results of operations or cash flows of the Company.
In July 2009, the ASC became the authoritative source of
accounting principals to be applied to financial statements
prepared in accordance with GAAP. In accordance with the ASC,
citations to accounting literature in this report are to the
relevant topic of the ASC or are presented in plain English.
This standard is effective for financial statements issued for
interim and annual periods ending after September 15, 2009.
The Company adopted this standard on its effective date.
In May 2009, the FASB issued an update to ASC 855
“Subsequent Events.” This standard establishes general
standards of accounting for and disclosure of events that occur
after the balance sheet date, but before the financial
statements are issued or available to be issued
(“subsequent events”). This standard requires
disclosure of the date through which the entity has evaluated
subsequent events and the basis for that date. For public
entities, this is the date the financial statements are issued.
This standard does not apply to subsequent events or
transactions that are within the scope of other GAAP and will
not result in significant changes in the subsequent events
reported by the Company. This standard is effective for interim
or annual periods ending after June 15, 2009. The Company
adopted this standard on its effective date.
In April 2009, the FASB issued an update to ASC 820 “Fair
Value Measurements and Disclosures” and ASC 270
“Interim Reporting.” This standard requires
disclosures about fair value of financial instruments in interim
and annual financial statements. This standard is effective for
periods ending after June 15, 2009. The Company adopted
this standard on its effective date.
In December 2008, the FASB issued ASC 715
“Compensation-Retirement Benefits.” This standard
provides additional guidance on employers’ disclosures
about the plan assets of defined benefit pension or other
postretirement plans. ASC 715 requires disclosures about how
investment allocation decisions are made, the fair value of each
major category of plan assets, valuation techniques used to
develop fair value measurements of plan assets, the
34
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
impact of measurements on changes in plan assets when using
significant unobservable inputs and significant concentrations
of risk in the plan assets. These disclosures are required for
fiscal years ending after December 15, 2009. The Company
adopted this standard on its effective date.
In June 2008, the FASB issued an update to ASC 260
“Earnings Per Share.” This standard addresses whether
instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore, need
to be included in the allocation in computing earnings per share
under the two-class method described in ASC 260. The FASB
concluded that all outstanding unvested share-based payment
awards that contain rights to nonforfeitable dividends
participate in undistributed earnings with common shareholders.
If awards are considered participating securities, the Company
is required to apply the two-class method of computing basic and
diluted earnings per share. The Company determined that its
outstanding unvested shares are participating securities.
Accordingly, effective January 1, 2009, earnings per common
share are computed using the two-class method prescribed by ASC
260. All previously reported earnings per common share data has
been retrospectively adjusted to conform to the new computation
method (see EPS in Note 1).
In December 2007, the FASB issued an update to ASC 805
“Business Combinations.” The objective of the standard
is to establish principles and requirements for how an acquirer
in a business combination recognizes and measures in its
financial statements, the identifiable assets acquired, the
liabilities assumed, and any controlling interest; recognizes
and measures the goodwill acquired in the business combination
or a gain from a bargain purchase; and determines what
information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the
business combination. This standard is to be applied
prospectively to business combinations for which the acquisition
date is on or after an entity’s fiscal year that begins
after December 15, 2008. Upon adoption, ASC 805 did not
have a significant impact on the Company’s consolidated
results of operations, financial position or cash flows.
However, depending on the nature of an acquisition or the
quantity of acquisitions entered into after the adoption, ASC
805 may significantly impact the Company’s
consolidated results of operations, financial position or cash
flows when compared to acquisitions accounted for under prior
U.S. GAAP and result in more earnings volatility and
generally lower earnings due to, among other items, the
expensing of deal costs and restructuring costs of acquired
companies.
New
Accounting Pronouncements
In October 2009, the FASB issued ASU
No. 2009-13,
“Revenue Recognition (Topic 605) —
Multiple-Deliverable Revenue Arrangements.” ASU
No. 2009-13
addresses the accounting for multiple-deliverable arrangements
to enable vendors to account for products or services
(deliverables) separately rather than as a combined unit. This
guidance establishes a selling price hierarchy for determining
the selling price of a deliverable, which is based on:
(a) vendor-specific objective evidence;
(b) third-party evidence; or (c) estimates. This
guidance also eliminates the residual method of allocation and
requires that arrangement consideration be allocated at the
inception of the arrangement to all deliverables using the
relative selling price method. In addition, this guidance
significantly expands required disclosures related to a
vendor’s multiple-deliverable revenue arrangements. ASU
No. 2009-13
is effective prospectively for revenue arrangements entered into
or materially modified in fiscal years beginning on or after
June 15, 2010 and early adoption is permitted. A company
may elect, but will not be required, to adopt the amendments in
ASU
No. 2009-13
retrospectively for all prior periods. Management is currently
evaluating the requirements of ASU
No. 2009-13
and has not yet determined the impact on the Company’s
consolidated financial statements.
| 2. | Inventory |
Inventories are stated at the lower of cost or market. Cost,
which includes material, labor, and factory overhead, is
determined on a FIFO basis.
Prior to January 1, 2009, we valued certain inventories
under the LIFO cost method. As of January 1, 2009, we
changed our method of accounting for these inventories from the
LIFO method to the FIFO method. As of
35
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
December 31, 2008, the inventories for which the LIFO
method of accounting was applied represented approximately 85%
of total net inventories. We believe that this change is to a
preferable method which better reflects the current cost of
inventory on our consolidated balance sheets. Additionally, this
change conforms all of our worldwide inventories to a consistent
inventory costing method and provides better comparability to
our peers. We applied this change in accounting principle
retrospectively to all prior periods presented herein in
accordance with ASC 250 “Accounting Changes and Error
Corrections.” As a result of this accounting change, our
retained earnings as of December 31, 2006 decreased to
$621.2 million using the FIFO method from
$638.6 million as originally reported using the LIFO
method. The following tables summarize the effect of the
accounting change on our consolidated financial statements.
| Year Ended December 31, 2009 | ||||||||||||
|
Computed
|
||||||||||||
|
Under Prior
|
Effect of
|
As Computed
|
||||||||||
| Method | Change | Under FIFO | ||||||||||
| (Thousands, except per share data) | ||||||||||||
|
Statement of Operations:
|
||||||||||||
|
Cost of sales
|
$ | 803,536 | $ | 3,739 | $ | 807,275 | ||||||
|
Income taxes
|
56,662 | (1,226 | ) | 55,436 | ||||||||
|
Net income
|
115,904 | (2,513 | ) | 113,391 | ||||||||
|
Earnings per common share:
|
||||||||||||
|
Basic
|
1.44 | (0.03 | ) | 1.41 | ||||||||
|
Diluted
|
1.43 | (0.03 | ) | 1.40 | ||||||||
|
Statement of Cash Flows:
|
||||||||||||
|
Net income
|
115,904 | (2,513 | ) | 113,391 | ||||||||
|
Deferred income taxes
|
2,307 | (1,226 | ) | 1,081 | ||||||||
|
Changes in inventories
|
19,410 | 3,739 | 23,149 | |||||||||
|
Net cash provided by operating activities
|
212,532 | — | 212,532 | |||||||||
| Year Ended December 31, 2008 | ||||||||||||
|
Computed
|
As Computed
|
|||||||||||
|
Under Prior
|
Effect of
|
Under
|
||||||||||
| Method | Change | FIFO | ||||||||||
| (Thousands, except per share data) | ||||||||||||
|
Statement of Operations:
|
||||||||||||
|
Cost of sales
|
$ | 885,562 | $ | 6,476 | $ | 892,038 | ||||||
|
Income taxes
|
67,343 | (2,142 | ) | 65,201 | ||||||||
|
Net income
|
131,360 | (4,334 | ) | 127,026 | ||||||||
|
Earnings per common share:
|
||||||||||||
|
Basic
|
1.60 | (0.05 | ) | 1.55 | ||||||||
|
Diluted
|
1.59 | (0.06 | ) | 1.53 | ||||||||
|
Statement of Cash Flows:
|
||||||||||||
|
Net income
|
131,360 | (4,334 | ) | 127,026 | ||||||||
|
Accrued expenses
|
601 | 614 | 1,215 | |||||||||
|
Deferred income taxes
|
(8,196 | ) | (2,621 | ) | (10,817 | ) | ||||||
|
Changes in inventories
|
(9,659 | ) | 5,270 | (4,389 | ) | |||||||
|
Net cash provided by operating activities
|
224,131 | (1,071 | ) | 223,060 | ||||||||
36
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| Year Ended December 31, 2007 | ||||||||||||
|
Computed
|
||||||||||||
|
Under Prior
|
Effect of
|
As Computed
|
||||||||||
| Method | Change | Under FIFO | ||||||||||
| (Thousands, except per share data) | ||||||||||||
|
Statement of Operations:
|
||||||||||||
|
Cost of sales
|
$ | 790,182 | $ | 2,288 | $ | 792,470 | ||||||
|
Income taxes
|
79,300 | (843 | ) | 78,457 | ||||||||
|
Net income
|
155,145 | (1,445 | ) | 153,700 | ||||||||
|
Earnings per common share:
|
||||||||||||
|
Basic
|
1.91 | (0.02 | ) | 1.89 | ||||||||
|
Diluted
|
1.89 | (0.02 | ) | 1.87 | ||||||||
|
Statement of Cash Flows:
|
||||||||||||
|
Net income
|
155,145 | (1,445 | ) | 153,700 | ||||||||
|
Deferred income taxes
|
2,449 | (979 | ) | 1,470 | ||||||||
|
Changes in inventories
|
(3,502 | ) | 3,311 | (191 | ) | |||||||
|
Net cash provided by operating activities
|
198,107 | 887 | 198,994 | |||||||||
| As of December 31, 2009 | As of December 31, 2008 | |||||||||||||||||||||||
|
Computed
|
As Computed
|
Computed
|
As Computed
|
|||||||||||||||||||||
|
Under
|
Effect of
|
Under
|
Under Prior
|
Effect of
|
Under
|
|||||||||||||||||||
| Balance Sheet: | Prior Method | Change | FIFO | Method | Change | FIFO | ||||||||||||||||||
|
Inventories
|
$ | 196,162 | $ | (36,699 | ) | $ | 159,463 | $ | 214,160 | $ | (32,960 | ) | $ | 181,200 | ||||||||||
|
Other current assets (prepaid taxes)
|
25,876 | 9,669 | 35,545 | 24,423 | 8,443 | 32,866 | ||||||||||||||||||
|
Accrued expenses (income tax payable)
|
98,116 | 614 | 98,730 | 116,572 | 614 | 117,186 | ||||||||||||||||||
|
Deferred income tax liability
|
151,158 | (2,352 | ) | 148,806 | 144,336 | (2,352 | ) | 141,984 | ||||||||||||||||
|
Cumulative translation adjustment
|
59,137 | 262 | 59,399 | 39,873 | 331 | 40,204 | ||||||||||||||||||
|
Retained earnings
|
922,600 | (25,623 | ) | 896,977 | 845,396 | (23,110 | ) | 822,286 | ||||||||||||||||
| 3. | Restructuring |
Since mid-2008, we have recorded restructuring costs as a result
of cost reduction efforts and facility closings. Accruals have
been recorded based on these costs and primarily consist of
employee termination benefits. We record accruals for employee
termination benefits based on the guidance of ASC 420 “Exit
or Disposal Cost Obligations.” These expenses are included
in Restructuring expenses in the Consolidated Statements of
Operations while the restructuring accruals are included in
Accrued expenses in our Consolidated Balance Sheets.
2009
Initiatives
During the year ended December 31, 2009, the Company
recorded pre-tax restructuring expenses totaling
$12.1 million for employee severance related to employee
reductions across various functional areas as well as facility
closures resulting from the Company’s cost savings
initiatives. These initiatives included severance benefits for
478 employees. The Company is anticipating the employee
reductions to be completed by mid 2010 with an expected
additional total cost of $4.0 — $5.0 million in
2010, with severance payments expected to be fully paid by the
end of 2011 using cash from operations.
37
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
2008
Initiatives
In 2008, the Company recorded pre-tax restructuring expenses
totaling $18.0 million for employee severance related to
employee reductions across various functional areas as well as
facility closures resulting from our cost savings initiatives.
These initiatives included severance benefits for
380 employees. These employee reductions were completed by
the end of 2008.
Pre-tax restructuring expenses, by segment for the year ended
December 31, 2009, were as follows:
|
Severance
|
||||||||||||
| Costs | Exit Costs | Total | ||||||||||
| (In thousands) | ||||||||||||
|
Fluid & Metering Technologies
|
$ | 2,694 | $ | 1,364 | $ | 4,058 | ||||||
|
Health & Science Technologies
|
2,201 | 1,303 | 3,504 | |||||||||
|
Dispensing Equipment
|
1,155 | 860 | 2,015 | |||||||||
|
Fire & Safety/Diversified Products
|
1,308 | — | 1,308 | |||||||||
|
Corporate/Other
|
488 | 706 | 1,194 | |||||||||
|
Total restructuring costs
|
$ | 7,846 | $ | 4,233 | $ | 12,079 | ||||||
Pre-tax restructuring expenses, by segment for the year ended
December 31, 2008, were as follows:
|
Severance
|
||||||||||||
| Costs | Exit Costs | Total | ||||||||||
| (In thousands) | ||||||||||||
|
Fluid & Metering Technologies
|
$ | 3,978 | $ | 1,177 | $ | 5,155 | ||||||
|
Health & Science Technologies
|
3,226 | 1,015 | 4,241 | |||||||||
|
Dispensing Equipment
|
4,256 | 1,311 | 5,567 | |||||||||
|
Fire & Safety/Diversified Products
|
723 | — | 723 | |||||||||
|
Corporate/Other
|
1,898 | 411 | 2,309 | |||||||||
|
Total restructuring costs
|
$ | 14,081 | $ | 3,914 | $ | 17,995 | ||||||
Restructuring accruals of $6.9 million and
$9.3 million at December 31, 2009 and
December 31, 2008, respectively, are reflected in Accrued
expenses in our Consolidated Balance Sheets as follows:
|
2008
|
2009
|
|||||||||||
| Initiatives | Initiatives | Total | ||||||||||
| (In thousands) | ||||||||||||
|
BALANCE AT JANUARY 1, 2008
|
$ | — | $ | — | $ | — | ||||||
|
Restructuring costs/reversals
|
17,995 | — | 17,995 | |||||||||
|
Payments/utilization
|
(8,732 | ) | — | (8,732 | ) | |||||||
|
BALANCE AT DECEMBER 31, 2008
|
9,263 | — | 9,263 | |||||||||
|
Restructuring costs/reversals
|
828 | 11,251 | 12,079 | |||||||||
|
Acquisition related
|
— | 3,927 | 3,927 | |||||||||
|
Payments/utilization
|
(10,091 | ) | (8,300 | ) | (18,391 | ) | ||||||
|
BALANCE AT DECEMBER 31, 2009
|
$ | — | $ | 6,878 | $ | 6,878 | ||||||
38
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 4. | Balance Sheet Components |
The components of certain balance sheet accounts at
December 31, 2009 and 2008 were as follows:
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
RECEIVABLES
|
||||||||
|
Customers
|
$ | 185,926 | $ | 205,776 | ||||
|
Other
|
3,412 | 5,093 | ||||||
|
Total
|
189,338 | 210,869 | ||||||
|
Less allowance for doubtful accounts
|
6,160 | 5,600 | ||||||
|
Total receivables — net
|
$ | 183,178 | $ | 205,269 | ||||
|
INVENTORIES
|
||||||||
|
Raw materials and components parts
|
$ | 101,314 | $ | 110,290 | ||||
|
Work in process
|
18,978 | 22,483 | ||||||
|
Finished goods
|
39,171 | 48,427 | ||||||
|
Total inventories
|
$ | 159,463 | $ | 181,200 | ||||
|
PROPERTY, PLANT AND EQUIPMENT
|
||||||||
|
Land and improvements
|
$ | 19,776 | $ | 19,918 | ||||
|
Buildings and improvements
|
125,735 | 119,549 | ||||||
|
Machinery and equipment
|
235,219 | 246,052 | ||||||
|
Office and transportation equipment
|
91,706 | 92,555 | ||||||
|
Engineering drawings
|
1,869 | 2,510 | ||||||
|
Construction in progress
|
9,360 | 14,334 | ||||||
|
Total
|
483,665 | 494,918 | ||||||
|
Less accumulated depreciation and amortization
|
305,382 | 308,635 | ||||||
|
Total property, plant and equipment — net
|
$ | 178,283 | $ | 186,283 | ||||
|
ACCRUED EXPENSES
|
||||||||
|
Payroll and related items
|
$ | 39,315 | $ | 45,162 | ||||
|
Management incentive compensation
|
12,157 | 10,078 | ||||||
|
Income taxes payable
|
3,757 | 8,275 | ||||||
|
Deferred income taxes
|
56 | 1,471 | ||||||
|
Insurance
|
4,375 | 9,964 | ||||||
|
Warranty
|
4,383 | 3,751 | ||||||
|
Deferred revenue
|
4,480 | 2,600 | ||||||
|
Restructuring
|
6,878 | 9,263 | ||||||
|
Other
|
23,329 | 26,622 | ||||||
|
Total accrued expenses
|
$ | 98,730 | $ | 117,186 | ||||
39
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
OTHER NONCURRENT LIABILITIES
|
||||||||
|
Pension and retiree medical obligations
|
$ | 67,426 | $ | 76,488 | ||||
|
Liability for uncertain tax positions
|
6,398 | 4,758 | ||||||
|
Derivative financial instruments
|
10,497 | 10,098 | ||||||
|
Deferred revenue
|
5,353 | 479 | ||||||
|
Other
|
10,137 | 5,197 | ||||||
|
Total other noncurrent liabilities
|
$ | 99,811 | $ | 97,020 | ||||
| 5. | Goodwill and Intangible Assets |
The changes in the carrying amount of goodwill for the years
ended December 31, 2009 and 2008, by business segment, were
as follows:
|
Fluid &
|
Health &
|
Fire & Safety/
|
||||||||||||||||||
|
Metering
|
Science
|
Dispensing
|
Diversified
|
|||||||||||||||||
| Technologies | Technologies | Equipment | Products | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Goodwill
|
$ | 341,521 | $ | 353,060 | $ | 137,390 | $ | 151,707 | $ | 983,678 | ||||||||||
|
Accumulated impairment losses
|
(6,659 | ) | — | — | — | (6,659 | ) | |||||||||||||
|
BALANCE AT JANUARY 1, 2008
|
334,862 | 353,060 | 137,390 | 151,707 | 977,019 | |||||||||||||||
|
Acquisitions (Note 14)
|
202,549 | 39,551 | — | — | 242,100 | |||||||||||||||
|
Foreign currency translation
|
(11,841 | ) | (35 | ) | (3,830 | ) | (4,155 | ) | (19,861 | ) | ||||||||||
|
Purchase price adjustments
|
(1,183 | ) | (922 | ) | — | — | (2,105 | ) | ||||||||||||
|
Goodwill impairment
|
— | — | (30,090 | ) | — | (30,090 | ) | |||||||||||||
|
BALANCE AT DECEMBER 31, 2008
|
524,387 | 391,654 | 103,470 | 147,552 | 1,167,063 | |||||||||||||||
|
Foreign currency translation
|
7,164 | 298 | 1,503 | 1,562 | 10,527 | |||||||||||||||
|
Purchase price adjustments
|
2,428 | 427 | — | — | 2,855 | |||||||||||||||
|
BALANCE AT DECEMBER 31, 2009
|
$ | 533,979 | $ | 392,379 | $ | 104,973 | $ | 149,114 | $ | 1,180,445 | ||||||||||
ASC 350 requires that goodwill be tested for impairment at the
reporting unit level on an annual basis and between annual tests
if an event occurs or circumstances change that would more
likely than not reduce the fair value of the reporting unit
below its carrying value. Goodwill represents the purchase price
in excess of the net amount assigned to assets acquired and
liabilities assumed.
Goodwill and other acquired intangible assets with indefinite
lives were tested for impairment as of October 31, 2009,
the Company’s annual impairment date. In 2009, there were
no triggering events or change in circumstances that would have
required a review other than as of our annual test date. The
Company concluded that the fair value of each of the reporting
units and indefinite-lived intangible assets was in excess of
the carrying value as of October 31, 2009. However, a 10%
decrease in the fair value of the Banjo or the Water reporting
units within the Fluid & Metering Technologies Segment
could potentially result in a goodwill impairment charge at
these reporting units. The total goodwill balance for these two
reporting units as of October 31, 2009 was
$288.7 million.
In 2008 in accordance with ASC 350, the Company concluded that
Fluid Management, a reporting unit within the Company’s
Dispensing Equipment segment, experienced a downturn in capital
spending by its customer base and the loss of market share which
required the Company to perform an interim period goodwill
impairment test.
40
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The Company performed the first step of the two-step impairment
test and compared the fair value of the reporting unit to its
carrying value. Consistent with the Company’s approach in
its annual impairment testing, in assessing the fair value of
the Fluid Management reporting unit, the Company considered both
the market approach and income approach. In 2008 under the
market approach, the fair value of the reporting unit is based
on comparing the reporting unit to comparable publicly traded
companies or comparable entities which have been recently
acquired in arms-length transactions. Under the income approach,
the fair value of the reporting unit is based on the present
value of estimated future cash flows. The income approach is
dependent on a number of significant management assumptions
including estimates of operating results, capital expenditures,
other operating costs and discount rates. Due to current
conditions within the market and the specific reporting unit,
weighting was equally attributed to both the market and income
approaches (50% each) in arriving at the fair value of the
reporting unit. The Company determined that the fair value of
the Fluid Management reporting unit was less than the carrying
value of the net assets of the reporting unit, and thus the
Company performed step two of the impairment test.
In step two of the impairment test, the Company determined the
implied fair value of the goodwill and compared it to the
carrying value of the goodwill. The Company allocated the
current fair value of the Fluid Management reporting unit to all
of its assets and liabilities as if the reporting unit had
presently been acquired in a business combination. The excess of
the fair value of the reporting unit over the fair value of its
identifiable assets and liabilities is the implied fair value of
goodwill. The Company’s step two analysis resulted in an
implied fair value of goodwill of $21.2 million, and as a
result, the Company recognized an impairment charge of
$30.1 million in the third quarter of 2008.
The following table provides the gross carrying value and
accumulated amortization for each major class of intangible
asset at December 31, 2009 and 2008:
| At December 31, 2009 | At December 31, 2008 | |||||||||||||||||||||||||||
|
Gross
|
Weighted
|
Gross
|
||||||||||||||||||||||||||
|
Carrying
|
Accumulated
|
Average
|
Carrying
|
Accumulated
|
||||||||||||||||||||||||
| Amount | Amortization | Net | Life | Amount | Amortization | Net | ||||||||||||||||||||||
|
Amortizable intangible assets:
|
||||||||||||||||||||||||||||
|
Patents
|
$ | 9,914 | $ | (4,289 | ) | $ | 5,625 | 11 | $ | 11,795 | $ | (5,550 | ) | $ | 6,245 | |||||||||||||
|
Trade names
|
63,589 | (10,144 | ) | 53,445 | 15 | 62,805 | (6,310 | ) | 56,495 | |||||||||||||||||||
|
Customer relationships
|
157,890 | (32,422 | ) | 125,468 | 12 | 156,216 | (16,601 | ) | 139,615 | |||||||||||||||||||
|
Non-compete agreements
|
4,268 | (3,356 | ) | 912 | 4 | 4,569 | (2,989 | ) | 1,580 | |||||||||||||||||||
|
Unpatented technology
|
36,047 | (6,240 | ) | 29,807 | 14 | 35,527 | (2,939 | ) | 32,588 | |||||||||||||||||||
|
Other
|
6,236 | (2,239 | ) | 3,997 | 10 | 6,282 | (1,679 | ) | 4,603 | |||||||||||||||||||
|
Total amortizable intangible assets
|
277,944 | (58,690 | ) | 219,254 | 277,194 | (36,068 | ) | 241,126 | ||||||||||||||||||||
|
Banjo trade name
|
62,100 | — | 62,100 | 62,100 | — | 62,100 | ||||||||||||||||||||||
| $ | 340,044 | $ | (58,690 | ) | $ | 281,354 | $ | 339,294 | $ | (36,068 | ) | $ | 303,226 | |||||||||||||||
The Banjo trade name is an indefinite lived intangible asset
which is tested for impairment on an annual basis. Amortization
of intangible assets was $24.5 million, $17.6 million
and $9.7 million in 2009, 2008 and 2007, respectively.
Amortization expense for each of the next five years is
estimated to be approximately $25.0 million annually.
41
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 6. | Borrowings |
Borrowings at December 31, 2009 and 2008 consisted of the
following:
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
Credit facility
|
$ | 298,732 | $ | 448,763 | ||||
|
Term loan
|
95,000 | 100,000 | ||||||
|
Other borrowings
|
6,368 | 5,237 | ||||||
|
Total borrowings
|
400,100 | 554,000 | ||||||
|
Less current portion
|
8,346 | 5,856 | ||||||
|
Total long-term borrowings
|
$ | 391,754 | $ | 548,144 | ||||
The Company maintains a $600.0 million unsecured domestic,
multi-currency bank revolving credit facility (“Credit
Facility”), which expires on December 21, 2011. In
2008, the Credit Facility was amended to allow the Company to
designate certain foreign subsidiaries as designated borrowers.
Upon approval from the lenders, the designated borrowers will be
allowed to receive loans under the Credit Facility. A designated
borrower sublimit was established as the lesser of the aggregate
commitments or $100.0 million. As of the amendment date,
Fluid Management Europe B.V., (FME) was approved by the lenders
as a designated borrower. FME’s borrowings under the Credit
Facility at year end were approximately $48.7 million (Euro
34 million). As the FME borrowings under the Credit
Facility are Euro denominated and the cash flows that will be
used to make payments of principal and interest are
predominately denominated in Euros, the Company does not
anticipate any significant foreign exchange gains or losses in
servicing this debt.
At December 31, 2009 there was $298.7 million
outstanding under the Credit Facility and outstanding letters of
credit totaled approximately $7.1 million. The net
available borrowing under the Credit Facility as of
December 31, 2009, was approximately $294.2 million.
Interest is payable quarterly on the outstanding borrowings at
the bank agent’s reference rate. Interest on borrowings
based on LIBOR plus an applicable margin is payable on the
maturity date of the borrowing, or quarterly from the effective
date for borrowings exceeding three months. The applicable
margin is based on the Company’s senior, unsecured,
long-term debt rating and can range from 24 basis points to
50 basis points. Based on the Company’s BBB rating at
December 31, 2009, the applicable margin was 40 basis
points. An annual Credit Facility fee, also based on the
Company’s credit rating, is currently 10 basis points
and is payable quarterly.
At December 31, 2009 the Company had one interest rate
exchange agreement related to the Credit Facility. The interest
rate exchange agreement, expiring in January 2011, effectively
converted $250.0 million of floating-rate debt into
fixed-rate debt at an interest rate of 3.25%. The fixed rate
noted above is comprised of the fixed rate on the interest rate
exchange agreement and the Company’s current margin of
40 basis points on the Credit Facility.
On February 15, 2008, the Company retired its
$150.0 million senior notes using proceeds available under
the Company’s Credit Facility.
On April 18, 2008, the Company completed a
$100.0 million unsecured senior bank term loan agreement
(“Term Loan”), with covenants consistent with the
existing Credit Facility and a maturity on December 21,
2011. At December 31, 2009, there was $95.0 million
outstanding under the Term Loan with $5.0 million included
within short term borrowings. Interest under the Term Loan is
based on the bank agent’s reference rate or LIBOR plus an
applicable margin and is payable at the end of the selected
interest period, but at least quarterly. The applicable margin
is based on the Company’s senior, unsecured, long-term debt
rating and can range from 45 to 100 basis points. Based on
the Company’s current debt rating, the applicable margin is
80 basis points. The Term Loan requires repayments of
$5.0 million and $7.5 million in April of 2010 and
2011, respectively, with the remaining
42
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
balance due on December 21, 2011. The Company used the
proceeds from the Term Loan to pay down existing debt
outstanding under the Credit Facility.
The Company currently maintains an interest rate exchange
agreement related to the Term Loan that expires in December
2011. With a current notional amount of $95.0 million, the
agreement effectively converted $100.0 million of
floating-rate debt into fixed-rate debt at an interest rate of
4.00%. The fixed rate is comprised of the fixed rate on the
interest rate exchange agreement and the Company’s current
margin of 80 basis points on the Term Loan.
Other borrowings of $6.4 million at December 31, 2009
was comprised of capital leases as well as debt at international
locations maintained for working capital purposes. Interest is
payable on the outstanding debt balances at the international
locations at rates ranging from 0.8% to 4.0% per annum.
There are two financial covenants that the Company is required
to maintain in connection with the Credit Facility and Term
Loan. As defined in the agreement, the minimum interest coverage
ratio (operating cash flow to interest) is 3.0 to 1 and the
maximum leverage ratio (outstanding debt to operating cash flow)
is 3.25 to 1. At December 31, 2009, the Company was in
compliance with both of these financial covenants.
Total borrowings at December 31, 2009 have scheduled
maturities as follows (in thousands):
|
2010
|
$ | 8,346 | ||
|
2011
|
389,083 | |||
|
2012
|
330 | |||
|
2013
|
309 | |||
|
2014
|
320 | |||
|
Thereafter
|
1,712 | |||
|
Total borrowings
|
$ | 400,100 | ||
| 7. | Derivative Instruments |
The Company enters into cash flow hedges to reduce the exposure
to variability in certain expected future cash flows. The type
of cash flow hedges the Company enters into includes foreign
currency contracts and interest rate exchange agreements that
effectively convert a portion of floating-rate debt to
fixed-rate debt and are designed to reduce the impact of
interest rate changes on future interest expense.
The effective portion of gains or losses on interest rate
exchange agreements is reported in accumulated other
comprehensive income in shareholders’ equity and
reclassified into net income in the same period or periods in
which the hedged transaction affects net income. The remaining
gain or loss in excess of the cumulative change in the present
value of future cash flows or the hedged item, if any, is
recognized into net income during the period of change.
Fair values relating to derivative financial instruments reflect
the estimated amounts that the Company would receive or pay to
sell or buy the contracts based on quoted market prices of
comparable contracts at each balance sheet date.
At December 31, 2009, the Company had two interest rate
exchange agreements. The first interest rate exchange agreement,
expiring in January 2011, effectively converted
$250.0 million of floating-rate debt into fixed-rate debt
at an interest rate of 3.25%. The second interest rate exchange
agreement, expiring December 2011, with a current notional
amount of $95.0 million, effectively converted
$100.0 million of floating-rate debt into fixed-rate debt
at an interest rate of 4.00%. The fixed rate is comprised of the
fixed rate on the interest rate exchange agreements and the
Company’s current margin of 40 basis points for the
Credit Facility and 80 basis points on the Term Loan.
43
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Based on interest rates at December 31, 2009, approximately
$9.3 million of the amount included in accumulated other
comprehensive income (loss) in shareholders’ equity at
December 31, 2009 will be recognized to net income over the
next 12 months as the underlying hedged transactions are
realized.
The following table set’s forth the fair value amounts of
derivative instruments held by the Company as of
December 31, 2009 and 2008:
| Fair Value-Liabilities | ||||||||||
|
December 31,
|
December 31,
|
Balance Sheet
|
||||||||
| 2009 | 2008 |
Caption
|
||||||||
| (In thousands) | ||||||||||
|
Interest rate contracts
|
$ | 10,497 | $ | 10,098 | Other noncurrent liabilities | |||||
|
Foreign exchange contracts
|
— | 272 | Accrued expenses | |||||||
| $ | 10,497 | $ | 10,370 | |||||||
The following table summarizes the gain (loss) recognized and
the amounts and location of income (expense) and gain (loss)
reclassified into income for interest rate contracts and foreign
currency contracts for the year ended December 31, 2009 and
2008:
|
Gain (Loss) Recognized in
|
Income (Expense)
|
|||||||||||||||||
|
Other Comprehensive
|
and Gain (Loss)
|
|||||||||||||||||
| Income (Loss) | Reclassified into Income |
Income
|
||||||||||||||||
| Year Ended December 31, |
Statement
|
|||||||||||||||||
| 2009 | 2008 | 2009 | 2008 | Caption | ||||||||||||||
| (In thousands) | ||||||||||||||||||
|
Interest rate contracts
|
$ | (8,509 | ) | $ | (9,743 | ) | $ | (8,111 | ) | $ | 348 | Interest expense | ||||||
|
Foreign exchange contracts
|
1,187 | (307 | ) | 899 | (19 | ) | Sales | |||||||||||
| 8. | Fair Value Measurements |
ASC 820
“Fair Value Measurements and Disclosures”
defines fair value, provides guidance for measuring fair
value and requires certain disclosures. This standard discusses
valuation techniques, such as the market approach (comparable
market prices), the income approach (present value of future
income or cash flow), and the cost approach (cost to replace the
service capacity of an asset or replacement cost). The standard
utilizes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value into three broad
levels. The following is a brief description of those three
levels:
| • | Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities. | |
| • | Level 2: Inputs, other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. | |
| • | Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions. |
The following table summarizes the basis used to measure the
Company’s financial assets and liabilities at fair value on
a recurring basis in the balance sheet at December 31, 2009
and 2008:
| Basis of Fair Value Measurements | ||||||||||||||||
|
Balance at
|
||||||||||||||||
|
December 31,
|
||||||||||||||||
| 2009 | Level 1 | Level 2 | Level 3 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Money market investment
|
$ | 9,186 | $ | 9,186 | — | — | ||||||||||
|
Interest rate exchange agreement derivative financial instruments
|
$ | 10,497 | — | $ | 10,497 | — | ||||||||||
44
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
|
Balance at
|
||||||||||||||||
|
December 31,
|
||||||||||||||||
| 2008 | Level 1 | Level 2 | Level 3 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Interest rate exchange agreement derivative financial instruments
|
$ | 10,098 | — | $ | 10,098 | — | ||||||||||
|
Foreign currency contracts
|
$ | 272 | — | $ | 272 | — | ||||||||||
In determining the fair value of the Company’s interest
rate exchange agreement derivatives, the Company uses a present
value of expected cash flows based on market observable interest
rate yield curves commensurate with the term of each instrument
and the credit default swap market to reflect the credit risk of
either the Company or the counterparty.
The carrying value of our cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximates
their fair values because of the short term nature of these
instruments. At December 31, 2009, the fair value of our
Credit Facility and Term Loan, based on the current market rates
for debt with similar credit risk and maturity, was
approximately $375.6 million compared to the carrying value
of $393.7 million.
| 9. | Commitments and Contingencies |
At December 31, 2009, total future minimum rental payments
under noncancelable operating leases, primarily for office
facilities, warehouses and data processing equipment, were
$33.2 million. The future minimum rental commitments for
each of the next five years and thereafter are as follows:
2010 — $8.6 million; 2011 —
$5.9 million; 2012 — $4.5 million;
2013 — $3.1 million; 2014 —
$2.2 million; thereafter — $8.9 million.
Rental expense from continuing operations totaled
$12.2 million, $12.6 million and $11.6 million
for the years ended December 31, 2009, 2008, and 2007,
respectively.
The Company is a party to various legal proceedings involving
employment, contractual, product liability and other matters,
none of which is expected to have a material adverse effect on
its results of operations, financial condition, or cash flows.
| 10. | Common and Preferred Stock |
On April 21, 2008, the Company’s Board of Directors
authorized the repurchase of up to $125.0 million of its
outstanding common shares either in the open market or through
private transactions. In 2008 the Company purchased a total of
2.3 million shares at a cost of approximately
$50.0 million. No shares were purchased in 2009.
At December 31, 2009 and 2008, the Company had
150 million shares of authorized common stock, with a par
value of $.01 per share and 5 million shares of preferred
stock with a par value of $.01 per share. No preferred stock was
issued as of December 31, 2009 and 2008.
| 11. | Income Taxes |
Pretax income for the years ended December 31, 2009, 2008
and 2007 was taxed in the following jurisdictions:
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Domestic
|
$ | 114,389 | $ | 120,962 | $ | 162,880 | ||||||
|
Foreign
|
54,438 | 71,265 | 69,996 | |||||||||
|
Total
|
$ | 168,827 | $ | 192,227 | $ | 232,876 | ||||||
45
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The provision (benefit) for income taxes for the years ended
December 31, 2009, 2008, and 2007, was as follows:
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Current
|
||||||||||||
|
U.S.
|
$ | 34,921 | $ | 47,594 | $ | 50,045 | ||||||
|
State and local
|
2,704 | 6,542 | 5,522 | |||||||||
|
Foreign
|
16,730 | 21,882 | 21,420 | |||||||||
|
Total current
|
54,355 | 76,018 | 76,987 | |||||||||
|
Deferred
|
||||||||||||
|
U.S.
|
1,658 | (10,099 | ) | 4,198 | ||||||||
|
State and local
|
110 | (503 | ) | 400 | ||||||||
|
Foreign
|
(687 | ) | (215 | ) | (3,128 | ) | ||||||
|
Total deferred
|
1,081 | (10,817 | ) | 1,470 | ||||||||
|
Total provision for income taxes
|
$ | 55,436 | $ | 65,201 | $ | 78,457 | ||||||
Deferred tax assets (liabilities) related to the following at
December 31, 2009 and 2008 were:
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
Employee and retiree benefit plans
|
$ | 24,075 | $ | 29,197 | ||||
|
Depreciation and amortization
|
(167,345 | ) | (170,652 | ) | ||||
|
Inventories
|
7,240 | 5,596 | ||||||
|
Allowances and accruals
|
7,589 | 7,434 | ||||||
|
Other
|
(2,633 | ) | 4,076 | |||||
|
Total
|
$ | (131,074 | ) | $ | (124,349 | ) | ||
The deferred tax assets and liabilities recognized in the
Company’s Consolidated Balance Sheets as of
December 31, 2009 and 2008 were:
| 2009 | 2008 | |||||||
| (In thousands) | ||||||||
|
Deferred tax asset — other current assets
|
$ | 17,615 | $ | 11,469 | ||||
|
Deferred tax asset — other noncurrent assets
|
173 | 7,637 | ||||||
|
Total deferred tax assets
|
17,788 | 19,106 | ||||||
|
Deferred tax liability — accrued expenses
|
(56 | ) | (1,471 | ) | ||||
|
Noncurrent deferred tax liability — deferred income
taxes
|
(148,806 | ) | (141,984 | ) | ||||
|
Total deferred tax liabilities
|
(148,862 | ) | (143,455 | ) | ||||
|
Net deferred tax liabilities
|
$ | (131,074 | ) | $ | (124,349 | ) | ||
46
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The provision for income taxes differs from the amount computed
by applying the statutory federal income tax rate to pretax
income. The computed amount and the differences for the years
ended December 31, 2009, 2008, and 2007 are shown in the
following table:
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Pretax income
|
$ | 168,827 | $ | 192,227 | $ | 232,876 | ||||||
|
Provision for income taxes:
|
||||||||||||
|
Computed amount at statutory rate of 35%
|
$ | 59,089 | $ | 67,280 | $ | 81,507 | ||||||
|
State and local income tax (net of federal tax benefit)
|
1,829 | 3,925 | 3,849 | |||||||||
|
Taxes on
non-U.S.
earnings-net
of foreign tax credits
|
(4,117 | ) | (5,191 | ) | (407 | ) | ||||||
|
U.S. business tax credits
|
(754 | ) | (857 | ) | (679 | ) | ||||||
|
Domestic activities production deduction
|
(1,925 | ) | (2,291 | ) | (2,450 | ) | ||||||
|
Revaluation of deferred taxes for
non-U.S.
rate changes
|
— | — | (4,535 | ) | ||||||||
|
Other
|
1,314 | 2,335 | 1,172 | |||||||||
|
Total provision for income taxes
|
$ | 55,436 | $ | 65,201 | $ | 78,457 | ||||||
The Company has not provided an estimate for any U.S. or
additional foreign taxes on undistributed earnings of foreign
subsidiaries that might be payable if these earnings were
repatriated since the Company considers these amounts to be
permanently invested.
We adopted the provisions of ASC 740 on January 1, 2007. In
accordance with ASC 740, the Company recognized a
cumulative-effect adjustment of $1.2 million, increasing
its liability for unrecognized tax benefits, interest, and
penalties and reducing the January 1, 2007 balance of
retained earnings.
A reconciliation of the beginning and ending amount of
unrecognized tax benefits for the years ended December 31,
2009, 2008 and 2007 are shown in the following table:
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Unrecognized tax benefits beginning balance
|
$ | 4,009 | $ | 5,938 | $ | 5,485 | ||||||
|
Gross increases for tax positions of prior years
|
2,138 | 2,571 | 2,943 | |||||||||
|
Gross decreases for tax positions of prior years
|
— | (1,836 | ) | (432 | ) | |||||||
|
Settlements
|
(628 | ) | (993 | ) | (1,952 | ) | ||||||
|
Lapse of statute of limitations
|
(234 | ) | (1,671 | ) | (106 | ) | ||||||
|
Unrecognized tax benefits ending balance
|
$ | 5,285 | $ | 4,009 | $ | 5,938 | ||||||
We recognize interest and penalties related to uncertain tax
positions in income tax expense. As of December 31, 2009,
2008 and 2007 we had approximately $0.9 million,
$0.9 million and $1.0 million, respectively, of
accrued interest related to uncertain tax positions. As of
December 31, 2009, 2008 and 2007 we had approximately
$0.2 million of accrued penalties related to uncertain tax
positions.
The total amount of unrecognized tax benefits that would affect
our effective tax rate if recognized is $4.4 million as of
December 31, 2009, $3.1 million as of
December 31, 2008 and $2.5 million as of
December 31, 2007. The tax years
2005-2008
remain open to examination by major taxing jurisdictions. Due to
the potential for resolution of federal, state and foreign
examinations, and the expiration of various statutes of
limitation, it is reasonably possible that the Company’s
gross unrecognized tax benefits balance may change within the
next twelve months by a range of zero to $0.3 million.
47
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
At December 31, 2009 and 2008, the Company had state net
operating loss carry forwards of approximately
$12.7 million and $14.3 million, respectively. At
December 31, 2009 and 2008 the Company had foreign net
operating loss carry forwards of approximately
$12.5 million and $9.7 million, respectively. At
December 31, 2009 and 2008, the Company had a foreign
capital loss carry forward of approximately $2.3 million
and $3.8 million respectively. If unutilized, the state net
operating loss will expire between 2016 and 2028. Neither the
foreign net operating loss nor the foreign capital loss has an
expiration date. At December 31, 2009 and 2008, the Company
recorded a valuation allowance against the deferred tax asset
attributable to the state net operating loss of
$0.2 million and $0.4 million, respectively. The
Company has not recorded a valuation allowance against the
foreign net operating loss at either December 31, 2009 or
2008. At December 31, 2009 and 2008, the Company has a
valuation allowance against the deferred tax asset attributable
to the foreign capital loss of $0.6 million and
$1.1 million, respectively.
| 12. | Comprehensive Income |
The components of Accumulated other comprehensive income (loss)
for 2009, 2008 and 2007 follow:
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Unrealized losses on derivatives
|
||||||||||||
|
Pretax amount
|
$ | (127 | ) | $ | (10,370 | ) | $ | — | ||||
|
Tax benefit
|
56 | 3,728 | — | |||||||||
|
Aftertax amount
|
$ | (71 | ) | $ | (6,642 | ) | $ | — | ||||
|
Pension and other post-retirement plans
|
||||||||||||
|
Pretax amount
|
$ | 9,863 | $ | (20,996 | ) | $ | 10,097 | |||||
|
Tax benefit (provision)
|
(3,467 | ) | 7,717 | (4,163 | ) | |||||||
|
Aftertax amount
|
$ | 6,396 | $ | (13,279 | ) | $ | 5,934 | |||||
|
Cumulative translation adjustment
|
||||||||||||
|
Pretax amount
|
$ | 19,195 | $ | (45,863 | ) | $ | 33,573 | |||||
|
Tax benefit (provision)
|
— | — | — | |||||||||
|
Aftertax amount
|
$ | 19,195 | $ | (45,863 | ) | $ | 33,573 | |||||
Foreign currency translation adjustments are generally not
adjusted for income taxes as they relate to indefinite
investments in non-US subsidiaries.
| 13. | Business Segments and Geographic Information |
IDEX has four reportable business segments: Fluid &
Metering Technologies, Health & Science Technologies,
Dispensing Equipment, and Fire & Safety/Diversified
Products. Reporting units in the Fluid & Metering
Technologies segment include Banjo, Energy, Water and IPT.
Reporting units in the Health & Science Technologies
segment include HST Core, Gast, and Micropump. Reporting units
in the Dispensing Equipment segment include the Fluid Management
businesses. Reporting units in the Fire &
Safety/Diversified Products segment include Fire Suppression,
Rescue Tools and Band-It.
The Fluid & Metering Technologies Segment designs,
produces and distributes positive displacement pumps, flow
meters, injectors, and other fluid-handling pump modules and
systems and provides flow monitoring and other services for
water and wastewater. The Health & Science
Technologies Segment designs, produces and distributes a wide
range of precision fluidics solutions, including very high
precision, low-flow rate pumping solutions required in
analytical instrumentation, clinical diagnostics and drug
discovery, high performance molded and extruded,
48
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
biocompatible medical devices and implantables, air compressors
used in medical, dental and industrial applications, and
precision gear and peristaltic pump technologies that meet
exacting OEM specifications. The Dispensing Equipment Segment
produces precision equipment for dispensing, metering and mixing
colorants, paints, and hair colorants and other personal care
products used in a variety of retail and commercial businesses
around the world. The Fire & Safety/Diversified
Products Segment produces firefighting pumps and controls,
rescue tools, lifting bags and other components and systems for
the fire and rescue industry, and engineered stainless steel
banding and clamping devices used in a variety of industrial and
commercial applications.
Information on the Company’s business segments from
continuing operations is presented below, based on the nature of
products and services offered. The Company evaluates performance
based on several factors, of which operating income is the
primary financial measure. Intersegment sales are accounted for
at fair value as if the sales were to third parties.
| 2009 | 2008(5) | 2007(5) | ||||||||||
| (In thousands) | ||||||||||||
|
NET SALES
|
||||||||||||
|
Fluid & Metering Technologies:
|
||||||||||||
|
External customers
|
$ | 640,242 | $ | 696,641 | $ | 568,622 | ||||||
|
Intersegment sales
|
866 | 1,061 | 1,685 | |||||||||
|
Total segment sales
|
641,108 | 697,702 | 570,307 | |||||||||
|
Health & Science Technologies:
|
||||||||||||
|
External customers
|
299,336 | 328,514 | 323,639 | |||||||||
|
Intersegment sales
|
4,993 | 3,077 | 3,531 | |||||||||
|
Total segment sales
|
304,329 | 331,591 | 327,170 | |||||||||
|
Dispensing Equipment:
|
||||||||||||
|
External customers
|
127,279 | 163,861 | 177,948 | |||||||||
|
Intersegment sales
|
— | — | — | |||||||||
|
Total segment sales
|
127,279 | 163,861 | 177,948 | |||||||||
|
Fire & Safety/Diversified Products:
|
||||||||||||
|
External customers
|
262,804 | 300,455 | 288,422 | |||||||||
|
Intersegment sales
|
5 | 7 | 2 | |||||||||
|
Total segment sales
|
262,809 | 300,462 | 288,424 | |||||||||
|
Intersegment eliminations
|
(5,864 | ) | (4,145 | ) | (5,218 | ) | ||||||
|
Total net sales
|
$ | 1,329,661 | $ | 1,489,471 | $ | 1,358,631 | ||||||
|
OPERATING INCOME(1)
|
||||||||||||
|
Fluid & Metering Technologies
|
$ | 100,289 | $ | 123,801 | $ | 119,060 | ||||||
|
Health & Science Technologies
|
51,712 | 58,297 | 61,473 | |||||||||
|
Dispensing Equipment(2)
|
15,147 | (10,748 | ) | 39,179 | ||||||||
|
Fire & Safety/Diversified Products
|
59,884 | 74,310 | 66,287 | |||||||||
|
Corporate office and other(3)
|
(42,178 | ) | (39,704 | ) | (33,204 | ) | ||||||
|
Total operating income
|
$ | 184,854 | $ | 205,956 | $ | 252,795 | ||||||
49
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 2009 | 2008(5) | 2007(5) | ||||||||||
| (In thousands) | ||||||||||||
|
ASSETS
|
||||||||||||
|
Fluid & Metering Technologies
|
$ | 1,043,082 | $ | 1,070,348 | $ | 698,286 | ||||||
|
Health & Science Technologies
|
567,096 | 594,459 | 542,427 | |||||||||
|
Dispensing Equipment
|
164,979 | 179,800 | 236,751 | |||||||||
|
Fire & Safety/Diversified Products
|
285,893 | 286,482 | 312,603 | |||||||||
|
Corporate office and other(3)
|
37,107 | 20,711 | 180,011 | |||||||||
|
Total assets
|
$ | 2,098,157 | $ | 2,151,800 | $ | 1,970,078 | ||||||
|
DEPRECIATION AND AMORTIZATION(4)
|
||||||||||||
|
Fluid & Metering Technologies
|
$ | 32,584 | $ | 26,276 | $ | 16,797 | ||||||
|
Health & Science Technologies
|
14,293 | 11,806 | 11,156 | |||||||||
|
Dispensing Equipment
|
3,124 | 3,986 | 3,151 | |||||||||
|
Fire & Safety/Diversified Products
|
5,328 | 5,288 | 5,676 | |||||||||
|
Corporate office and other
|
1,017 | 1,243 | 1,258 | |||||||||
|
Total depreciation and amortization
|
$ | 56,346 | $ | 48,599 | $ | 38,038 | ||||||
|
CAPITAL EXPENDITURES
|
||||||||||||
|
Fluid & Metering Technologies
|
$ | 12,867 | $ | 13,859 | $ | 11,407 | ||||||
|
Health & Science Technologies
|
6,365 | 5,365 | 5,342 | |||||||||
|
Dispensing Equipment
|
864 | 2,528 | 2,832 | |||||||||
|
Fire & Safety/Diversified Products
|
3,686 | 4,743 | 3,532 | |||||||||
|
Corporate office and other
|
1,743 | 1,863 | 3,383 | |||||||||
|
Total capital expenditures
|
$ | 25,525 | $ | 28,358 | $ | 26,496 | ||||||
| (1) | Segment operating income excludes net unallocated corporate operating expenses. | |
| (2) | Segment operating income includes $30.1 million goodwill impairment charge in 2008 for Fluid Management. | |
| (3) | Includes intersegment eliminations. | |
| (4) | Excludes amortization of debt issuance expenses. | |
| (5) | Certain prior year amounts have been restated to reflect the LIFO to FIFO inventory costing change. |
50
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Information about the Company’s operations in different
geographical regions for the years ended December 31, 2009,
2008 and 2007 is shown below. Net sales were attributed to
geographic areas based on location of the customer, and no
country outside the U.S. was greater than 10% of total
revenues.
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
NET SALES
|
||||||||||||
|
U.S.
|
$ | 698,822 | $ | 793,872 | $ | 734,877 | ||||||
|
Europe
|
361,774 | 386,864 | 340,543 | |||||||||
|
Other countries
|
269,065 | 308,735 | 283,211 | |||||||||
|
Total net sales
|
$ | 1,329,661 | $ | 1,489,471 | $ | 1,358,631 | ||||||
|
LONG-LIVED ASSETS — PROPERTY, PLANT AND EQUIPMENT
|
||||||||||||
|
U.S.
|
$ | 105,165 | $ | 111,252 | $ | 110,371 | ||||||
|
Europe
|
61,766 | 65,208 | 54,401 | |||||||||
|
Other countries
|
11,352 | 9,823 | 8,227 | |||||||||
|
Total long-lived assets
|
$ | 178,283 | $ | 186,283 | $ | 172,999 | ||||||
| 14. | Acquisitions |
On January 1, 2008, the Company acquired the stock of ADS,
a provider of metering technology and flow monitoring services
for water and wastewater markets. ADS is headquartered in
Huntsville, Alabama, with regional sales and service offices
throughout the United States and Australia. With annual revenues
of approximately $70.0 million, ADS operates as part of the
Water reporting unit within the Company’s Fluid &
Metering Technologies Segment. The Company acquired ADS for an
aggregate purchase price of $156.1 million, consisting
entirely of cash. Approximately $155.0 million of the cash
payment was financed with borrowings under the Company’s
Credit Facility, of which $140.0 million was reflected as
restricted cash at December 31, 2007. Goodwill and
intangible assets recognized as part of this transaction were
$102.1 million and $51.9 million, respectively. The
$102.1 million of goodwill is not deductible for tax
purposes.
On October 1, 2008, the Company acquired the stock of
Richter, a provider of premium quality lined pumps, valves and
control equipment for the chemical and pharmaceutical
industries. Richter’s corrosion resistant fluoroplastic
lined products offer solutions for demanding applications in the
process industry. Headquartered in Kempen, Germany, with
facilities in China, India and the U.S., Richter has annual
revenues of approximately $53.0 million. Richter operates
as part of the IPT reporting unit within the Company’s
Fluid & Metering Technologies Segment. The Company
acquired Richter for an aggregate purchase price of
$102.0 million, consisting of $93.3 million in cash
and the assumption of approximately $8.7 million of debt
related items. Approximately $63.7 million of the cash
payment was financed with borrowings under the Company’s
Credit Facility. Goodwill and intangible assets recognized as
part of this transaction were $57.8 million and
$32.7 million, respectively. The $57.8 million of
goodwill is not deductible for tax purposes.
On October 14, 2008, the Company acquired the stock of
iPEK, a provider of systems focused on infrastructure analysis,
specifically wastewater collection systems. iPEK is a developer
of remote controlled systems for infrastructure inspection.
Headquartered in Hirschegg, Austria, iPEK has annual revenues of
approximately $25.0 million. iPEK operates as part of the
Water reporting unit within the Company’s Fluid &
Metering Technologies Segment and is expected to leverage the
ADS acquisition which was completed in January 2008. The Company
acquired iPEK for an aggregate purchase price of
$44.5 million, consisting of $43.1 million in cash and
the assumption of approximately $1.4 million of debt
related items. Approximately $33.2 million of the cash
payment was financed with borrowings under the Company’s
Credit Facility. Goodwill and intangible assets
51
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CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
recognized as part of this transaction were $21.1 million
and $17.8 million, respectively. Of the $21.1 million
of goodwill, approximately $20.0 million is expected to be
deductible for tax purposes.
On October 16, 2008, the Company acquired the stock of
IETG, a provider of flow monitoring and underground utility
surveillance services for the water and wastewater markets. IETG
products and services enable water companies to effectively
manage their water distribution and sewerage networks, while its
surveillance service specializes in underground asset detection
and mapping for utilities and other private companies.
Headquartered in Leeds, United Kingdom, IETG has annual revenues
of approximately $26.0 million. IETG operates as part of
the Water reporting unit within IDEX’s Fluid &
Metering Technologies Segment. The Company acquired IETG for an
aggregate purchase price of $36.9 million, consisting of
$35.0 million in cash and the assumption of approximately
$1.9 million of debt related items. Approximately
$20.5 million of the cash payment was financed with
borrowings under the Company’s Credit Facility. Goodwill
and intangible assets recognized as part of this transaction
were $24.0 million and $9.2 million, respectively. The
$24.0 million of goodwill is not deductible for tax
purposes.
On October 20, 2008, the Company acquired the stock of
Semrock, a provider of optical filters for biotech and
analytical instrumentation in the life sciences markets.
Semrock’s products are used in the biotechnology and
analytical instrumentation industries. Semrock produces optical
filters using
state-of-the-art
manufacturing processes which enable them to offer significant
improvements in the performance and reliability of their
customers’ instruments. Headquartered in Rochester, New
York, Semrock has annual revenues of approximately
$21.0 million. Semrock operates as part of the HST Core
reporting unit within the Company’s Health &
Science Technologies Segment. The Company acquired Semrock for
an aggregate purchase price of $60.6 million, consisting
entirely of cash. Approximately $60.0 million of the cash
payment was financed with borrowings under the Company’s
Credit Facility. Goodwill and intangible assets recognized as
part of this transaction were $38.1 million and
$20.0 million, respectively. The $38.1 million of
goodwill is not deductible for tax purposes.
On November 14, 2008, the Company acquired the stock of
Innovadyne, a provider of nanoliter dispensing instruments for
the life sciences industry. Innovadyne’s products are used
for assay miniaturization across a broad range of disciplines
including High Throughput Screening, Assay Development,
PCR/Sequencing, and Protein Crystallography. Innovadyne operates
as part of the HST Core reporting unit within the Company’s
Health & Science Technologies Segment. The Company
acquired Innovadyne for an aggregate purchase price of
$3.3 million, consisting entirely of cash. Approximately
$3.3 million of the cash payment was financed with
borrowings under the Company’s Credit Facility. Goodwill
and intangible assets recognized as part of this transaction
were $1.4 million and $1.1 million, respectively. The
$1.4 million of goodwill is not deductible for tax purposes.
On February 14, 2007, the Company acquired the stock of
Faure Herman, a leading provider of ultrasonic and helical
turbine flow meters used in the custody transfer and control of
high value fluids and gases. Headquartered in La Ferté
Bernard, France, Faure Herman has sales offices in Europe and
North America, with annual revenues of approximately
$22.0 million. Faure Herman operates as part of the
Company’s Energy reporting unit within its
Fluid & Metering Technologies Segment. The Company
acquired Faure Herman for an aggregate purchase price of
$25.9 million, consisting of $24.3 million in cash and
the assumption of approximately $1.6 million of debt.
Approximately $12.9 million of the cash payment was
financed with borrowings under the Company’s Credit
Facility. Goodwill and intangible assets recognized as part of
this transaction were $13.4 million and $7.7 million,
respectively. The $13.4 million of goodwill is not
deductible for tax purposes.
On June 12, 2007, the Company acquired the assets of
Quadro, a leading provider of particle control solutions for the
pharmaceutical and bio-pharmaceutical markets. Quadro’s
core capabilities include fine milling, emulsification and
special handling of liquid and solid particulates for
laboratory, pilot phase and production scale processing within
the pharmaceutical and bio-pharmaceutical markets. Headquartered
in Waterloo, Ontario, Canada, Quadro, with annual revenues of
approximately $25.0 million, operates as part of the IPT
reporting unit within the Company’s Fluid &
Metering Technologies Segment. The Company acquired Quadro for a
purchase price of $32.2 million, consisting entirely of
cash. Approximately $11.3 million of the cash payment was
financed
52
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CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
with borrowings under the Company’s Credit Facility.
Goodwill and intangible assets recognized as part of this
transaction were $12.1 million and $10.9 million,
respectively. Of the $12.1 million of goodwill,
approximately $8.9 million is expected to be deductible for
tax purposes.
On October 18, 2007, the Company acquired the assets of
Isolation Technologies, a leading developer of advanced column
hardware and accessories for the High Performance Liquid
Chromatography (HPLC) market. HPLC instruments are used in a
variety of analytical chemistry applications, with primary
commercial applications including drug discovery and quality
control measurements for pharmaceutical and food/beverage
testing. Isolation Technologies, with annual revenues of
approximately $12.0 million, operates as part of the HST
Core reporting unit in the Company’s Health and Science
Technologies Segment. The Company acquired Isolation
Technologies for a purchase price of $30.2 million,
consisting entirely of cash. Approximately $29.7 million of
the cash payment was financed by borrowings under the
Company’s Credit Facility. Goodwill and intangible assets
recognized as part of this transaction were $17.9 million
and $8.7 million, respectively. The $17.9 million of
goodwill is deductible for tax purposes.
The results of operations for these acquisitions have been
included within the Company’s financial results from the
date of the acquisition. The Company does not consider these
acquisitions to be material to its results of operations for any
of the periods presented.
| 15. | Discontinued Operations |
On August 13, 2007, the Company completed the sale of
Halox, its chemical and electrochemical systems product line
operating as part of the Fluid & Metering Technologies
Segment.
Summarized results of the Company’s discontinued operations
are as follows:
|
For the Year Ended
|
||||
| December 31, 2007 | ||||
| (In thousands) | ||||
|
Revenue
|
$ | 1,428 | ||
|
Loss from discontinued operations before income taxes
|
$ | (1,106 | ) | |
|
Income tax benefit (provision)
|
387 | |||
|
Loss from discontinued operations
|
$ | (719 | ) | |
| 16. | Share-Based Compensation |
The Company maintains two share-based compensation plans for
executives, non-employee directors, and certain key employees
which authorize the granting of stock options, unvested shares,
unvested share units, and other types of awards consistent with
the purpose of the plans. The number of shares authorized for
issuance under the Company’s plans as of December 31,
2009 totals 7.1 million, of which 1.7 million shares
were available for future issuance. Stock options granted under
these plans are generally non-qualified, and are granted with an
exercise price equal to the market price of the Company’s
stock at the date of grant. Substantially all of the options
issued to employees prior to 2005 become exercisable in five
equal installments, while the majority of options issued to
employees in 2005 and after become exercisable in four equal
installments, beginning one year from the date of grant, and
generally expire 10 years from the date of grant. Stock
options granted to non-employee directors cliff vest after one
or two years. Unvested share and unvested share unit awards
generally cliff vest after three or four years for employees,
and three years for non-employee directors. The Company issued
273,000, 583,000 and 134,000 of unvested shares as compensation
to key employees in 2009, 2008 and 2007, respectively. Of the
shares granted in 2008, 242,800 of the shares vest 50% on
April 8, 2011 and 50% on April 8, 2013, but such
vesting may be accelerated if the Company’s share price for
any five consecutive trading days equals or exceeds $65.90
(twice the closing price of the shares on the date of grant).
Also, 12,333 of the 2008 shares issued vested on
April 8, 2009 with
53
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
another 12,333 vesting on April 8, 2010 and 49,334 vesting
on April 8, 2011. The unvested shares granted in 2009 and
2007 and the remaining unvested shares granted in 2008 contain a
cliff vesting feature and vest either three or four years after
the grant date for employees and three years for non-employee
directors.
All unvested shares carry dividend and voting rights, and the
sale of the shares is restricted prior to the date of vesting.
The Company accounts for share-based payments in accordance with
ASC 718. Accordingly, the Company expenses the fair value of
awards made under its share-based plans. That cost is recognized
in the consolidated financial statements over the requisite
service period of the grants.
Weighted average option fair values and assumptions for the
period specified are disclosed in the following table:
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Weighted average fair value of grants
|
$ | 5.32 | $ | 8.81 | $ | 9.55 | ||||||
|
Dividend yield
|
2.35 | % | 1.46 | % | 1.37 | % | ||||||
|
Volatility
|
32.53 | % | 31.51 | % | 30.59 | % | ||||||
|
Risk-free interest rate
|
0.69 | % - 4.63% | 1.68 | % - 5.33% | 4.23 | % - 4.92% | ||||||
|
Expected life (in years)
|
5.85 | 5.28 | 4.64 | |||||||||
The assumptions are as follows:
| • | The Company estimated volatility using its historical share price performance over the contractual term of the option. | |
| • | The Company uses historical data to estimate the expected life of the option. The expected life assumption for the years ended December 31, 2009, 2008 and 2007 is an output of the Binomial lattice option-pricing model, which incorporates vesting provisions, rate of voluntary exercise and rate of post-vesting termination over the contractual life of the option to define expected employee behavior. | |
| • | The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. For the years ended December 31, 2009, 2008 and 2007, we present the range of risk-free one-year forward rates, derived from the U.S. treasury yield curve, utilized in the Binomial lattice option-pricing model. | |
| • | The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the option. |
The Company’s policy is to recognize compensation cost on a
straight-line basis over the requisite service period for the
entire award. Additionally, the Company’s general policy is
to issue new shares of common stock to satisfy stock option
exercises or grants of unvested shares.
Total compensation cost for stock options is as follows:
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Cost of goods sold
|
$ | 945 | $ | 1,043 | $ | 999 | ||||||
|
Selling, general and administrative expenses
|
6,288 | 7,175 | 7,330 | |||||||||
|
Total expense before income taxes
|
7,233 | 8,218 | 8,329 | |||||||||
|
Income tax benefit
|
(2,322 | ) | (2,585 | ) | (3,032 | ) | ||||||
|
Total expense after income taxes
|
$ | 4,911 | $ | 5,633 | $ | 5,297 | ||||||
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CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Total compensation cost for unvested shares is as follows:
| Years Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Cost of goods sold
|
$ | 248 | $ | 79 | $ | 28 | ||||||
|
Selling, general and administrative expenses
|
8,229 | 6,717 | 4,213 | |||||||||
|
Total expense before income taxes
|
8,477 | 6,796 | 4,241 | |||||||||
|
Income tax benefit
|
(1,444 | ) | (1,108 | ) | (827 | ) | ||||||
|
Total expense after income taxes
|
$ | 7,033 | $ | 5,688 | $ | 3,414 | ||||||
Recognition of compensation cost was consistent with recognition
of cash compensation for the same employees. Compensation cost
capitalized as part of inventory was immaterial.
As of December 31, 2009, there was $10.3 million of
total unrecognized compensation cost related to stock options
that is expected to be recognized over a weighted-average period
of 1.3 years. As of December 31, 2009, there was
$11.7 million of total unrecognized compensation cost
related to unvested shares that is expected to be recognized
over a weighted-average period of 1.1 years.
A summary of the Company’s stock option activity as of
December 31, 2009, and changes during the year ended
December 31, 2009 is presented in the following table:
|
Weighted
|
Weighted-Average
|
Aggregate
|
||||||||||||||
|
Average
|
Remaining
|
Intrinsic
|
||||||||||||||
|
Stock Options
|
Shares | Price | Contractual Term | Value | ||||||||||||
|
Outstanding at January 1, 2009
|
5,485,896 | $ | 25.87 | 6.55 | $ | 16,785,351 | ||||||||||
|
Granted
|
1,195,780 | 20.25 | ||||||||||||||
|
Exercised
|
(473,208 | ) | 16.22 | |||||||||||||
|
Forfeited/Expired
|
(415,440 | ) | 30.85 | |||||||||||||
|
Outstanding at December 31, 2009
|
5,793,028 | $ | 25.14 | 6.40 | $ | 40,557,214 | ||||||||||
|
Vested and expected to vest at December 31, 2009
|
5,590,573 | $ | 25.14 | 6.31 | $ | 39,209,262 | ||||||||||
|
Exercisable at December 31, 2009
|
3,500,837 | $ | 24.08 | 5.04 | $ | 27,821,826 | ||||||||||
The intrinsic value for stock options outstanding and
exercisable is defined as the difference between the market
value of the Company’s common stock as of the end of the
period, and the grant price. The total intrinsic value of
options exercised in 2009, 2008 and 2007, was $5.3 million,
$10.4 million and $17.3 million, respectively. In
2009, 2008 and 2007, cash received from options exercised was
$7.7 million, $10.4 million and $14.0 million,
respectively, while the actual tax benefit realized for the tax
deductions from stock options exercised totaled
$1.9 million, $3.1 million and $6.3 million,
respectively.
55
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A summary of the Company’s unvested share activity as of
December 31, 2009, and changes during the year ending
December 31, 2009 is presented in the following table:
|
Weighted-Average
|
||||||||
|
Grant Date Fair
|
||||||||
|
Unvested Shares
|
Shares | Value | ||||||
|
Nonvested at January 1, 2009
|
903,200 | $ | 31.57 | |||||
|
Granted
|
273,419 | 20.34 | ||||||
|
Vested
|
(219,282 | ) | 26.32 | |||||
|
Forfeited
|
(36,738 | ) | 29.24 | |||||
|
Nonvested at December 31, 2009
|
920,599 | 29.58 | ||||||
Generally, unvested share grants accrue dividends and their fair
value is equal to the market price of the Company’s stock
at the date of the grant.
| 17. | Retirement Benefits |
The Company sponsors several qualified and nonqualified pension
plans and other postretirement plans for its employees. The
Company uses a measurement date of December 31 for its defined
benefit pension plans and post retirement medical plans. In
2008, the Company adopted the measurement date provisions of ASC
715, “Compensation-Retirement Benefits”. Those
provisions require the measurement date of plan assets and
liabilities to coincide with the sponsor’s year end.
The following table provides a reconciliation of the changes in
the benefit obligations and fair value of plan assets over the
two-year period ended December 31, 2009, and a statement of
the funded status at December 31 for both years.
| Pension Benefits | ||||||||||||||||||||||||
| 2009 | 2008 | Other Benefits | ||||||||||||||||||||||
| U.S. | Non-U.S. | U.S. | Non-U.S. | 2009 | 2008 | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
CHANGE IN BENEFIT OBLIGATION
|
||||||||||||||||||||||||
|
Obligation at January 1
|
$ | 72,689 | $ | 36,811 | $ | 71,507 | $ | 34,711 | $ | 21,767 | $ | 21,890 | ||||||||||||
|
ASC 715 measurement date adjustment
|
— | — | — | 589 | — | — | ||||||||||||||||||
|
Service cost
|
1,551 | 824 | 1,765 | 932 | 468 | 607 | ||||||||||||||||||
|
Interest cost
|
4,375 | 2,122 | 4,484 | 1,901 | 1,018 | 1,328 | ||||||||||||||||||
|
Plan amendments
|
— | — | 501 | 9 | (2,932 | ) | — | |||||||||||||||||
|
Benefits paid
|
(4,233 | ) | (1,563 | ) | (4,761 | ) | (1,475 | ) | (1,135 | ) | (1,058 | ) | ||||||||||||
|
Actuarial gain (loss)
|
7,817 | (1,253 | ) | (551 | ) | (1,563 | ) | (1,418 | ) | (445 | ) | |||||||||||||
|
Currency translation
|
— | 1,845 | — | (6,377 | ) | 291 | (555 | ) | ||||||||||||||||
|
Acquisitions
|
— | — | — | 8,043 | — | — | ||||||||||||||||||
|
Curtailments/settlements
|
(987 | ) | — | (256 | ) | — | — | — | ||||||||||||||||
|
Other
|
— | 556 | — | 41 | — | — | ||||||||||||||||||
|
Obligation at December 31
|
$ | 81,212 | $ | 39,342 | $ | 72,689 | $ | 36,811 | $ | 18,059 | $ | 21,767 | ||||||||||||
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CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| Pension Benefits | ||||||||||||||||||||||||
| 2009 | 2008 | Other Benefits | ||||||||||||||||||||||
| U.S. | Non-U.S. | U.S. | Non-U.S. | 2009 | 2008 | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
CHANGE IN PLAN ASSETS
|
||||||||||||||||||||||||
|
Fair value of plan assets at January 1
|
$ | 39,974 | $ | 11,975 | $ | 63,612 | $ | 18,301 | $ | — | $ | — | ||||||||||||
|
Actual return on plan assets
|
9,638 | 1,848 | (19,523 | ) | (1,670 | ) | — | — | ||||||||||||||||
|
Employer contributions
|
8,818 | 1,812 | 902 | 1,432 | 1,135 | 1,058 | ||||||||||||||||||
|
Benefits paid
|
(4,233 | ) | (1,563 | ) | (4,761 | ) | (1,475 | ) | (1,135 | ) | (1,058 | ) | ||||||||||||
|
Currency translation
|
— | 1,279 | — | (4,587 | ) | — | — | |||||||||||||||||
|
Settlements
|
(987 | ) | — | (256 | ) | — | — | — | ||||||||||||||||
|
Other
|
— | 25 | — | (26 | ) | $ | — | $ | — | |||||||||||||||
|
Fair value of plan assets at December 31
|
$ | 53,210 | $ | 15,376 | $ | 39,974 | $ | 11,975 | $ | — | $ | — | ||||||||||||
|
Funded status at December 31
|
$ | (28,002 | ) | $ | (23,966 | ) | $ | (32,715 | ) | $ | (24,836 | ) | $ | (18,059 | ) | $ | (21,767 | ) | ||||||
|
COMPONENTS ON THE CONSOLIDATED BALANCE SHEETS
|
||||||||||||||||||||||||
|
Current liabilities
|
$ | (601 | ) | $ | (1,032 | ) | $ | (651 | ) | $ | (876 | ) | $ | (968 | ) | $ | (1,303 | ) | ||||||
|
Noncurrent liabilities
|
(27,401 | ) | (22,934 | ) | (32,064 | ) | (23,960 | ) | (17,091 | ) | (20,464 | ) | ||||||||||||
|
Net liability at December 31
|
$ | (28,002 | ) | $ | (23,966 | ) | $ | (32,715 | ) | $ | (24,836 | ) | $ | (18,059 | ) | $ | (21,767 | ) | ||||||
The accumulated benefit obligation for all defined benefit
pension plans was $114.8 million and $103.3 million at
December 31, 2009 and 2008, respectively.
The weighted average assumptions used in the measurement of the
Company’s benefit obligation at December 31, 2009 and
2008, were as follows:
| U.S. Plans | Non-U.S. Plans | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
|
Discount rate
|
5.80 | % | 6.30 | % | 5.88 | % | 5.73 | % | ||||||||
|
Rate of compensation increase
|
3.89 | % | 4.00 | % | 3.35 | % | 3.17 | % | ||||||||
The pretax amounts recognized in Accumulated other comprehensive
(income) loss as of December 31, 2009 and 2008 were as
follows:
| Pension Benefits | ||||||||||||||||||||||||
| 2009 | 2008 | Other Benefits | ||||||||||||||||||||||
| U.S. | Non-U.S. | U.S. | Non-U.S | 2009 | 2008 | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Prior service cost (credit)
|
$ | 735 | $ | 8 | $ | 1,047 | $ | 8 | $ | (2,966 | ) | $ | (330 | ) | ||||||||||
|
Net loss
|
38,043 | 5,466 | 41,403 | 7,662 | 661 | 1,991 | ||||||||||||||||||
|
Total
|
$ | 38,778 | $ | 5,474 | $ | 42,450 | $ | 7,670 | $ | (2,305 | ) | $ | 1,661 | |||||||||||
57
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The amounts in Accumulated other comprehensive loss as of
December 31, 2009, that are expected to be recognized as
components of net periodic benefit cost during 2010 are as
follows:
|
Non-U.S.
|
Other
|
|||||||||||||||
|
U.S. Pension
|
Pension Benefit
|
Post-Retirement
|
||||||||||||||
| Benefit Plans | Plans | Benefit Plans | Total | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Prior service cost (credit)
|
$ | 228 | $ | 1 | $ | (305 | ) | $ | (76 | ) | ||||||
|
Net loss (gain)
|
4,279 | 308 | (45 | ) | 4,542 | |||||||||||
|
Total
|
$ | 4,507 | $ | 309 | $ | (350 | ) | $ | 4,466 | |||||||
The following tables provide the components of, and the weighted
average assumptions used to determine, the net periodic benefit
cost for the plans in 2009, 2008 and 2007:
| Pension Benefits | ||||||||||||||||||||||||
| 2009 | 2008 | 2007 | ||||||||||||||||||||||
| U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Service cost
|
$ | 1,551 | $ | 824 | $ | 1,765 | $ | 932 | $ | 1,876 | $ | 874 | ||||||||||||
|
Interest cost
|
4,375 | 2,122 | 4,484 | 1,901 | 4,288 | 1,626 | ||||||||||||||||||
|
Expected return on plan assets
|
(3,505 | ) | (780 | ) | (5,169 | ) | (1,017 | ) | (5,242 | ) | (1,075 | ) | ||||||||||||
|
Net amortization
|
5,299 | 370 | 2,244 | 381 | 2,730 | 715 | ||||||||||||||||||
|
Net periodic benefit cost
|
$ | 7,720 | $ | 2,536 | $ | 3,324 | $ | 2,197 | $ | 3,652 | $ | 2,140 | ||||||||||||
| Other Benefits | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
| (In thousands) | ||||||||||||
|
Service cost
|
$ | 468 | $ | 607 | $ | 611 | ||||||
|
Interest cost
|
1,018 | 1,328 | 1,230 | |||||||||
|
Net amortization
|
(385 | ) | 137 | 227 | ||||||||
|
Net periodic benefit cost
|
$ | 1,101 | $ | 2,072 | $ | 2,068 | ||||||
| U.S. Plans | Non-U.S. Plans | |||||||||||||||||||||||
| 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||||||||
|
Discount rate
|
6.30 | % | 6.40 | % | 5.80 | % | 5.73 | % | 5.48 | % | 4.80 | % | ||||||||||||
|
Expected return on plan assets
|
8.50 | % | 8.50 | % | 8.50 | % | 6.05 | % | 5.82 | % | 6.00 | % | ||||||||||||
|
Rate of compensation increase
|
4.00 | % | 4.00 | % | 4.00 | % | 3.17 | % | 3.92 | % | 3.72 | % | ||||||||||||
58
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table provides pretax amounts recognized in
Accumulated other comprehensive income (loss) in 2009:
| Pension Benefits | ||||||||||||
|
Other
|
||||||||||||
| U.S. | Non-U.S. | Benefits | ||||||||||
| (In thousands) | ||||||||||||
|
Net gain (loss) in current year
|
$ | (1,683 | ) | $ | 2,320 | $ | 1,418 | |||||
|
Prior service cost
|
— | — | 2,932 | |||||||||
|
Amortization of prior service cost (credit)
|
312 | 1 | (304 | ) | ||||||||
|
Amortization of net loss (gain)
|
4,986 | 369 | (81 | ) | ||||||||
|
Exchange rate effect on amounts in OCI
|
— | (418 | ) | 11 | ||||||||
|
Total
|
$ | 3,615 | $ | 2,272 | $ | 3,976 | ||||||
The discount rates for our plans are derived by matching the
plan’s cash flows to a yield curve that provides the
equivalent yields on zero-coupon bonds for each maturity. The
discount rate selected is the rate that produces the same
present value of cash flows.
In selecting the expected rate of return on plan assets, the
Company considers the historical returns and expected returns on
plan assets. The expected returns are evaluated using asset
return class, variance and correlation assumptions based on the
plan’s target asset allocation and current market
conditions.
Prior service costs are amortized on a straight-line basis over
the average remaining service period of active participants.
Gains and losses in excess of 10% of the greater of the benefit
obligation or the market value of assets are amortized over the
average remaining service period of active participants. Costs
of bargaining unit-sponsored multi-employer plans and defined
contribution plans were $9.6 million, $9.8 million and
$9.4 million for 2009, 2008 and 2007, respectively.
For measurement purposes, a 7.6% weighted average annual rate of
increase in the per capita cost of covered health care benefits
was assumed for 2009. The rate was assumed to decrease gradually
each year to a rate of 5.40% for 2015, and remain at that level
thereafter. Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care
plans. A 1% increase in the assumed health care cost trend rates
would increase the service and interest cost components of the
net periodic benefit cost by $0.1 million and the health
care component of the accumulated postretirement benefit
obligation by $1.5 million. A 1% decrease in the assumed
health care cost trend rate would decrease the service and
interest cost components of the net periodic benefit cost by
$0.1 million and the health care component of the
accumulated postretirement benefit obligation by
$1.2 million.
Plan
Assets
The Company’s pension plan weighted average asset
allocations at December 31, 2009 and 2008, by asset
category, were as follows:
| 2009 | 2008 | |||||||
|
Equity securities
|
66 | % | 53 | % | ||||
|
Fixed income securities
|
34 | 43 | ||||||
|
Other
|
— | 4 | ||||||
|
Total
|
100 | % | 100 | % | ||||
59
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table summarizes the basis used to measure defined
benefit plans’ assets at fair value at December 31,
2009:
| Basis of Fair Value Measurement | ||||||||||||||||
| Outstanding Balances | Level 1 | Level 2 | Level 3 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Equities:
|
||||||||||||||||
|
U.S.
|
$ | 11,107 | $ | 11,107 | $ | — | $ | — | ||||||||
|
Non U.S.
|
6,749 | 6,749 | — | — | ||||||||||||
|
Absolute return funds(1)
|
49,386 | 17,930 | 31,456 | — | ||||||||||||
|
Other(2)
|
1,343 | 1,343 | — | — | ||||||||||||
| $ | 68,585 | $ | 37,129 | $ | 31,456 | $ | — | |||||||||
| (1) | Primarily funds invested by managers that have a global mandate with the flexibility to allocate capital broadly across a wide range of asset classes and strategies including, but not limited to equities, fixed income, commodities, interest rate futures, currencies and other securities to outperform an agreed benchmark with specific return and volatility targets. | |
| (2) | Primarily cash and cash equivalents. |
Equities that are valued using quoted prices are valued at the
published market prices. Equities in a common collective trust
or a registered investment company that are valued using
significant other observable inputs are valued at the net asset
value (NAV) provided by the fund administrator. The NAV is based
on value of the underlying assets owned by the fund minus its
liabilities. Fixed income securities that are valued using
significant other observable inputs are valued at prices
obtained from independent financial service industry-recognized
vendors.
Investment
Policies and Strategies
The investment objectives of the Company’s plan assets are
to earn the highest possible rate of return consistent with the
tolerance for risk as determined periodically by the Company in
its role as a fiduciary. The general guidelines of asset
allocation of fund assets are that “equities” will
represent from 55% to 75% of the market value of total fund
assets with a target of 66%, and “fixed income”
obligations, including cash, will represent from 25% to 45% with
a target of 34%. The term “equities” includes common
stock, convertible bonds and convertible stock. The term
“fixed income” includes preferred stock
and/or
contractual payments with a specific maturity date. The Company
strives to maintain asset allocations within the designated
ranges by conducting periodic reviews of fund allocations and
plan liquidity needs, and rebalancing the portfolio accordingly.
The total fund performance is monitored and results measured
using a 3- to
5-year
moving average against long-term absolute and relative return
objectives to meet actuarially determined forecasted benefit
obligations. No restrictions are placed on the selection of
individual investments by the qualified investment fund
managers. The performance of the investment fund managers is
reviewed on a regular basis, using appointed professional
independent advisors. As of December 31, 2009 and 2008,
there were no shares of the Company’s stock held in plan
assets.
Cash
Flows
The Company expects to contribute approximately
$4.7 million to its defined benefit plans and
$1.0 million to its other postretirement benefit plans in
2010. The Company also expects to contribute approximately
$11.8 million to its defined contribution plans in 2010.
60
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Estimated
Future Benefit Payments
The future estimated benefit payments for the next five years
and the five years thereafter are as follows: 2010 —
$7.7 million; 2011 — $8.0 million;
2012 — $8.7 million; 2013 —
$8.6 million; 2014-$9.9 million; 2015 to
2019 — $48.7 million.
| 18. | Quarterly Results of Operations (Unaudited) |
The following table summarizes the unaudited quarterly results
of operations for the years ended December 31, 2009 and
2008.
| 2009 Quarters | 2008 Quarters(1) | |||||||||||||||||||||||||||||||
| First | Second | Third | Fourth | First | Second | Third | Fourth | |||||||||||||||||||||||||
|
Net sales
|
$ | 326,613 | $ | 336,455 | $ | 323,249 | $ | 343,344 | $ | 371,662 | $ | 397,310 | $ | 365,193 | $ | 355,306 | ||||||||||||||||
|
Gross profit
|
123,194 | 131,101 | 129,058 | 139,033 | 152,480 | 161,510 | 147,784 | 135,659 | ||||||||||||||||||||||||
|
Operating income(2)
|
39,161 | 46,735 | 46,517 | 52,441 | 65,412 | 72,110 | 30,804 | 37,630 | ||||||||||||||||||||||||
|
Net income
|
$ | 22,605 | $ | 27,922 | $ | 29,777 | $ | 33,087 | $ | 39,603 | $ | 45,060 | $ | 19,883 | $ | 22,480 | ||||||||||||||||
|
Basic EPS
|
$ | .28 | $ | .35 | $ | .37 | $ | .41 | $ | .49 | $ | .55 | $ | .24 | $ | .28 | ||||||||||||||||
|
Diluted EPS
|
$ | .28 | $ | .34 | $ | .37 | $ | .40 | $ | .48 | $ | .54 | $ | .24 | $ | .27 | ||||||||||||||||
|
Basic weighted average shares outstanding
|
79,513 | 79,675 | 79,740 | 79,937 | 81,067 | 81,322 | 81,572 | 80,529 | ||||||||||||||||||||||||
|
Diluted weighted average shares outstanding
|
80,219 | 80,507 | 80,879 | 81,303 | 82,288 | 82,746 | 82,957 | 81,289 | ||||||||||||||||||||||||
| (1) | Certain prior year amounts have been restated to reflect the LIFO to FIFO inventory costing change. Statements (continue | |
| (2) | Third quarter 2008 operating income includes a $30.1 million goodwill impairment charge for Fluid Management. |
61
Table of Contents
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of IDEX Corporation
We have audited the accompanying consolidated balance sheets of
IDEX Corporation and subsidiaries (the “Company”) as
of December 31, 2009 and 2008, and the related consolidated
statements of operations, shareholders’ equity, and cash
flows for each of the three years in the period ended
December 31, 2009. Our audits also included the financial
statement schedule listed in the Index at Item 15. These
consolidated financial statements and financial statement
schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 2009 and 2008, and the results
of its operations and its cash flows for each of the three years
in the period ended December 31, 2009, in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
As discussed in Note 2, in 2009, the Company changed its
method of accounting for approximately 85% of its net
inventories from the
last-in,
first-out method to the
first-in,
first-out method and, retrospectively, adjusted the 2008 and
2007 financial statements for the change.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
Company’s internal control over financial reporting as of
December 31, 2009, based on the criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 26, 2010,
expressed an unqualified opinion on the Company’s internal
control over financial reporting.
/s/ Deloitte &
Touche LLP
Deloitte & Touche LLP
Chicago, Illinois
February 26, 2010
62
Table of Contents
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of IDEX Corporation
We have audited the internal control over financial reporting of
IDEX Corporation and subsidiaries (the “Company”) as
of December 31, 2009, based on criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. The Company’s management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based
on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing, and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed by, or under the supervision of, the
company’s principal executive and principal financial
officers, or persons performing similar functions, and effected
by the company’s board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of
America (“generally accepted accounting principles”).
A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance
with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a
material effect on the financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2009, based on the criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements and financial statement
schedule as of and for the year ended December 31, 2009, of
the Company and our report dated February 26, 2010,
expressed an unqualified opinion on those consolidated financial
statements and financial statement schedule and included an
explanatory paragraph referring to the Company’s change in
the method of accounting for 85% of the Company’s net
inventories from the
last-in,
first-out method to the
first-in,
first-out method in 2009.
/s/ Deloitte &
Touche LLP
Deloitte & Touche LLP
Chicago, Illinois
February 26, 2010
63
Table of Contents
MANAGEMENT’S
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Internal control over financial reporting refers to the process
designed by, or under the supervision of, our Chief Executive
Officer and Chief Financial Officer, and effected by our board
of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with accounting principles
generally accepted in the United States of America, and includes
those policies and procedures that:
| • | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; | |
| • | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and | |
| • | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Internal control over financial reporting cannot provide
absolute assurance of achieving financial reporting objectives
because of its inherent limitations. Internal control over
financial reporting is a process that involves human diligence
and compliance and is subject to lapses in judgment and
breakdowns resulting from human failures. Internal control over
financial reporting also can be circumvented by collusion or
improper management override. Because of such limitations, there
is a risk that material misstatements may not be prevented or
detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is
possible to design into the process safeguards to reduce, though
not eliminate, this risk. Management is responsible for
establishing and maintaining effective internal control over
financial reporting for the Company. Management has used the
framework set forth in the report entitled “Internal
Control — Integrated Framework” issued by the
Committee of Sponsoring Organizations of the Treadway Commission
to assess the effectiveness of the Company’s internal
control over financial reporting. Management has concluded that
the Company’s internal control over financial reporting was
effective as of December 31, 2009.
The effectiveness of the Company’s internal control over
financial reporting as of December 31, 2009, has been
audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report
which appears herein.
/s/ Lawrence
D. Kingsley
Lawrence D. Kingsley
Chairman of the Board and Chief Executive Officer
Chairman of the Board and Chief Executive Officer
/s/ Dominic
A. Romeo
Dominic A. Romeo
Vice President and Chief Financial Officer
Northbrook, Illinois
February 26, 2010
February 26, 2010
64
Table of Contents
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
None.
| Item 9A. | Controls and Procedures. |
The Company maintains disclosure controls and procedures that
are designed to ensure that information required to be disclosed
in the Company’s Exchange Act reports is recorded,
processed, summarized and reported within the time periods
specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to the
Company’s management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.
As required by SEC
Rule 13a-15(b),
the Company carried out an evaluation, under the supervision and
with the participation of the Company’s management,
including the Company’s Chief Executive Officer and the
Company’s Chief Financial Officer, of the effectiveness of
the design and operation of the Company’s disclosure
controls and procedures as of the end of the period covered by
this report. Based on the foregoing, the Company’s Chief
Executive Officer and Chief Financial Officer concluded that the
Company’s disclosure controls and procedures were effective.
The information set forth under the captions “Report of
Independent Registered Public Accounting Firm” and
“Management’s Report on Internal Control Over
Financial Reporting” on pages 62-64 of Part II.
Item 8. Financial Statements and Supplementary Data is
incorporated herein by reference.
There has been no change in the Company’s internal controls
over financial reporting during the Company’s most recent
fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control
over financial reporting.
| Item 9B. | Other Information. |
None.
PART III
| Item 10. | Directors, Executive Officers and Corporate Governance. |
Information under the headings “Election of Directors”
and “Section 16(a) Beneficial Ownership Reporting
Compliance,” and the information under the subheading
“Information Regarding the Board of Directors and
Committees,” in the Company’s 2010 Proxy Statement is
incorporated herein by reference. Information regarding
executive officers of the Company is located in Part I.
Item 1. of this report under the caption “Executive
Officers of the Registrant.”
The Company has adopted a Code of Business Conduct and Ethics
applicable to the Company’s directors, officers (including
the Company’s principal executive officer and principal
financial & accounting officer) and employees. The
Code of Business Conduct and Ethics, along with the Audit
Committee Charter, Nominating and Corporate Governance Committee
Charter, Compensation Committee Charter and Corporate Governance
Guidelines are available on the Company’s website at
www.idexcorp.com
.
In the event that we amend or waive any of the provisions of the
Code of Business Conduct and Ethics applicable to our principal
executive officer or principal financial & accounting
officer, we intend to disclose the same on the Company’s
website.
| Item 11. | Executive Compensation. |
Information under the heading “Executive Compensation”
in the Company’s 2010 Proxy Statement is incorporated
herein by reference.
65
Table of Contents
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. |
Information under the heading “Security Ownership” and
the information under the subheading “Equity Compensation
Plans” in the Company’s 2010 Proxy Statement is
incorporated herein by reference.
| Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
No certain relationships exist. Information under the heading
“Information Regarding the Board of Directors and
Committees” in the Company’s 2010 Proxy Statement is
incorporated herein by reference.
| Item 14. | Principal Accountant Fees and Services |
Information under the heading “Principal Accountant Fees
and Services” in the Company’s 2010 Proxy Statement is
incorporated herein by reference.
PART IV
| Item 15. | Exhibits and Financial Statement Schedule. |
(A) 1. Financial Statements
Consolidated financial statements filed as part of this report
are listed under Part II. Item 8. “Financial
Statements and Supplementary Data” of this Annual Report on
Form 10-K.
2. Financial Statement Schedule
|
2009 Form
|
||||
| 10-K Page | ||||
|
Schedule II — Valuation and Qualifying
Accounts
|
67 | |||
All other schedules are omitted because they are not applicable,
not required, or because the required information is included in
the Consolidated Financial Statements of the Company or the
Notes thereto.
3. Exhibits
The exhibits filed with this report are listed on the
“Exhibit Index.”
(B) Exhibit Index
Reference is made to the Exhibit Index beginning on
page 69 hereof.
66
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
FOR THE
YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
|
Charged
|
||||||||||||||||||||
|
Balance
|
to Costs
|
Balance
|
||||||||||||||||||
|
Beginning
|
and
|
End of
|
||||||||||||||||||
|
Description
|
of Year | Expenses(1) | Deductions(2) | Other(3) | Year | |||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Year Ended December 31, 2009:
|
||||||||||||||||||||
|
Deducted from assets to which they apply:
|
||||||||||||||||||||
|
Accounts receivable reserves
|
$ | 5,600 | $ | 1,789 | $ | 617 | $ | (612 | ) | $ | 6,160 | |||||||||
|
Year Ended December 31, 2008:
|
||||||||||||||||||||
|
Deducted from assets to which they apply:
|
||||||||||||||||||||
|
Accounts receivable reserves
|
5,746 | 1,379 | 1,621 | 96 | 5,600 | |||||||||||||||
|
Year Ended December 31, 2007:
|
||||||||||||||||||||
|
Deducted from assets to which they apply:
|
||||||||||||||||||||
|
Accounts receivable reserves
|
3,545 | 2,636 | 625 | 190 | 5,746 | |||||||||||||||
| (1) | Includes provision for doubtful accounts, sales returns and sales discounts granted to customers. | |
| (2) | Represents uncollectible accounts, net of recoveries. | |
| (3) | Represents acquisition, divestiture, translation and reclassification adjustments. |
67
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
IDEX CORPORATION
| By: |
/s/
DOMINIC
A. ROMEO
|
Dominic A. Romeo
Vice President and Chief Financial Officer
Date: February 26, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
Signature
|
Title
|
Date
|
||||
|
/s/
LAWRENCE
D. KINGSLEY
|
Chairman of the Board and Chief Executive Officer (Principal Executive Officer) | February 26, 2010 | ||||
|
/s/
DOMINIC
A. ROMEO
|
Vice President and Chief Financial Officer (Principal Financial Officer) | February 26, 2010 | ||||
|
/s/
MICHAEL
J. YATES
|
Vice President and Chief Accounting Officer (Principal Accounting Officer) | February 26, 2010 | ||||
|
/s/
BRADLEY
J. BELL
|
Director | February 26, 2010 | ||||
|
/s/
RUBY
R. CHANDY
|
Director | February 26, 2010 | ||||
|
/s/
WILLIAM
M. COOK
|
Director | February 26, 2010 | ||||
|
/s/
FRANK
S. HERMANCE
|
Director | February 26, 2010 | ||||
|
/s/
GREGORY
F. MILZCIK
|
Director | February 26, 2010 | ||||
|
/s/
NEIL
A. SPRINGER
|
Director | February 26, 2010 | ||||
|
/s/
MICHAEL
T. TOKARZ
|
Director | February 26, 2010 | ||||
68
Table of Contents
Exhibit Index
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Exhibit
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||||
|
Number
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Description
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|||
| 3 | .1 | Restated Certificate of Incorporation of IDEX Corporation (formerly HI, Inc.) (incorporated by reference to Exhibit No. 3.1 to the Registration Statement on Form S-1 of IDEX, et al., Registration No. 33-21205, as filed on April 21, 1988) | ||
| 3 | .1(a) | Amendment to Restated Certificate of Incorporation of IDEX Corporation (formerly HI, Inc.) (incorporated by reference to Exhibit No. 3.1 (a) to the Quarterly Report of IDEX on Form 10-Q for the quarter ended March 31, 1996, Commission File No. 1-10235) | ||
| 3 | .1(b) | Amendment to Restated Certificate of Incorporation of IDEX Corporation (formerly HI, Inc.) (incorporated by reference to Exhibit No. 3.1 (b) to the Current Report of IDEX on Form 8-K March 24, 2005, Commission File No. 1-10235) | ||
| 3 | .2 | Amended and Restated By-Laws of IDEX Corporation (incorporated by reference to Exhibit No. 3.2 to Post-Effective Amendment No. 2 to the Registration Statement on Form S-1 of IDEX, et al., Registration No. 33-21205, as filed on July 17, 1989) | ||
| 3 | .2(a) | Amended and Restated Article III, Section 13 of the Amended and Restated By-Laws of IDEX Corporation (incorporated by reference to Exhibit No. 3.2 (a) to Post-Effective Amendment No. 3 to the Registration Statement on Form S-1 of IDEX, et al., Registration No. 33-21205, as filed on February 12, 1990) | ||
| 4 | .1 | Restated Certificate of Incorporation and By-Laws of IDEX Corporation (filed as Exhibits No. 3.1 through 3.2 (a)) | ||
| 4 | .4 | Specimen Certificate of Common Stock of IDEX Corporation (incorporated by reference to Exhibit No. 4.3 to the Registration Statement on Form S-2 of IDEX, et al., Registration No. 33-42208, as filed on September 16, 1991) | ||
| 4 | .5 | Credit Agreement, dated as of December 21, 2006, among IDEX Corporation, Bank of America N.A. as Agent and Issuing Bank, and the Other Financial Institutions Party Hereto (incorporated by reference to Exhibit 10.1 to the Current Report of IDEX on Form 8-K dated December 22, 2006, Commission File No. 1-10235) | ||
| 4 | .5(a) | Amendment No. 2 to Credit Agreement, dated as of September 29, 2008, among IDEX Corporation, Bank of America N.A. as Agent and Issuing Bank, and the other financial institutions party hereto (incorporated by reference to Exhibit No. 4.3 (a) to the Quarterly Report of IDEX on Form 10-Q for the quarter ended September 30, 2008, Commission File No. 1-10235) | ||
| 4 | .6 | Credit Lyonnais Uncommitted Line of Credit, dated as of December 3, 2001 (incorporated by reference to Exhibit 4.6 to the Annual Report of IDEX on Form 10-K for the year ended December 31, 2001, Commission File No. 1-10235) | ||
| 4 | .6(a) | Amendment No. 8 dated as of December 12, 2007 to the Credit Lyonnais Uncommitted Line of Credit Agreement dated December 3, 2001 (incorporated by reference to Exhibit 4.6 (a) to the Annual Report of IDEX on Form 10-K for the year ended December 31, 2007, Commission File No. 1-10235) | ||
| 4 | .7 | Term Loan Agreement, dated April 18, 2008, among IDEX Corporation, Bank of America N.A. as Agent, and the other financial institutions party hereto (incorporated by reference to Exhibit No. 10.1 to the Current Report of IDEX on Form 8-K dated April 18, 2008, Commission File No. 1-10235) | ||
| 10 | .1** | Revised and Restated IDEX Management Incentive Compensation Plan for Key Employees Effective January 1, 2003 (incorporated by reference to Exhibit 10.2 to the Quarterly Report of IDEX on Form 10-Q for the quarter ended March 31, 2003, Commission File No. 1-10235) | ||
| 10 | .2** | Form of Indemnification Agreement of IDEX Corporation (incorporated by reference to Exhibit No. 10.23 to the Registration Statement on Form S-1 of IDEX, et al., Registration No. 33-28317, as filed on April 26, 1989) | ||
69
Table of Contents
|
Exhibit
|
||||
|
Number
|
Description
|
|||
| 10 | .3** | IDEX Corporation Amended and Restated Stock Option Plan for Outside Directors adopted by resolution of the Board of Directors dated as of January 25, 2000 (incorporated by reference to Exhibit No. 10.1 of the Quarterly Report of IDEX on Form 10-Q for the quarter ended March 31, 2000, Commission File No. 10-10235) | ||
| 10 | .3(a)** | First Amendment to IDEX Corporation Amended and Restated Stock Option Plan for Outside Directors, adopted by resolution of the Board of Directors dated as of November 20, 2003 (incorporated by reference to Exhibit 10.6 (a) to the Annual Report of IDEX on Form 10-K for the year ended December 31, 2003) | ||
| 10 | .4** | 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. 1-102351) | ||
| 10 | .5** | Third Amended and Restated 1996 Stock Option Plan for Non-Officer Key Employees of IDEX Corporation dated January 9, 2003 (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 of IDEX, Registration No. 333-104768, as filed on April 25, 2003) | ||
| 10 | .6** | 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. 1-102351) | ||
| 10 | .7** | First Amended and Restated 1996 Stock Plan for Officers of IDEX Corporation (incorporated by reference to Exhibit No. 10.1 to the Quarterly Report of IDEX on Form 10-Q for the quarter ended March 31, 1998, Commission File No. 1-102351) | ||
| 10 | .8** | 2001 Stock Plan for Officers dated March 27, 2001 (incorporated by reference to Exhibit No. 10.2 to the Quarterly Report of IDEX on Form 10-Q for the quarter ended March 31, 2001, Commission File No. 1-10235) | ||
| 10 | .9** | 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. 1-102351) | ||
| 10 | .10** | Second Amended and Restated IDEX Corporation Directors Deferred Compensation Plan (incorporated by reference to Exhibit No. 10.14 (b) to the Annual Report of IDEX on Form 10-K for the year ended December 31, 1997, Commission File No. 1-10235) | ||
| 10 | .11** | IDEX Corporation 1996 Deferred Compensation Plan for Officers (incorporated by reference to Exhibit No. 4.8 to the Registration Statement on Form S-8 of IDEX, et al., Registration No. 333-18643, as filed on December 23, 1996) | ||
| 10 | .11(a)** | First Amendment to the IDEX Corporation 1996 Deferred Compensation Plan for Officers, dated March 23, 2004 (incorporated by reference to Exhibit No. 10.1 to the Quarterly Report of IDEX on Form 10-Q for the quarter ended March 31, 2004) | ||
| 10 | .12** | IDEX Corporation 1996 Deferred Compensation Plan for Non-Officer Presidents (incorporated by reference to Exhibit No. 4.7 to the Registration Statement on Form S-8 of IDEX, et al., Registrant No. 333-18643, as filed on December 23, 1996) | ||
| 10 | .13** | Letter Agreement between IDEX Corporation and John L. McMurray, dated April 24, 2000 (incorporated by reference to Exhibit No. 10.17 (a) to the Annual Report of IDEX on Form 10-K for the year ended December 31, 2001, Commission File No. 1-10235) | ||
| 10 | .14** | Letter Agreement between IDEX Corporation and Dominic A. Romeo, dated December 1, 2003 (incorporated by reference to Exhibit No. 10.21 to the Annual Report of IDEX on Form 10-K for the year ended December 31, 2005) | ||
| 10 | .15** | Employment Agreement between IDEX Corporation and Lawrence D. Kingsley, dated July 21, 2004 (incorporated by reference to Exhibit No. 10.1 to the Quarterly Report of IDEX on Form 10-Q for the quarter ended September 30, 2004) | ||
| 10 | .15(a)** | First Amendment to Employment Agreement between IDEX Corporation and Lawrence D. Kingsley, dated March 22, 2005 (incorporated by reference to Exhibit 10.20 (a) to the Current Report of IDEX on Form 8-K dated March 24, 2005, Commission File No. 1-10235) | ||
70
Table of Contents
|
Exhibit
|
||||
|
Number
|
Description
|
|||
| 10 | .16** | Form Stock Option Agreement (incorporated by reference to Exhibit 10.23 to the Current Report of IDEX on Form 8-K dated March 24, 2005, Commission File No. 1-10235) | ||
| 10 | .17** | Form Unvested Stock Agreement (incorporated by reference to Appendix A of the Proxy Statement of IDEX Corporation, dated February 25, 2005, Commission File No. 1-10235) | ||
| 10 | .18** | IDEX Corporation Incentive Award Plan (incorporated by reference to Exhibit 10.24 to the Current Report of IDEX on Form 8-K dated March 24, 2005, Commission File No. 1-10235) | ||
| 10 | .19** | Letter Agreement between IDEX Corporation and Frank J. Notaro, dated April 24, 2000 (incorporated by reference to Exhibit 10.25 to the Annual Report of IDEX on Form 10-K for the year ended December 31, 2005, Commission File No. 1-10235) | ||
| 10 | .20** | Definitive agreement to acquire Nova Technologies Corporation, dated November 13, 2007, (incorporated by reference to exhibit 10.1 to the Current Report of IDEX on Form 8-K dated November 16, 2007, Commission File No. 1-10235) | ||
| 10 | .21** | IDEX Corporation Incentive Award Plan (as Amended and Restated) (incorporated by reference to Appendix A of the Proxy Statement of IDEX Corporation, filed March 7, 2008, Commission File No. 1-10235) | ||
| 10 | .22** | IDEX Corporation Restricted Stock Award Agreement with Lawrence Kingsley, dated April 8, 2008 (incorporated by reference to Exhibit 10.2 to the Current Report of IDEX Corporation on Form 8-K, dated April 8, 2008, Commission File No. 1-10235) | ||
| 10 | .23** | IDEX Corporation Restricted Stock Award Agreement with Dominic Romeo, dated April 8, 2008 (incorporated by reference to Exhibit 10.3 to the Current Report of IDEX Corporation on Form 8-K, dated April 8, 2008, Commission File No. 1-10235) | ||
| 10 | .24** | Form of IDEX Corporation Restricted Stock Award Agreement, dated April 8, 2008 (incorporated by reference to Exhibit 10.4 to the Current Report of IDEX Corporation on Form 8-K, dated April 8, 2008, Commission File No. 1-10235) | ||
| 10 | .25** | Second Amendment to Employment Agreement between IDEX Corporation and Lawrence D. Kingsley, dated December 8, 2008 (incorporated by reference to Exhibit 10.28 to the Annual Report of IDEX on Form 10-K for the year ended December 31, 2008, Commission File No. 1-10235) | ||
| *10 | .26** | Letter Agreement between IDEX Corporation and Harold Morgan, dated June 6, 2008 | ||
| *12 | Ratio of Earnings to Fixed Charges | |||
| *13 | The portions of IDEX Corporation’s 2009 Annual Report to Shareholders, which are specifically incorporated by reference. | |||
| 18 | Letter from Deloitte and Touche, LLP regarding change in accounting principle hereto (incorporated by reference to Exhibit No. 18 to the Quarterly Report of IDEX on Form 10-Q for the quarter ended March 31, 2009, Commission File No. 1-10235) | |||
| *21 | Subsidiaries of IDEX | |||
| *23 | Consent of Deloitte & Touche LLP | |||
| *31 | .1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14 (a) or Rule 15d-14(a) | ||
| *31 | .2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14 (a) or Rule 15d-14(a) | ||
| *32 | .1 | Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code | ||
| *32 | .2 | Certification pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code | ||
| * | Filed herewith | |
| ** | Management contract or compensatory plan or agreement. |
71
TABLE OF CONTENTS
Part IprintItem 1. BusinessprintItem 1A. Risk FactorsprintItem 1B. Unresolved Staff CommentsprintItem 2. PropertiesprintItem 3. Legal ProceedingsprintItem 4. ReservedprintPart IIprintItem 5. Market For Registrant S Common Equity, Related Shareholder Matters and Issuer Purchases Of Equity SecuritiesprintItem 6. Selected Financial Data. (1)printItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsprintItem 7A. Quantitative and Qualitative Disclosures About Market RiskprintItem 8. Financial Statements and Supplementary DataprintItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureprintItem 9A. Controls and ProceduresprintItem 9B. Other InformationprintPart IIIprintItem 10. Directors, Executive Officers and Corporate GovernanceprintItem 11. Executive CompensationprintItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Shareholder MattersprintItem 13. Certain Relationships and Related Transactions, and Director IndependenceprintItem 14. Principal Accountant Fees and ServicesprintPart IVprintItem 15. Exhibits and Financial Statement Scheduleprint