Results of Operations. The following table presents selected historical results of operations of IES and subsidiaries with dollar amounts in thousands. These historical statements of operations include the results of operations for businesses acquired through purchases beginning on their respective dates of acquisition. 2001 ---------------- 2002 ---------------- (IN THOUSANDS) 2003 ---------------- Revenues........................... $1,693,213 100% $1,475,430 100% $1,448,553 100% Cost of services................... 1,385,589 82 1,253,844 85 1,241,330 86 ---------- --- ---------- --- ---------- --- Gross profit....................... 307,624 18 221,586 15 207,223 14 Selling, general and administrative expenses......................... 214,073 12 174,184 12 153,651 10 Restructuring charges.............. -- -- 5,556 -- -- -- Goodwill amortization.............. 12,983 1 -- -- -- -- ---------- --- ---------- --- ---------- --- Income from operations............. 80,568 5 41,846 3 53,572 4 Interest and other expense, net.... (26,187) (2) (25,738) (2) (24,963) (2) Income before income taxes and ---------- --- ---------- --- ---------- --- cumulative effect of change in accounting principle............. 54,381 3 16,108 1 28,609 2 Provision for income taxes......... Cumulative effect of change in 25,671 1 6,175 - 8,179 1 accounting principle, net of tax.............................. -- -- 283,284 19 -- -- ---------- --- ---------- --- ---------- --- Net income (loss).................. $ 28,710 2% $ (273,351) (18)% $ 20,430 1% ========== === ========== === ========== === YEAR ENDED SEPTEMBER 30, 2003 COMPARED TO YEAR ENDED SEPTEMBER 30, 2002 REVENUES YEAR ENDED SEPTEMBER 30, 2002 2003 2003 Commercial and Industrial.................................. 81% 81% (2)% Residential................................................ 19% 19% (2)% --- --- -- Total Company.............................................. 100% 100% (2)% === === == Revenues decreased $26.8 million, or 2%, from $1,475.4 million for the year ended September 30, 2002 to $1,448.6 million for the year ended September 30, 2003. The decrease in total revenues is the result of $41.6 million in lost revenues on divested or closed companies that were included in revenues for the year ended September 30, 2002, but not during the year ended September 30, 2003. These lost revenues were partially offset by $32.2 million of revenues from an acquisition during the year ended September 30, 2003. The decline in commercial and industrial revenues is attributable to $29.4 million decline in communications work due to market contractions, particularly in California, Colorado, Washington, D.C. and Virginia. The decrease in residential revenues is attributable to a $36.9 million decline in multi-family residential construction projects, primarily in Colorado and Maryland, offset by a $31.0 million increase in single-family construction spending. We believe record low interest rates during the last 12-18 months is driving demand for new homes, leading to record levels of single-family residential construction spending. As families move into their new single-family homes, the demand for multi-family housing has dropped. GROSS MARGIN SEGMENT GROSS MARGINS AS A PERCENTAGE OF TOTAL REVENUES --------------- 2002 2003 ----- ----- Year Ended September 30, Commercial and Industrial................................. 13% 13% Residential............................................... 22% 21% -- -- Total Company............................................. 15% 14% == == Gross profit decreased $14.4 million, or 7% from $221.6 million for the year ended September 30, 2002 to $207.2 million for the year ended September 30, 2003. The decline in commercial and industrial gross profit was due to lower revenues earned year over year as discussed and due to a shift in the type of commercial and industrial work performed during the year ended September 30, 2003. The related service and maintenance work for commercial and industrial customers, which tends to earn higher gross margins than fixed price contracts, declined $6.0 million in gross profit during the year. This decline was moderated by a $87.1 million increase in larger project work awarded during the year, particularly industrial contracts in excess of $1 million. These larger projects produce gross profits but tend to earn lower gross margins as a percentage of revenue due to the competitive bidding procedures in place to be awarded this type of work. The shift of project work from small projects such as the service and maintenance work to larger projects in excess of $1 million impacted gross profits by approximately $9.2 million. Overall gross margin as a percentage of revenues decreased approximately 1% from 15% for the year ended September 30, 2002 to 14% for the year ended September 30, 2003. Had we earned last year's gross margin of 15%, gross profit for the year ended September 30, 2003 would have been $217.3 million, an increase of $10.1 million. The decline in gross margin during the year ended September 30, 2003 was due to the shift in type of commercial and industrial work performed and due to the increased competition for available residential work. We believe record low interest rates during the last 12-18 months is driving demand for new homes, leading to record levels of single-family residential construction spending. This increased demand for residential construction has increased pricing pressure for available work, particularly affecting our operating units that perform limited amounts of residential work in addition to their commercial and industrial contract expertise.
Appears in 1 contract
Sources: Annual Report
Results of Operations. The following table presents selected historical results of operations of IES and subsidiaries with dollar amounts in thousands. These historical statements of operations include the results of operations for businesses acquired through purchases beginning on their respective dates of acquisition. 2001 ---------------- 2002 ---------------- (IN THOUSANDS) 2003 ---------------- Revenues........................... 1996 ---- CHANGE ------ 1995 ---- CHANGE ------ 1994 ---- Net sales............................... $1,693,213 100562,551 15% $1,475,430 100$ 487,336 22% $1,448,553 100% Cost of services................... 1,385,589 82 1,253,844 85 1,241,330 86 ---------- --- ---------- --- ---------- --- Gross profit....................... 307,624 18 221,586 15 207,223 14 Selling, general and administrative expenses......................... 214,073 12 174,184 12 153,651 10 Restructuring charges.............. -- -- 5,556 -- -- -- Goodwill amortization.............. 12,983 1 -- -- -- -- ---------- --- ---------- --- ---------- --- $ 399,502 Income from operations............. 80,568 5 41,846 3 53,572 4 .................. 98,305 14 86,238 32 65,538 Interest and other expense, net.... ........................ 18,942 19 15,948 17 13,581 Net income.............................. 50,198 11 45,325 35 33,610 FINANCIAL POSITION Working capital......................... $108,313 5% $ 103,091 26% $ 82,007 Total assets............................ 583,773 25 466,122 26 371,096 Long-term debt.......................... 271,709 32 206,184 23 168,166 Shareholders' equity.................... 195,509 30 150,945 30 116,305 PERFORMANCE MEASURES Percent of net sales Income from operations............... 17.5% 17.7% 16.4% Net income........................... 8.9 9.3 8.4 Return on average assets................ 9.7 10.8 10.7 Debt as a percent of capitalization..... 58.2 57.7 59.1 Return on average shareholders' equity.. 29.0 33.9 33.6 PER SHARE DATA Net income.............................. $ 1.69 10% $ 1.53% 34% $ 1.15 Cash dividends paid..................... .43 16 .37 - Shareholders' equity.................... 6.76 28 5.26 29 4.06 OTHER DATA Employees............................... 3,598 11% 3,233 14% 2,841 Shareholders of record.................. 1,305 (26,1874) 1,359 (2) (25,738) (2) (24,963) (2) Income before income taxes 1,388 Weighted average shares outstanding..... 29,779 1 29,609 1 29,331 All share and ---------- --- ---------- --- ---------- --- cumulative effect per share data throughout this report have been restated to reflect the three-for-two stock splits effected in the form of change 50% stock dividends in accounting principle............. 54,381 3 16,108 1 28,609 2 Provision January 1995 and 1997. SHAREHOLDER'S LETTER - -------------------------------------------------------------------------------- TO OUR SHAREHOLDERS: 1996 was another excellent year for income taxes......... Cumulative effect of change IDEX. Records were set in 25,671 1 6,175 - 8,179 1 accounting principlesales, net income and earnings per share; we acquired a significant business; several new products were introduced; our international expansion continued; and the company ranked at the high end of tax.............................. -- -- 283,284 19 -- -- ---------- --- ---------- --- ---------- --- peer group comparisons in profitability and growth. This year's performance continues the unbroken string of improvements in net income (before unusual items) since the company was formed in 1988. These achievements result from the superb contributions of an exceptionally capable team throughout IDEX of whom we're very proud. Recognizing the strength of the company and its prospects, our Board of Directors in December approved another three-for-two stock split and an increase in cash dividends. NET INCOME RISES 11% ON A SALES INCREASE OF 15% Net sales were a record $562.6 million in 1996 and increased by 15% over the $487.3 million of 1995. Net income (loss).................. $ 28,710 2reached a new high of $50.2 million and rose by 11% $ (273,351) (18)% $ 20,430 over the $45.3 million of last year. Earnings per share on a post-split basis at $1.69 grew by 16 cents over the previous high of $1.53 set in 1995. Market conditions enabled us to show an improvement of only 1% ========== === ========== === ========== === YEAR ENDED SEPTEMBER 30in the revenues of our base businesses, 2003 COMPARED TO YEAR ENDED SEPTEMBER 30, 2002 REVENUES YEAR ENDED SEPTEMBER 30, 2002 2003 2003 Commercial with almost all of the growth resulting from including 1995 acquisitions for a full year and Industrial.................................. 81our 1996 acquisition for five months. IDEX's operating profit margins always have been well above average for an industrial company. Our margins at 17.5% 81% (2)% Residential................................................ 19% 19% (2)% --- --- -- Total Company.............................................. 100% 100% (2)% === === == Revenues decreased $26.8 million, or 2of sales were slightly below last year's 17.7%, from but that was due entirely to the inclusion of the recently acquired businesses in this year's results. Our high base business margins were actually improved slightly, and we see opportunities to improve margins at recently acquired businesses. Since the company was formed in 1988, earnings per share have grown at a compound annual rate of 22%. FLUID MANAGEMENT ACQUIRED On July 29, 1996, IDEX acquired Fluid Management, headquartered in Wheeling, Illinois, with operations in the Netherlands, Germany and Australia, and with worldwide distribution. Fluid Management is the world's leading manufacturer of dispensing and mixing equipment for colorants, inks and dyes. We paid $1,475.4 135 million for the business, or about 8.3 times earnings before interest, taxes, depreciation, and amortization. Fluid Management has revenues of approximately $90 million, and about 50% of its sales occur outside of the U.S. Harbil(R), ▇▇▇▇▇▇(R), Accutinter(R) and Eurotinter are among the brand names one will see on its products in local paint stores, printing plants, truck manufacturing plants and other locations where paint, ink and other fluids are mixed and dispensed. Fluid Management is an IDEX type of company with excellent potential. We will continue to apply our rigid criteria and follow our disciplined approach as we seek to add businesses in the future. INTERNAL DEVELOPMENT We recognize that we must continuously improve operations and introduce new products to sustain the growth IDEX has exhibited to date. Our future success hinges on superior customer service and top-quality, state-of-the-art products manufactured at competitive prices. Again in 1996 about one-fourth of our sales resulted from products totally redesigned or introduced within the past four years. Among the new products introduced in 1996 were electronically controlled pumps at ▇▇▇▇▇▇ ▇▇▇▇, new truck-mounted LP gas pumps at ▇▇▇▇▇▇, the International Sales Percent of Year Total Sales In Dollars Millions Operating Margins Value line Industrial Idex Composite Index Net Income Margins Value line Industrial Idex Composite Index 1987 19% 35 18% 10% 5% 6% 1988 22% 48 19% 10% 7% 5% 1989 24% 52 17% 9% 7% 4% 1990 26% 59 16% 8% 7% 4% 1991 28% 63 15% 8% 7% 4% 1992 28% 79 16% 9% 8% 5% 1993 27% 84 16% 10% 8% 5% 1994 32% 127 18% 11% 9% 6% 1995 35% 169 18% 11% 9% 6% 1996 41% 231 International growth has been Since formation of the IDEX has outperformed a key factor in IDEX's success. company, IDEX has continuously most manufacturers achieved significantly higher in net income margins. operating margins than most manufacturers. - -----------------------------------------------------------------------------96) FoamMaster(R) pump system for fire fighting at ▇▇▇▇, a new peristaltic metering pump at Pulsafeeder, and a patented Ultra-Lok(R) clamping system at Band It. Quality has always been a cornerstone of business practice in IDEX, but the internationally recognized ISO 9000 standards have become the ideal in recent years. Every one of our business units--at all manufacturing locations around the globe--has achieved ISO certification. In our continuing efforts to improve efficiency and enhance customer service, we made major advances in business systems at Viking, Pulsafeeder, Signfix and ▇▇▇▇▇▇. We consolidated Pulsafeeder's Oklahoma facility with its operations in Florida, and we installed more productive manufacturing equipment in many locations. A normal measure of productivity is sales per employee, which has risen every year ended September 30since IDEX began operations, 2002 and reached a new high of $167,000 in 1996. Our focus on cash flow enabled us to cut debt by $1,448.6 68 million in 1996 before borrowing $133 million to complete the Fluid Management acquisition. The tremendous potential in international markets has been a focus for several years. In 1996, 41% of total revenues were to customers outside of the U.S. and 62% of these revenues were produced in IDEX facilities outside the U.S. International sales growth has outpaced domestic growth for many years, and we expect this will continue as we emphasize international development in 1997 and the years beyond. STOCK SPLIT AND DIVIDEND INCREASE DEMONSTRATE CONFIDENCE Given IDEX's solid performance and its positive outlook, in December 1996 our Board of Directors declared a three-for-two stock split and a 12.5% increase in cash dividends. The stock split was effected in the form of a 50% stock dividend, and the cash dividend on the post-split shares is 12 cents per share per calendar quarter, which is equivalent to 18 cents on the pre-split shares, and is up by 2 cents from the previous dividend level. Both the stock split and the first increased cash dividend are being paid on January 31, 1997, to shareholders of record on January 15, 1997. POSITIONED FOR FUTURE GROWTH IDEX has many strengths that position it especially well for the year ended September 30future: - - We serve diverse markets. - - We sell to thousands of customers. - - We have significant market shares, 2003with each of our businesses either number one or a close second in market share in its niche. The decrease in total revenues is the result of $41.6 million in lost revenues on divested or closed companies that were included in revenues for the year ended September 30, 2002, but not during the year ended September 30, 2003- - We emphasize new product and process development. - - We have healthy margins and strong cash flow. - - Our international sales are significant and growing. - - We will continue to explore acquisition opportunities following our disciplined approach. These lost revenues were partially offset by $32.2 million characteristics give us a solid base for future development. We are proud of revenues from all of the people of the company who have helped make IDEX successful and continue to carry out their responsibilities in an acquisition during the year ended September 30, 2003. The decline in commercial and industrial revenues is attributable to $29.4 million decline in communications work due to market contractions, particularly in California, Colorado, Washington, D.C. and Virginia. The decrease in residential revenues is attributable to a $36.9 million decline in multi-family residential construction projects, primarily in Colorado and Maryland, offset by a $31.0 million increase in single-family construction spendingextraordinary manner. We believe record low interest rates during 1997 will be another excellent year for IDEX, and that the last 12years beyond also hold a great deal of promise. We hope that you, our shareholders, share in our positive view of tomorrow for IDEX. [Signature of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇] ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ [PHOTO OF ▇▇▇▇▇▇ ▇. ▇▇▇▇▇] Chairman of the Board and President January 21, 1997 FLUID HANDLING GROUP - -------------------------------------------------------------------------------- [PHOTO] IDEX's Fluid Handling Group is comprised of eight business units that design, produce, and distribute a broad range of engineered industrial pumps and related controls, fire-18 months is driving demand fighting pumps and rescue tools, mixing and dispensing equipment, lubrication systems and low-horsepower compressors. In 1996 the Fluid Handling Group accounted for new homes75% of sales and 78% of profits. Sales to customers outside of the U.S. represented 41% of the Group's shipments. SALES [PIE CHART] Fluid Handling 75% Industrial Products 25% ▇▇▇▇▇▇ FLUID MANAGEMENT ▇▇▇▇ PRODUCTS LUBRIQUIP MICROPUMP PULSAFEEDER VIKING PUMP ▇▇▇▇▇▇ ▇▇▇▇ 7 INDUSTRIAL PRODUCTS GROUP - -------------------------------------------------------------------------------- The Industrial Products Group includes four business units that design, leading to record levels produce and distribute proprietary products for a wide range of singleindustrial applications. These products include metal fabrication equipment and tooling, high-family residential construction spendingquality stainless steel banding and clamping devices and related installation tools, sign mounting systems and vibration control mechanisms. As families move into their new single-family homes, the demand for multi-family housing has dropped. GROSS MARGIN SEGMENT GROSS MARGINS AS A PERCENTAGE OF TOTAL REVENUES --------------- 2002 2003 ----- ----- Year Ended September 30, Commercial The Industrial Products Group generated 25% of sales and Industrial................................. 13% 13% Residential............................................... 22% 21of profits in 1996, and sales to customers outside the U.S. represented 41% -- -- Total Company............................................. 15of its shipments. Fluid Handling 78% 14Industrial Products 22% == == Gross profit decreased $14.4 millionBAND-IT SIGNFIX STRIPPIT VIBRATECH 8 5 BUSINESS PROFILE - ------------------------------------------------------------------------------------------------------------------------------------ [▇▇▇▇▇▇ PHOTO] ▇▇▇▇▇▇ [FLUID MANAGEMENT PHOTO] FLUID MANAGEMENT [▇▇▇▇ PRODUCTS PHOTO] ▇▇▇▇ PRODUCTS [LUBRIQUIP PHOTO] LUBRIQUIP PRODUCT Small-horsepower Precision-engineered Truck-mounted and portable Centralized oil and grease OFFERING compressors, vane and turbine pumps, and valves. equipment for dispensing, metering and mixing paints, coatings, colorants, inks, dyes and other liquids and pastes. fire pumps, and the ▇▇▇▇▇ Jaws of Life(R) and Lukas rescue tool systems. lubrication systems, force- feed lubricators, metering devices, related electronic control and accessories. - ------------------------------------------------------------------------------------------------------------------------------------ MARKETS Liquefied petroleum gas (LPG), Retail and commercial paint Public and private fire Machine tools, transfer SERVED oil and gas, petrochemical, outlets; printers; paint, and rescue applications. machines, conveyors, environmental, health care coating, ink and other packaging machinery, and general industrial. manufacturers. transportation equipment and construction machinery. - ------------------------------------------------------------------------------------------------------------------------------------ PRODUCT Products used for transfer Fluid management systems Pumps for water or 7foam to Lubrication devices to APPLICATIONS of LPG, alternative fuels for a wide variety of extinguish fires, and rescue prolong equipment life and and other gases and liquids. liquids and pastes in a equipment for extricating reduce maintenance costs. broad range of industries, accident victims. from retail point-of-sale equipment to complete manufacturing systems. - ------------------------------------------------------------------------------------------------------------------------------------ COMPETITIVE Market leader for pumps Industry innovator and World's leading manufacturer Market leader in centralized STRENGTHS and small-horsepower worldwide market leader of truck-mounted fire pumps lubrication systems serving compressors used in LPgas in automatic and manually and rescue systems with a broad range of industries. distribution facilities with operated dispensing, estimated worldwide market Estimated one-third market estimated 50% from $221.6 million for the year ended September 30, 2002 to $207.2 million for the year ended September 30, 2003market share. The decline in commercial metering and industrial gross profit was due to lower revenues earned year over year as discussed and due to a shift in the type of commercial and industrial work performed during the year ended September 30, 2003. The related service and maintenance work for commercial and industrial customers, which tends to earn higher gross margins than fixed price contracts, declined $6.0 million in gross profit during the year. This decline was moderated by a $87.1 million increase in larger project work awarded during the year, particularly industrial contracts mixing share in excess of $1 million50%. These larger projects produce gross profits but tend to earn lower gross margins as share. equipment. Estimated 50% worldwide market share. INTERNATIONAL 40% of sales outside 55% of sales outside the 50% of sales outside the 20% of sales outside SCOPE the U.S. U.S. Also manufactures in the Netherlands, Germany and Australia. U.S. Also manufactures in England and Germany. the U.S. - ----------------------------------------- EXAMPLES New truck-mounted LPgas ----------------------------------------------------------- New high-speed automatic New electronically ------------------------------ New Trabon(R) modular OF RECENTLY pumps, and a percentage new line dispensers featuring controlled FoamMaster(R) divider valve with zero-leak INTRODUCED of revenue due to the competitive bidding procedures in place to be awarded this type of work. The shift of project work from small projects such as the service water cooled and maintenance work to larger projects in excess of $1 million impacted gross profits by approximately $9.2 million. Overall gross margin as a percentage of revenues decreased approximately 1% from 15% flanged advanced graphic software, pump system for fire- inlet and integral filter, PRODUCTS gas compressors for the year ended September 30process industries. integrated label printer and color matching system. Completely redesigned line of manual and automatic dispensers and mixers for European market. fighting applications. status indicators and electronic sensors. - ----------------------------------------- MANUFACTURING Oklahoma City, 2002 to 14% for the year ended September 30Oklahoma ----------------------------------------------------------- Wheeling, 2003. Had we earned last year's gross margin of 15%Illinois Conshohocken, gross profit for the year ended September 30Pennsylvania ------------------------------ Warrensville Heights, 2003 would have been $217.3 millionOhio LOCATIONS Sassenheim, an increase of $10.1 million. The decline in gross margin during the year ended September 30Netherlands Norderstedt, 2003 was due to the shift in type of commercial and industrial work performed and due to the increased competition for available residential work. We believe record low interest rates during the last 12-18 months is driving demand for new homesGermany Unanderra, leading to record levels of single-family residential construction spending. This increased demand for residential construction has increased pricing pressure for available workAustralia Shelby, particularly affecting our operating units that perform limited amounts of residential work in addition to their commercial and industrial contract expertise.North Carolina St. ▇▇▇▇▇▇, Tennessee Warwick, England Erlangen, Germany McKees Rocks, Pennsylvania Madison, Wisconsin - ------------------------------------------------------------------------------------------------------------------------------------ -- --
Appears in 1 contract
Sources: Annual Report
Results of Operations. The following table presents selected historical results of operations of IES presents, for the periods indicated, the period to period change in dollars (in millions) and subsidiaries with dollar amounts in thousands. These historical percentages for the various statements of operations include the results line items. -------------------------------------------------- YEARS ENDED YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 1999 AND ---------------------- ---------------------- STATEMENT OF OPERATIONS: Operating revenues................................ $ (635) (4.8)% $ 501 4.0% Costs and expenses: Operating (exclusive of operations for businesses acquired through purchases beginning on their respective dates of acquisition. 2001 ---------------- 2002 ---------------- depreciation and ------- ------- amortization shown below).................... (IN THOUSANDS731) 2003 ---------------- Revenues........................... $1,693,213 100% $1,475,430 100% $1,448,553 100% Cost of services(8.8) 986 13.5 General and administrative...................... (182) (9.5) 587 44.0 Depreciation and amortization................... 1,385,589 82 1,253,844 85 1,241,330 86 ---------- --- ---------- --- ---------- --- Gross profit....................... 307,624 18 221,586 15 207,223 14 Selling, general (185) (11.5) 115 7.7 Asset impairments and administrative expenses......................... 214,073 12 174,184 12 153,651 unusual items............. 10 Restructuring charges.............. -- -- 5,556 -- -- -- Goodwill amortization.............. 12,983 1 -- -- -- -- ---------- --- ---------- --- ---------- --- 1.4 (125) (14.5) ------- ------- (1,133) (9.0) (199) (1.6) ------- ------- Income (loss) from operations............. 80,568 5 41,846 3 53,572 4 ..................... 498 92.2 700 437.5 ------- ------- Other income (expense): Interest expense................................ 22 2.9 (88) (12.9) Interest and other expenseincome, net.... .................. (26,18737) (240.7) (25,73875) (245.2) Minority interest............................... 1 4.2 -- 0.0 ------- ------- (14) (24,9632.0) (2163) (30.2) ------- ------- Income (loss) before income taxes and ---------- --- ---------- --- ---------- --- cumulative effect of change in accounting principle............. 54,381 3 16,108 1 28,609 2 extraordinary item.............................. 484 296.9 537 76.7 Provision for income taxes......... Cumulative effect of change in 25,671 ........................ 186 80.2 165 246.3 ------- ------- Loss before extraordinary item.................... 298 75.4 372 48.5 Extraordinary item................................ 3 100.0 1 6,175 - 8,179 1 accounting principle, net of tax.............................. -- -- 283,284 19 -- -- ---------- --- ---------- --- ---------- --- 25.0 ------- ------- Net income (loss).................. .......................................... $ 28,710 2301 75.6% $ (273,351) (18)% $ 20,430 1373 48.4% See Management's Discussion ======= and Analysis -- ======= 1999 Accounting Charges and Adjustments. The following table presents, for the periods indicated, the percentage relationship that the various statements of operations line items bear to operating revenues: YEARS ENDED DECEMBER 31, 2000 1999 1998 STATEMENT OF OPERATIONS: Operating revenues........................................ 100.0% 100.0% 100.0% Costs and expenses: Operating (exclusive of depreciation and amortization shown below)......................................... 60.4 63.0 57.7 General and administrative.............................. 13.9 14.6 10.6 Depreciation and amortization........................... 11.4 12.3 11.9 Merger and acquisition related costs.................... -- 0.4 14.3 Asset impairments and unusual items..................... 6.0 5.6 6.8 91.7 95.9 101.3 Income (loss) from operations............................. 8.3 4.1 (1.3) Other income (expense): Interest expense........................................ (6.0) (5.8) (5.4) Interest and other income, net.......................... 0.4 0.7 1.3 Minority interest....................................... (0.2) (0.2) (0.2) (5.8) (5.3) (4.3) ----- ------ ----- Income (loss) before income taxes and extraordinary item.................................................... 2.5 (1.2) (5.6) Provision for income taxes................................ 3.3 1.8 0.5 Loss before extraordinary item............................ (0.8) (3.0) (6.1) Extraordinary item........................................ -- -- -- Net loss.................................................. (0.8)% (3.0)% (6.1)% ===== ====== === ========== === ========== === YEAR See Management's Discussion and Analysis -- 1999 Accounting Charges and Adjustments. RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED SEPTEMBER 30DECEMBER 31, 2003 COMPARED TO YEAR ENDED SEPTEMBER 302000 Operating Revenues Operating revenues for 2000 were $12.5 billion, 2002 REVENUES YEAR ENDED SEPTEMBER 30, 2002 2003 2003 Commercial compared with $13.1 billion in 1999 and Industrial.................................. 81% 81% (2)% Residential................................................ 19% 19% (2)% --- --- -- Total Company.............................................. 100% 100% (2)% === === == Revenues decreased $26.8 million, or 2%, from $1,475.4 million for the year ended September 30, 2002 to $1,448.6 million for the year ended September 30, 200312.6 billion in 1998. The higher revenues in 1999 reflect acquisitions of solid waste businesses in North America. The decrease in total revenues in 2000 is the result of $41.6 million in lost revenues on divested or closed companies that were included in revenues for the year ended September 30, 2002, but not during the year ended September 30, 2003. These lost revenues were partially offset by $32.2 million of revenues from an acquisition during the year ended September 30, 2003. The decline in commercial and industrial revenues is attributable to $29.4 million decline in communications work primarily due to market contractions, particularly in California, Colorado, Washington, D.C. the divestitures of WM International and Virginia. The decrease in residential revenues is attributable to a $36.9 million decline in multinon-family residential construction projects, primarily in Colorado and Maryland, offset by a $31.0 million increase in single-family construction spending. We believe record low interest rates during the last 12-18 months is driving demand for new homes, leading to record levels of single-family residential construction spending. As families move into their new single-family homes, the demand for multi-family housing has dropped. GROSS MARGIN SEGMENT GROSS MARGINS AS A PERCENTAGE OF TOTAL REVENUES --------------- 2002 2003 ----- ----- Year Ended September 30, Commercial and Industrial................................. 13% 13% Residential............................................... 22% 21% -- -- Total Company............................................. 15% 14% == == Gross profit decreased $14.4 million, or 7% from $221.6 million for the year ended September 30, 2002 to $207.2 million for the year ended September 30, 2003. The decline in commercial and industrial gross profit was due to lower revenues earned year over year as discussed and due to a shift in the type of commercial and industrial work performed during the year ended September 30, 2003. The related service and maintenance work for commercial and industrial customers, which tends to earn higher gross margins than fixed price contracts, declined $6.0 million in gross profit solid waste operations during the year. This decline was moderated Operating revenues by reportable segment (in millions): OPERATING REVENUES [PERFORMANCE GRAPH] NASW operating revenue mix (in millions): OPERATING REVENUES [PERFORMANCE GRAPH] NASW operating revenues increased in 2000 from 1999 primarily due to internal growth of comparable operations of 1.4% (or $150 million) from pricing increases and 2.5% (or $267 million) from volume increases. During the first half of 2000, the pricing in the recyclable materials markets favorably impacted overall pricing increases. However, during the second half of 2000 the recyclable materials market experienced a $87.1 million significant downturn that offset the improvements experienced earlier in the year. Additionally, the Company implemented a fuel surcharge in March 2000 to mitigate the significant increase in larger project the cost of fuel. Excluding the impact of price increases in the commodity markets for recyclable materials, and the fuel surcharge that was implemented, there was a price increase of 0.6% in 2000 compared to 1999. Acquisitions of NASW businesses during 2000 and the full year effect of acquisitions that were completed in 1999 accounted for an increase in operating revenues of approximately $286 million for 2000, as compared to 1999. The primary offset to the increase in operating revenues was the divestiture of certain non-integrated NASW operations. However, the foreign currency fluctuations with the Canadian dollar also negatively impacted operating revenues during 2000. NASW operating revenues in 1999 were lower than expected due to substantial difficulties in the integration of operations after the mergers with WM Holdings on July 16, 1998 and Eastern Environmental Services on December 31, 1998, including the information systems (particularly the billing systems) and related work awarded during flow. In 1999, the yearCompany experienced significant difficulty in the conversion from the WM Holdings' information systems to the systems currently in use, resulting in delays and errors, particularly industrial contracts with the billing systems, including delays in excess submitting bills to customers and errors in both computing and delivering bills. Staffing levels were insufficient to address customer complaints and disputes and did not support timely follow-up with customers. Billing system issues initially became evident in the second quarter of $1 million1999 as receivable aging levels rose. At that time, management believed that the increase in receivables was a short-term issue, receivables would return to historical levels once the billing system conversions were complete and there was not a significant collectability issue with its recorded receivables. In connection with the 1999 accounting review, it was concluded that certain of these accounts had deteriorated to the point that they may be uncollectable, and therefore, a significant increase in the allowance for doubtful accounts was recorded in the third quarter of 1999. These larger projects produce gross profits but tend events also contributed a higher than usual provision for uncollectable accounts in the fourth quarter of 1999. Beginning in the third quarter of 1999, resources dedicated to earn lower gross margins receivable collection efforts were increased on both a temporary and permanent basis and the billing systems began to stabilize. In 2000, the Company was successful in collecting certain accounts that were reserved for in 1999. Acquisitions of NASW business during 1999 and the full year effect of acquisitions which were completed in 1998 accounted for an increase in operating revenues of approximately $616 million for 1999, as a percentage compared to 1998. NASW operating revenues also increased from internal growth of revenue due comparable operations of 2.6% for 1999, as compared to the competitive bidding procedures in place to be awarded this type of work1998. The shift Company believes that its internal revenue growth in 1999 was detrimentally affected by certain inflexibilities in its pricing strategy and the lack of project work from small projects such as responsiveness of that strategy to localized competitive conditions, resulting in lost customers and volumes. Offsetting the service and maintenance work to larger projects increase in excess operating revenues were divestitures of $1 million impacted gross profits by NASW businesses with revenues of approximately $9.2 million. Overall gross margin as a percentage of revenues decreased approximately 1% from 15% for the year ended September 30, 2002 to 14% for the year ended September 30, 2003. Had we earned last year's gross margin of 15%, gross profit for the year ended September 30, 2003 would have been $217.3 290 million, an increase of $10.1 million. The decline in gross margin during as well as other business factors that comprised the year ended September 30remaining differences, 2003 was due to including the shift in type of commercial and industrial work performed and due to foreign currency fluctuations with the increased competition for available residential work. We believe record low interest rates during the last 12-18 months is driving demand for new homes, leading to record levels of single-family residential construction spending. This increased demand for residential construction has increased pricing pressure for available work, particularly affecting our operating units that perform limited amounts of residential work in addition to their commercial and industrial contract expertiseCanadian dollar.
Appears in 1 contract
Sources: Annual Report
Results of Operations. The following table presents selected historical results sets forth, for the fiscal years indicated, certain financial data as a percentage of operations sales. Results for any one or more periods are not necessarily indicative of IES and subsidiaries with dollar amounts in thousandsfuture results. These historical statements of operations include the results of operations for businesses acquired through purchases beginning on their respective dates of acquisition. 2001 ---------------- 2002 ---------------- (IN THOUSANDS) 2003 ---------------- Revenues........................... $1,693,213 100PERCENTAGE OF NET SALES FOR FISCAL YEAR ENDED --------------------- JANUARY 30, JANUARY 31, FEBRUARY 1, 1999 1998 1997 ---- ---- ---- Net Sales............................................................ 100.0% $1,475,430 100100.0% $1,448,553 100100.0% Cost of services................... 1,385,589 82 1,253,844 85 1,241,330 86 ---------- --- ---------- --- ---------- --- sales and occupancy expenses................................. 66.7 66.2 64.2 ----- ----- ----- Gross profit....................... 307,624 18 221,586 15 207,223 14 ......................................................... 33.3 33.8 35.8 Selling, general and administrative expenses......................... 214,073 12 174,184 12 153,651 10 Restructuring charges.............. -- -- 5,556 -- -- -- Goodwill amortization.............. 12,983 1 -- -- -- -- ---------- --- ---------- --- ---------- --- Income from operations............. 80,568 5 41,846 3 53,572 4 28.7 27.9 28.3 ----- ----- ----- Operating income..................................................... 4.6 5.9 7.5 Interest and other expense, net.... (26,187) (2) (25,738) (2) (24,963) (2) ................................................ 0.4 0.5 0.9 ----- ----- ----- Income before income taxes and ---------- --- ---------- --- ---------- --- cumulative effect of change in accounting principle............. 54,381 3 16,108 1 28,609 2 Provision for income taxes......... Cumulative effect of change in 25,671 1 6,175 - 8,179 1 accounting principle, net of tax.............................. -- -- 283,284 19 -- -- ---------- --- ---------- --- ---------- --- Net income (loss).................. $ 28,710 2% $ (273,351) (18)% $ 20,430 1% ========== === ========== === ========== === YEAR ENDED SEPTEMBER 30, 2003 COMPARED TO YEAR ENDED SEPTEMBER 30, 2002 REVENUES YEAR ENDED SEPTEMBER 30, 2002 2003 2003 Commercial and Industrial.................................. 81% 81% (2)% Residential................................................ 19% 19% (2)% --- --- -- Total Company.............................................. 100% 100% (2)% === === == Revenues decreased $26.8 million, or 2%, from $1,475.4 million for the year ended September 30, 2002 to $1,448.6 million for the year ended September 30, 2003. The decrease in total revenues is the result of $41.6 million in lost revenues on divested or closed companies that were included in revenues for the year ended September 30, 2002, but not during the year ended September 30, 2003. These lost revenues were partially offset by $32.2 million of revenues from an acquisition during the year ended September 30, 2003. The decline in commercial and industrial revenues is attributable to $29.4 million decline in communications work due to market contractions, particularly in California, Colorado, Washington, D.C. and Virginia. The decrease in residential revenues is attributable to a $36.9 million decline in multi-family residential construction projects, primarily in Colorado and Maryland, offset by a $31.0 million increase in single-family construction spending. We believe record low interest rates during the last 12-18 months is driving demand for new homes, leading to record levels of single-family residential construction spending. As families move into their new single-family homes, the demand for multi-family housing has dropped. GROSS MARGIN SEGMENT GROSS MARGINS AS A PERCENTAGE OF TOTAL REVENUES --------------- 2002 2003 ........................................... 4.2 5.4 6.6 Income tax expense................................................... 1.7 2.2 2.7 ----- ----- Year Ended September 30, Commercial and Industrial................................. 13----- Net income........................................................... 2.5% 133.2% Residential............................................... 223.9% 21% -- -- Total Company............................................. 15% 14% == == Gross profit decreased $14.4 million, or 7% from $221.6 million for the year ended September 30, 2002 to $207.2 million for the year ended September 30, 2003. The decline in commercial and industrial gross profit was due to lower revenues earned year over year as discussed and due to a shift in the type of commercial and industrial work performed during the year ended September 30, 2003. The related service and maintenance work for commercial and industrial customers, which tends to earn higher gross margins than fixed price contracts, declined $6.0 million in gross profit during the year. This decline was moderated by a $87.1 million increase in larger project work awarded during the year, particularly industrial contracts in excess of $1 million. These larger projects produce gross profits but tend to earn lower gross margins as a percentage of revenue due to the competitive bidding procedures in place to be awarded this type of work. The shift of project work from small projects such as the service and maintenance work to larger projects in excess of $1 million impacted gross profits by approximately $9.2 million. Overall gross margin as a percentage of revenues decreased approximately 1% from 15% for the year ended September 30, 2002 to 14% for the year ended September 30, 2003. Had we earned last year's gross margin of 15%, gross profit for the year ended September 30, 2003 would have been $217.3 million, an increase of $10.1 million. The decline in gross margin during the year ended September 30, 2003 was due to the shift in type of commercial and industrial work performed and due to the increased competition for available residential work. We believe record low interest rates during the last 12-18 months is driving demand for new homes, leading to record levels of single-family residential construction spending. This increased demand for residential construction has increased pricing pressure for available work, particularly affecting our operating units that perform limited amounts of residential work in addition to their commercial and industrial contract expertise.----- ----- ----- ----- ----- ----- COMPARISON OF FISCAL 1998 TO FISCAL 1997
Appears in 1 contract
Sources: Annual Report (Natural Wonders Inc)