UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2000 ------------------------------------------------- Commission File Number 333-51355 ---------------------------------------------------------- NUMATICS, INCORPORATED -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Michigan 38-2955710 -------------------------------------------------------------------------------- (State or other jurisdiction of Identification Number) incorporation or organization) (I.R.S. Employer 1450 North Milford Road, Milford, Michigan 48357 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (248) 887-4111 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No _______ ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock - 2,659,575 shares as of November 7, 2000 INDEX NUMATICS, INCORPORATED AND SUBSIDIARIES Page No. Description -------------------------------------------------------------------------------- 1 PART I. FINANCIAL INFORMATION 1 Item 1 Consolidated Financial Statements (Unaudited) 4 Notes to Consolidated Financial Statements (Unaudited) 10 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3 Quantitative and Qualitative Disclosures About Market Risk 13 PART II. OTHER INFORMATION 13 Item 6 Exhibits and Reports on Form 8-K 13 Signatures 14 Exhibit 27 Financial Data Schedule ii PART I. FINANCIAL INFORMATION Item 1. Financial Statements Numatics, Incorporated Consolidated Statements of Operations

~~Page~~(Unaudited) ~~No.~~(Unaudited) ~~Description~~Three Months Ended Nine Months Ended September 30 September 30 ------------------------------- ------------------------------- 2000 1999 2000 1999 ----------- ----------- 1------------ ~~PART~~------------ I.Net ~~FINANCIAL~~sales ~~INFORMATION~~$36,596,534 1$35,249,776 ~~Item~~$113,300,074 1$103,694,410 ~~Consolidated~~Costs ~~Financial~~and ~~Statements~~expenses: ~~(Unaudited)~~Costs 4of ~~Notes~~products tosold ~~Consolidated~~22,897,103 ~~Financial~~22,178,135 ~~Statements~~70,249,923 ~~(Unaudited)~~64,597,935 10Marketing, ~~Item~~engineering, 2general ~~Management's~~and ~~Discussion~~administrative ~~and~~8,401,621 ~~Analysis~~7,817,142 of25,801,756 ~~Financial~~23,588,063 ~~Condition~~Single business tax 103,500 121,190 332,200 388,250 ----------- ----------- ------------ ------------ Operating income 5,194,310 5,133,309 16,916,195 15,120,162 Other expenses Interest and ~~Results~~other offinancing ~~Operations~~expenses 4,215,712 3,988,035 12,588,476 ~~Item~~11,991,628 3Other ~~Quantitative~~600,921 ~~and~~(403,567) ~~Qualitative~~1,644,098 ~~Disclosures~~936,557 ~~About~~----------- ~~Market~~----------- ~~Risk~~------------ 13------------ ~~PART~~Income ~~II.~~before ~~OTHER~~income ~~INFORMATION~~taxes 13377,677 ~~Item~~1,548,841 62,683,621 ~~Exhibits~~2,191,977 ~~and~~Income ~~Reports~~taxes on333,594 ~~Form~~570,989 81,453,084 1,153,278 -K---------- 13----------- ~~Signatures~~------------ 14------------ ~~Exhibit~~Net 27income ~~Financial~~$ ~~Data~~44,083 ~~Schedule~~$ 977,852 $ 1,230,537 $ 1,038,699 =========== =========== ============ ============

See accompanying notes. 1 Numatics, Incorporated Consolidated Balance Sheets

(Unaudited) ~~(Unaudited)~~September ~~Three~~30 ~~Months~~December ~~Ended~~31 ~~Six~~2000 ~~Months~~1999 ~~Ended June 30 June 30~~ ------------ ------------ ASSETS Current assets: Cash and equivalents $ 1,290,197 $ 1,552,063 Accounts receivable 26,173,552 23,964,195 Inventories 38,205,201 35,377,585 Other current assets 4,187,932 3,816,348 ------------ ------------ Total current assets 69,856,882 64,710,191 Other assets: Goodwill, net of accumulated amortization 5,465,727 6,123,496 Other intangible assets, net of accumulated amortization 4,548,523 5,217,320 Deferred income taxes 3,056,341 2,609,032 Investment in affiliates 2,192,646 2,294,454 Other 216,729 386,002 ------------ ------------ ~~2000~~15,479,966 ~~1999~~16,630,304 ~~2000~~Properties: ~~1999~~Land 1,354,907 1,489,357 Buildings and improvements 14,338,637 14,099,546 Machinery and equipment 51,318,462 48,190,493 ------------ --- --------- 67,012,006 63,779,396 Less accumulated depreciation (34,310,412) (30,567,303) ------ ------ ------------ 32,701,594 33,212,093 ------------ ------------ ~~Net sales~~ $ 39118,~~573~~038,~~749~~442 $ 34114,~~076~~552,~~759~~588 $============ ~~76,703,540~~============ $LIABILITIES ~~68,444,634~~AND ~~Costs~~ACCUMULATED ~~and~~DEFICIENCY ~~expenses~~Current liabilities: ~~Costs~~Accounts ofpayable ~~products~~trade ~~sold~~$ 247,~~896~~765,~~640~~564 20$ 10,~~697~~370,~~113~~630 47Accrued expenses 1,~~352~~951,~~820~~247 421,~~419~~601,~~800~~220 ~~Marketing~~Accrued interest 5,730,203 ~~engineering~~2,966,874 ~~general~~Compensation and ~~administrative~~employee ~~8,859,812~~benefits 74,~~998~~427,~~925~~162 174,~~400~~614,~~135~~723 ~~15,770,921~~Income ~~Single~~and single business tax ~~114~~1,~~600 128~~367,987 580,713 ~~228~~Current portion of long term debt 3,~~700~~360,147 ~~267~~3,~~060~~414,651 ------------- ------------- ~~-------------~~Total ~~-------------~~current ~~Operating~~liabilities ~~income 5~~24,~~702~~602,~~697~~310 523,~~252~~548,~~141~~811 ~~11,721,885~~Long 9term debt,~~986,853~~ ~~Other~~less ~~expenses~~current ~~Interest~~portion ~~and~~159,531,424 ~~other~~158,977,572 ~~financing~~Deferred ~~expenses~~retirement 4benefits 5,~~192~~959,~~186~~464 45,~~117~~173,~~599~~025 8Deferred income taxes - 63,~~372~~594 Minority interest in subsidiaries (redeemable upon the happening of certain events outside the control of the Company: $593,~~764~~228 8in 2000 and $1,~~003~~015,~~593~~818 ~~Other~~in ~~444~~1999) 734,~~075~~431 ~~402~~683,~~819~~987 1Common stock $.01 par value,~~043~~ 9,~~177~~950,000 1shares authorized; 2,~~340~~659,~~124~~575 ~~-------------~~shares ~~-------------~~outstanding ~~-------------~~and ~~-------------~~related ~~Income~~additional ~~before~~paid ~~income~~in ~~taxes~~capital 14,~~066~~602,~~436~~151 ~~731~~4,~~723~~602,151 2Accumulated deficiency (76,~~305~~982,~~944~~721) ~~643~~(78,~~136~~213,258) ~~Income~~Equity ~~taxes~~adjustment ~~558,708~~from ~~398,435~~foreign 1currency translation (408,~~119,490~~617) ~~582~~(283,~~289~~294) ------------- ------------- (72,789,187) (73,894,401) ------------- ------------- ~~Net income~~ $ ~~507~~118,~~728 $ 333~~038,~~288~~442 $ 1114,~~186~~552,~~454~~588 ~~$ 60,847~~ ============= ============~~= ============= =============~~

See accompanying notes. 2 Numatics, Incorporated Consolidated Statements of Cash Flows

(Unaudited) ~~June~~Nine 30Months ~~December~~Ended 31September ~~2000~~30 ~~1999~~ ------------- --------------- ~~ASSETS~~2000 ~~Current~~1999 ~~assets: Cash and equivalents $ 1,092,608 $ 1,552,063 Accounts receivable 26,670,077 23,964,195 Inventories 37,632,932 35,377,585 Other current assets 3,942,906 3,816,348~~ ------------- ------------- ~~Total~~Operating ~~current~~activities ~~assets~~Net 69income $ 1,~~338~~230,~~523~~537 64$ 1,~~710~~038,~~191~~699 ~~Other~~Adjustments ~~assets:~~to ~~Goodwill,~~reconcile net ofincome ~~accumulated~~to ~~amortization~~net 5cash provided by operating activities: Depreciation 4,~~743~~011,~~783~~120 63,~~123~~337,~~496~~413 ~~Other~~Amortization ~~intangible~~1,030,440 ~~assets~~923,688 ~~net~~Minority ofinterest ~~accumulated~~expense ~~amortization~~50,444 4141,~~729~~507 Deferred taxes (488,~~610~~512) 5(408,~~217,320~~459) Deferred ~~income~~retirement ~~taxes~~benefits 3786,~~051~~440 667,~~290~~569 2Unrealized foreign currency losses 1,~~609~~430,~~032~~901 ~~Investment~~698,765 Changes in ~~affiliates~~operating assets and liabilities: Trade receivables (2,~~182~~826,~~820~~522) (2,~~294~~019,~~454~~801) ~~Other~~Inventories ~~255~~(3,~~588~~835,714) ~~386~~(1,~~002~~577,010) ~~-------------~~Other ~~-------------~~current 15assets 146,~~963,091~~403 16(399,~~630,304~~133) ~~Properties:~~Accounts ~~Land~~payable 1and accrued expenses 740,~~372,269~~260 13,~~489~~169,~~357~~559 ~~Buildings~~Compensation and ~~improvements~~employee 14benefits (167,~~302,122~~433) 14(289,~~099,546~~496) ~~Machinery~~Income and ~~equipment~~single ~~50,663,223~~business 48taxes 576,190 1,~~493~~131,685 ------------- ------------- 66Net cash provided by operating activities 2,~~337~~684,~~614~~554 636,~~779~~414,~~396~~986 ~~Less~~Investing ~~accumulated~~activities ~~depreciation~~Capital expenditures (334,~~125~~033,~~514~~711) (305,~~567~~224,~~303~~026) ~~-------------~~Other ~~-------------~~investments 33218,~~212,100~~160 33(408,~~212,093~~486) ------------- ------------- $Net ~~118,513,714~~cash $used ~~114,552,588~~in ~~=============~~investing ~~=============~~activities ~~LIABILITIES AND ACCUMULATED DEFICIENCY Current liabilities: Accounts payable trade $ 9~~(3,~~709~~815,~~919~~551) ~~$ 10,370,630 Accrued expenses~~ (5,~~169~~632,~~892~~512) ~~4,568,094~~Financing ~~Compensation~~activities ~~and~~Proceeds ~~employee~~from ~~benefits~~long-term ~~4,556,298~~borrowing 41,~~614~~507,~~723~~208 ~~Income~~- ~~and~~Debt ~~single~~repayments ~~business tax 1~~(447,~~197,867~~518) ~~580~~(688,~~713~~347) ~~Current~~Debt ~~portion~~issuance ofcosts ~~long~~- ~~term debt 3~~63,~~361,401~~235 ~~3,414,651~~ ------------- ------------- ~~Total~~Net ~~current~~cash ~~liabilities~~provided ~~23,995,377~~by ~~23,548,811 Long term debt, less current portion 160,837,734 158,977,572 Deferred retirement benefits 5,680,652 5,173,025 Deferred income taxes -- 63,594 Minority interest in subsidiaries~~ (~~redeemable~~used ~~upon the happening of certain events outside the control of the Company: $657,436~~ in) ~~2000~~financing ~~and~~activities $1,~~015~~059,~~818~~690 ~~in 1999) 719,992 683,987 Common stock $.01 par value, 9,950,000 shares authorized; 2,659,575 shares outstanding and related additional paid in capital 4,602,151 4,602,151 Accumulated deficiency~~ (77625,~~026,804~~112) ~~(78,213,258)~~Effect ~~Equity~~of ~~adjustment~~exchange ~~from~~rate ~~foreign~~changes ~~currency~~on ~~translation~~cash (~~295~~190,~~388~~559) (~~283~~136,~~294~~329) ------------- ------------- Net increase (~~72,720,041~~decrease) in cash and equivalents (73261,~~894,401~~866) 21,033 Cash and equivalents at beginning of period 1,552,063 1,186,082 ------------- ------------- Cash and equivalents at end of period $ ~~118~~1,~~513~~290,~~714~~197 $ ~~114~~1,~~552~~207,~~588~~115 ============= =============

See accompanying notes. 3 NUMATICS, INCORPORATED Notes to Consolidated Financial Statements (Unaudited) September 30, 2000 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Numatics, Incorporated annual report on Form 10-K for the year ended December 31, 1999. The Financial Accounting Standards Board issued "Statements of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities." The Company plans to adopt this statement on January 1, 2001 with no material effect on the Company's financial statements. In December 1999, the SEC staff issued Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements. This bulletin has no effect on the Company's financial statements. 2. COMPREHENSIVE INCOME The components of comprehensive income for three-month and nine-month periods ended September 30, 2000 and 1999 are as follows:

~~(Unaudited)~~Three ~~Six~~Months Ended Nine Months Ended ~~June~~September 30 September 30 --------------------------- ~~2000 1999~~ ----------- -------------- ~~Operating~~2000 ~~activities~~1999 ~~Net~~2000 ~~income~~1999 $ 1,186,454 $ 60,847 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 2,683,648 2,265,979 Amortization 688,005 566,104 Minority interest expense 36,005 80,137 Deferred taxes (452,745) (320,509) Deferred retirement benefits 507,626 444,594 Unrealized foreign currency losses 1,006,654 1,134,926 Changes in operating assets and liabilities: Trade receivables (3,015,110) (2,084,743) Inventories (2,766,993) (1,370,435) Other current assets 533,570 30,023 Accounts payable and accrued expenses 34,065 983,785 Compensation and employee benefits (113,305) (615,977) Income and single business taxes 285,134 1,074,475 ----------- ----------- ~~Net cash provided by operating activities 613,008 2,249,206 Investing activities Capital expenditures (2,982,615) (3,850,448) Other investments 227,206 (402,838)~~ ----------- ----------- Net ~~cash~~earnings ~~used~~$ in44,083 ~~investing~~$ ~~activities~~977,852 (2$1,~~755~~230,~~409)~~537 (4$1,~~253~~038,~~286)~~699 ~~Financing~~Foreign ~~activities~~currency ~~Proceeds~~translation ~~from~~adjustments ~~long-term borrowing 2~~(113,~~685,000~~229) ~~2,144,860 Debt repayments~~ (~~781~~47,~~793~~639) (~~338~~125,~~072~~323) ~~Debt issuance costs -- 62~~336,~~783~~867 ----------- ----------- ~~Net cash provided by financing activities 1,903,207 1,869,571 Effect of exchange rate changes on cash (220,261) (167,413)~~ ----------- ----------- ~~Net~~$ ~~decrease in cash and equivalents~~ (~~459~~69,~~455~~146) ~~(301,922)~~$ ~~Cash and equivalents at beginning of period 1~~930,~~552,063~~213 $1,~~186~~105,~~082~~214 ~~----------- ----------- Cash and equivalents at end of period~~ $ 1,~~092~~375,~~608 $ 884,160 =========== ===========~~566

4 NUMATICS, INCORPORATED Notes to Consolidated Financial Statements (Unaudited) September 30, 2000 The components of accumulated comprehensive income at September 30, 2000 and December 31, 1999 are as follows: 9/30/2000 12/31/1999 ---------- ----------- Foreign currency translation adjustments $ (408,617) $ (283,294) ========== =========== 3. SEGMENT AND GEOGRAPHIC INFORMATION The Company reports its segments based on geographic area. The operating segments' accounting policies are consistent with those described in Note 1. Financial information, summarized by geographic area, is as follows:

Three Months Ended ~~Six~~Nine Months Ended ~~June~~September 30 ~~June~~September 30 ----------------------------~~----------~~ ----------------------------~~-----------~~ 2000 1999 2000 1999 ------------~~-----~~ ------------~~-----~~ ------------~~-----~~ ------------~~------~~ Net ~~earnings~~sales $North ~~507,728~~America $30,798,259 ~~333~~$30,~~288~~350,822 $ 196,~~186~~117,~~454~~441 $ 6087,~~847~~798,087 ~~Foreign~~International ~~currency translation adjustments (142~~5,~~462)~~798,275 ~~237~~4,~~956~~898,954 ~~(12~~17,~~094)~~182,633 ~~384~~15,~~506~~896,323 ------------ ------------ ------------ ------------ $ ~~365~~36,~~266~~596,534 $ ~~571~~35,~~244~~249,776 $ 1113,~~174~~300,~~360~~074 $ ~~445~~103,~~353~~694,410

6/Three Months Ended Nine Months Ended September 30/ September 30 ---------------------------- ---------------------------- 2000 ~~12/31/~~1999 2000 1999 ------------ ------------ ------------- ------------ ~~Foreign~~Operating ~~currency~~income ~~translation~~(loss) ~~adjustments~~North America $ 4,855,186 $ 5,280,010 $ 15,977,074 $ 15,427,084 International 339,124 (~~295~~146,~~388~~701) $939,121 (~~283~~306,~~294~~922) ~~=================~~------------ ~~=================~~------------ ------------ ------------ $ 5,194,310 $ 5,133,309 $ 16,916,195 $ 15,120,162

5 NUMATICS, INCORPORATED Notes to Consolidated Financial Statements (Unaudited) September 30, 2000 4. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES The $115 million of 9 5/8 % senior subordinated notes issued by Numatics, Incorporated in 1998 are guaranteed by the Company's United States subsidiaries in which it owns 100 % of the voting stock. Each of the Guarantor Subsidiaries has fully and unconditionally guaranteed, on a joint and several basis, the obligation to pay principal, premium, if any, and interest on the Notes. The following supplemental consolidating condensed financial statements present: 1. Consolidating condensed balance sheets as of September 30, 2000 and December 31, 1999, consolidating condensed statements of operations for the three and nine month periods ended September 30, 2000 and 1999 and consolidating condensed statements of cash flows for the nine months ended September 30, 2000 and 1999. 2. Numatics, Incorporated (the Parent), combined Guarantor Subsidiaries and combined Non-Guarantor Subsidiaries (consisting of the Parent's foreign subsidiaries). 3. Elimination entries necessary to consolidate the Parent and all of its subsidiaries. Management does not believe that separate financial statements of the Guarantor Subsidiaries are material to investors. Therefore, separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented. 6 NUMATICS, INCORPORATED Notes to Consolidated Financial Statements (Unaudited) September 30, 2000 4. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (continued) BALANCE SHEET September 30, 2000

~~Three~~Non- ~~Months~~Guarantor ~~Ended~~Guarantor ~~Six~~Parent ~~Months~~Subsidiaries ~~Ended~~Subsidiaries ~~June~~Eliminations 30Consolidated ~~June 30~~ ------------------------------------------- ------------------------------- Trade receivables $ 15,094,814 $2,474,697 $ 8,604,041 $ -~~----------~~ ~~2000~~$ ~~1999~~26,173,552 ~~2000~~Inventories ~~1999~~22,507,006 4,674,050 12,237,145 (1,213,000) 38,205,201 Other 3,359,073 535,783 1,583,273 - 5,478,129 ------------------- -------------------- -------------------- ---------------~~----~~ ~~Net~~Total ~~sales~~current ~~North~~assets ~~America~~40,960,893 $7,684,530 3422,~~127~~424,~~898~~459 $(1,213,000) 2869,~~987~~856,~~267~~882 $Goodwill, 65net of accumulated amortization 1,~~319~~361,~~182~~592 $- 572,~~447~~700,~~265~~460 ~~International~~1,403,675 5,~~445~~465,~~851~~727 5Other 20,~~089~~882,~~492~~378 40,573 696,897 (11,~~384~~605,~~358~~609) 10,~~997~~014,~~369~~239 ~~-------------~~Intercompany ~~-------------~~amounts ~~------------- ------------- $ 39~~25,~~573~~166,~~749~~356 $540,243 343,~~076~~669,~~759~~241 ~~$ 76~~(29,~~703~~375,~~540~~840) $- 68Property,~~444,634~~ ~~Three~~plant ~~Months~~and ~~Ended~~equipment, ~~Six~~net ~~Months~~of ~~Ended~~accumulated ~~June~~depreciation 3027,148,846 ~~June~~1,108,348 304,444,400 - 32,701,594 ------------------------------------------ -------------------------------- $115,520,065 $9,373,694 $33,935,457 $(40,790,774) $118,038,442 ========================================================================== Accounts payable and accrued expenses $ 11,399,781 $1,099,587 $ 2,947,646 - $ 15,447,014 Compensation and employee benefits 2,988,846 157,256 1,281,060 - 4,427,162 Current portion of long-term debt 2,804,801 - 522,346 -~~-----~~ ~~2000~~3,360,147 ~~1999~~Other ~~2000~~707,154 ~~1999~~(766) 661,599 - 1,367,987 ------------------- -------------------- -------------------- --------------- Total current liabilities 17,900,582 1,256,077 5,445,651 - 24,602,310 Long---term ~~Operating~~debt ~~income~~less ~~(loss)~~current ~~North~~portion ~~America~~153,444,895 $277,024 5,~~499~~809,~~615~~505 $- 159,531,424 Other 5,~~331~~959,~~013~~464 $- 11- 734,~~121~~431 6,~~888~~693,895 $Intercompany 10amounts 11,~~147~~424,~~074~~487 ~~International~~4,429,812 ~~203~~13,~~082~~521,541 (7829,~~872~~375,840) ~~599~~- Accumulated earnings (deficiency) (73,~~997~~209,363) 3,410,781 9,158,760 (~~160~~12,~~221~~149,365) (72,789,187) ------------- ------------- ------------- ----------------------------------- $ 5115,~~702~~520,~~697~~065 $ 59,~~252~~373,~~141~~694 $ 1133,~~721~~935,~~885~~457 $(40,790,774) 9$118,~~986~~038,~~853~~442 ==========================================================================

BALANCE SHEET December 31, 1999

~~BALANCE SHEET June 30, 2000~~ Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated -------------------------------------------------------------------------~~-------~~ Trade receivables $ ~~14,642,374 $ 2,599,910 $ 9,427,793 $ -- $ 26,670,077 Inventories 21,372,825 4,919,179~~ 12,567,928 (1,227,000) 37,632,932 Other 3,411,957 422,340 1,201,217 -- 5,035,514 -------------------------------------------------------------------------------- Total current assets 39,427,156 7,941,429 23,196,938 (1,227,000) 69,338,523 Goodwill, net of accumulated amortization 1,384,155 -- 2,900,387 1,459,241 5,743,783 Other 21,078,330 40,572 706,015 (11,605,609) 10,219,308 Intercompany amounts 26,151,087 518,521 4,520,647 (31,190,255) -- Property, plant and equipment, net of accumulated depreciation 27,661,689 1,030,865 4,519,546 -- 33,212,100 -------------------------------------------------------------------------------- $ 115,702,417 $ 9,531,387 $ 35,843,533 $ (42,563,623) $ 118,513,714 ================================================================================ Accounts payable and accrued expenses $ 9,695,496 $ 1,047,366 $ 4,136,949 $ -- $ 14,879,811 Compensation and employee benefits 3,008,222 159,902 1,388,174 -- 4,556,298 Current portion of long-term debt 2,789,380 -- 572,021 -- 3,361,401 Other 539,904 109,434 548,529 -- 1,197,867 -------------------------------------------------------------------------------- Total current liabilities 16,033,002 1,316,702 6,645,673 -- 23,995,377 Long-term debt less current portion 154,644,894 316,426 5,876,414 -- 160,837,734 Other 5,680,652 -- -- 719,992 6,400,644 Intercompany amounts 12,410,462 4,505,628 14,274,165 (31,190,255) -- Accumulated earnings (deficiency) (73,066,593) 3,392,631 9,047,281 (12,093,360) (72,720,041) -------------------------------------------------------------------------------- $ 115,702,417 $ 9,531,387 $ 35,843,533 $ (42,563,623) $ 118,513,714 ================================================================================ December 31, 1999 Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated -------------------------------------------------------------------------------- Trade receivables $ 12,880,427 $ 2,837,294 $ 8,246,474 $ -- $ 23,964,195 Inventories 19,558,547 4,752,589 12,404,449 (1,338,000) 35,377,585 Other 3,237,081 620,917 1,510,413 -- 5,368,411 -------------------------------------------------------------------------~~-------~~ Total current assets 35,676,055 8,210,800 22,161,336 (1,338,000) 64,710,191 Goodwill, net of accumulated amortization 1,429,281 -- 3,123,842 1,570,373 6,123,496 Other 19,611,630 40,172 178,188 (9,323,182) 10,506,808 Intercompany amounts 25,530,618 466,158 4,234,758 (30,231,534) -- Property, plant and equipment, net of accumulated depreciation 27,343,326 959,693 4,909,074 -- 33,212,093 -------------------------------------------------------------------------~~-------~~ $ 109,590,910 $ 9,676,823 $ 34,607,198 $ (39,322,343) $ 114,552,588 ~~================================================================================~~------------------------------------------------------------------------- Accounts payable and accrued expenses $ 10,313,402 $ 1,287,689 $ 3,337,633 $ -- $ 14,938,724 Compensation and employee benefits 3,072,524 158,014 1,384,185 -- 4,614,723 Current portion of long-term debt 2,843,227 -- 571,424 -- 3,414,651 Other 392,003 80,034 108,676 -- 580,713 -------------------------------------------------------------------------~~-------~~ Total current liabilities 16,621,156 1,525,737 5,401,918 -- 23,548,811 Long-term debt less current portion 152,003,109 354,414 6,620,049 -- 158,977,572 Other 5,173,025 -- 63,595 683,986 5,920,606 Intercompany amounts 9,460,130 4,628,788 16,142,616 (30,231,534) -- Accumulated earnings (deficiency) (73,666,510) 3,167,884 6,379,020 (9,774,795) (73,894,401) -------------------------------------------------------------------------~~-------~~ $ 109,590,910 $ 9,676,823 $ 34,607,198 $ (39,322,343) $ 114,552,588 =========================================================================~~=======~~

7 NUMATICS, INCORPORATED Notes to Consolidated Financial Statements (Unaudited) September 30, 2000 4. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (continued) STATEMENT OF OPERATIONS Three Months Ended September 30, 2000

~~STATEMENT OF OPERATIONS Three Months Ended June 30, 2000~~ Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated ----------------------------------------------------------------------~~--------~~ Net sales $~~28,888,758~~ ~~$ 5~~26,~~174~~235,~~270~~086 $~~13,051,721~~ ~~$(7~~4,~~541~~746,~~000)~~430 $ ~~39,573,749 Costs and expenses 24,143,822 4,957,014~~ 12,~~097~~676,~~650~~018 (7,327,434) 33,871,052 ------------------------------------------------------------------------------ Operating income 4,744,936 217,256 954,071 (213,566) 5,702,697 Interest and other 4,341,371 91,030 753,221 9,347 5,194,969 ------------------------------------------------------------------------------ Net income $ ~~403,565 $ 126,226 $ 200,850 $~~ (222,913) $ 507,728 ============================================================================== Three Months Ended June 30, 1999 Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated ------------------------------------------------------------------------------ Net sales $24,474,859 $ 5,273,787 $12,058,113 $(7,~~730~~061,000) $ 3436,~~076~~596,~~759~~534 Costs and expenses 2022,~~179~~047,~~887~~199 4,~~798~~725,~~797~~032 11,~~489~~649,~~262~~427 (7,~~643~~019,~~328~~434) 2831,~~824~~402,~~618~~224 ----------------------------------------------------------------------~~--------~~ Operating income 4,~~294~~187,~~972~~887 ~~474~~21,~~990~~398 ~~568~~1,~~851~~026,591 (8641,~~672~~566) 5,~~252~~194,~~141~~310 Interest and other 4,~~108~~330,~~877~~655 ~~179~~3,~~642~~246 ~~581~~801,~~891~~887 4814,~~443~~439 45,~~918~~150,~~853~~227 ----------------------------------------------------------------------~~--------~~ Net income (loss) $ ~~186,095 $ 295,348 $~~ (13142,~~040~~768) $ ~~(135~~18,~~115)~~152 $ 333,288 ============================================================================== Six Months Ended June 30, 2000 Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated ------------------------------------------------------------------------------ Net sales $ 55,655,911 $ 9,848,541 $ 26,270,088 $(15,071,000) $ 76,703,540 Costs and expenses 46,375,860 9,444,878 24,231,785 (15,070,868) 64,981,655 ------------------------------------------------------------------------------ Operating income 9,280,051 403,663 2,038,303 (132) 11,721,885 Interest and other 8,688,889 178,915 1,631,622 36,005 10,535,431 ------------------------------------------------------------------------------ Net income $ 591,162 $ 224,~~748~~704 $ ~~406,681 $~~ (3656,~~137~~005) $ 144,~~186,454~~083 ============================================================================== Six Months Ended June 30, 1999 Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated ------------------------------------------------------------------------------ Net sales $48,423,265 $ 9,106,642 $24,073,727 $(13,159,000) $ 68,444,634 Costs and expenses 39,953,486 8,421,475 22,974,476 (12,891,656) 58,457,781 ------------------------------------------------------------------------------ Operating income 8,469,779 685,167 1,099,251 (267,344) 9,986,853 Interest and other 8,269,318 256,574 1,319,977 80,137 9,926,006 ------------------------------------------------------------------------------ Net income (loss) $ 200,461 $ 428,593 $ (220,726) $ (347,481) $ 60,847 ==============================================================================

STATEMENT OF OPERATIONS Three Months Ended September 30, 1999

~~STATEMENT OF CASH FLOWS Six Months ended June 30, 2000~~ Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated ---------------------------------------------------------------------~~---------~~ Net ~~cash~~sales ~~provided by operating activities~~ $ ~~102~~25,~~577 $ 132~~588,~~325~~272 $ ~~378~~4,~~106~~928,220 $ ~~-- $ 613~~11,~~008 Cash flows from investing activities: Capital expenditures (2~~751,~~539,982)~~284 ~~(205,488)~~$ (~~237~~7,~~145) -- (2~~018,982,615) Other investments 227,596 (400) 10 -- 227,206 ---------------------------------------------------------------------------- Net cash used in investing activities (2,312,386) (205,888) (237,135) -- (2,755,409) Cash flows from financing activities: Proceeds from borrowing 2,685,000 ~~-- -- -- 2,685,000 Debt repayments (340,647~~) ~~(37,988)~~$ ~~(403~~35,~~158) -- (781~~249,~~793)~~776 ~~Other~~Costs --and --expenses ~~(36~~21,~~065) (184~~271,~~196)~~950 ~~(220~~4,~~261) ---------------------------------------------------------------------------- Net cash provided by (used in) financing activities 2~~385,~~344,353~~115 ~~(37~~11,~~988) (439~~369,~~223)~~730 (~~184~~6,~~196) 1~~910,~~682,946 Intercompany accounts (37,436~~328) ~~(175~~30,524) 28,764 184,196 -- ---------------------------------------------------------------------------- Net increase (decrease) in cash 97,108 (287,075) (269,488) -- (459,455) ---------------------------------------------------------------------------- Cash and equivalents at beginning of year 116,~~240~~467 ~~531,357 904,466~~ -- ~~1,552,063~~ -------------------------------------------------------------------~~---------~~ ~~Cash~~Operating ~~and~~income ~~equivalents at end of period $ 213~~4,~~348 $ 244~~316,~~282~~322 ~~$ 634~~543,~~978~~105 ~~$ -- $ 1~~381,~~092,608~~554 ============================================================================ Six Months ended June 30, 1999 Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated ------------------------------------------------------------------------------ Net cash provided by (~~used in) operating activities $ 1~~107,~~952,476 $ 436,419 $ (139,689~~672) ~~$ -- $ 2~~5,~~249~~133,~~206~~309 ~~Cash~~Interest ~~flows~~and ~~from~~other ~~investing activities: Capital expenditures (~~3,~~167~~852,~~026)~~929 ~~(279~~226,~~725)~~479 ~~(403,697) -- (3,850,448) Other investments (490,984) 73,417~~ 14,~~729~~679 ~~-- (402~~61,~~838)~~370 ~~------------------------------------------------------------------------------ Net cash used in investing activities (3,658,010) (206,308) (388,968) -- (~~4,253,286) Cash flows from financing activities: Proceeds from borrowing 1,912,420 -- 232,440 -- 2,144,860 Debt repayments (338,072) -- -- -- (338,072) Debt issuance costs -- -- 62,783 -- 62,783 Other -- -- (32,667) (134,746) (167,413) ------------------------------------------------------------------------------ Net cash provided by (used in) financing activities 1,574,348 -- 262,556 (134,746) 1,702,158 Intercompany accounts 152,672 (155,~~274)~~457 ~~(132,144) 134,746~~ -- -------------------------------------------------------------------~~-----------~~ Net ~~increase~~income ~~(decrease)~~$ ~~in cash 21~~463,~~486~~393 74,837 (398,245) -- (301,922) ------------------------------------------------------------------------------ Cash and equivalents at beginning of year 111,491 133,589 941,002 -- 1,186,082 ------------------------------------------------------------------------------ Cash and equivalents at end of period $ ~~132~~316,~~977~~626 $ ~~208~~366,~~426~~875 $ ~~542~~(169,~~757~~042) $ ~~-- $ 884~~977,~~160~~852 =====================================================================~~=========~~

STATEMENT OF OPERATIONS Nine Months Ended September 30, 2000

STATEMENT OF OPERATIONS Nine Months Ended September 30, 1999

8 NUMATICS, INCORPORATED Notes to Consolidated Financial Statements (Unaudited) September 30, 2000 4. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (continued) STATEMENT OF CASH FLOWS Nine Months ended September 30, 2000

STATEMENT OF CASH FLOWS Nine Months ended September 30, 1999

9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended September 30, 2000 Compared With Three Months Ended September 30, 1999 Net Sales. Net sales of $36.6 million for the three months ended September 30, 2000 were 3.8% higher than the $35.2 million in the same period of 1999. Net sales of traditional valve products increased 3.3% or $0.6 million while net sales of cylinder products increased 14.4% or $0.7 million and other sales remained constant. North American sales increased 1.5% or $0.4 million and international sales increased 18.4% or $0.9 million. Gross Profit. Gross profit was $13.7 million, or 37.4% of net sales, for the three months ended September 30, 2000 compared with $13.1 million, or 37.1% of net sales, in the same period of 1999. This increase resulted from volume efficiencies on the increased sales. Marketing, Engineering, General and Administrative. Marketing, engineering, general and administrative expenses were $8.4 million for the three months ended September 30, 2000, $0.6 million higher than the same period in 1999. The implementation of a new enterprise-wide computer system at the U.S. Valves and FRL divisions in the first quarter, 2000 accounted for the majority of the increase. Incremental ongoing costs related to this implementation were approximately $0.3 million per quarter. Additionally, the Company incurred approximately $0.1 million in one-time costs related to the implementation and enhancements to the system this quarter. Operating Income. Operating income for the three months ended September 30, 2000 was $5.2 million compared to $5.1 million in the same period in 1999. This $0.1 million increase was primarily due to the increased sales for the period, offset by higher marketing, engineering, general and administrative expenses. Operating income in North America decreased $0.4 million, or 8.0%, and the international segment's operating income increased $0.5 million. Interest and Other Financing Expenses. Interest expense increased $0.2 million to $4.2 million in the third quarter of 2000 from $4.0 million in 1999 as a result of the general increase in interest rates. Other Expense. Other expense of $0.6 million for the three months ended September 30, 2000 was attributable to unrealized foreign exchange losses which resulted from the strengthening of the U.S. dollar against major foreign currencies, compared to an unrealized foreign exchange gain of $0.4 million for the three months ended September 30, 1999. 10 Net Income. Due to the factors discussed above, net income decreased $0.9 million, to near break-even during the three months ended September 30, 2000 from $1.0 million in the third quarter of 1999. Nine Months Ended September 30, 2000 Compared With Nine Months Ended September 30, 1999 Net Sales. Net sales of $113.3 million for the nine months ended September 30, 2000 were 9.3% higher than the $103.7 million in the same period of 1999 principally due to the rebound of the pneumatic market and product and market expansions. Net sales of traditional valve products increased 4.8% or $2.8 million while net sales of other products increased 9.7% or $3.0 million and cylinder sales increased 26.4% or $3.8 million. North American sales increased 9.5% or $8.3 million and international sales increased 8.1% or $1.3 million. Gross Profit. Gross profit was $43.1 million, or 38.0% of net sales, for the nine months ended September 30, 2000 compared with $39.1 million, or 37.7% of net sales, in the same period of 1999. Efficiencies related to the increased sales level contributed to this improvement in gross margin. Marketing, Engineering, General and Administrative. Marketing, engineering, general and administrative expenses were $25.8 million for the nine months ended September 30, 2000, $2.2 million higher than the $23.6 million in the same period of 1999. This increase was primarily attributable to expanded marketing programs, professional fees, and costs associated with the implementation of a new enterprise-wide computer system at the U.S. Valves and FRL divisions in the first quarter, 2000. Incremental ongoing costs related to the computer system were $1.0 million while incremental one-time costs for implementation and enhancements to the system were $0.6 million Operating Income. Operating income for the nine months ended September 30, 2000 was $16.9 million compared to $15.1 million in the same period in 1999. This $1.8 million increase was primarily due to the increased sales levels. Operating income in North America increased $0.6 million, or 3.6%, while the international segment's operating income increased $1.2 million. Interest and Other Financing Expenses. Interest expense increased $0.6 million to $12.6 million in the first nine months of 2000 from $12.0 million in 1999 as a result of the general increase in interest rates. Other Expense. Other expense of $1.6 million for the nine months ended September 30, 2000 was attributable to unrealized foreign exchange losses, which resulted from the strengthening of the U.S. dollar against major foreign currencies, compared to $0.9 million in the nine months ended September 30, 1999. 11 Net Income. Due to the factors discussed above, net income increased $0.2 million, to $1.2 million during the nine months ended September 30, 2000 from $1.0 million in the first nine months of 1999. Liquidity and Capital Resources Historically, the Company has utilized cash from operations and borrowings under its credit facilities to satisfy its operating and capital needs and to service its indebtedness. Working capital was $45.3 million at September 30, 2000 compared to $41.2 million at December 31, 1999. The increase was primarily attributable to a $2.2 million increase in accounts receivable and a $2.8 million increase in inventories, offset by a $0.8 million increase in the liability for income and single business tax. Total assets were $118.0 million at September 30, 2000 compared to $114.6 million at December 31, 1999. This increase was mainly due to the changes in accounts receivable and inventory mentioned above. Total debt outstanding was $162.8 million at September 30, 2000 compared to $162.4 million at December 31, 1999. This increase was used primarily to fund the increases in the Company's working capital. The Company estimates that the borrowing base limitations would have limited the Company's revolving credit availability to approximately $34.4 million as of September 30, 2000. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the information that would be provided under Item 305 of Regulation S-K from the end of the preceding fiscal year to September 30, 2000. 12 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Description ------- ----------- 10.8.1 Numatics, Incorporated Incentive Plan adopted June 29, 2000 ** 61,000 shares offered at $17.50, 4 year vesting 10.8.2 Form of Stock Transfer Agreement referred to in Incentive Plan ** 27 Financial Data Schedule ** Indicates contract or compensatory plan or arrangement with one or more Numatics executive officers and/or directors (b) Reports on Form 8-K: No reports on Form 8-K were filed by the Company during the three months ended September 30, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NUMATICS, INCORPORATED By: /s/ Robert P. Robeson --------------------------------- Robert P. Robeson Vice President, Treasurer and Chief Financial Officer Date: November 7, 2000 ------------------------------ 13

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