IDEX CORP /DE/
10-Ks and 10-Qs
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Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
|
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the Fiscal Year Ended December 31, 2010 | ||
|
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 | 36-3555336 | |
|
(State or other jurisdiction
of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
|
1925 West Field Court, Lake Forest, Illinois
(Address of principal executive offices) |
60045
(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
þ
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, 2010 closing price of $28.57) held by
non-affiliates of IDEX Corporation was $2,292,832,953.
The number of shares outstanding of IDEX Corporation’s
common stock, par value $.01 per share (the “Common
Stock”), as of February 17, 2011 was 82,441,446 (net
of treasury shares).
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the 2010 Annual Report to stockholders of IDEX
Corporation (“the 2010 Annual Report”) are
incorporated by reference in Part II of this
Form 10-K
and portions of the Proxy Statement of IDEX Corporation (the
“2011 Proxy Statement”) with respect to the 2011
annual meeting of stockholders are incorporated by reference
into Part III of this
Form 10-K.
Table of
Contents
Table of Contents
| 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, Chemical,
Food & Pharmaceuticals (“CFP”) and
Water & Waste Water (“Water”). Reporting
units in the Health & Science Technologies segment
include IDEX Health & Science (“IH&S”),
Semrock, Precision Polymer Engineering (“PPE”),
previously referred to as Seals, Ltd, Gast and Micropump. The
Dispensing Equipment segment is a reporting unit. Reporting
units in the Fire &
Safety/Diversified
Products segment include Fire Suppression, Rescue Tools 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 the
water and wastewater industries. 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 2010, with approximately
47% 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 2010 sales were to customers
outside the U.S.
Energy.
Energy includes the Company’s
Corken, Faure Herman, Liquid Controls, S.A.M.P.I. 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. 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. Faure Herman is a leading
supplier of ultrasonic and helical turbine flow meters used in
the custody transfer and control of high value fluids and gases.
Approximately 55% of Energy’s 2010 sales were to customers
outside the U.S.
Chemical, Food &
Pharmaceuticals.
CFP includes the Company’s
Quadro, Richter, Viking and Warren Rupp businesses. CFP is a
leading producer of air-operated and motor-driven
double-diaphragm pumps and
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Table of Contents
replacement parts; a leading provider of premium quality lined
pumps, valves and control equipment for the chemical, fine
chemical and pharmaceutical industries and a leading provider of
particle control solutions for the pharmaceutical and
bio-pharmaceutical markets. Quadro’s products (which also
include Fitzpatrick, Inc. (“Fitzpatrick”) and Wright
Flow products) consist of rotary lobe pumps, stainless-steel
centrifugal and positive displacement pumps, pump replacement
parts and customized size reduction, roll compaction and drying
systems 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. Richter’s corrosion
resistant fluoroplastic lined products offer superior solutions
for demanding applications in the process industry.
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. Warren Rupp
products (which also include Pumper Parts and Versa-Matic
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.
Markets served by Warren Rupp products include chemical, paint,
food processing, electronics, construction, utilities, mining
and industrial maintenance.CFP maintains operations in Muskego,
Wisconsin; Elmhurst, Illinois; Waterloo, Ontario, Canada; and
Eastbourne, East Sussex, England (Quadro); Kampen, Germany;
Nanjing, China, and Coimbatore, India (Richter); Cedar Falls,
Iowa (Richter, Quadro and Viking); and Mansfield, Ohio (Warren
Rupp);. CFP uses primarily independent distributors to sell and
market its products. Approximately 53% of CFP’s 2010 sales
were to customers outside the U.S.
Water & Waste Water.
Water includes
the Company’s ADS, IETG, iPEK, Knight and Pulsafeeder
businesses. Water is a leading provider of metering technology
and flow monitoring products and underground surveillance
services for water & wastewater markets, as well as a
leading manufacturer of pumps and dispensing equipment for
industrial laundries, commercial dishwashing and chemical
metering; and a provider 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’s 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, including the maintenance and construction
of such systems. IETG’s 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. Knight is a leading manufacturer
of pumps and dispensing equipment for industrial laundries,
commercial dishwashing and chemical metering. Pulsafeeder
products are used to introduce precise amounts of fluids into
processes to manage water quality and chemical composition, as
well as peristaltic pumps. Its markets include water and
wastewater treatment, oil & gas, power generation,
pulp & paper, chemical and 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; and Sulzberg, Germany
(iPEK); Lake Forest, California; Mississauga, Ontario, Canada;
Eastbourne, East Sussex, England;,Unanderra, New South Wales,
Australia, and Ciudad Juarez, Chihuahua, Mexico
(Maquila
Arrangement)
(Knight); Rochester, New York; Punta Gorda,
Florida; Loveland, Ohio; and Milan, Italy (Pulsafeeder).
Approximately 41% of Water’s 2010 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 and
sealing 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 segment
accounted for 26% of IDEX’s sales and 28% of operating
income in 2010, with approximately 45% of its sales to customers
outside the U.S.
2
Table of Contents
IDEX Health & Science.
IH&S
consists of the Eastern Plastics, Innovadyne, Isolation
Technologies, Rheodyne, Ismatec, Sapphire Engineering, Systec
and Upchurch Scientific businesses and has facilities in Rohnert
Park, California (Innovadyne, Rheodyne and Systec products);
Bristol, Connecticut (Eastern Plastics products); Glattbrugg,
Switzerland and Wertheim-Mondfeld, Germany (Ismatec products);
Middleboro, Massachusetts (Isolation Technologies and Sapphire
Engineering products); and Oak Harbor, Washington (Upchurch
Scientific and Ismatec 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. Ismatec is a
manufacturer of peristaltic metering pumps, analytical process
controllers, and sample preparation systems. 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, are used
in a broad set of end markets including medical diagnostics,
analytical instrumentation, and laboratory automation. Isolation
Technologies products include 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. Approximately 44% of IH&S’s 2010 sales were
to customers outside the U.S.
Semrock.
Semrock 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 39% of Semrock’s 2010 sales were to customers
outside the U.S.
Precision Polymer Engineering (PPE).
PPE,
which was acquired in April 2010 and is located in Blackburn,
England, is a provider of proprietary high performance seals and
advanced sealing solutions for a diverse range of global
industries and applications, including hazardous duty,
analytical instrumentation, semiconductor/solar, process
technologies, pharmaceutical, electronics, and food
applications. Approximately 83% of PPE’s 2010 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. Jun-Air has locations in Norresundby, Denmark and
Lyon, France; and Dankeryd, The Netherlands. Approximately 29%
of Gast’s 2010 sales were to customers outside the U.S.
Micropump.
Micropump includes the
Company’s 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. 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 68% of Micropump’s 2010 sales were to
customers outside the U.S.
3
Table of Contents
DISPENSING
EQUIPMENT SEGMENT
The Dispensing Equipment Segment produces precision equipment
for dispensing, metering and mixing colorants and paints used in
a variety of retail and commercial businesses around the world.
The segment accounted for 8% of IDEX’s sales and 7% of
IDEX’s operating income in 2010, with approximately 67% of
its sales to customers outside the U.S. Dispensing
Equipment is a global supplier of precision-designed tinting,
mixing, dispensing and measuring equipment for auto refinishing
and architectural paints. Dispensing Equipment products are used
in retail and commercial stores, hardware stores, home centers,
department stores, automotive body shops as well as
point-of-purchase
dispensers. 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.
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 18% of IDEX’s sales
and 21% of IDEX’s operating income in 2010, with
approximately 55% 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),
with additional facilities located in Conshohocken, Pennsylvania
(Hale); Neenah, Wisconsin (Class 1 and Hale); and Warwick,
England (Godiva). Approximately 37% of Fire Suppression’s
2010 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); Tianjin, China (Dinglee); Erlangen,
Germany (Lukas); and Zulpich, Germany (Vetter). Approximately
79% of Rescue Tools’s 2010 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 2010 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.
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
4
Table of Contents
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); Dionex
Corporation (with respect to analytical instrumentation); Parker
Hannifin (with respect to sealing devices); 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, 2010, the Company had 5,966 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 one to one and a half 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.
Raw
Materials
The Company uses a wide variety of raw materials which are
generally available from a number of sources. As a result,
shortages from any single supplier have not had, and are not
likely to have a material impact on operations.
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 2010, 2009, and
2008, see the table titled “Company and Business Segment
Financial Information” presented on page 18 in
Part II. Item 7. “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” and Note 11 of the Notes to Consolidated
Financial Statements 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
|
48 | 6 | Chairman of the Board and Chief Executive Officer | |||||||
|
Dominic A. Romeo
|
51 | 7 | Vice President and Chief Financial Officer | |||||||
|
Kevin G. Hostetler
|
42 | 5 | Vice President-Group Executive Fluid & Metering Technologies | |||||||
|
John L. McMurray
|
60 | 18 | Vice President-Corporate | |||||||
|
Heath A. Mitts
|
40 | 5 | Vice President-Corporate Finance | |||||||
|
Harold Morgan
|
52 | 3 | Vice President-Human Resources | |||||||
|
Frank J. Notaro
|
47 | 13 | Vice President-General Counsel and Secretary | |||||||
|
Daniel J. Salliotte
|
44 | 6 | Vice President-Strategy and Business Development | |||||||
|
Andrew K. Silvernail
|
39 | 2 | Vice President-Group Executive Health & Science Technologies, Global Dispensing and Fire & Safety/Diversified Products | |||||||
|
Michael J. Yates
|
45 | 5 | Vice President and Chief Accounting Officer | |||||||
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. Romeo has been Vice President and Chief Financial
Officer of the Company since January 2004. As previously
announced in December 2010, Mr. Romeo is retiring in
February 2011.
Mr. Hostetler has been Vice President-Group Executive
Fluid & Metering Technologies since February 2010.
Mr. Hostetler joined IDEX in July 2005 as President of the
Energy Group and was appointed Vice President, Group Executive
and President Energy and Water and IDEX Asia in December 2008.
Mr. McMurray has served as Vice President-Corporate since
February 2010 with responsibilities for operational excellence,
supply chain and environment and health and safety. Prior to
that, Mr. McMurray was Vice President-Group Executive from
August 2003. Mr. McMurray will be retiring in April 2011.
Mr. Mitts has been Vice President-Corporate Finance since
September 2005. In December 2010, the Company announced that
Mr. Mitts is succeeding Mr. Romeo as Chief Financial
Officer in February 2011.
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. Notaro has served as Vice President-General Counsel and
Secretary since March 1998.
Mr. Salliotte has been Vice President-Strategy and Business
Development since October 2004.
Mr. Silvernail has been Vice President-Group Executive
Health & Science Technologies, Global Dispensing and
Fire & Safety/Diversified Products since January 2011.
From February 2010 to December 2010, Mr. Silvernail was
Vice President-Group Executive Health & Sciences
Technologies and Global Dispensing. Mr. Silvernail joined
IDEX in January 2009 as Vice President-Group Executive
Health & Science Technologies. Prior to joining IDEX,
Mr. Silvernail served as Group President at Rexnord
Industries from April 2005 to August 2008.
Mr. Yates has been Vice-President and Chief Accounting
Officer since February 2010. Mr. Yates was hired as Vice
President-Controller in October 2005.
6
Table of Contents
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. The information on the Company’s website is
not incorporated into this
Form 10-K.
| 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 those operations and the financial results of
these operations elsewhere in this report, the most significant
factors affecting our operations include the following:
CHANGES
IN U.S. OR INTERNATIONAL ECONOMIC CONDITIONS COULD ADVERSELY
AFFECT THE PROFITABILITY OF ANY OF OUR BUSINESSES.
In 2010, 51% of the Company’s revenue was derived from
domestic operations while 49% was derived from international
operations. The Company’s largest markets include life
sciences and medical technologies, fire and rescue, petroleum
LPG, paint and coatings, chemical processing and water and
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 2010, approximately 49% of our total sales were to customers
outside the U.S. We expect our international operations and
export sales to continue to be significant for the foreseeable
future. Both our sales from international operations and export
sales are subject in varying degrees to risks inherent in doing
business outside the United States. These 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; | |
| • | 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 revenue grew organically by 12% in 2010, but
was down 14% in 2009. Approximately 19% 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.
7
Table of Contents
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 acquisitions. We intend to
continue to seek 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 those 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 the assumption of
undisclosed or unindemnified liabilities, 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 may not 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 may not 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.
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”.
8
Table of Contents
AN
UNFAVORABLE OUTCOME OF 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”.
OUR
INTANGIBLE ASSETS ARE A SIGNIFICANT PORTION OF OUR TOTAL ASSETS
AND A WRITE-OFF OF OUR INTANGIBLE ASSETS COULD ADVERSELY IMPACT
OUR OPERATING RESULTS AND SIGNIFICANTLY REDUCE OUR NET
WORTH.
Our total assets reflect substantial intangible assets,
primarily goodwill and identifiable intangible assets. At
December 31, 2010, goodwill and intangible assets totaled
$1,207.0 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 be required to 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.
| 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 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%), China (4%) and The
Netherlands (2%). 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 32,165 square feet
of leased space in Lake Forest, Illinois.
Approximately 2.9 million square feet (73%) of the
principal plant and office floor area is owned by the Company,
and the balance is held under lease. Approximately
1.9 million square feet (48%) of the principal plant and
office floor area is held by business units in the
Fluid & Metering Technologies Segment;
0.7 million square feet (18%) is held by business units in
the Health & Science Technologies Segment;
0.5 million square feet (12%) is held by business units in
the Dispensing Equipment Segment; and 0.8 million square
feet (19%) is held by business units in the Fire &
Safety/Diversified Products Segment.
| Item 3. | Legal Proceedings. |
The Company and nine 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. These 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
9
Table of Contents
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. | (Removed and Reserved). |
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
The principal market for the Company’s Common Stock is the
New York Stock Exchange, but the Common Stock is also listed on
the Chicago Stock Exchange. As of February 17, 2011, Common
Stock was held by approximately 7,000 shareholders and
there were 82,441,446 shares of Common Stock outstanding,
net of treasury shares.
The high and low sales prices of the Common Stock per share and
the dividends paid per share during the last two years is as
follows:
| 2010 | 2009 | |||||||||||||||||||||||
|
Dividends
|
Dividends
|
|||||||||||||||||||||||
| High | Low | Per Share | High | Low | Per Share | |||||||||||||||||||
|
First Quarter
|
$ | 33.66 | $ | 28.09 | $ | 0.12 | $ | 26.24 | $ | 16.67 | $ | 0.12 | ||||||||||||
|
Second Quarter
|
35.54 | 28.49 | 0.15 | 26.18 | 19.67 | 0.12 | ||||||||||||||||||
|
Third Quarter
|
36.24 | 27.54 | 0.15 | 29.71 | 22.16 | 0.12 | ||||||||||||||||||
|
Fourth Quarter
|
40.29 | 35.08 | 0.15 | 32.85 | 26.08 | 0.12 | ||||||||||||||||||
Our payment of dividends in the future will be determined by our
Board of Directors and will depend on business conditions, our
earnings and other factors.
For information pertaining to securities authorized for issuance
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 the Company
purchases of Common Stock during the quarter ended
December 31, 2010:
|
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, 2010 to
October 31, 2010 |
— | — | — | $ | 75,000,020 | |||||||||||
|
November 1, 2010 to
November 30, 2010 |
— | — | — | $ | 75,000,020 | |||||||||||
|
December 1, 2010 to
December 31, 2010 |
— | — | — | $ | 75,000,020 | |||||||||||
|
Total
|
— | — | — | $ | 75,000,020 | |||||||||||
| (1) | On April 21, 2008, the Board of Directors authorized the repurchase of up to $125.0 million of outstanding common shares either in the open market or through private transactions. |
10
Table of Contents
Performance Graph.
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
our Common Stock and each index was $100 on December 31,
2005. Total return values for our 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.
| 12/05 | 12/06 | 12/07 | 12/08 | 12/09 | 12/10 | |||||||||||||||||||||||||
|
IDEX Corporation
|
$ | 100.00 | $ | 115.33 | $ | 131.86 | $ | 88.14 | $ | 113.69 | $ | 142.77 | ||||||||||||||||||
|
S&P 500 Index
|
100.00 | 113.62 | 117.63 | 72.36 | 89.33 | 100.75 | ||||||||||||||||||||||||
|
S&P Industrial Machinery Index
|
100.00 | 119.40 | 132.46 | 87.79 | 102.71 | 136.65 | ||||||||||||||||||||||||
|
Russell 2000 Index
|
100.00 | 117.00 | 113.79 | 74.19 | 92.90 | 116.40 | ||||||||||||||||||||||||
11
Table of Contents
| Item 6. | Selected Financial Data. (1) |
| (dollars in thousands, except per share data) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
|
RESULTS OF OPERATIONS
|
||||||||||||||||||||
|
Net sales
|
$ | 1,513,073 | $ | 1,329,661 | $ | 1,489,471 | $ | 1,358,631 | $ | 1,154,940 | ||||||||||
|
Gross profit
|
618,483 | 522,386 | 597,433 | 566,161 | 474,172 | |||||||||||||||
|
Selling, general and administrative expenses
|
358,272 | 325,453 | 343,392 | 313,366 | 260,201 | |||||||||||||||
|
Goodwill impairment
|
— | — | 30,090 | — | — | |||||||||||||||
|
Restructuring expenses
|
11,095 | 12,079 | 17,995 | — | — | |||||||||||||||
|
Operating income
|
249,116 | 184,854 | 205,956 | 252,795 | 213,971 | |||||||||||||||
|
Other income (expense) — net
|
(1,092 | ) | 1,151 | 5,123 | 3,434 | 1,040 | ||||||||||||||
|
Interest expense
|
16,150 | 17,178 | 18,852 | 23,353 | 16,353 | |||||||||||||||
|
Provision for income taxes
|
74,774 | 55,436 | 65,201 | 78,457 | 67,038 | |||||||||||||||
|
Income from continuing operations
|
157,100 | 113,391 | 127,026 | 154,419 | 131,620 | |||||||||||||||
|
Income/(loss) from discontinued
operations-net
of tax
|
— | — | — | (719 | ) | 12,949 | ||||||||||||||
|
Net income
|
157,100 | 113,391 | 127,026 | 153,700 | 144,569 | |||||||||||||||
|
FINANCIAL POSITION
|
||||||||||||||||||||
|
Current assets
|
$ | 692,758 | $ | 451,712 | $ | 480,688 | $ | 617,622 | $ | 400,724 | ||||||||||
|
Current liabilities
|
353,668 | 189,682 | 219,869 | 198,953 | 187,252 | |||||||||||||||
|
Working capital
|
339,090 | 262,030 | 260,819 | 418,669 | 213,472 | |||||||||||||||
|
Current ratio
|
2.0 | 2.4 | 2.2 | 3.1 | 2.1 | |||||||||||||||
|
Capital expenditures
|
32,769 | 25,525 | 28,358 | 26,496 | 21,198 | |||||||||||||||
|
Depreciation and amortization
|
58,108 | 56,346 | 48,599 | 38,038 | 29,956 | |||||||||||||||
|
Total assets
|
2,381,695 | 2,098,157 | 2,151,800 | 1,970,078 | 1,653,637 | |||||||||||||||
|
Total borrowings
|
527,895 | 400,100 | 554,000 | 454,731 | 361,980 | |||||||||||||||
|
Shareholders’ equity
|
1,375,660 | 1,268,104 | 1,144,783 | 1,143,207 | 962,088 | |||||||||||||||
|
PERFORMANCE MEASURES
|
||||||||||||||||||||
|
Percent of net sales:
|
||||||||||||||||||||
|
Gross profit
|
40.9 | % | 39.3 | % | 40.1 | % | 41.7 | % | 41.0 | % | ||||||||||
|
SG&A expenses
|
23.7 | 24.5 | 23.1 | 23.1 | 22.5 | |||||||||||||||
|
Operating income
|
16.5 | 13.9 | 13.8 | 18.6 | 18.5 | |||||||||||||||
|
Income before income taxes
|
15.3 | 12.7 | 12.9 | 17.1 | 17.2 | |||||||||||||||
|
Income from continuing operations
|
10.4 | 8.5 | 8.5 | 11.4 | 11.4 | |||||||||||||||
|
Effective tax rate
|
32.2 | 32.8 | 33.9 | 33.7 | 33.7 | |||||||||||||||
|
Return on average
assets
(2)
|
7.0 | 5.3 | 6.2 | 8.5 | 9.1 | |||||||||||||||
|
Borrowings as a percent of capitalization
|
27.7 | 24.0 | 32.6 | 28.5 | 27.3 | |||||||||||||||
|
Return on average shareholders’
equity
(2)
|
11.9 | 9.4 | 11.1 | 14.7 | 14.9 | |||||||||||||||
|
PER SHARE
DATA
(3)(4)
|
||||||||||||||||||||
|
Basic
|
||||||||||||||||||||
|
— income from continuing operations
|
$ | 1.93 | $ | 1.41 | $ | 1.55 | $ | 1.90 | $ | 1.65 | ||||||||||
|
— net income
|
1.93 | 1.41 | 1.55 | 1.89 | 1.81 | |||||||||||||||
|
Diluted
|
||||||||||||||||||||
|
— income from continuing operations
|
1.90 | 1.40 | 1.53 | 1.88 | 1.62 | |||||||||||||||
|
— net income
|
1.90 | 1.40 | 1.53 | 1.87 | 1.78 | |||||||||||||||
|
Cash dividends declared
|
.60 | .48 | .48 | .48 | .40 | |||||||||||||||
|
Shareholders’ equity
|
16.76 | 15.66 | 14.26 | 14.01 | 11.94 | |||||||||||||||
|
Stock price
|
||||||||||||||||||||
|
— high
|
40.29 | 32.85 | 40.75 | 44.99 | 35.65 | |||||||||||||||
|
— low
|
27.54 | 16.67 | 17.70 | 30.41 | 26.00 | |||||||||||||||
|
— close
|
39.12 | 31.15 | 24.15 | 36.13 | 31.61 | |||||||||||||||
|
Price/earnings ratio at year end
|
21 | 22 | 16 | 19 | 20 | |||||||||||||||
|
Other Data
|
||||||||||||||||||||
|
Employees at year end
|
5,966 | 5,300 | 5,813 | 5,009 | 4,863 | |||||||||||||||
|
Shareholders at year end
|
7,000 | 7,000 | 7,000 | 7,000 | 6,700 | |||||||||||||||
|
Shares outstanding (in
000s)
(3):
|
||||||||||||||||||||
|
Weighted average
|
||||||||||||||||||||
|
— basic
|
80,466 | 79,716 | 81,123 | 80,666 | 79,527 | |||||||||||||||
|
— diluted
|
81,983 | 80,727 | 82,320 | 82,086 | 80,976 | |||||||||||||||
|
At year end (net of treasury)
|
82,070 | 80,970 | 80,302 | 81,579 | 80,546 | |||||||||||||||
| (1) | For additional detail, see Notes to Consolidated Financial Statements in Part II. Item 8. “Financial Statements and Supplementary Data”. | |
| (2) | Return calculated based on income from continuing operations. | |
| (3) | 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 2007. | |
| (4) | Adjusted to reflect the accounting guidance provided in Accounting Standards Codification (“ASC”) 260, “Earnings Per Share”. |
12
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
This management’s discussion and analysis, including,
without limitations the section entitled “Historical
Overview and Outlook” and other portions of this report
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 and Outlook
IDEX 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 reportable 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 and paints 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.
Some of our key 2010 financial highlights are as follows:
| • | Sales of $1.51 billion rose 14%; organic sales — excluding acquisitions and foreign currency translation — were up 12%. | |
| • | Gross margins improved 160 basis points to 40.9% of sales |
13
Table of Contents
| • | Operating margins at 16.5% increased 260 basis points compared to 2009. | |
| • | Net income increased 39% to $157.1 million. | |
| • | Diluted EPS of $1.90 increased 50 cents compared to 2009. |
For 2011, the Company is expected to grow organically in the mid
to high single digits with acquisition-related growth projected
at approximately 4 percent for transactions completed in
2010 and two acquisitions to be completed in the first quarter
of 2011. Based on the Company’s current outlook, for the
full year 2011, we are forecasting fully diluted EPS of $2.23 to
$2.33.
Results
of Operations
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, 2010. For purposes of this
discussion and analysis section, reference is made to the table
on page 16 and the Consolidated Statements of Operations in
Part II. Item 8. “Financial Statements and
Supplementary Data” on page 26.
Performance
in 2010 Compared with 2009
Sales in 2010 of $1,513.1 million were 14% higher than the
$1,329.7 million recorded a year ago. This increase
reflects a 12% increase in organic sales and 3% from four
acquisitions (PPE — April 2010, OBL — July
2010, Periflo — September 2010 and
Fitzpatrick — November 2010), partially offset by 1%
unfavorable foreign currency translation. Organic sales
increased in Fluid & Metering Technologies,
Health & Science Technologies and Fire &
Safety/Diversified Products segments, but were flat in the
Dispensing Equipment segment. Domestic organic sales were up 9%
versus the prior year, while international organic sales
increased 15% in 2010. Organic sales to customers outside the
U.S. represented 49% of total sales in 2010 and 46% in 2009.
In 2010, Fluid & Metering Technologies contributed 48%
of sales and 44% of operating income; Health & Science
Technologies accounted for 26% of sales and 28% of operating
income; Dispensing Equipment accounted for 8% of sales and 7% of
operating income; and Fire & Safety/Diversified
Products represented 18% of sales and 21% of operating income.
Fluid & Metering Technologies sales of
$729.9 million in 2010 increased $88.8 million, or
14%, compared with 2009. This reflects a 13% increase in organic
sales and 2% for acquisitions (OBL, Periflo and Fitzpatrick),
partially offset by 1% unfavorable foreign currency translation.
The increase in organic growth was driven by strong global
growth across energy, chemical, food & pharma and
water & wastewater markets. In 2010, organic sales
increased approximately 13% domestically and 14%
internationally. Organic sales to customers outside the
U.S. were approximately 46% of total segment sales in 2010
and 41% in 2009.
Health & Science Technologies sales of
$397.2 million increased $92.9 million, or 31%, in
2010 compared with last year. This change reflects a 21%
increase in organic growth and a 10% increase from the
acquisition of PPE. The increase in organic sales reflects
market strength across all Health & Science
Technologies products. In 2010, organic sales increased 14%
domestically and 32% internationally. Organic sales to customers
outside the U.S. were approximately 43% of total segment
sales in 2010 and 40% in 2009.
Dispensing Equipment sales of $125.3 million decreased
$2.0 million, or 2%, in 2010 compared with the prior year.
This change reflects 2% unfavorable foreign currency
translation, while organic growth was flat in 2010 compared to
2009. The Dispensing Equipment Segment experienced strength in
Asia and parts of Eastern Europe, offset by softness in North
America and Western Europe. Organic domestic sales decreased 9%
compared with 2009, while organic international sales increased
5%. Organic sales to customers outside the U.S. were 67% of
total segment sales in 2010 and 66% in 2009.
Fire & Safety/Diversified Products sales of
$265.5 million increased $2.7 million, or 1%, in 2010
compared with 2009. Organic sales activity increased 2%, while
foreign currency translation accounted for a 1% decrease. The
increase in organic business growth was driven by higher demand
for engineered band clamping systems, partially offset by
weakness in fire suppression. In 2010, organic sales decreased
3% domestically and increased 7%
14
Table of Contents
internationally. Organic sales to customers outside the
U.S. were 56% of total segment sales in 2010 and 55% in
2009.
Gross profit of $618.5 million in 2010 was
$96.1 million, or 18%, higher than 2009. As a percent of
sales, gross profit was 40.9% in 2010, which represented a 160
basis-point increase from 39.3% in 2009. The increase in gross
margin primarily reflects higher sales volume, cost reductions
due to our restructuring initiatives and change in product mix.
Selling, general and administrative (“SG&A”)
expenses increased to $358.3 million in 2010 from
$325.5 million in 2009. The $32.8 million increase
reflects approximately $22.0 million for volume related
expenses and $10.8 million for incremental costs associated
with the acquisitions of PPE in April 2010, OBL in July 2010,
Periflo in September 2010 and Fitzpatrick in November 2010. As a
percent of net sales, SG&A expenses were 23.7% for 2010 and
24.5% in 2009.
In 2010, the Company recorded pre-tax restructuring expenses
totaling $11.1 million, while $12.1 million was
recorded in 2009. These restructuring expenses were mainly
attributable to 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
215 employees in 2010 and 478 in 2009. The Company has
completed these employee reductions in 2010 and expects
severance payments to be fully paid by the end of 2011 using
cash from operations.
Operating income increased $64.3 million, or 35%, to
$249.1 million in 2010 from $184.9 million in 2009.
This increase primarily reflects an increase in volume, changes
in product mix and cost reductions due to our restructuring
initiatives. Operating margins in 2010 were 16.5% of sales
compared with 13.9% recorded in 2009.
In the Fluid & Metering Technologies Segment,
operating income of $131.9 million and operating margins of
18.1% in 2010 were up from the $100.3 million and 15.6%
recorded in 2009, principally due to higher sales and cost
reduction initiatives. In the Health & Science
Technologies Segment, operating income of $82.3 million and
operating margins of 20.7% in 2010 were up from the
$51.7 million and 17.0% recorded in 2009 due to higher
volume and cost reduction initiatives. In the Dispensing
Equipment Segment, operating income of $19.5 million and
operating margins of 15.6% in 2010 were up from the
$15.1 million and 11.9% recorded in 2009 due to cost
reduction initiatives and improved productivity. Operating
income and operating margins in the Fire &
Safety/Diversified
Products Segment of $62.8 million and 23.7%, respectively,
were higher than the $59.9 million and 22.8% recorded in
2009, due to higher volume and favorable mix.
Other expense was $1.1 million in 2010 compared with a
$1.2 million gain in 2009, due to unfavorable foreign
currency translation.
Interest expense decreased to $16.2 million in 2010 from
$17.2 million in 2009. The decrease was principally due to
lower debt levels and a lower interest rate environment.
The provision for income taxes increased to $74.8 million
in 2010 from $55.4 million in 2009. The effective tax rate
decreased to 32.2% in 2010 from 32.8% in 2009, due to changes in
the mix of global pre-tax income among taxing jurisdictions.
Net income for 2010 was $157.1 million, 39% higher than the
$113.4 million earned in 2009. Diluted earnings per share
in 2010 of $1.90 increased $0.50, or 36%, compared with last
year.
15
Table of Contents
Company
and Business Segment Financial Information
| For the Years Ended December 31, (1) | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Fluid & Metering Technologies
|
||||||||||||
|
Net
sales
(2)
|
$ | 729,945 | $ | 641,108 | $ | 697,702 | ||||||
|
Operating
income
(3)
|
131,944 | 100,289 | 123,801 | |||||||||
|
Operating
margin
(3)
|
18.1 | % | 15.6 | % | 17.7 | % | ||||||
|
Identifiable assets
|
$ | 1,111,085 | $ | 1,043,082 | $ | 1,070,348 | ||||||
|
Depreciation and amortization
|
33,134 | 32,584 | 26,276 | |||||||||
|
Capital expenditures
|
17,308 | 12,867 | 13,859 | |||||||||
|
Health & Science Technologies
|
||||||||||||
|
Net
sales
(2)
|
$ | 397,198 | $ | 304,329 | $ | 331,591 | ||||||
|
Operating
income
(3)
|
82,332 | 51,712 | 58,297 | |||||||||
|
Operating
margin
(3)
|
20.7 | % | 17.0 | % | 17.6 | % | ||||||
|
Identifiable assets
|
$ | 648,400 | $ | 567,096 | $ | 594,459 | ||||||
|
Depreciation and amortization
|
16,012 | 14,293 | 11,806 | |||||||||
|
Capital expenditures
|
7,516 | 6,365 | 5,365 | |||||||||
|
Dispensing Equipment
|
||||||||||||
|
Net
sales
(2)
|
$ | 125,320 | $ | 127,279 | $ | 163,861 | ||||||
|
Operating income
(loss)
(3)(4)
|
19,490 | 15,147 | (10,748 | ) | ||||||||
|
Operating
margin
(3)(4)
|
15.6 | % | 11.9 | % | (6.6 | )% | ||||||
|
Identifiable assets
|
$ | 205,540 | $ | 164,979 | $ | 179,800 | ||||||
|
Depreciation and amortization
|
3,753 | 3,124 | 3,986 | |||||||||
|
Capital expenditures
|
1,129 | 864 | 2,528 | |||||||||
|
Fire & Safety/Diversified Products
|
||||||||||||
|
Net
sales
(2)
|
$ | 265,501 | $ | 262,809 | $ | 300,462 | ||||||
|
Operating
income
(3)
|
62,844 | 59,884 | 74,310 | |||||||||
|
Operating
margin
(3)
|
23.7 | % | 22.8 | % | 24.7 | % | ||||||
|
Identifiable assets
|
$ | 278,567 | $ | 285,893 | $ | 286,482 | ||||||
|
Depreciation and amortization
|
4,885 | 5,328 | 5,288 | |||||||||
|
Capital expenditures
|
3,513 | 3,686 | 4,743 | |||||||||
|
Total IDEX
|
||||||||||||
|
Net sales
|
$ | 1,513,073 | $ | 1,329,661 | $ | 1,489,471 | ||||||
|
Operating income
|
249,116 | 184,854 | 205,956 | |||||||||
|
Operating margin
|
16.5 | % | 13.9 | % | 13.8 | % | ||||||
|
Total assets
|
$ | 2,381,695 | $ | 2,098,157 | $ | 2,151,800 | ||||||
|
Depreciation and
amortization
(5)
|
58,108 | 56,346 | 48,599 | |||||||||
|
Capital expenditures
|
32,769 | 25,525 | 28,358 | |||||||||
| (1) | Data includes acquisition of Fitzpatrick (November 2010), Periflo (September 2010), OBL (July 2010), IETG (October 2008), iPEK (October 2008), Richter (October 2008) and ADS (January 2008) in the Fluid & Metering Technologies Segment and PPE (April 2010), Innovadyne (November 2008) and Semrock (October 2008) 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. |
16
Table of Contents
Performance
in 2009 Compared with 2008
Sales in 2009 of $1,329.7 million were 11% lower than the
$1,489.5 million recorded in 2008. This decrease reflects a
14% decrease in organic sales and 2% unfavorable foreign
currency translation, partially offset by a 5% increase from
five acquisitions (Richter — October 2008,
iPEK — October 2008, IETG — October 2008,
Semrock — October 2008 and Innovadyne —
November 2008). Organic sales decreased in all four of the
Company’s reportable 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. Organic sales to customers outside the
U.S. were approximately 41% of total segment sales in 2009
and 43% in 2008.
Health & Science Technologies sales of
$304.3 million decreased $27.3 million, or 8%, in 2009
compared with 2008. This change represents a 12% decrease in
organic volume and 1% unfavorable foreign currency translation,
partially offset by a 5% increase from the acquisitions of
Semrock and Innovadyne. The decrease in organic sales reflected
market softness across the Health & Science
Technologies businesses. In 2009, organic sales decreased 13%
domestically and 10% internationally. Organic sales to customers
outside the U.S. were approximately 40% of total segment
sales in 2009 and 38% in 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%. Organic sales to
customers outside the U.S. were 66% of total segment sales
in 2009, down from 73% 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. Organic sales to
customers outside the U.S. were 55% of total segment sales
in 2009 and 53% 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.
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.
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
in 2008 within the Company’s Dispensing Equipment Segment.
Fluid Management had experienced a downturn in capital spending
by its customer base and a loss of market share. The Company
performed an impairment test and compared the fair
17
Table of Contents
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.
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 a 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.
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 replacement of
$150.0 million of debt with a lower interest rate borrowing
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 in 2008. Diluted earnings per share in 2009
of $1.40 decreased $0.13, or 8%, compared with 2008.
Liquidity
and Capital Resources
At December 31, 2010, working capital was
$339.1 million and the Company’s current ratio was 2.0
to 1. Cash flows from operating activities decreased
$28.1 million, or 13%, to $184.5 million in 2010,
primarily due to the settlement of the forward starting interest
rate contract entered into during 2010 in connection with the
$300.0 million 4.5% Senior Notes issued in December
2010.
Cash flows from operations were more than adequate to fund
capital expenditures of $32.8 million and
$25.5 million in 2010 and 2009, 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 PPE in April 2010 for cash consideration of
$51.3 million and the assumption of approximately
$2.7 million in debt related items, OBL in July 2010 for
cash consideration of $15.4 million, Periflo in September
2010 for cash consideration of $4.3 million and Fitzpatrick
in November 2010 for cash consideration of $20.3 million
and the assumption of approximately $0.4 million in debt
related items. The cash payment for PPE was financed with
borrowings under the Company’s credit facility, while the
other acquisitions were paid with cash from operations.
18
Table of Contents
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, 2010, there was $27.8 million outstanding
under the Credit Facility. The net available borrowing under the
Credit Facility as of December 31, 2010, was approximately
$572.2 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 credit rating at December 31, 2010, 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.
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, 2010, there was $90.0 million
outstanding under the Term Loan 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 a repayment of
$7.5 million in April 2011, with the remaining balance due
on December 21, 2011. The Company currently maintains an
interest rate exchange agreement related to the Term Loan which
expires in December 2011. This interest rate exchange agreement
has a current notional amount of $90.0 million, the
agreement effectively converted the $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 June 9, 2010, the Company completed a private placement
of €81.0 million ($96.8 million) aggregate
principal amount of 2.58% Series 2010 Senior Euro Notes due
June 9, 2015 (“2.58% Senior Euro Notes”)
pursuant to a Master Note Purchase Agreement, dated June 9,
2010 (the “Purchase Agreement”). The Purchase
Agreement provides for the issuance of additional series of
notes in the future. The 2.58% Senior Euro Notes bear
interest at a rate of 2.58% per annum and will mature on
June 9, 2015. The 2.58% Senior Euro Notes are
unsecured obligations of the Company and rank pari passu in
right of payment with all of the Company’s other senior
debt. The Company may at any time prepay all or any portion of
the 2.58% Senior Euro Notes; provided that such portion is
greater than 5% of the aggregate principal amount of Notes then
outstanding under the Purchase Agreement. In the event of a
prepayment, the Company will pay an amount equal to par plus
accrued interest plus a make-whole premium. The Purchase
Agreement contains certain covenants that restrict the
Company’s ability to, among other things, transfer or sell
assets, create liens and engage in certain mergers or
consolidations. In addition, the Company must comply with a
leverage ratio and interest coverage ratio as set forth in the
Purchase Agreement. The Purchase Agreement provides for
customary events of default. In the case of an event of default
arising from specified events of bankruptcy or insolvency, all
outstanding 2.58% Senior Euro Notes will become due and
payable immediately without further action or notice. In the
case of payment events of defaults, any holder of the
2.58% Senior Euro Notes affected thereby may declare all
the 2.58% Senior Euro Notes held by it due and payable
immediately. In the case of any other event of default, a
majority of the holders of the 2.58% Senior Euro Notes may
declare all the 2.58% Senior Euro Notes to be due and
payable immediately. The Company used a portion of the proceeds
from the private placement to pay down existing debt outstanding
under the Credit Facility that had previously been denominated
in Euros, with the remainder being available for ongoing
business activities.
On December 6, 2010, the Company completed a public
offering of $300.0 million 4.5% Notes due
December 15, 2020 (“4.5% Senior Notes”). The
net proceeds from the offering of approximately
$295.7 million, after deducting the $1.6 million
issuance discount, the $1.9 million underwriting commission
and estimated offering expenses of approximately
$0.8 million, was used to repay $250.0 million of
outstanding indebtedness under the Credit Facility. The balance
of the net proceeds will be used for general corporate purposes.
The 4.5% Senior Notes will bear interest at a rate of 4.5%
per annum, which is payable semi-annually in arrears each June
15 and December 15, beginning June 15, 2011. The
Company may redeem all or part of the 4.5% Senior Notes at
any time prior to maturity at the redemption prices set forth in
the Note Indenture (“Indenture”) governing the
19
Table of Contents
4.5% Senior Notes. The Company may issue additional debt
from time to time pursuant to the Indenture. The Indenture and
4.5% Senior Notes contain covenants that limit the
Company’s ability to, among other things, incur certain
liens securing indebtedness, engage in certain sale-leaseback
transactions, and enter into certain consolidations, mergers,
conveyances, transfers or leases of all or substantially all the
Company’s assets. The terms of the 4.5% Senior Notes
also require the Company to make an offer to repurchase
4.5% Senior Notes upon a change of control triggering event
(as defined in the Indenture) at a price equal to 101% of their
principal amount plus accrued and unpaid interest if any.
On April 15, 2010, the Company entered into a forward
starting interest rate contract with a notional amount of
$300.0 million with a settlement date in December 2010.
This contract was entered into in anticipation of the issuance
of the $300.0 million 4.5% Senior Notes and was
designed to lock in the market interest rate as of
April 15, 2010. The Company settled this interest rate
contract in December 2010, resulting in a $31.0 million
payment. The $31.0 million will be amortized into interest
expense over the 10 year term of the 4.5% Senior Notes
yielding an effective interest rate of 5.8%.
There are two key financial covenants that the Company is
required to maintain in connection with the Credit Facility,
Term Loan, and 2.58% Senior Euro Notes. There are no
financial covenants relating to the 4.5% Senior Notes. The
most restrictive financial covenants under these debt
instruments require a minimum interest coverage ratio (operating
cash flow to interest) of 3.0 to 1 and a maximum leverage ratio
(outstanding debt to operating cash flow) of 3.25 to 1. At
December 31, 2010, the Company was in compliance with both
of these financial covenants. The Company expects to be in
compliance with both of these key financial covenants throughout
2011.
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. No shares were purchased in 2010 or 2009.
We expect our current cash and cash that will be generated from
operations during 2011 will be sufficient to meet our operating
cash requirements, planned capital expenditures, interest on all
borrowings, required debt repayments, pension and postretirement
funding requirements and annual dividend payments to holders of
the Company’s stock during the next twelve months.
Additionally, in the event that suitable businesses are
available for acquisition upon acceptable terms, we may obtain
all or a portion of the financing for these acquisitions through
the incurrence of additional borrowings. Our current intention,
if the available terms and conditions are acceptable, is to
enter into a new revolving credit facility agreement during 2011
since the existing Credit Facility matures on December 21,
2011. As of December 31, 2010, $27.8 million is
outstanding under the existing Credit Facility and
$90.0 million is outstanding under the Term Loan and both
are classified as short term borrowings on the Balance Sheet. We
expect our cash and cash from operations to be adequate to repay
these balances during 2011.
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,
2010, 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
20
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
(1)
|
$ | 677,156 | $ | 139,347 | $ | 32,538 | $ | 138,333 | $ | 366,938 | ||||||||||
|
Interest rate exchange agreements
|
2,365 | 2,365 | — | — | — | |||||||||||||||
|
Operating lease commitments
|
35,321 | 9,679 | 12,668 | 6,057 | 6,917 | |||||||||||||||
|
Capital lease
obligations
(2)
|
3,808 | 793 | 981 | 718 | 1,316 | |||||||||||||||
|
Purchase
obligations
(3)
|
76,629 | 63,084 | 2,514 | 11,031 | — | |||||||||||||||
|
Pension and post-retirement obligations
|
96,100 | 8,600 | 17,600 | 19,500 | 50,400 | |||||||||||||||
|
Income tax
obligations
(4)
|
6,440 | 1,319 | 4,201 | 204 | 716 | |||||||||||||||
|
Total contractual
obligations
(5)
|
$ | 897,819 | $ | 225,187 | $ | 70,502 | $ | 175,843 | $ | 426,287 | ||||||||||
| (1) | Includes interest payments based on contractual terms and current interest rates for variable debt. | |
| (2) | Consists primarily of property leases. | |
| (3) | Consists primarily of inventory commitments. | |
| (4) | Excludes interest and penalties. | |
| (5) | Comprises liabilities recorded on the balance sheet of $492,878, and obligations not recorded on the balance sheet of $404,941. |
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.
21
Table of Contents
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
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 13 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
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 31 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 2010 and 2009 ranges for these three
assumptions utilized by the Company are as follows:
| Assumptions: | 2010 Range | 2009 Range | ||
|
Weighted average cost of capital
|
12.1% to 13.9% | 11.0% to 13.7% | ||
|
EBITDA multiples
|
9.0x to 12.0x | 9.0x to 11.0x | ||
|
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 substantially in excess of its carrying
value as of October 31, 2010, and thus no goodwill
impairment was identified.
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
22
Table of Contents
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 14 of the Notes to Consolidated
Financial Statements in Part II. Item 8.
“Financial Statements and Supplementary Data”.
Level 1 assets are valued using unadjusted quoted prices
for identical assets in active markets. Level 2 assets are
valued using quoted prices or other observable inputs for
similar assets. Level 3 assets are valued using
unobservable inputs, but reflect the assumptions market
participants would use in pricing the assets. 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 January 2010, the Financial Accounting Standards Board
(“FASB”) issued ASU
2010-06,
“Fair Value Measurements and Disclosures (Topic 820).”
This Update provides amendments to Subtopic
820-10
and
related guidance within U.S. Generally Accepted Accounting
Principles (“GAAP”) to require disclosure of the
transfers in and out of Levels 1 and 2 and a schedule for
Level 3 that separately identifies purchases, sales,
issuances and settlements and requires more detailed disclosures
regarding valuation techniques and inputs. The new disclosures
and clarifications of existing disclosures were effective for
the Company’s fiscal year 2010, except for the disclosures
about purchases, sales, issuances and settlements in the roll
forward of activity in Level 3 fair value measurements,
which will be effective for the Company’s fiscal year 2011.
See Note 7 of the Notes to Consolidated Financial
Statements in Part II, Item 8 of this report for
disclosures associated with the adoption of this standard that
were effective in 2010.
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.
23
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 exchange agreements. Under the
policy, we do not use financial or commodity derivative
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
(expense)-net” on the Consolidated Statements of Operations.
24
Table of Contents
| Item 8. | Financial Statements and Supplementary Data. |
CONSOLIDATED BALANCE SHEETS
| As of December 31, | ||||||||
| 2010 | 2009 | |||||||
| (In thousands except share and per share amounts) | ||||||||
|
ASSETS
|
||||||||
|
Current assets
|
||||||||
|
Cash and cash equivalents
|
$ | 235,136 | $ | 73,526 | ||||
|
Receivables — net
|
213,553 | 183,178 | ||||||
|
Inventories
|
196,546 | 159,463 | ||||||
|
Other current assets
|
47,523 | 35,545 | ||||||
|
Total current assets
|
692,758 | 451,712 | ||||||
|
Property, plant and equipment — net
|
188,562 | 178,283 | ||||||
|
Goodwill
|
1,207,001 | 1,180,445 | ||||||
|
Intangible assets — net
|
281,392 | 281,354 | ||||||
|
Other noncurrent assets
|
11,982 | 6,363 | ||||||
|
Total assets
|
$ | 2,381,695 | $ | 2,098,157 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
|
Current liabilities
|
||||||||
|
Trade accounts payable
|
$ | 104,055 | $ | 73,020 | ||||
|
Accrued expenses
|
117,879 | 98,730 | ||||||
|
Short-term borrowings
|
119,445 | 8,346 | ||||||
|
Dividends payable
|
12,289 | 9,586 | ||||||
|
Total current liabilities
|
353,668 | 189,682 | ||||||
|
Long-term borrowings
|
408,450 | 391,754 | ||||||
|
Deferred income taxes
|
148,534 | 148,806 | ||||||
|
Other noncurrent liabilities
|
95,383 | 99,811 | ||||||
|
Total liabilities
|
1,006,035 | 830,053 | ||||||
|
Commitments and contingencies (Note 8)
|
||||||||
|
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: 84,636,668 shares at December 31, 2010 and
83,510,320 shares at December 31, 2009
|
846 | 835 | ||||||
|
Additional paid-in capital
|
441,271 | 401,570 | ||||||
|
Retained earnings
|
1,005,040 | 896,977 | ||||||
|
Treasury stock at cost: 2,566,985 shares at
December 31, 2010 and 2,540,052 shares at
December 31, 2009
|
(58,788 | ) | (56,706 | ) | ||||
|
Accumulated other comprehensive income (loss)
|
(12,709 | ) | 25,428 | |||||
|
Total shareholders’ equity
|
1,375,660 | 1,268,104 | ||||||
|
Total liabilities and shareholders’ equity
|
$ | 2,381,695 | $ | 2,098,157 | ||||
See Notes to Consolidated Financial Statements.
25
Table of Contents
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands except per share amounts) | ||||||||||||
|
Net sales
|
$ | 1,513,073 | $ | 1,329,661 | $ | 1,489,471 | ||||||
|
Cost of sales
|
894,590 | 807,275 | 892,038 | |||||||||
|
Gross profit
|
618,483 | 522,386 | 597,433 | |||||||||
|
Selling, general and administrative expenses
|
358,272 | 325,453 | 343,392 | |||||||||
|
Goodwill impairment
|
— | — | 30,090 | |||||||||
|
Restructuring expenses
|
11,095 | 12,079 | 17,995 | |||||||||
|
Operating income
|
249,116 | 184,854 | 205,956 | |||||||||
|
Other income (expense) — net
|
(1,092 | ) | 1,151 | 5,123 | ||||||||
|
Interest expense
|
16,150 | 17,178 | 18,852 | |||||||||
|
Income before income taxes
|
231,874 | 168,827 | 192,227 | |||||||||
|
Provision for income taxes
|
74,774 | 55,436 | 65,201 | |||||||||
|
Net income
|
$ | 157,100 | $ | 113,391 | $ | 127,026 | ||||||
|
Earnings per common share:
|
||||||||||||
|
Basic earnings per common share
|
$ | 1.93 | $ | 1.41 | $ | 1.55 | ||||||
|
Diluted earnings per common share
|
$ | 1.90 | $ | 1.40 | $ | 1.53 | ||||||
|
Share data:
|
||||||||||||
|
Basic weighted average common shares outstanding
|
80,466 | 79,716 | 81,123 | |||||||||
|
Diluted weighted average common shares outstanding
|
81,983 | 80,727 | 82,320 | |||||||||
See Notes to Consolidated Financial Statements.
26
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, 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 | ) | |||||||||||||||||||
|
Net change in retirement obligations (net of tax benefit of
$7.7 million)
|
— | — | — | (13,279 | ) | — | — | (13,279 | ) | |||||||||||||||||||
|
Net change on derivatives designated as cash flow hedges (net of
tax benefit of $3.7 million)
|
— | — | — | — | (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 | |||||||||||||||||||||
|
Net change in retirement obligations (net of tax expense of
$3.5 million)
|
— | — | — | 6,396 | — | — | 6,396 | |||||||||||||||||||||
|
Net change on derivatives designated as cash flow hedges (net of
tax benefit of $0.1 million)
|
— | — | — | — | (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 | |||||||||||
|
Net income
|
— | 157,100 | — | — | — | — | 157,100 | |||||||||||||||||||||
|
Other comprehensive income, net of tax:
|
||||||||||||||||||||||||||||
|
Cumulative translation adjustment
|
— | — | (21,097 | ) | — | — | — | (21,097 | ) | |||||||||||||||||||
|
Net change in retirement obligations (net of tax benefit of
$1.7 million)
|
— | — | — | (2,830 | ) | — | — | (2,830 | ) | |||||||||||||||||||
|
Net change on derivatives designated as cash flow hedges (net of
tax benefit of $11.9 million)
|
— | — | — | — | (14,210 | ) | — | (14,210 | ) | |||||||||||||||||||
|
Other comprehensive loss
|
— | — | — | — | — | — | (38,137 | ) | ||||||||||||||||||||
|
Comprehensive income
|
— | — | — | — | — | — | 118,963 | |||||||||||||||||||||
|
Issuance of 1,222,274 shares of common stock from issuance
of unvested shares, exercise of stock options and deferred
compensation plans
|
22,354 | — | — | — | — | — | 22,354 | |||||||||||||||||||||
|
Share-based compensation
|
17,358 | — | — | — | — | — | 17,358 | |||||||||||||||||||||
|
Unvested shares surrendered for tax withholding
|
— | — | — | — | — | (2,082 | ) | (2,082 | ) | |||||||||||||||||||
|
Cash dividends declared — $.60 per common share
outstanding
|
— | (49,037 | ) | — | — | — | — | (49,037 | ) | |||||||||||||||||||
|
Balance, December 31, 2010
|
$ | 442,117 | $ | 1,005,040 | $ | 38,302 | $ | (30,088 | ) | $ | (20,923 | ) | $ | (58,788 | ) | $ | 1,375,660 | |||||||||||
See Notes to Consolidated Financial Statements.
27
Table of Contents
IDEX
CORPORATION
| For The Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Cash flows from operating activities
|
||||||||||||
|
Net income
|
$ | 157,100 | $ | 113,391 | $ | 127,026 | ||||||
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||||||
|
Loss on sale of fixed assets
|
12 | 447 | — | |||||||||
|
Goodwill impairment
|
— | — | 30,090 | |||||||||
|
Depreciation and amortization
|
32,367 | 31,850 | 30,989 | |||||||||
|
Amortization of intangible assets
|
25,741 | 24,496 | 17,610 | |||||||||
|
Amortization of debt issuance expenses
|
547 | 308 | 288 | |||||||||
|
Share-based compensation expense
|
17,358 | 15,710 | 15,014 | |||||||||
|
Deferred income taxes
|
(7,336 | ) | 1,081 | (10,817 | ) | |||||||
|
Excess tax benefit from share-based compensation
|
(3,457 | ) | (2,762 | ) | (3,134 | ) | ||||||
|
Forward starting interest rate contract
|
(30,970 | ) | — | — | ||||||||
|
Changes in (net of the effect from acquisitions):
|
||||||||||||
|
Receivables
|
(22,162 | ) | 26,069 | 19,667 | ||||||||
|
Inventories
|
(26,651 | ) | 23,149 | (4,389 | ) | |||||||
|
Trade accounts payable
|
21,432 | (16,310 | ) | (6,385 | ) | |||||||
|
Accrued expenses
|
17,941 | (14,294 | ) | 1,215 | ||||||||
|
Other — net
|
2,555 | 9,397 | 5,886 | |||||||||
|
Net cash flows provided by operating activities
|
184,477 | 212,532 | 223,060 | |||||||||
|
Cash flows from investing activities
|
||||||||||||
|
Cash purchases of property, plant and equipment
|
(31,740 | ) | (25,059 | ) | (27,837 | ) | ||||||
|
Acquisition of businesses, net of cash acquired
|
(91,286 | ) | — | (392,825 | ) | |||||||
|
Proceeds from fixed assets disposals
|
720 | 3,582 | — | |||||||||
|
Changes in restricted cash
|
— | — | 140,005 | |||||||||
|
Other — net
|
— | 1,860 | — | |||||||||
|
Net cash flows used in investing activities
|
(122,306 | ) | (19,617 | ) | (280,657 | ) | ||||||
|
Cash flows from financing activities
|
||||||||||||
|
Borrowings under credit facilities for acquisitions
|
53,866 | — | 180,665 | |||||||||
|
Borrowings under credit facilities and term loan
|
7,685 | 70,114 | 483,044 | |||||||||
|
Proceeds from issuance of 2.58% Senior Euro Notes
|
96,762 | — | — | |||||||||
|
Payments under credit facilities and term loan
|
(331,632 | ) | (225,604 | ) | (413,207 | ) | ||||||
|
Proceeds from issuance of 4.5% Senior Notes
|
298,427 | — | — | |||||||||
|
Payment of 6.875% Senior Notes
|
— | — | (150,000 | ) | ||||||||
|
Debt issuance costs
|
(2,685 | ) | — | — | ||||||||
|
Dividends paid
|
(46,334 | ) | (38,637 | ) | (39,398 | ) | ||||||
|
Proceeds from stock option exercises
|
18,057 | 7,694 | 10,421 | |||||||||
|
Excess tax benefit from share-based compensation
|
3,457 | 2,762 | 3,134 | |||||||||
|
Purchase of common stock
|
— | — | (50,000 | ) | ||||||||
|
Other — net
|
(2,082 | ) | (1,313 | ) | (1,980 | ) | ||||||
|
Net cash flows provided by (used in) financing activities
|
95,521 | (184,984 | ) | 22,679 | ||||||||
|
Effect of exchange rate changes on cash and cash equivalents
|
3,918 | 4,242 | (6,486 | ) | ||||||||
|
Net increase (decrease) in cash
|
161,610 | 12,173 | (41,404 | ) | ||||||||
|
Cash and cash equivalents at beginning of year
|
73,526 | 61,353 | 102,757 | |||||||||
|
Cash and cash equivalents at end of period
|
$ | 235,136 | $ | 73,526 | $ | 61,353 | ||||||
|
Supplemental cash flow information
|
||||||||||||
|
Cash paid for:
|
||||||||||||
|
Interest
|
$ | 16,776 | $ | 17,311 | $ | 20,139 | ||||||
|
Income taxes
|
73,867 | 50,796 | 72,074 | |||||||||
|
Significant non-cash activities:
|
||||||||||||
|
Debt acquired with acquisition of business
|
758 | — | — | |||||||||
|
Issuance of unvested shares
|
5,603 | 5,131 | — | |||||||||
See Notes to Consolidated Financial Statements.
28
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Significant Accounting Policies |
Business
IDEX 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; 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
revenue recognition, sales returns and allowances, allowance for
doubtful accounts, inventory valuation, recoverability of
long-lived assets, 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 collectability 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 Accounting Standards
Codification (“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
29
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
sale based upon the length of the warranty period, warranty
costs incurred and any other related information known to the
Company.
Shipping
and Handling Costs
Shipping and handling costs are included in cost of sales and
are recognized as a period expense during the period in which
they are incurred.
Advertising
Costs
Advertising costs of $11.0 million, $11.4 million and
$11.1 million for the twelve months ended December 31,
2010, 2009 and 2008, respectively are expensed as incurred.
Cash and
Cash Equivalents
The Company considers all highly liquid debt instruments
purchased with an original maturity of 90 days or less 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 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 31,
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
thirteen reporting units and indefinite-lived intangible asset.
See Note 4 for a further discussion on goodwill and
intangible assets.
Borrowing
Expenses
Expenses, inclusive of commissions and professional fees,
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.
30
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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, earnings per common share were computed using the
two-class method prescribed by ASC 260. Net income
attributable to common shareholders was reduced by
$1.4 million, $0.8 million and $0.9 million in
2010, 2009 and 2008, respectively.
Basic weighted average shares outstanding reconciles to diluted
weighted average shares outstanding as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Basic weighted average common shares outstanding
|
80,466 | 79,716 | 81,123 | |||||||||
|
Dilutive effect of stock options, DCUs and unvested shares
|
1,517 | 1,011 | 1,197 | |||||||||
|
Diluted weighted average common shares outstanding
|
81,983 | 80,727 | 82,320 | |||||||||
Options to purchase approximately 0.2 million,
2.2 million and 3.3 million shares of common stock as
of December 31, 2010, 2009 and 2008, 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 compensation plans. That
cost is recognized in the consolidated financial statements over
the requisite service period of the grants. See Note 13 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 & 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
|
4 to 20 years |
31
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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 $31.8 million, $29.6 million
and $29.5 million in 2010, 2009 and 2008, 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 in “Accumulated other comprehensive income
(loss)” in the Consolidated Balance Sheets. The effect of
transaction gains and losses is reported within “Other
income (expense)-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 and for loss carryforwards. 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 2% of net sales for all years
presented.
Recently
Adopted Accounting Pronouncements
In January 2010, the FASB issued ASU
2010-06,
“Fair Value Measurements and Disclosures (Topic 820).”
This Update provides amendments to Subtopic
820-10
and
related guidance within GAAP to require disclosure of the
transfers in and out of Levels 1 and 2 and a schedule for
Level 3 that separately identifies purchases, sales,
issuances and settlements and requires more detailed disclosures
regarding valuation techniques and inputs. The new disclosures
and clarifications of existing disclosures were effective for
the Company’s fiscal year 2010, except for the disclosures
about purchases, sales, issuances and settlements in the roll
forward of activity in Level 3 fair value measurements,
which will be effective for the Company’s fiscal year 2011.
See Note 7 for disclosures associated with the adoption of
this standard that were effective in 2010.
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,
32
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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. | Restructuring |
The Company has recorded restructuring expenses 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 expenses 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 related restructuring
accruals are included in Accrued expenses in our Consolidated
Balance Sheets.
During the year ended December 31, 2010, the Company
recorded an additional $11.1 million of pre-tax
restructuring expenses related to our 2009 restructuring
initiative for employee severance related to employee reductions
across various functional areas as well as facility closures
resulting from the Company’s cost savings initiatives. In
2009, the Company recorded pre-tax restructuring expenses
totaling $12.1 million related to this same initiative. The
2009 initiative included severance benefits for approximately
700 employees.
Pre-tax restructuring expenses, by segment, for the year ended
December 31, 2010, were as follows:
|
Severance
|
||||||||||||
| Costs | Exit Costs | Total | ||||||||||
| (In thousands) | ||||||||||||
|
Fluid & Metering Technologies
|
$ | 2,630 | $ | 320 | $ | 2,950 | ||||||
|
Health & Science Technologies
|
3,511 | 1,650 | 5,161 | |||||||||
|
Dispensing Equipment
|
641 | — | 641 | |||||||||
|
Fire & Safety/Diversified Products
|
589 | — | 589 | |||||||||
|
Corporate/Other
|
1,754 | — | 1,754 | |||||||||
|
Total restructuring costs
|
$ | 9,125 | $ | 1,970 | $ | 11,095 | ||||||
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 | ||||||
33
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Restructuring accruals of $3.5 million and
$6.9 million at December 31, 2010 and
December 31, 2009, respectively, are reflected in Accrued
expenses in our Consolidated Balance Sheets as follows:
|
2009
|
2008
|
|||||||||||
| Initiatives | Initiatives | Total | ||||||||||
| (In thousands) | ||||||||||||
|
BALANCE AT JANUARY 1, 2009
|
$ | — | $ | 9,263 | $ | 9,263 | ||||||
|
Restructuring costs
|
11,251 | 828 | 12,079 | |||||||||
|
Acquisition related
|
3,927 | — | 3,927 | |||||||||
|
Payments/utilization
|
(8,300 | ) | (10,091 | ) | (18,391 | ) | ||||||
|
BALANCE AT DECEMBER 31, 2009
|
6,878 | — | 6,878 | |||||||||
|
Restructuring costs
|
11,095 | — | 11,095 | |||||||||
|
Payments/utilization
|
(14,430 | ) | — | (14,430 | ) | |||||||
|
BALANCE AT DECEMBER 31, 2010
|
$ | 3,543 | $ | — | $ | 3,543 | ||||||
| 3. | Balance Sheet Components |
The components of certain balance sheet accounts at
December 31, 2010 and 2009 were as follows:
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
RECEIVABLES
|
||||||||
|
Customers
|
$ | 212,899 | $ | 185,926 | ||||
|
Other
|
5,976 | 3,412 | ||||||
|
Total
|
218,875 | 189,338 | ||||||
|
Less allowance for doubtful accounts
|
5,322 | 6,160 | ||||||
|
Total receivables — net
|
$ | 213,553 | $ | 183,178 | ||||
|
INVENTORIES
|
||||||||
|
Raw materials and components parts
|
$ | 141,316 | $ | 113,777 | ||||
|
Work in process
|
24,757 | 20,669 | ||||||
|
Finished goods
|
51,747 | 43,626 | ||||||
|
Total
|
217,820 | 178,072 | ||||||
|
Less inventory reserves
|
21,274 | 18,609 | ||||||
|
Total
inventories-net
|
$ | 196,546 | $ | 159,463 | ||||
|
PROPERTY, PLANT AND EQUIPMENT
|
||||||||
|
Land and improvements
|
$ | 23,956 | $ | 19,776 | ||||
|
Buildings and improvements
|
127,272 | 125,735 | ||||||
|
Machinery and equipment
|
253,193 | 235,219 | ||||||
|
Office and transportation equipment
|
95,141 | 91,706 | ||||||
|
Engineering drawings
|
1,456 | 1,869 | ||||||
|
Construction in progress
|
7,003 | 9,360 | ||||||
|
Total
|
508,021 | 483,665 | ||||||
|
Less accumulated depreciation and amortization
|
319,459 | 305,382 | ||||||
|
Total property, plant and equipment — net
|
$ | 188,562 | $ | 178,283 | ||||
34
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
ACCRUED EXPENSES
|
||||||||
|
Payroll and related items
|
$ | 46,937 | $ | 39,315 | ||||
|
Management incentive compensation
|
19,985 | 12,157 | ||||||
|
Income taxes payable
|
6,126 | 3,757 | ||||||
|
Deferred income taxes
|
723 | 56 | ||||||
|
Insurance
|
5,544 | 4,375 | ||||||
|
Warranty
|
3,831 | 4,383 | ||||||
|
Deferred revenue
|
7,172 | 4,480 | ||||||
|
Restructuring
|
3,543 | 6,878 | ||||||
|
Interest rate exchange agreement
|
2,328 | — | ||||||
|
Liability for uncertain tax positions
|
1,647 | 313 | ||||||
|
Other
|
20,043 | 23,016 | ||||||
|
Total accrued expenses
|
$ | 117,879 | $ | 98,730 | ||||
|
OTHER NONCURRENT LIABILITIES
|
||||||||
|
Pension and retiree medical obligations
|
$ | 74,559 | $ | 67,426 | ||||
|
Liability for uncertain tax positions
|
5,912 | 6,398 | ||||||
|
Interest rate exchange agreement
|
— | 10,497 | ||||||
|
Deferred revenue
|
4,225 | 5,353 | ||||||
|
Other
|
10,687 | 10,137 | ||||||
|
Total other noncurrent liabilities
|
$ | 95,383 | $ | 99,811 | ||||
| 4. | Goodwill and Intangible Assets |
The changes in the carrying amount of goodwill for the years
ended December 31, 2010 and 2009, by business segment, were
as follows:
|
Fluid &
|
Health &
|
Fire & Safety/
|
||||||||||||||||||
|
Metering
|
Science
|
Dispensing
|
Diversified
|
|||||||||||||||||
| Technologies | Technologies | Equipment | Products | Total | ||||||||||||||||
| (In thousands) | ||||||||||||||||||||
|
Goodwill
|
$ | 531,046 | $ | 391,654 | $ | 133,560 | $ | 147,552 | $ | 1,203,812 | ||||||||||
|
Accumulated impairment losses
|
(6,659 | ) | — | (30,090 | ) | — | (36,749 | ) | ||||||||||||
|
BALANCE AT JANUARY 1, 2009
|
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 | |||||||||||||||
|
Acquisitions (Note 12)
|
15,828 | 29,653 | — | — | 45,481 | |||||||||||||||
|
Foreign currency translation
|
(7,890 | ) | (768 | ) | (6,193 | ) | (4,074 | ) | (18,925 | ) | ||||||||||
|
BALANCE AT DECEMBER 31, 2010
|
$ | 541,917 | $ | 421,264 | $ | 98,780 | $ | 145,040 | $ | 1,207,001 | ||||||||||
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
35
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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, 2010,
the Company’s annual impairment assessment date. In 2010,
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, 2010.
The following table provides the gross carrying value and
accumulated amortization for each major class of intangible
asset at December 31, 2010 and 2009:
| At December 31, 2010 | At December 31, 2009 | |||||||||||||||||||||||||||
|
Gross
|
Weighted
|
Gross
|
||||||||||||||||||||||||||
|
Carrying
|
Accumulated
|
Average
|
Carrying
|
Accumulated
|
||||||||||||||||||||||||
| Amount | Amortization | Net | Life | Amount | Amortization | Net | ||||||||||||||||||||||
|
Amortizable intangible assets:
|
||||||||||||||||||||||||||||
|
Patents
|
$ | 9,906 | $ | (5,052 | ) | $ | 4,854 | 11 | $ | 9,914 | $ | (4,289 | ) | $ | 5,625 | |||||||||||||
|
Trade names
|
69,043 | (13,769 | ) | 55,274 | 15 | 63,589 | (10,144 | ) | 53,445 | |||||||||||||||||||
|
Customer relationships
|
169,065 | (47,686 | ) | 121,379 | 11 | 157,890 | (32,422 | ) | 125,468 | |||||||||||||||||||
|
Non-compete agreements
|
4,087 | (3,501 | ) | 586 | 4 | 4,268 | (3,356 | ) | 912 | |||||||||||||||||||
|
Unpatented technology
|
43,206 | (9,407 | ) | 33,799 | 14 | 36,047 | (6,240 | ) | 29,807 | |||||||||||||||||||
|
Other
|
5,957 | (2,557 | ) | 3,400 | 10 | 6,236 | (2,239 | ) | 3,997 | |||||||||||||||||||
|
Total amortizable intangible assets
|
301,264 | (81,972 | ) | 219,292 | 277,944 | (58,690 | ) | 219,254 | ||||||||||||||||||||
|
Banjo trade name
|
62,100 | — | 62,100 | 62,100 | — | 62,100 | ||||||||||||||||||||||
| $ | 363,364 | $ | (81,972 | ) | $ | 281,392 | $ | 340,044 | $ | (58,690 | ) | $ | 281,354 | |||||||||||||||
The Banjo trade name is an indefinite lived intangible asset
which is tested for impairment on an annual basis on
October 31. Amortization of intangible assets was
$25.7 million, $24.5 million and $17.6 million in
2010, 2009 and 2008, respectively. Amortization expense for each
of the next five years is estimated to be approximately
$27.0 million annually.
| 5. | Borrowings |
Borrowings at December 31, 2010 and 2009 consisted of the
following:
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Credit Facility
|
$ | 27,842 | $ | 298,732 | ||||
|
Term Loan
|
90,000 | 95,000 | ||||||
|
2.58% Senior Euro Notes
|
107,341 | — | ||||||
|
4.5% Senior Notes
|
298,427 | — | ||||||
|
Other borrowings
|
4,285 | 6,368 | ||||||
|
Total borrowings
|
527,895 | 400,100 | ||||||
|
Less current portion
|
119,445 | 8,346 | ||||||
|
Total long-term borrowings
|
$ | 408,450 | $ | 391,754 | ||||
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
36
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Company to designate certain foreign subsidiaries as designated
borrowers. Upon approval from the lenders, the designated
borrowers were 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. On March 16, 2010, IDEX UK Ltd. (“IDEX
UK”) was also approved by the lenders as a designated
borrower which allowed them to receive loans under the Credit
Facility. FME had no borrowings under the Credit Facility as of
December 31, 2010, while $48.7 million was outstanding
as of December 31,2009. This balance was repaid with
proceeds from the €81.0 million 2.58% Senior Euro
Notes. IDEX UK’s borrowings included within short term
borrowings under the Credit Facility at December 31, 2010
were £18.0 million ($27.8 million). As the IDEX
UK’s borrowings under the Credit Facility are British Pound
denominated and the cash flows that will be used to make
payments of principal and interest are predominately generated
in British Pound, the Company does not anticipate any
significant foreign exchange gains or losses in servicing this
debt.
At December 31, 2010 there was $27.8 million
outstanding under the Credit Facility. The net available
borrowing under the Credit Facility as of December 31,
2010, was approximately $572.2 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 credit rating at December 31, 2010,
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.
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, 2010, there was $90.0 million
outstanding under the Term Loan 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 a repayment of
$7.5 million in April 2011, with the remaining balance due
on December 21, 2011. The Company currently maintains an
interest rate exchange agreement related to the Term Loan which
expires in December 2011. This interest rate exchange agreement
has a current notional amount of $90.0 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 June 9, 2010, the Company completed a private placement
of €81.0 million ($96.8 million) aggregate
principal amount of 2.58% Series 2010 Senior Euro Notes due
June 9, 2015 (“2.58% Senior Euro Notes”)
pursuant to a Master Note Purchase Agreement, dated June 9,
2010 (the “Purchase Agreement”). The Purchase
Agreement provides for the issuance of additional series of
notes in the future. The 2.58% Senior Euro Notes bear
interest at a rate of 2.58% per annum and will mature on
June 9, 2015. The 2.58% Senior Euro Notes are
unsecured obligations of the Company and rank pari passu in
right of payment with all of the Company’s other senior
debt. The Company may at any time prepay all or any portion of
the 2.58% Senior Euro Notes; provided that such portion is
greater than 5% of the aggregate principal amount of Notes then
outstanding under the Purchase Agreement. In the event of a
prepayment, the Company will pay an amount equal to par plus
accrued interest plus a make-whole premium. The Purchase
Agreement contains certain covenants that restrict the
Company’s ability to, among other things, transfer or sell
assets, create liens and engage in certain mergers or
consolidations. In addition, the Company must comply with a
leverage ratio and interest coverage ratio as set forth in the
Purchase Agreement. The Purchase Agreement provides for
customary events of default. In the case of an event of default
arising from specified events of bankruptcy or insolvency, all
outstanding 2.58% Senior Euro Notes will become due and
payable immediately without further action or notice. In the
case of payment events of defaults, any holder of the
2.58% Senior Euro
37
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Notes affected thereby may declare all the 2.58% Senior
Euro Notes held by it due and payable immediately. In the case
of any other event of default, a majority of the holders of the
2.58% Senior Euro Notes may declare all the
2.58% Senior Euro Notes to be due and payable immediately.
The Company used a portion of the proceeds from the private
placement to pay down existing debt outstanding under the Credit
Facility that had previously been denominated in Euros, with the
remainder being available for ongoing business activities.
On December 6, 2010, the Company completed a public
offering of $300.0 million 4.5% Notes due
December 15, 2020 (“4.5% Senior Notes”). The
net proceeds from the offering of approximately
$295.7 million, after deducting the $1.6 million
issuance discount, the $1.9 million underwriting commission
and estimated offering expenses of approximately
$0.8 million, was used to repay $250.0 million of
outstanding indebtedness under the Credit Facility. The balance
of the net proceeds will be used for general corporate purposes.
The 4.5% Senior Notes will bear interest at a rate of 4.5%
per annum, which is payable semi-annually in arrears each June
15 and December 15, beginning June 15, 2011. The
Company may redeem all or part of the 4.5% Senior Notes at
any time prior to maturity at the redemption prices set forth in
the Note Indenture (“Indenture”) governing the
4.5% Senior Notes. The Company may issue additional debt
from time to time pursuant to the Indenture. The Indenture and
4.5% Senior Notes contain covenants that limit the
Company’s ability to, among other things, incur certain
liens securing indebtedness, engage in certain sale-leaseback
transactions, and enter into certain consolidations, mergers,
conveyances, transfers or leases of all or substantially all the
Company’s assets. The terms of the 4.5% Senior Notes
also require the Company to make an offer to repurchase
4.5% Senior Notes upon a change of control triggering event
(as defined in the Indenture) at a price equal to 101% of their
principal amount plus accrued and unpaid interest if any.
On April 15, 2010, the Company entered into a forward
starting interest rate contract with a notional amount of
$300.0 million with a settlement date in December 2010.
This contract was entered into in anticipation of the issuance
of the $300.0 million 4.5% Senior Notes and was
designed to lock in the market interest rate as of
April 15, 2010. The Company settled this interest rate
contract in December 2010, resulting in a $31.0 million
payment. The $31.0 million will be amortized into interest
expense over the 10 year term of the 4.5% Senior Notes
yielding an effective interest rate of 5.8%.
Other borrowings of $4.3 million at December 31, 2010
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 1.0% to 7.28% per annum.
There are two key financial covenants that the Company is
required to maintain in connection with the Credit Facility,
Term Loan, and 2.58% Senior Euro Notes. There are no
financial covenants relating to the 4.5% Senior Notes. The
most restrictive financial covenants under these debt
instruments require a minimum interest coverage ratio (operating
cash flow to interest) of 3.0 to 1 and a maximum leverage ratio
(outstanding debt to operating cash flow) of 3.25 to 1. At
December 31, 2010, the Company was in compliance with both
of these financial covenants.
Total borrowings at December 31, 2010 have scheduled
maturities as follows (in thousands):
|
2011
|
$ | 119,445 | ||
|
2012
|
472 | |||
|
2013
|
338 | |||
|
2014
|
295 | |||
|
2015
|
107,647 | |||
|
Thereafter
|
299,698 | |||
|
Total borrowings
|
$ | 527,895 | ||
38
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 6. | 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 (loss) 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, 2010, the Company had one interest rate
exchange agreement. The interest rate exchange agreement,
expiring in December 2011, with a current notional amount of
$90.0 million, effectively converted $100.0 million of
floating-rate debt into fixed-rate debt at an interest rate of
4.00%. The fixed rate consists of the fixed rate on the interest
rate exchange agreements and the Company’s current margin
of 80 basis points on the Term Loan.
Expiring in January 2011, the interest rate exchange agreement
related to the Credit Facility was settled in December 2010. The
interest rate exchange agreement effectively converted
$250.0 million of floating-rate debt into fixed-rate debt
at an interest rate of 3.25%.
Based on interest rates at December 31, 2010, approximately
$5.9 million of the amount included in accumulated other
comprehensive income (loss) in shareholders’ equity at
December 31, 2010 will be recognized to net income over the
next 12 months as the underlying hedged transactions are
realized. The $5.9 million is comprised of
$2.3 million from the interest rate exchange agreement and
$3.6 million from the forward starting interest rate
contract.
At December 31, 2010, the Company had foreign currency
exchange contracts with an aggregate notional amount of
$2.5 million to manage its exposure to fluctuations in
foreign currency exchange rates. The change in fair market value
of these contracts for the twelve months ended December 31,
2010 was immaterial.
The following table sets forth the fair value amounts of
derivative instruments held by the Company as of
December 31, 2010 and 2009:
| Fair Value-Assets (Liabilities) | ||||||||||
|
December 31,
|
December 31,
|
Balance Sheet
|
||||||||
| 2010 | 2009 | Caption | ||||||||
| (In thousands) | ||||||||||
|
Interest rate exchange agreement
|
$ | (2,328 | ) | $ | — | Accrued expenses | ||||
|
Interest rate exchange agreement
|
— | (10,497 | ) | Other noncurrent liabilities | ||||||
|
Foreign exchange contracts
|
176 | — | Other current assets | |||||||
39
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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, 2010 and
2009:
|
Gain (Loss) Recognized in
|
(Expense)
|
|||||||||||||||||
|
Other Comprehensive
|
and Gain (Loss)
|
|||||||||||||||||
| Income | Reclassified into Income |
Income
|
||||||||||||||||
| Twelve Months Ended December 31, |
Statement
|
|||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | Caption | ||||||||||||||
| (In thousands) | ||||||||||||||||||
|
Interest rate agreements
|
$ | (31,792 | ) | $ | (8,509 | ) | $ | (8,805 | ) | $ | (8,111 | ) | Interest expense | |||||
|
Interest rate agreements
|
— | — | (440 | ) | — | Miscellaneous loss | ||||||||||||
|
Foreign exchange contracts
|
126 | 1,187 | 126 | 899 | Sales | |||||||||||||
| 7. | 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 (liabilities) at fair value on a
recurring basis in the balance sheet at December 31, 2010
and 2009:
| Basis of Fair Value Measurements | ||||||||||||||||
|
Balance at
|
||||||||||||||||
|
December 31,
|
||||||||||||||||
| 2010 | Level 1 | Level 2 | Level 3 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Money market investments
|
$ | 96,730 | $ | 96,730 | — | — | ||||||||||
|
Interest rate agreements
|
$ | (2,328 | ) | — | $ | (2,328 | ) | — | ||||||||
|
Foreign currency contracts
|
$ | 176 | — | $ | 176 | — | ||||||||||
|
Balance at
|
||||||||||||||||
|
December 31,
|
||||||||||||||||
| 2009 | Level 1 | Level 2 | Level 3 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Money market investment
|
$ | 9,186 | $ | 9,186 | — | — | ||||||||||
|
Interest rate agreements
|
$ | (10,497 | ) | — | $ | (10,497 | ) | — | ||||||||
There were no transfers of assets or liabilities between
Level 1 and Level 2 in 2010 or 2009.
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
40
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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, 2010, the fair value of our
Credit Facility, Term Loan, 2.58% Senior Euro Notes and
4.5% Senior Notes, based on quoted market prices and
current market rates for debt with similar credit risk and
maturity, was approximately $515.5 million compared to the
carrying value of $523.6 million.
| 8. | Commitments and Contingencies |
The Company leases certain office facilities, warehouses and
data processing equipment under operating leases. Rental expense
totaled $13.9 million, $12.2 million and
$12.6 million for the years ended December 31, 2010,
2009, and 2008, respectively.
The aggregate future minimum lease payments for operating and
capital leases as of December 31, 2010 were as follows:
| Operating | Capital | |||||||
| (In thousands) | ||||||||
|
2011
|
$ | 9,679 | $ | 793 | ||||
|
2012
|
7,371 | 567 | ||||||
|
2013
|
5,297 | 414 | ||||||
|
2014
|
3,339 | 359 | ||||||
|
2015
|
2,718 | 359 | ||||||
|
2016 and thereafter
|
6,917 | 1,316 | ||||||
Warranty costs are provided for at time of sale. The warranty
provision is based on historical costs and adjusted for specific
known claims. A roll forward of the warranty reserve is as
follows:
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Beginning balance January 1
|
$ | 4,383 | $ | 3,751 | ||||
|
Provision for warranties
|
4,331 | 4,507 | ||||||
|
Claim settlements
|
(4,665 | ) | (3,918 | ) | ||||
|
Other adjustments
|
(218 | ) | 43 | |||||
|
Ending balance December 31
|
$ | 3,831 | $ | 4,383 | ||||
41
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The Company is party to various 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.
| 9. | Common and Preferred Stock |
On April 21, 2008, the Board of Directors authorized the
repurchase of up to $125.0 million of 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 2010 and 2009.
At December 31, 2010 and 2009, the Company had
150 million shares of authorized common stock, with a par
value of $.01 per share and 5 million shares of authorized
preferred stock with a par value of $.01 per share. No preferred
stock was issued as of December 31, 2010 and 2009.
| 10. | Income Taxes |
Pretax income for the years ended December 31, 2010, 2009
and 2008 was taxed in the following jurisdictions:
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Domestic
|
$ | 161,573 | $ | 114,389 | $ | 120,962 | ||||||
|
Foreign
|
70,301 | 54,438 | 71,265 | |||||||||
|
Total
|
$ | 231,874 | $ | 168,827 | $ | 192,227 | ||||||
The provision (benefit) for income taxes for the years ended
December 31, 2010, 2009, and 2008, was as follows:
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Current
|
||||||||||||
|
U.S.
|
$ | 59,384 | $ | 34,921 | $ | 47,594 | ||||||
|
State and local
|
4,548 | 2,704 | 6,542 | |||||||||
|
Foreign
|
18,178 | 16,730 | 21,882 | |||||||||
|
Total current
|
82,110 | 54,355 | 76,018 | |||||||||
|
Deferred
|
||||||||||||
|
U.S.
|
(6,550 | ) | 1,658 | (10,099 | ) | |||||||
|
State and local
|
(293 | ) | 110 | (503 | ) | |||||||
|
Foreign
|
(493 | ) | (687 | ) | (215 | ) | ||||||
|
Total deferred
|
(7,336 | ) | 1,081 | (10,817 | ) | |||||||
|
Total provision for income taxes
|
$ | 74,774 | $ | 55,436 | $ | 65,201 | ||||||
42
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Deferred tax assets (liabilities) related to the following at
December 31, 2010 and 2009 were:
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Employee and retiree benefit plans
|
$ | 17,764 | $ | 24,075 | ||||
|
Depreciation and amortization
|
(179,889 | ) | (167,345 | ) | ||||
|
Inventories
|
6,934 | 7,240 | ||||||
|
Allowances and accruals
|
16,690 | 7,589 | ||||||
|
Interest rate exchange agreement
|
11,995 | 3,783 | ||||||
|
Other
|
1,617 | (6,416 | ) | |||||
|
Total
|
$ | (124,889 | ) | $ | (131,074 | ) | ||
The deferred tax assets and liabilities recognized in the
Company’s Consolidated Balance Sheets as of
December 31, 2010 and 2009 were:
| 2010 | 2009 | |||||||
| (In thousands) | ||||||||
|
Deferred tax asset — other current assets
|
$ | 23,829 | $ | 17,615 | ||||
|
Deferred tax asset — other noncurrent assets
|
539 | 173 | ||||||
|
Total deferred tax assets
|
24,368 | 17,788 | ||||||
|
Deferred tax liability — accrued expenses
|
(723 | ) | (56 | ) | ||||
|
Noncurrent deferred tax liability — deferred income
taxes
|
(148,534 | ) | (148,806 | ) | ||||
|
Total deferred tax liabilities
|
(149,257 | ) | (148,862 | ) | ||||
|
Net deferred tax liabilities
|
$ | (124,889 | ) | $ | (131,074 | ) | ||
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, 2010, 2009, and 2008 are shown in the
following table:
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Pretax income
|
$ | 231,874 | $ | 168,827 | $ | 192,227 | ||||||
|
Provision for income taxes:
|
||||||||||||
|
Computed amount at statutory rate of 35%
|
$ | 81,156 | $ | 59,089 | $ | 67,280 | ||||||
|
State and local income tax (net of federal tax benefit)
|
2,766 | 1,829 | 3,925 | |||||||||
|
Taxes on
non-U.S.
earnings-net
of foreign tax credits
|
(8,545 | ) | (4,117 | ) | (5,191 | ) | ||||||
|
U.S. business tax credits
|
(935 | ) | (754 | ) | (857 | ) | ||||||
|
Domestic activities production deduction
|
(4,720 | ) | (1,925 | ) | (2,291 | ) | ||||||
|
Other
|
5,052 | 1,314 | 2,335 | |||||||||
|
Total provision for income taxes
|
$ | 74,774 | $ | 55,436 | $ | 65,201 | ||||||
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.
43
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
A reconciliation of the beginning and ending amount of
unrecognized tax benefits for the years ended December 31,
2010, 2009 and 2008 are shown in the following table:
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Unrecognized tax benefits beginning balance
|
$ | 5,285 | $ | 4,009 | $ | 5,938 | ||||||
|
Gross increases for tax positions of prior years
|
3,049 | 2,138 | 2,571 | |||||||||
|
Gross decreases for tax positions of prior years
|
(675 | ) | — | (1,836 | ) | |||||||
|
Settlements
|
(517 | ) | (628 | ) | (993 | ) | ||||||
|
Lapse of statute of limitations
|
(702 | ) | (234 | ) | (1,671 | ) | ||||||
|
Unrecognized tax benefits ending balance
|
$ | 6,440 | $ | 5,285 | $ | 4,009 | ||||||
We recognize interest and penalties related to uncertain tax
positions in income tax expense. As of December 31, 2010,
2009 and 2008 we had approximately $0.8 million,
$0.9 million and $0.9 million, respectively, of
accrued interest related to uncertain tax positions. As of
December 31, 2010, 2009 and 2008 we had approximately
$0.4 million, $0.2 million and $0.2 million,
respectively, 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 $5.8 million,
$4.4 million and $3.1 million as of December 31,
2010, December 31, 2009 and December 31, 2008,
respectively. The tax years
2005-2009
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 $1.6 million.
The Company had loss carry forwards for U.S. federal and
non-U.S. purposes
at December 31, 2010 of $3.5 and $13.7 million
respectively, and as of December 31, 2009,
$2.2 million and $12.5 million, respectively. The
federal loss carry forwards are available for use against the
Company’s consolidated federal taxable income and expire
between 2023 and 2030. The entire balance of the
non-U.S. losses
is available to be carried forward, with $9.5 million of
these losses beginning to expire during the years 2012 through
2019. The remaining $4.2 million of such losses can be
carried forward indefinitely. At December 31, 2010 and
2009, the Company had a foreign capital loss carry forward of
approximately $1.3 million and $2.3 million
respectively. The foreign capital loss can be carried forward
indefinitely. At December 31, 2010 and 2009, the Company
has a valuation allowance against the deferred tax asset
attributable to the foreign capital loss of $0.4 million
and $0.6 million, respectively. At December 31, 2010
and 2009, the Company had state net operating loss carry
forwards of approximately $18.7 million and
$12.7 million, respectively. If unutilized, the state net
operating loss will expire between 2016 and 2029. At
December 31, 2010 and 2009, the Company recorded a
valuation allowance against the deferred tax asset attributable
to the state net operating loss of $0.4 million and
$0.2 million, respectively.
| 11. | 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; Chemical,
Food & Pharmaceuticals; and Water & Waste
Water. Reporting units in the Health & Science
Technologies Segment include IDEX Health & Science;
Semrock; PPE; Gast; and Micropump. The Dispensing Equipment
Segment is a reporting unit. 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 & wastewater. The Health & Science
Technologies Segment designs, produces and distributes a
44
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
wide range of precision fluidics and sealing 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 and paints 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 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.
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
NET SALES
|
||||||||||||
|
Fluid & Metering Technologies:
|
||||||||||||
|
External customers
|
$ | 729,233 | $ | 640,242 | $ | 696,641 | ||||||
|
Intersegment sales
|
712 | 866 | 1,061 | |||||||||
|
Total segment sales
|
729,945 | 641,108 | 697,702 | |||||||||
|
Health & Science Technologies:
|
||||||||||||
|
External customers
|
393,481 | 299,336 | 328,514 | |||||||||
|
Intersegment sales
|
3,717 | 4,993 | 3,077 | |||||||||
|
Total segment sales
|
397,198 | 304,329 | 331,591 | |||||||||
|
Dispensing Equipment:
|
||||||||||||
|
External customers
|
125,127 | 127,279 | 163,861 | |||||||||
|
Intersegment sales
|
193 | — | — | |||||||||
|
Total segment sales
|
125,320 | 127,279 | 163,861 | |||||||||
|
Fire & Safety/Diversified Products:
|
||||||||||||
|
External customers
|
265,232 | 262,804 | 300,455 | |||||||||
|
Intersegment sales
|
269 | 5 | 7 | |||||||||
|
Total segment sales
|
265,501 | 262,809 | 300,462 | |||||||||
|
Intersegment eliminations
|
(4,891 | ) | (5,864 | ) | (4,145 | ) | ||||||
|
Total net sales
|
$ | 1,513,073 | $ | 1,329,661 | $ | 1,489,471 | ||||||
|
OPERATING
INCOME
(1)
|
||||||||||||
|
Fluid & Metering Technologies
|
$ | 131,944 | $ | 100,289 | $ | 123,801 | ||||||
|
Health & Science Technologies
|
82,332 | 51,712 | 58,297 | |||||||||
|
Dispensing
Equipment
(2)
|
19,490 | 15,147 | (10,748 | ) | ||||||||
|
Fire & Safety/Diversified Products
|
62,844 | 59,884 | 74,310 | |||||||||
|
Corporate office and
other
(3)
|
(47,494 | ) | (42,178 | ) | (39,704 | ) | ||||||
|
Total operating income
|
$ | 249,116 | $ | 184,854 | $ | 205,956 | ||||||
45
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
ASSETS
|
||||||||||||
|
Fluid & Metering Technologies
|
$ | 1,111,085 | $ | 1,043,082 | $ | 1,070,348 | ||||||
|
Health & Science Technologies
|
648,400 | 567,096 | 594,459 | |||||||||
|
Dispensing Equipment
|
205,540 | 164,979 | 179,800 | |||||||||
|
Fire & Safety/Diversified Products
|
278,567 | 285,893 | 286,482 | |||||||||
|
Corporate office and
other
(3)
|
138,103 | 37,107 | 20,711 | |||||||||
|
Total assets
|
$ | 2,381,695 | $ | 2,098,157 | $ | 2,151,800 | ||||||
|
DEPRECIATION AND
AMORTIZATION
(4)
|
||||||||||||
|
Fluid & Metering Technologies
|
$ | 33,134 | $ | 32,584 | $ | 26,276 | ||||||
|
Health & Science Technologies
|
16,012 | 14,293 | 11,806 | |||||||||
|
Dispensing Equipment
|
3,753 | 3,124 | 3,986 | |||||||||
|
Fire & Safety/Diversified Products
|
4,885 | 5,328 | 5,288 | |||||||||
|
Corporate office and other
|
324 | 1,017 | 1,243 | |||||||||
|
Total depreciation and amortization
|
$ | 58,108 | $ | 56,346 | $ | 48,599 | ||||||
|
CAPITAL EXPENDITURES
|
||||||||||||
|
Fluid & Metering Technologies
|
$ | 17,308 | $ | 12,867 | $ | 13,859 | ||||||
|
Health & Science Technologies
|
7,516 | 6,365 | 5,365 | |||||||||
|
Dispensing Equipment
|
1,129 | 864 | 2,528 | |||||||||
|
Fire & Safety/Diversified Products
|
3,513 | 3,686 | 4,743 | |||||||||
|
Corporate office and other
|
3,303 | 1,743 | 1,863 | |||||||||
|
Total capital expenditures
|
$ | 32,769 | $ | 25,525 | $ | 28,358 | ||||||
| (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. |
46
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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, 2010,
2009 and 2008 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.
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
NET SALES
|
||||||||||||
|
U.S.
|
$ | 766,067 | $ | 698,822 | $ | 793,872 | ||||||
|
Europe
|
402,056 | 361,774 | 386,864 | |||||||||
|
Other countries
|
344,950 | 269,065 | 308,735 | |||||||||
|
Total net sales
|
$ | 1,513,073 | $ | 1,329,661 | $ | 1,489,471 | ||||||
|
LONG-LIVED ASSETS — PROPERTY, PLANT AND EQUIPMENT
|
||||||||||||
|
U.S.
|
$ | 108,951 | $ | 105,165 | $ | 111,252 | ||||||
|
Europe
|
68,756 | 61,766 | 65,208 | |||||||||
|
Other countries
|
10,855 | 11,352 | 9,823 | |||||||||
|
Total long-lived assets — net
|
$ | 188,562 | $ | 178,283 | $ | 186,283 | ||||||
| 12. | Acquisitions |
All of the Company’s acquisitions have been accounted for
under ASC 805, Business Combinations. Accordingly, the
accounts of the acquired companies, after adjustments to reflect
fair values assigned to assets and liabilities, have been
included in the consolidated financial statements from their
respective dates of acquisition.
2010
Acquisitions
On April 15, 2010, the Company acquired the stock of PPE,
previously referred to as Seals, Ltd, a leading provider of
proprietary high performance seals and advanced sealing
solutions for a diverse range of global industries, including
analytical instrumentation, semiconductor/solar and process
technologies. PPE consists of the Polymer Engineering and
Perlast divisions. PPE’ Polymer Engineering division
focuses on sealing solutions for hazardous duty applications.
The Perlast division produces highly engineered seals for
analytical instrumentation, pharmaceutical, electronics, and
food applications. Headquartered in Blackburn, England, PPE
operates as part of the Health & Science Technologies
Segment with annual revenues of approximately $32.0 million
(£21 million). The Company acquired PPE for an
aggregate purchase price of $54.0 million, consisting of
$51.3 million in cash and the assumption of approximately
$2.7 million of debt related items. The cash payment was
financed with borrowings under the Company’s Credit
Facility. Goodwill and intangible assets recognized as part of
this transaction were $29.7 million and $17.2 million,
respectively. The $29.7 million of goodwill is not
deductible for tax purposes.
On July 21, 2010, the Company acquired the stock of OBL,
S.r.l. (“OBL”), a leading provider of mechanical and
hydraulic diaphragm pumps. OBL provides polymer blending systems
and related accessories for a diverse range of global
industries, including water, waste water, oil and gas,
petro-chemical and power generation markets. Headquartered in
Milan, Italy, with annual revenues of approximately
$10.9 million (€8.5 million), OBL operates within
IDEX’s Fluid & Metering Technologies Segment as
part of the Water & Waste Water reporting unit. The
Company acquired OBL for cash consideration of
$15.4 million. Goodwill and intangible assets recognized as
part of this transaction were $7.7 million and
$4.0 million, respectively. The $7.7 million of
goodwill is not deductible for tax purposes.
47
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
On September 17, 2010, the Company acquired the assets of
Periflo, a leading provider of peristaltic pumps for the
industrial and municipal water & wastewater markets.
Periflo offers a complete family of peristaltic hose pumps for a
wide variety of applications. Headquartered in Loveland, Ohio,
with annual revenues of approximately $3.5 million, Periflo
operates within IDEX’s Fluid & Metering
Technologies Segment as part of the Water & Waste
Water reporting unit. The Company acquired Periflo for cash
consideration of $4.3 million. Goodwill and intangible
assets recognized as part of this transaction were
$2.5 million and $0.7 million, respectively. The
$2.5 million of goodwill is deductible for tax purposes.
On November 1, 2010, the Company acquired the stock of
Fitzpatrick, a global leader in the design and manufacture of
process technologies for the pharmaceutical, food and personal
care markets. Fitzpatrick designs and manufactures customized
size reduction, roll compaction and drying systems to support
their customers’ product development and manufacturing
processes. Fitzpatrick expands the capability of IDEX’s
Quadro Engineering business by adding coarse particle sizing,
roll compaction and drying systems to Quadro’s fine
particle processing. Headquartered in Elmhurst, Illinois,
Fitzpatrick has annual revenues of approximately
$22.0 million. Fitzpatrick operates in the Chemical
Food & Pharmaceutical reporting unit within the
Fluid & Metering Technologies Segment. The Company
acquired Fitzpatrick for cash consideration of approximately
$20.3 million. Goodwill and intangible assets recognized as
part of this transaction were $5.6 million and
$8.0 million, respectively. The $5.6 million of
goodwill is not deductible for tax purposes.
The purchase price for 2010 acquisitions has been allocated to
the assets acquired and liabilities assumed based on estimated
fair values at the date of the acquisition. For certain
acquisitions that occurred in 2010, the Company is in the
process of obtaining or finalizing appraisals of tangible and
intangible assets and it is continuing to evaluate the initial
purchase price allocations, as of the acquisition date, which
will be adjusted as additional information relative to the fair
values of the assets and liabilities of the businesses become
known. Accordingly, management has used their best estimate in
the initial purchase price allocation as of the date of these
financial statements.
The allocation of the acquisition costs to the assets acquired
and liabilities assumed, based on their estimated fair values
were as follows:
| 2010 | ||||
| In thousands | ||||
|
Current assets, net of cash acquired
|
$ | 25,231 | ||
|
Property, plant and equipment
|
18,344 | |||
|
Goodwill
|
45,481 | |||
|
Intangible assets
|
29,861 | |||
|
Other assets
|
2,950 | |||
|
Total assets acquired
|
121,867 | |||
|
Total liabilities assumed
|
(30,581 | ) | ||
|
Net assets acquired
|
$ | 91,286 | ||
Acquired intangible assets consist of trademarks, customer
relationships, unpatented technology and non-compete agreements,
which are being amortized over a life of 2-15 years. The
goodwill recorded for the acquisitions reflects the strategic
fit and revenue and earnings growth potential of these
businesses.
The Company incurred $4.0 million of acquisition related
transaction costs in 2010, relating to completed, pending and
potential transactions that ultimately were not completed.
2008
Acquisitions
On January 1, 2008, the Company acquired the stock of ADS,
a provider of metering technology and flow monitoring services
for water & wastewater markets. ADS is headquartered
in Huntsville, Alabama, with regional
48
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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 cash
consideration of $156.1 million. Approximately
$155.0 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 $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 Chemical, Food & Pharmaceutical
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. 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 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 & 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
Company’s Health & Science Technologies Segment.
The Company acquired Semrock for cash consideration of
$60.6 million. 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.
49
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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 IH&S reporting unit within the
Company’s Health & Science Technologies Segment.
The Company acquired Innovadyne for cash consideration of
$3.3 million, which 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 $1.2 million, respectively. The $1.4 million of
goodwill is not deductible for tax purposes.
The allocation of the acquisition costs to the assets acquired
and liabilities assumed, based on their estimated fair values
were as follows:
| 2008 | ||||
| In thousands | ||||
|
Current assets, net of cash acquired
|
$ | 81,969 | ||
|
Property, plant and equipment
|
25,558 | |||
|
Goodwill
|
244,519 | |||
|
Intangible assets
|
132,791 | |||
|
Other assets
|
800 | |||
|
Total assets acquired
|
485,637 | |||
|
Total liabilities assumed
|
(94,266 | ) | ||
|
Net assets acquired
|
$ | 391,371 | ||
Acquired intangible assets consist of patents, trademarks,
customer relationships, unpatented technology and non-compete
agreements, which are being amortized over a life of
2-17 years. The 2008 acquisitions resulted in the
recognition of goodwill totaling $244.5 million, of which
$20.0 million is deductible for tax purposes. The goodwill
recorded for the acquisitions reflects the strategic fit and
revenue and earnings growth potential of these businesses.
| 13. | 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,
2010 totals 10.6 million, of which 4.3 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
264,915, 273,000 and 583,000 of unvested shares as compensation
to key employees in 2010, 2009 and 2008, 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).
All unvested shares carry dividend and voting rights, and the
sale of the shares is restricted prior to the date of vesting.
50
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
|
Weighted average fair value of grants
|
$ | 9.56 | $ | 5.32 | $ | 8.81 | ||||||
|
Dividend yield
|
1.51 | % | 2.35 | % | 1.46 | % | ||||||
|
Volatility
|
33.43 | % | 32.53 | % | 31.51 | % | ||||||
|
Risk-free interest rate
|
0.32 | % - 5.67% | 0.69 | % - 4.63% | 1.68 | % - 5.33% | ||||||
|
Expected life (in years)
|
5.98 | 5.85 | 5.28 | |||||||||
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, 2010, 2009 and 2008 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, 2010, 2009 and 2008, 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, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Cost of goods sold
|
$ | 804 | $ | 945 | $ | 1,043 | ||||||
|
Selling, general and administrative expenses
|
6,923 | 6,288 | 7,175 | |||||||||
|
Total expense before income taxes
|
7,727 | 7,233 | 8,218 | |||||||||
|
Income tax benefit
|
(2,450 | ) | (2,322 | ) | (2,585 | ) | ||||||
|
Total expense after income taxes
|
$ | 5,277 | $ | 4,911 | $ | 5,633 | ||||||
51
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Total compensation cost for unvested shares is as follows:
| Years Ended December 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Cost of goods sold
|
$ | 311 | $ | 248 | $ | 79 | ||||||
|
Selling, general and administrative expenses
|
8,382 | 8,229 | 6,717 | |||||||||
|
Restructuring expenses
|
938 | — | — | |||||||||
|
Total expense before income taxes
|
9,631 | 8,477 | 6,796 | |||||||||
|
Income tax benefit
|
(2,097 | ) | (1,444 | ) | (1,108 | ) | ||||||
|
Total expense after income taxes
|
$ | 7,534 | $ | 7,033 | $ | 5,688 | ||||||
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, 2010, 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, 2010, there was
$9.7 million of total unrecognized compensation cost
related to unvested shares that is expected to be recognized
over a weighted-average period of 1.0 years.
A summary of the Company’s stock option activity as of
December 31, 2010, and changes during the year ended
December 31, 2010 is presented in the following table:
|
Weighted
|
Weighted-Average
|
Aggregate
|
||||||||||||||
|
Average
|
Remaining
|
Intrinsic
|
||||||||||||||
| Stock Options | Shares | Price | Contractual Term | Value | ||||||||||||
|
Outstanding at January 1, 2010
|
5,793,028 | $ | 25.14 | 6.40 | $ | 40,557,217 | ||||||||||
|
Granted
|
947,275 | 31.85 | ||||||||||||||
|
Exercised
|
(956,256 | ) | 19.85 | |||||||||||||
|
Forfeited/Expired
|
(379,824 | ) | 30.97 | |||||||||||||
|
Outstanding at December 31, 2010
|
5,404,223 | $ | 26.85 | 6.29 | $ | 66,329,686 | ||||||||||
|
Vested and expected to vest at December 31, 2010
|
5,227,778 | $ | 26.81 | 6.21 | $ | 64,381,855 | ||||||||||
|
Exercisable at December 31, 2010
|
3,262,249 | $ | 26.02 | 4.97 | $ | 42,741,628 | ||||||||||
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 2010, 2009 and 2008, was
$14.4 million, $5.3 million and $10.4 million,
respectively. In 2010, 2009 and 2008, cash received from options
exercised was $18.1 million, $7.7 million and
$10.4 million, respectively, while the actual tax benefit
realized for the tax deductions from stock options exercised
totaled $5.2 million, $1.9 million and
$3.1 million, respectively.
52
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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, 2010, and changes during the year ending
December 31, 2010 is presented in the following table:
|
Weighted-Average
|
||||||||
|
Grant Date Fair
|
||||||||
| Unvested Shares | Shares | Value | ||||||
|
Nonvested at January 1, 2010
|
920,599 | $ | 29.58 | |||||
|
Granted
|
264,915 | 31.90 | ||||||
|
Vested
|
(173,703 | ) | 32.38 | |||||
|
Forfeited
|
(61,714 | ) | 27.89 | |||||
|
Nonvested at December 31, 2010
|
950,097 | 29.83 | ||||||
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.
| 14. | 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. The
Company employs the measurement date provisions of ASC 715,
“Compensation-Retirement Benefits”, which require the
measurement date of plan assets and liabilities to coincide with
the sponsor’s year end.
53
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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, 2010, and a statement of
the funded status at December 31 for both years.
| Pension Benefits | Other Benefits | |||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||
| U.S. | Non-U.S. | U.S. | Non-U.S. | |||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
CHANGE IN BENEFIT OBLIGATION
|
||||||||||||||||||||||||
|
Obligation at January 1
|
$ | 81,212 | $ | 39,342 | $ | 72,689 | $ | 36,811 | $ | 18,059 | $ | 21,767 | ||||||||||||
|
Service cost
|
1,665 | 719 | 1,551 | 824 | 528 | 468 | ||||||||||||||||||
|
Interest cost
|
4,525 | 2,148 | 4,375 | 2,122 | 1,008 | 1,018 | ||||||||||||||||||
|
Plan amendments
|
101 | 128 | — | — | (400 | ) | (2,932 | ) | ||||||||||||||||
|
Benefits paid
|
(3,567 | ) | (1,542 | ) | (4,233 | ) | (1,563 | ) | (842 | ) | (1,135 | ) | ||||||||||||
|
Actuarial (gain) loss
|
6,166 | 3,561 | 7,817 | (1,253 | ) | 1,598 | (1,418 | ) | ||||||||||||||||
|
Currency translation
|
— | (2,117 | ) | — | 1,845 | 117 | 291 | |||||||||||||||||
|
Curtailments/settlements
|
— | — | (987 | ) | — | — | — | |||||||||||||||||
|
Other
|
— | 6 | — | 556 | — | — | ||||||||||||||||||
|
Obligation at December 31
|
$ | 90,102 | $ | 42,245 | $ | 81,212 | $ | 39,342 | $ | 20,068 | $ | 18,059 | ||||||||||||
|
CHANGE IN PLAN ASSETS
|
||||||||||||||||||||||||
|
Fair value of plan assets at January 1
|
$ | 53,210 | $ | 15,376 | $ | 39,974 | $ | 11,975 | $ | — | $ | — | ||||||||||||
|
Actual return on plan assets
|
5,631 | 1,842 | 9,638 | 1,848 | — | — | ||||||||||||||||||
|
Employer contributions
|
2,873 | 1,765 | 8,818 | 1,812 | 842 | 1,135 | ||||||||||||||||||
|
Benefits paid
|
(3,567 | ) | (1,542 | ) | (4,233 | ) | (1,563 | ) | (842 | ) | (1,135 | ) | ||||||||||||
|
Currency translation
|
— | (381 | ) | — | 1,279 | — | — | |||||||||||||||||
|
Settlements
|
— | — | (987 | ) | — | — | — | |||||||||||||||||
|
Other
|
— | 340 | — | 25 | — | — | ||||||||||||||||||
|
Fair value of plan assets at December 31
|
$ | 58,147 | $ | 17,400 | $ | 53,210 | $ | 15,376 | $ | — | $ | — | ||||||||||||
|
Funded status at December 31
|
$ | (31,955 | ) | $ | (24,845 | ) | $ | (28,002 | ) | $ | (23,966 | ) | $ | (20,068 | ) | $ | (18,059 | ) | ||||||
|
COMPONENTS ON THE CONSOLIDATED BALANCE SHEETS
|
||||||||||||||||||||||||
|
Current liabilities
|
$ | (657 | ) | $ | (653 | ) | $ | (601 | ) | $ | (1,032 | ) | $ | (999 | ) | $ | (968 | ) | ||||||
|
Noncurrent liabilities
|
(31,298 | ) | (24,192 | ) | (27,401 | ) | (22,934 | ) | (19,069 | ) | (17,091 | ) | ||||||||||||
|
Net liability at December 31
|
$ | (31,955 | ) | $ | (24,845 | ) | $ | (28,002 | ) | $ | (23,966 | ) | $ | (20,068 | ) | $ | (18,059 | ) | ||||||
The accumulated benefit obligation for all defined benefit
pension plans was $126.4 million and $114.8 million at
December 31, 2010 and 2009, respectively.
The weighted average assumptions used in the measurement of the
Company’s benefit obligation at December 31, 2010 and
2009 were as follows:
| U.S. Plans | Non-U.S. Plans | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Discount rate
|
5.20 | % | 5.80 | % | 5.35 | % | 5.88 | % | ||||||||
|
Rate of compensation increase
|
3.90 | % | 3.89 | % | 3.37 | % | 3.35 | % | ||||||||
54
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The pretax amounts recognized in Accumulated other comprehensive
income (loss) as of December 31, 2010 and 2009 were as
follows:
| Pension Benefits | ||||||||||||||||||||||||
| 2010 | 2009 | Other Benefits | ||||||||||||||||||||||
| U.S. | Non-U.S. | U.S. | Non-U.S | 2010 | 2009 | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Prior service cost (credit)
|
$ | 597 | $ | 131 | $ | 735 | $ | 8 | $ | (3,044 | ) | $ | (2,966 | ) | ||||||||||
|
Net loss
|
38,813 | 7,629 | 38,043 | 5,466 | 2,313 | 661 | ||||||||||||||||||
|
Total
|
$ | 39,410 | $ | 7,760 | $ | 38,778 | $ | 5,474 | $ | (731 | ) | $ | (2,305 | ) | ||||||||||
The amounts in Accumulated other comprehensive income (loss) as
of December 31, 2010, that are expected to be recognized as
components of net periodic benefit cost during 2011 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)
|
$ | 178 | $ | 9 | $ | (346 | ) | $ | (159 | ) | ||||||
|
Net loss
|
4,146 | 415 | 190 | 4,751 | ||||||||||||
|
Total
|
$ | 4,324 | $ | 424 | $ | (156 | ) | $ | 4,592 | |||||||
The following tables provide the components of, and the weighted
average assumptions used to determine, the net periodic benefit
cost for the plans in 2010, 2009 and 2008:
| Pension Benefits | ||||||||||||||||||||||||
| 2010 | 2009 | 2008 | ||||||||||||||||||||||
| U.S. | Non-U.S. | U.S. | Non-U.S. | U.S. | Non-U.S. | |||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Service cost
|
$ | 1,665 | $ | 719 | $ | 1,551 | $ | 824 | $ | 1,765 | $ | 932 | ||||||||||||
|
Interest cost
|
4,525 | 2,148 | 4,375 | 2,122 | 4,484 | 1,901 | ||||||||||||||||||
|
Expected return on plan assets
|
(4,396 | ) | (945 | ) | (3,505 | ) | (780 | ) | (5,169 | ) | (1,017 | ) | ||||||||||||
|
Net amortization
|
4,401 | 302 | 5,299 | 370 | 2,244 | 381 | ||||||||||||||||||
|
Net periodic benefit cost
|
$ | 6,195 | $ | 2,224 | $ | 7,720 | $ | 2,536 | $ | 3,324 | $ | 2,197 | ||||||||||||
| Other Benefits | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
| (In thousands) | ||||||||||||
|
Service cost
|
$ | 528 | $ | 468 | $ | 607 | ||||||
|
Interest cost
|
1,008 | 1,018 | 1,328 | |||||||||
|
Net amortization
|
(370 | ) | (385 | ) | 137 | |||||||
|
Net periodic benefit cost
|
$ | 1,166 | $ | 1,101 | $ | 2,072 | ||||||
| U.S. Plans | Non-U.S. Plans | |||||||||||||||||||||||
| 2010 | 2009 | 2008 | 2010 | 2009 | 2008 | |||||||||||||||||||
|
Discount rate
|
5.80 | % | 6.30 | % | 6.40 | % | 5.88 | % | 5.73 | % | 5.48 | % | ||||||||||||
|
Expected return on plan assets
|
8.50 | % | 8.50 | % | 8.50 | % | 6.28 | % | 6.05 | % | 5.82 | % | ||||||||||||
|
Rate of compensation increase
|
3.89 | % | 4.00 | % | 4.00 | % | 3.35 | % | 3.17 | % | 3.92 | % | ||||||||||||
55
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following table provides pretax amounts recognized in
Accumulated other comprehensive income (loss) in 2010:
| Pension Benefits | ||||||||||||
|
Other
|
||||||||||||
| U.S. | Non-U.S. | Benefits | ||||||||||
| (In thousands) | ||||||||||||
|
Net loss in current year
|
$ | (4,931 | ) | $ | (2,663 | ) | $ | (1,598 | ) | |||
|
Prior service cost
|
(101 | ) | (128 | ) | 400 | |||||||
|
Amortization of prior service cost (credit)
|
239 | 5 | (324 | ) | ||||||||
|
Amortization of net loss (gain)
|
4,161 | 297 | (46 | ) | ||||||||
|
Exchange rate effect on amounts in OCI
|
— | 204 | (6 | ) | ||||||||
|
Total
|
$ | (632 | ) | $ | (2,285 | ) | $ | (1,574 | ) | |||
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 $7.2 million, $9.6 million and
$9.8 million for 2010, 2009 and 2008, respectively.
For measurement purposes, a 7.9% weighted average annual rate of
increase in the per capita cost of covered health care benefits
was assumed for 2010. The rate was assumed to decrease gradually
each year to a rate of 4.50% for 2028, 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
$1.3 million.
Plan
Assets
The Company’s pension plan weighted average asset
allocations at December 31, 2010 and 2009, by asset
category, were as follows:
| 2010 | 2009 | |||||||
|
Equity securities
|
67 | % | 66 | % | ||||
|
Fixed income securities
|
33 | 34 | ||||||
|
Total
|
100 | % | 100 | % | ||||
56
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IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following tables summarize the basis used to measure defined
benefit plans’ assets at fair value at December 31,
2010 and 2009:
| Basis of Fair Value Measurement | ||||||||||||||||
| Outstanding Balances | Level 1 | Level 2 | Level 3 | |||||||||||||
| (In thousands) | ||||||||||||||||
|
Equity
|
$ | 13,644 | $ | 13,644 | $ | — | $ | — | ||||||||
|
Absolute return
funds
(1)
|
||||||||||||||||
|
U.S.
|
38,325 | 18,549 | 19,776 | — | ||||||||||||
|
Non U.S.
|
22,838 | 17,400 | 5,438 | — | ||||||||||||
|
Other
(2)
|
740 | 740 | — | — | ||||||||||||
| $ | 75,547 | $ | 50,333 | $ | 25,214 | $ | — | |||||||||
| 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)
|
1,344 | 1,344 | — | — | ||||||||||||
| $ | 68,586 | $ | 37,130 | $ | 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
57
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
managers is reviewed on a regular basis, using appointed
professional independent advisors. As of December 31, 2010
and 2009, there were no shares of the Company’s stock held
in plan assets.
Cash
Flows
The Company expects to contribute approximately
$7.9 million to its defined benefit plans and
$1.0 million to its other postretirement benefit plans in
2011. The Company also expects to contribute approximately
$12.3 million to its defined contribution plans in 2011.
Estimated
Future Benefit Payments
The future estimated benefit payments for the next five years
and the five years thereafter are as follows: 2011 —
$8.6 million; 2012 — $8.8 million;
2013 — $8.8 million; 2014 —
$10.0 million; 2015 — $9.5 million; 2016 to
2020 — $50.4 million.
| 15. | Quarterly Results of Operations (Unaudited) |
The following table summarizes the unaudited quarterly results
of operations for the years ended December 31, 2010 and
2009.
| 2010 Quarters | 2009 Quarters | |||||||||||||||||||||||||||||||
| First | Second | Third | Fourth | First | Second | Third | Fourth | |||||||||||||||||||||||||
|
Net sales
|
$ | 355,598 | $ | 378,526 | $ | 373,731 | $ | 405,218 | $ | 326,613 | $ | 336,455 | $ | 323,249 | $ | 343,344 | ||||||||||||||||
|
Gross profit
|
147,541 | 154,821 | 154,133 | 161,988 | 123,194 | 131,101 | 129,058 | 139,033 | ||||||||||||||||||||||||
|
Operating income
|
57,893 | 62,780 | 62,439 | 66,004 | 39,161 | 46,735 | 46,517 | 52,441 | ||||||||||||||||||||||||
|
Net income
|
36,625 | 40,398 | 38,564 | 41,513 | 22,605 | 27,922 | 29,777 | 33,087 | ||||||||||||||||||||||||
|
Basic EPS
|
$ | .45 | $ | .50 | $ | .47 | $ | .51 | $ | .28 | $ | .35 | $ | .37 | $ | .41 | ||||||||||||||||
|
Diluted EPS
|
$ | .45 | $ | .49 | $ | .47 | $ | .50 | $ | .28 | $ | .34 | $ | .37 | $ | .40 | ||||||||||||||||
|
Basic weighted average shares outstanding
|
80,080 | 80,369 | 80,517 | 80,899 | 79,513 | 79,675 | 79,740 | 79,937 | ||||||||||||||||||||||||
|
Diluted weighted average shares outstanding
|
81,509 | 81,800 | 81,938 | 82,686 | 80,219 | 80,507 | 80,879 | 81,303 | ||||||||||||||||||||||||
| 16. | Subsequent Events |
On January 20, 2011, the Company acquired Advanced Thin
Films, LLC (“AT Films”) for cash consideration of
approximately $32.0 million. AT Films, with annual revenues
of approximately $9.0 million, specializes in optical
components and coatings for applications in the fields of
scientific research, defense, aerospace, telecommunications and
electronics manufacturing. AT Films’ core competence is in
the design and manufacture of filters, splitters, reflectors and
mirrors with the precise physical properties required to support
their customers’ most challenging and cutting-edge optical
applications. Headquartered in Boulder, Colorado, AT Films will
operate within the Health & Science Technologies
Segment as a part of the IDEX optical products platform.
On January 25, 2011, the Company entered into a merger
agreement to acquire Microfluidics International Corporation
(“Microfluidics”) at a price of $1.35 net per
share in cash. The transaction is expected to close in the first
quarter of 2011. With annual revenues of approximately
$16.0 million, Microfluidics is a global leader in the
design and manufacture of laboratory and commercial equipment
used in the production of micro and nano scale materials for the
pharmaceutical and chemical markets. Microfluidics is the
exclusive producer of the
Microfluidizer
®
family of high shear fluid processors for uniform particle size
reduction, robust cell disruption and nanoparticle creation.
Microfluidics’ product and service offerings will enhance
the Company’s micro fluidics and micro particle technology
position. Microfluidics is headquartered in Newton, MA.
While allocation of the purchase price is not complete, the
Company believes that the majority of the purchase price will be
allocated to goodwill and intangibles assets for both
acquisitions.
58
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, 2010 and 2009, and the related consolidated
statements of operations, shareholders’ equity, and cash
flows for each of the three years in the period ended
December 31, 2010. 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 consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 consolidated financial
position of the Company as of December 31, 2010 and 2009,
and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2010, 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.
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, 2010, 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 24, 2011,
expressed an unqualified opinion on the Company’s internal
control over financial reporting.
/s/ Deloitte &
Touche LLP
Deloitte & Touche LLP
Chicago, Illinois
February 24, 2011
59
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, 2010, based on criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. As described in Management’s Report on Internal
Control Over Financial Reporting, management excluded from its
assessment the internal control over financial reporting at
Precision Polymer Engineering Limited (“PPE”), which
was acquired on April 15, 2010, OBL, S.r.l.
(“OBL”), which was acquired on July 21, 2010,
Periflo, which was acquired on September 17, 2010, and
Fitzpatrick, Inc. (“Fitzpatrick”), which was acquired
on November 1, 2010. These exclusions constitute 7.6% and
5.6% of net and total assets, respectively, 2.7% of net sales,
and 2.8% of net income of the consolidated financial statement
amounts as of and for the year ended December 31, 2010.
Accordingly, our audit did not include the internal control over
financial reporting at PPE, OBL, Periflo, and Fitzpatrick. 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, 2010, 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, 2010, of
the Company and our report dated February 24, 2011,
expressed an unqualified opinion on those consolidated financial
statements and financial statement schedule.
/s/ Deloitte &
Touche LLP
Deloitte & Touche LLP
Chicago, Illinois
February 24, 2011
60
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, 2010.
The Company completed the acquisitions of PPE in April 2010, OBL
in July 2010, Periflo in September 2010 and Fitzpatrick in
November 2010. Due to the timing of the acquisitions, management
has excluded these acquisitions from our evaluation of
effectiveness of internal controls over financial reporting.
This exclusion represented 2.7% of total sales and 2.8% of net
income as well as 7.6% of net assets and 5.6% of total assets
for the year ended December 31, 2010.
The effectiveness of the Company’s internal control over
financial reporting as of December 31, 2010, 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
Lake Forest, Illinois
February 24, 2011
61
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
as of December 31, 2010.
Management’s Report on Internal Control Over Financial
Reporting appearing on page 61 of this report is
incorporated into this Item 9A by reference.
There has been no change in the Company’s internal control
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.
| 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 2011 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, principal
financial officer and principal 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, principal financial officer or principal
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 2011 Proxy Statement is incorporated
herein by reference.
62
Table of Contents
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters. |
Information under the heading “Security Ownership” in
the Company’s 2011 Proxy Statement is incorporated herein
by reference.
Equity
Compensation Plan Information
The following table sets forth certain information with respect
to the Company’s equity compensation plans as of
December 31, 2010.
|
Number of Securities
|
Weighted-Average
|
Number of Securities
|
||||||||||
|
To be Issued Upon
|
Exercise Price of
|
Remaining Available for
|
||||||||||
|
Exercise of
|
Outstanding
|
Future Issuance Under
|
||||||||||
|
Outstanding Options,
|
Options, Warrants
|
Equity Compensation
|
||||||||||
| Plan Category | Warrants and Rights | and Rights | Plans (1)(2) | |||||||||
|
Equity compensation plans approved by the Company’s
shareholders
|
6,379,628 | $ | 26.85 | 4,288,413 | ||||||||
|
Total
|
6,379,628 | $ | 26.85 | 4,288,413 | ||||||||
| (1) | Excludes securities to be issued upon the exercise of outstanding options, warrants and rights. | |
| (2) | All Deferred Compensation Units (“DCUs”) issued under the Directors Deferred Compensation Plan and Deferred Compensation Plan for Non-officer Presidents are to be issued under the Company’s Incentive Award Plan and any DCUs remaining in these plans were eliminated by shareholder approval on April 8, 2008. DCUs issued under the Deferred Compensation Plan for Officers continue to be issued under the Incentive Award Plan. |
The number of DCUs is determined by dividing the amount deferred
by the closing price of the Company’s Common Stock the day
before the date of deferral. The DCUs are entitled to receive
dividend equivalents which are reinvested in DCUs based on the
same formula for investment of a participant’s deferral.
Since deferred compensation is payable upon separation of
service within the meaning of Section 409A of the Internal
Revenue Code, no benefits are payable prior to the date that is
six months after the date of separation of service, or the date
of death of the employee, if earlier.
| 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 2011 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 2011 Proxy Statement is
incorporated herein by reference.
63
Table of Contents
| 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”.
2. Financial Statement
Schedule
|
2010 Form
|
||||
| 10-K Page | ||||
|
Schedule II — Valuation and Qualifying Accounts
|
65 | |||
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 67 hereof.
64
Table of Contents
IDEX
CORPORATION AND SUBSIDIARIES
FOR
THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
|
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, 2010:
|
||||||||||||||||||||
|
Deducted from assets to which they apply:
|
||||||||||||||||||||
|
Accounts receivable reserves
|
$ | 6,160 | $ | 945 | $ | 1,879 | $ | 96 | $ | 5,322 | ||||||||||
|
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 | |||||||||||||||
| (1) | Includes provision for doubtful accounts, sales returns and sales discounts granted to customers. | |
| (2) | Represents uncollectible accounts, net of recoveries. | |
| (3) | Represents translation and reclassification adjustments. |
65
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 24, 2011
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 24, 2011 | ||||
|
/s/
DOMINIC
A. ROMEO
|
Vice President and Chief Financial Officer (Principal Financial Officer) | February 24, 2011 | ||||
|
/s/
MICHAEL
J. YATES
|
Vice President and Chief Accounting Officer (Principal Accounting Officer) | February 24, 2011 | ||||
|
/s/
BRADLEY
J. BELL
|
Director | February 24, 2011 | ||||
|
/s/
RUBY
R. CHANDY
|
Director | February 24, 2011 | ||||
|
/s/
WILLIAM
M. COOK
|
Director | February 24, 2011 | ||||
|
/s/
FRANK
S. HERMANCE
|
Director | February 24, 2011 | ||||
|
/s/
GREGORY
F. MILZCIK
|
Director | February 24, 2011 | ||||
|
/s/
ERNEST
J. MROZEK
|
Director | February 24, 2011 | ||||
|
/s/
NEIL
A. SPRINGER
|
Director | February 24, 2011 | ||||
|
/s/
MICHAEL
T. TOKARZ
|
Director | February 24, 2011 | ||||
66
Table of Contents
Exhibit Index
|
Exhibit
|
||
| Number | Description | |
|
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) | |
|
4.8
|
Master Note Purchase Agreement, dated June 9, 2010 with respect to €81,000,000 2.58% Series 2010 Senior Notes due June 9, 2015 (incorporated by reference to Exhibit No. 4.1 to the Current Report of IDEX on Form 8-K filed June 14, 2010, Commission File No. 1-10235) | |
|
4.9
|
Indenture between IDEX Corporation and Wells Fargo Bank, National Association, as Trustee, dated as of December 6, 2010 (Debt Securities) (incorporated by reference to Exhibit No. 4.1 to the Current Report of IDEX on Form 8-K filed December 7, 2010, Commission File No. 1-10235) | |
|
4.10
|
First Supplemental Indenture between IDEX Corporation and Wells Fargo Bank, National Association, as Trustee, dated as of December 6, 2010 (as to 4.5% Senior Notes due 2010) (incorporated by reference to Exhibit No. 4.2 to the Current Report of IDEX on Form 8-K filed December 7, 2010, Commission File No. 1-10235) |
67
Table of Contents
|
Exhibit
|
||
| Number | Description | |
|
10.1**
|
Revised and Restated IDEX Management Incentive Compensation Plan for Key Employees Effective January 1, 2010 (incorporated by reference to Exhibit 10.2 to the Current Report of IDEX on Form 8-K filed on March 1, 2010, 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) | |
|
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. 1-10235) | |
|
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. 1-10235) | |
|
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. 1-10235) | |
|
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. 1-10235) | |
|
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. 1-10235) | |
|
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, Commission File No. 1-10235) | |
|
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. 10.13 (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**
|
Employment Agreement between IDEX Service Corporation and Dominic A. Romeo, effective March 1, 2010 (incorporated by reference to Exhibit No. 10.1 to the Current Report of IDEX on Form 8-K filed March 1, 2010, Commission File No. 1-10235) |
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|
Exhibit
|
||
| Number | Description | |
|
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, Commission File No. 1-10235) | |
|
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) | |
|
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, 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, 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 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 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 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 (incorporated by reference to Exhibit 10.26 to the Annual Report of IDEX on Form 10-K for the year ended December 31, 2009, Commission File No. 1-10235) | |
|
10.27**
|
Amendment to Agreement between IDEX Corporation, IDEX Service Corporation and Dominic A. Romeo, dated December 20, 2010 (incorporated by reference to Exhibit No. 10.1 to the Current Report of IDEX on Form 8-K filed December 23, 2010, Commission File No. 1-10235) | |
|
10.28**
|
Letter Agreement between IDEX Corporation and Frank J. Notaro, dated September 30, 2010 (incorporated by reference to Exhibit No. 10.1 to the Current Report of IDEX on Form 8-K filed October 1, 2010, Commission File No. 1-10235) | |
|
10.29**
|
Letter Agreement between IDEX Corporation and Harold Morgan, dated September 30, 2010 (incorporated by reference to Exhibit No. 10.2 to the Current Report of IDEX on Form 8-K filed October 1, 2010, Commission File No. 1-10235) | |
|
*10.30**
|
Third Amended and Restated IDEX Corporation Directors Deferred Compensation Plan | |
|
*10.31**
|
Merger and Restatement of IDEX Corporation Supplemental Executive Retirement Plan, the IDEX Corporation 1996 Deferred Compensation Plan for Officers and the IDEX Corporation 1996 Deferred Compensation Plan for Non- Officer Presidents | |
|
*12
|
Ratio of Earnings to Fixed Charges | |
|
*21
|
Subsidiaries of IDEX |
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|
Exhibit
|
||
| Number | Description | |
|
*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 | |
|
****101
|
The following materials from IDEX Corporation’s Annual Report on Form 10-K for the year ended December 31, 2010 formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Operations for the three years ended December 31, 2010, (ii) the Consolidated Balance Sheets at December 31, 2010 and 2009, (iii) the Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2010, (iv) the Consolidated Statements of Cash Flows for the three years ended December 31, 2010, (v) Notes to the Consolidated Financial Statements, and (vi) Financial Statement Schedule of Valuation and Qualifying Accounts. |
| * | Filed herewith. | |
| ** | Management contract or compensatory plan or agreement. | |
| *** | Furnished herewith. | |
| **** | In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. |
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TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. (removed and Reserved)Part IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial Data. (1)Item 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Shareholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accountant Fees and ServicesPart IVItem 15. Exhibits and Financial Statement Schedule