IEX - Earnings call transcript Q3 2018

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Operator

Greetings and welcome to the Third Quarter 2018 IDEX Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mike Yates, Chief Accounting Officer.

begin. may You

Michael J. Yates

Good President Sherry. This Mike is Thank Chief morning, Accounting Vice and Corporation. Officer Yates, you, everyone. for IDEX

start a performance on press for you thank outlining our the financial by three and our release Last me operating financial highlights. issued of quarter IDEX months for we night, the company's discussion third Let joining saying ending XX-Q. to along accessed release, presentation slides company's The be can September during our with XX, webcast, XXXX; and www.idexcorp.com. later today, at press we will file today's used our website the be

then we strategies; update each Andy with performance me today wrap operating discuss The third and deployment our Joining through walk finally, quarter today within an will and the for overview and CEO; on capital Bill our an fourth Andy he for our and financial is is will Officer. you market segments; Silvernail, our Financial conditions, quarter with Chairman results our follows: and the we full-year an the begin and XXXX. geographies Chief as outlook up call Grogan, of providing our format and will

open Following the for will your prepared questions. call the remarks, we

a for call company's two by should or our may exit you replay. to conference number may beginning entering toll-free to ID number any the webcast simply on homepage hours XXXXXXXX, dialing you replay the need you reason, access after If the concludes log complete approximately for the call XXX-XXX-XXXX and

release and IDEX's with call today's Exchange are subject Silvernail. to that, to language turn Before and night's in Harbor Andy call Commission. contain that and our filings over I'll a statements the we may in begin, Chairman the Securities With brief CEO, press certain the reminder, Safe forward-looking last

Andrew K. Silvernail

to Thank you, everybody. results. us morning, good appreciate our here I Mike, third joining XXXX discuss quarter you and

later on, results call also business of as these really our start Overall, positive. think landscape me questions with that remains points through today we And the go key the our brief some very think I of guidance. and a matter. and organic Let summary I the are

Our strong The to and off. pay targeted all of are continue fundamentally markets see growth investments our growth geographies. continue end across to we economics

is our powder to we ample drive dry balance long-term framework have sheet shareholders. across inflation Tariffs are play value to and strong for Our ramping. and

the teams to Our pressure. the have inbound ahead pricing and been remain able productivity through offset to actions headwinds of

variable excess to Finally, our rate $X.XX effective revise the favorability In than In of we that stock quarters impacted related versus (XX:XX:XX) estimate guide. third tax associated our drove EPSB our third the assumptions guide in $X.XX pressure we in the tax the reform. of more benefit repatriation have compensation to to and a tax a quarter, due rate have with tax by for fourth fourth had quarter, EPS been approximately normal. our

overall, highlights. for outperformed we $X.XX of pleased of X% sales and up the to details our and our previous in However, be The is line team, by our Adjusted it you in orders markets. some ETR again, adjusted first our conditions, XXX% continue our IDEX. we to end of growth XXX Sales about quarter. healthy QX were another the very $X.XX, op achieved had was and Orders along couple right, margin $XXX still momentum with for higher organically. up, both great performance our up walk minute. that by results organic our we guidance. outstanding organically. quarter a that guidance, a results impacted results day, here $X.XX board. which our XX%. the execution All We $X.XX full-year high-single-digit was full-year midpoint is strong guidance. we're XX% and the some are the shortly. onto Free drove net raising than the were was in items expected overall, basis here talk We, and I be Continuing market up for rates exceeded had cash of is XX%, our with through the once which with the points which income, is was half, million, quarter. At X% record, was across I'll I'll Adjusted were X% X% operating EPS flow another QX of or

pay and targeted across growth dividends, Our high-single-digit in rates to our sales we're driving growth continue orders business. efforts

on us few We Finally, from by results. see and our it's Great shareholders. the businesses allows after separates the units, critical to throughout be what their that in our IDEX difference are example and continues for the competition deliver employees example catalyst initiatives us teams, driven customers. our for behind to focused our our

line fuels seeing North across and on Water our remains we're activity continue at science innovation. industrial quarter, in across day expansion minute full. with and in Optics, In the is petroleum to new drive seeing Now, Energy project we're in product the and have grown business the across The and DNA commercial project underlying what is IVD/Bio intimacy in and market fire I'd to take like just Fluidics life through high ship emerging drive levels, & The Scientific our continue in healthy, customer to liquid Municipal, market stabilizing, geographies remains to markets remains globe. the growth. businesses a well to performed American gas, refined focus sequencing favorable, continue healthy and and the funnel has economic rescue investments we conditions is and and sales with the a our targeted do market In strong, our our turn book rates we've development growth initiatives conditions we rebounded teams If all you and oil through within be rising in. outlook, aviation. geographic and walk we regions markets markets for stable, prices the activity serve that bottom

close overall factors impact we several could the eye that keeping environment. on However, growth our are

remainder two and outperform As we the productivity have expect committed estimate volatile, markets. XXXX. future said, of our into through IDEX. we we affect could economy deeper the get as price With for our growth aggressive impact, look uncertainty. an offset real to we items We've impact. for ramifications potential we tariffs, the overall the that Regardless global concern any environment, is a to that remain and continues trajectory. million on and are We'll Inflation successful to the inflation to at realization. mitigating IDEX actions external continue central trade the of approximately best risk monitor impact an remains negatively eye to for which banks from are but $X in been the current These we keep

the that valuations. to quarterly challenged on we're quick to remains with the turn comment I for Overall, results, a in it due M&A. a environment top just Before but remains us, focus

Our teams only deals, hard deals are to that cultivation to fit into and do several at disciplined criteria. both at and our evaluation work we're of going going but remain we're

focus the always deliver Our our has and to will be shareholders. returns best to possible

strong, it. we'll balance deal and the on is right when Our comes capitalize along, sheet very

Okay.

all development. op XXX X% by slide $X.XX. in was turn XX%, million, to due points revenues expanded income Let's which investments is related Adjusted engineering was overall, new partially year. leverage to offset margin volume over in up QX basis $XXX of million, and last resulting net product XX%, up EPS primarily in gross three on $XXX by QX by segments. third I'm outperformance basis to X. quarter production X% We points margin up efficiencies XX to organically, driven results, to were

If you exclude up restructuring, or last adjusted EPS over XX% was $X.XX, $X.XX year.

is higher which from the than rate Our options the enactment XXXX stock tax XX.X%, benefit at due QX end effective and year in year, the tax last mainly the XX.X% of excess period. tax last lower was reform of to

our guidance. it adjusted was net million, and ETR for driven of favorability $X.XX previously amount. was lower was solid of the XXX cash basis quarter by EPS of third to compared than the $XXX two XXX% points midpoint a $X.XX income $X.XX of The impacted operations. favorability was The accounted of by out XX.X% It guided flow remaining our of Free items. EPS

capacity we plan to remains times sheet, of accelerated balance to. healthy. revolver $XX and have the us take strong deploy leverage net regards for leverage well very free in X.X debt right. made and in All flow cash we're $XX to debt a million we growth; of contribution CapEx invested to is able X.X it balance our million discretionary The over Gross our billion In deductions. combination months advantage the times. is position pension if a a of to next benefit XX $X.X sheet, and First, primarily second, defined in

for for basis Fluid quarter, a really array XX.X%, up XX% both segment orders, have the OEMs the and start business our business, here restructuring, & and conditions been at organically. and Let's the Orders by and wins up last into solid continues another Energy, gaining we'll were strong are outlook. perform digits have revenue. good our also we orders in had the up and well U.S. right. chemical strong and numbers XX% performance orders Sales confirmed strong the of oil look in quarter, Op really margin, and up on was optimistic signal Look, traction Ag Metering and X% and you In double quarter if sales. double-digits discussions, up up but future, Industrial a and XXX the turn driven of Pump with momentum Energy, for markets. slide the I'm Fluids points had businesses, that's remained had and in wide market project year, X, was to for in efforts X%, the the gas our orders principally targeted had All that overall, over favorable distribution great future. growth pre-season driving in organically. to exclude were a and and has sales, FMT.

QX also I'm to X. I Health Health very Science. orders with at X% organically. performance on were organically. X% go the overall, Let's here was up overall, & & Sales X% pleased on X% Science, up were slide

work and HST adjusted basis us Science business customers. Optics, is had their technology are in higher side, our growth the and to increased and In some industrial, in strong integration well product Lakes MPT, team are the automotive although outpacing IVD/Bio due op some in continues it well. we collaboration offerings serve we margin double-digit to Finger great in acquisition, expense, third the our pharma were in growing These perform the new XXX in In at Optics we restructuring that in to slowdown overall and Solutions, large Life our our driven And and by single order semicon, activity a due a still some oil going Sealing industrial businesses points by helping sales India. Gast. in and the markets, Life in is to with commercial Excluding wins. The food seen development achieved quarter, And customers. XX.X% end by digits. and are product have that already pickup better growth gas seeing The volume new targeted Science & in although productivity. the finally, markets development

I'm overall, XX% organically. our organically. X% X. on I'm X% segment, were were Diversified. Okay. QX slide orders up XX% overall, last revenues on QX up

energy some adjusted the the we steady. North BAND-IT, of third the industrial If Fire exclude is In and quarter, continues posted significant But growth growth volume orders quarter was some a In somewhat see some positive meaningful business some that had into the move fourth last driven business when versus between we restructuring, OEM of this and remains quarter, be I'm constraint for XXX and in globe. volume quarters nice to finally, can run above have of orders again about world though the Dispensing, third Safety, Dispensing, the project sure into for And the attributable supply third drove and double-digit we which by year op even in Fire wins the and margin fourth their posted revenue chain. increased in you the last year, over sales talk did here, right. Dispensing out and OEM and growth there that question-and-answer project did was amount to while get we rest basis XX.X%, volume and points strong we and America push again that. the sales pull quarter in continues Rescue And stable, around rates expectations. are All to recover, at The & productivity.

in with here for comments $XX X%. approximately organic conclude and revenue we'll a X. growth the The expected the from on expected revenue from net be interpretation, a Op top-line are FX fourth finally, free and headwind approximately tax effective to with in be capital volatility should in also reform. the $X.XX to X% of Let's and expected In rates. that organic we're based pressure could And million providing $X.XX EPS it headwind a and to We'll ranging XX%, year. September guided based high-end IRS due X% from in is the cash growth X% is in have for that XXX% quarter EPS estimating corporate before. XX%. the everybody $X.XX by costs $X.XX from and X% some the the related year. end on margin primarily slide This $XX the tailwind increased turn at noted. tax on the million with be around costs to approximately numbers about $XX mentioned be pension to on overall as and I I QX September and will on QX $XX million the driven This that overall, the be the $XX some range. million of distribution full-year, still we revised think guidance the $X.XX around knows tax approximately is be be the tax is fourth associated the tax repatriation is to If XXXX working operating expenditures have of flow to be as $X.XX the on the fourth range is expected XX $X.XX. we quarter. to to corporate be rates to will previous increased XX we've rate, Full-year we low-end so effective guidance XX%. to over through full-year the FX our rate is taxes full-year now CapEx to assumptions the there up of X% anticipated We income The we're XX%, previously. quarter. get QX to to to the margin guidance, due our But million I'm

let With any you always, costs excludes and, to As guidance future our we or it acquisitions that Sherry, me let pause any here for have. of that, me associated earnings turn restructuring. questions back

Operator

Thank you.

Our Please with is Halloran Mike first question W. Robert Company. from Baird & proceed.

Mike P. Halloran

guys. morning, Good

Andrew K. Silvernail

Mike. morning, Good

Mike P. Halloran

strong but strong right rates indicator-type perspective order we on that. don't are seems like just talk prepared internally. still of why the leading you lot mentioned certainly order about It volatility of in some and Andy, things So, your Obviously, where with rates cyclically now? the are remarks, BAND-IT more a from really like businesses, you the tariffs

your some of just means are dynamics on we it where underlying right and now. color you cyclically So, for sustainability think what the

Andrew K. Silvernail

You bet.

Mike, So, things think that there important. I are are really three

very the got we've a pretty we're cycle bumping actually issue against, overall is, long cycle folks kind sitting is, up one that in we've bit with relative the industrial the that of a young. are first is The normal quite what where we still a like. talked but cycle And to about looks cycle

two a really If about, just of we're years recession. tough you industrial think out

of And think so, that, conversation. I the cyclical kind overall, clouds that overall

as So, you that's still comps, quarter... you business two, find into good, weak get Number really And indicators run across number you're one. businesses meaning, fourth of – are this, into you it's within spots. our strength just struggling the you the look look, the board, at into if to the further get quite

Mike P. Halloran

Yeah.

Andrew K. Silvernail

go healthy, – generally ...comps the difficult. markets places in healthy, But indicators soft I and into spot. find a think very are markets. of That's we in we which prepared – are the reality and, emerging the the the the But some I more danger. exceptions become play, to XXXX, think become mentioned in difficult. get that geographies two hard then inflation with the where comps you are. of And the the items it's just that's And of my tariffs I boy, remarks are hand-in-hand. that course,

down you I our that's the rising would creates four young time, and in weeks. both market a cycle. $XX think of strength you at look inflation concerned, rolling which concerned. where at right. But has potential it does why dangerous relatively is kind what I a it of They traded be inflation issues – But have of when a think industrial you that, you people concerned, – think of suppliers stock picture cloudy in over probably have would customers have have tariffs pretty a when same these and they

And you it's so, as for we've downside. we are to us adjust to we than would much – always upside imagine, are the the easier said, –

minded might you if nothing immediate we pretty future, prepared does same we're tell the would imagine, be is tough as really anything thinking to the happen. horizon. on time, the something being At us negative about want that So, that about there's

Mike P. Halloran

a the then, to overall you are Great take called you And for how do side... in Dispensing & related, next fourth margin top pressures? the the next think the – of probably inflation the last a the feel three secondarily let's point close about persist in your to you year? Yeah. inflation picture You're color. enough Obviously, are on quarter, the And $X at pressures Safety, how in into that how to it's conversation I'm that into do assuming of headwind probably peak and segments, One, and of organization? that? Fire you million guys then, could two really in How of segue you year, out rate relative kind the responding run on. peak

Andrew K. Silvernail

Yeah.

Mike P. Halloran

context? are there maybe for those in where much think ...there's you the about conversation room opportunity do but how in progression, margins two runway the still marry in and margins,

Andrew K. Silvernail

positive to into if been basis you historically, at or percentage XX bps to proxy, go XX So, pricing side have – gone The today. bps of inflation price-cost we lot. XXXX. run or continue we wouldn't and to a I that as gap rates. edge that's still of continue XX why bps running been a which the – use obviously those up basis our sales, XX we've relative XX you ramped a and of to we as kind of we'll see inflation saw We points on that was up continue, that is just bps at points, if has had if recently, that do that XX we've The to look we sales, can't have goal front that to has

in so, we still whatnot, And of then stay our it's expectation there. positive you tariffs add and to and the impact price-cost, and have

So, I that to of don't give reason margin think why going relationship terms up there's in total. a in we're

So, good pretty feel I about that.

margins, the fact, still have a able was lot is really right. between that, don't hundred couple go if pretty see we're it our like right, our like on you matter of get don't But have that of – range. hit our if to through, range that's are basis peak go lot The as contribution environment, reason And environment be flow points this we'll X% still hit this in see that, margins to think maybe top forward, XX% and to we're at to room underlying I going a than through margins on growth to operating produce the of hot, we're XX% to frankly. threshold continue can continue we growth going we and be, quarter going bit X% we decent As we meaning, hotter a the relatively you in that worry to growth about flow going I a in level. to to through little of a flow companies market to

in bunch overall, profile. are need not hitting we're a a threshold costs depress we naturally put where of going margin the overall to fixed to now that So,

we still So, have volume flows that gap, incremental at attractive still through and pretty so rates.

Mike P. Halloran

Great it. color, as always. Appreciate

Andrew K. Silvernail

You bet.

Operator

Dray Please Deane from Capital Markets. is question next Our proceed. RBC with

Deane Dray

everyone. you. Thank morning, Good

Andrew K. Silvernail

Good morning, Deane.

Deane Dray

know there. basis basis and that quarter, in give you target points the the the points you just last on I Did to the where for Hey, questions positive expect but maybe to point gross year? reaffirmed spread, do specific XX on what you've Mike's price, price? then be XX price follow-up was of a pricing

William K. Grogan

elevated – the it's at it's quarter. the due and in the perspective, going to It Yeah, continue flattened seen. quarter hey, material and here the quarter. that, around out the quarter. have versus inflation This were second is just Deane. it's third increased a we've That's We've second to in X point and incremental expectation, primarily We is to drag really increase our fourth into the wage sequentially, we tariffs from Bill. additional

run So, into pricing to out as really that escalates fourth tariff here incremental rate the that there is quarter. offset the

Andrew K. Silvernail

Yes.

next better get So, point, little will we here we're year. X north of a bit little to the quarter fourth be in and and better that bit Deane, expect a into

inflation inching total XX up to gap. XX the that keep bp and positive With also bp we'll

Deane Dray

what's just excuse that to $XX clarify included assumption? in that, – me, million $X And million headwind, tariff

William K. Grogan

is fragmented That our on purchasing is the can chain calculate direct impact what supply overseas. we is impact indirect from with the and their

Andrew K. Silvernail

not perfect It's Deane. science,

into item literally P&L what to of hit the derivative and by But cost line the going all that the item can't kind we are line do you through that second impacts, factor impacts flowing other see But to business. it. into then material that's our of going happen is you have it. We

Deane Dray

gears, applauds and is about Andy used high-quality your a a not be are chasing just switch discipline also net a forever. problem Got thresholds, because everyone but into deals there But to then, your into passing – I the it. XXXX? you sensitivity what's think And that about is moment cash any bad to And asked. threshold threshold question term to to use those position? this pass a ago the willingness with

Andrew K. Silvernail

do there, end there We get at – the... get we Mike? of we the when Deane, I don't think get

Michael J. Yates

year. yeah, half second of – next Second

Andrew K. Silvernail

Second half of the next year, yeah.

of me, overall question to the back long-term the is want issue no. are to right, of return. cash think not better the sit don't I And if things, have fictional total cash, that – something a direct do shareholder about the what answer I'm building guess, cash. and right becomes I So, do building always it, to things do to to we I better with a little drive to build your smartest bit what's or to

And we're we years believe don't cash having different of three now, if with a – be got we we'll ourselves an conversation, from I there. inordinate so, if found amount maybe but

it So, we're and of pass position, net a XXXX that period if okay in a in we with cash time. I'm for

Deane Dray

then, just asked And and Q&A, – the last it. give question Dispensing you you the but color Got just question, outs? the us side can you think and in I for what's push going on, on the

Andrew K. Silvernail

Yeah.

So, relatively we ended in – the had it's hitting quarter some was large project, in to activity we the that third up actually going that thought fourth. order go

this – we and see a so business, lot. you in And it doesn't kind to us of know, happen periodically that

So, revenue bit in lighter quarter quarter we'll because the in third of we better little a and little here bit the had fourth a be it

Deane Dray

that? Did you size

William K. Grogan

about it's QX a Yeah, bit from QX, million million $X of spend, the the where business. pull is Dispensing I is and and would say, into really there FSD within little $X about from the Rescue

would X% calibrate X% closer So, growth, quarters the you if be two if and organic between the – to you in it, QX.

Andrew K. Silvernail

Yeah.

Deane Dray

you Thank helpful. That's

Andrew K. Silvernail

bet, You Deane.

Operator

Our from Graham BMO Markets. Capital with proceed. is Please next question Scott

R. Scott Graham

Hey, morning... good

Andrew K. Silvernail

Scott. Hi,

R. Scott Graham

back, Mike. and Bill, a ...Andy, hearty welcome

Michael J. Yates

Scott. Thanks,

R. Scott Graham

that HST, outsized ask of number? see it to a quarter like type in what bit exactly an guys and how wanted did the you do ahead you that there looks of about I with we've restructuring in go charge the got because little

William K. Grogan

Center Bill. completed third And we've incremental three primarily about. of which moves the Excellence the we it's opened were the of expense. out related talking been up Rochester that Scott, within was to, were a of final two That's amount – significant quarter the completed Hey, building

R. Scott Graham

is please. there – So,

Andrew K. Silvernail

Scott. ahead, Go ahead. Go

R. Scott Graham

piece, at going in to saving we as necessarily on a No, dollar I say that that, dollar cost look was that number just shouldn't so for the...

William K. Grogan

Correct.

R. Scott Graham

Right.

Andrew K. Silvernail

to to Yeah, the very here going there probably win operations this on to to a fair, We're at Rochester is capability a look there, to to for When going programs is but us. we and optical worldwide, open building, exciting. open a you big officially officially going in new And in right. going building that we're going but weeks. it's around have content our that's few that have look, – great this continue be deal, ability that's best-in-class what win we're

R. Scott Graham

you but if is maybe that. markets one right Thank maybe things, it's to take the I of choke and Obviously, them tariffs there inflation concern the very in and start are for certainly, demand... guess, folk. my from now, simple follow-up more hold is the Yep. a frontline several industrial on

Andrew K. Silvernail

Yeah.

R. Scott Graham

...you are number so of in guys cycle, short – very and a your businesses.

– was so, day? wondering this what that And I the about are customers saying to just if

Andrew K. Silvernail

the I It's But I people something think last necessarily an the and doing said thing, interesting same people and are call. similar in aren't what saying are what things.

overall the chatter could see mean inflation play So, in customer et supply where a out And project is, itself And there there of about so, risk by there what you is tariffs saw chatter cetera. I and right. chain, there's base clearly lot do I down, to a lot out activity of that demand, you that? slow think what and out if what mean the and

bill but see you've get wait that's driver off gone a push clearly go, book The seen business, up, to up. So, my project And where and think risk. real is is, to people pretty steady. over real pick years, activity risk book going ship, until decision-making here, That I'm demand clarity. been the me second a I okay, expect I to I and book ship the changing in two the and don't yeah, business the has last

quickly. that to things it to that shift think can like pushed of yet, that evidence you is, can to Scott, we're for. go out clear, It going being seen is the the into move, pushed pretty haven't problem when but We that something future. with be really can it's that get stuff And of looking out

the on. if our it's at look so, that in it's it's eye overall industrial mean, you And the and good. book it's bill business, keeping we're But something just world, solid, I

middle part think And happy – of get part go by through I the by you think Thanksgiving, anybody middle here, around feet of the the starts quarter know November not stuff. some I or of whether we'll of we to we'll getting close as so, the as November, know

that still we your to the we're deeper insight into to into but short get an the for our as So, going don't watching except to business have thing today we're point, fourth cycle, that's that a into the be out – looks we quarter. say good, that

R. Scott Graham

Okay, thanks.

Andrew K. Silvernail

bet. You

Operator

Steven from is UBS. question next Our with Please with your proceed Winoker question.

Peter Lennox-King

This Steve. on Peter morning, is guys. Good Lennox-King for

Andrew K. Silvernail

Peter. Hi,

Peter Lennox-King

could was the little about hoping in increase quarter. CapEx that bit I we talk a

Andrew K. Silvernail

Yeah.

Peter Lennox-King

were discussion. us growth And you you higher conversion could from talking for as with rate where incremental lower cope investing, then the margin pension investment And that particular, you're seeing. whether for just In along you're the contribution, lay guidance the that's slightly reason about front cash to with in out the the fixed free investment year? is cost planned incremental the the that, for that

Andrew K. Silvernail

too let bit, little So, Peter, I'm going to me I'll and it a – to talk it. in on then ask jump to Bill

that we generally, things of and little So, can a if than part due the at our bit expected, you be lighter the CapEx to year look is CapEx, bunch delivered. had actually was in of our quickly a first how

they've times, you equipment as extended. about lead So, been think

They've think, been have in I call. talked expected. the we would than that extended I about last more

here been and with So, than in have a a we in half. bit of to liked caught the it have little first year half the bunch up we were would second the lighter of we

been in. It's number. the majority is quarter invest and in say we $XX wouldn't found around there's third not in part. and planned And and have that's that are million in I to decided vast exciting that process things generally. like the just something surprising These long growth, just the So, that of anything

XXXX, couple XXXX, are look just all that internal that I teeing into our investing will things the at strat to recent with hopefully investments we're planning Those able with drive things here discussion and in the here in been we've have and So, that initiatives basis discussion we're I And up. future. the XXXX, in, bigger finished aligned weeks. look hundred we growth our as a we'll of outperformance points deliver that the board couple that

you bit anything up. add little that? of a that investments. The about And feel between want you quarter, popped is nothing the and first to I do to quarter Bill, second and So, good want else it's to timing – kind

William K. Grogan

No.

couple I as businesses. where the done the tech portfolio. last a really investment's a piece, higher product our capacity of of around relative of across a labor obviously, tooling, through lot and And shortages of build-out labs to have a then, we engineering cleanroom a talked productivity went but we've organization, growth, in capital lot new equipment the we through the about significant some across there's development think, addressing part new

various a retooled capacity sites with skilled address have we increased labor consolidation machine markets. So, within to couple

in it next I and So, think was productivity probably year, the us help will growth third of that too. some a that two-thirds capital of

Peter Lennox-King

slightly then, And helpful. the That's reason lower... the for CapEx Great. is pension that with the along

Andrew K. Silvernail

didn't yeah, answer Oh, I'm yeah. sorry, we that Yeah. direct.

So, $X $XX do normal was had $XX we $X our incrementally that million, or think in you rate, million? million million over What CapEx. run maybe

William K. Grogan

exactly. Yeah,

to XXX% $XX cash flow. going It's million around to it the guide, of was million. for That back expense $XX year So, we million. the $XX little free over and raised bit be at pension reconciles now, a our

Andrew K. Silvernail

Yeah.

Peter Lennox-King

really helpful. That's Thank Okay. you.

Andrew K. Silvernail

You bet, Peter.

Peter Lennox-King

volatility some Then, in more here the loose you if just that shake I the M&A having could recent Is in deals one how the you the that's is seeing the do environment. deployment with you're sort help on going – in the seeing that And conversations of term? market, near think sort of are or that sneak people? you're capital to

Andrew K. Silvernail

the to effect the going have it's think in near actually I opposite Peter, term.

with I might to who think, high actually relative would I'm it the But make find up if it than have religion things people actually may a liked, think sellers hoping valuations. that anything, have the bit pressure put them and I end hesitant. some have market little might been pretty expectations. coming some on folks that more of pause to of a

the sustained, said, things sugar level you that realism. normalize for get right, some off existed that's being and But you'll to start little of then get bit. here some into got if we quite get normalize, high Now, time you'll to to get something a

some play going itself that I for So, to think it's time through. take to

Peter Lennox-King

That's great. Thanks very much, guys.

Andrew K. Silvernail

Peter. Thanks,

Operator

question is Fargo. Please Poliniak with next from Wells Our proceed. Allison

Allison A. Poliniak-Cusic

morning. Good guys. Hi,

Andrew K. Silvernail

Allison. Hey,

Allison A. Poliniak-Cusic

you that you that to have talk On chain do to adjust your to component the costs, of cost opportunity? the suppliers, with tariff those some supply opportunity maybe mitigate pressure can

Andrew K. Silvernail

supply We do, is of majority actually in we're is borders. our chain region so some There it and the vast ton not of some. a done buy for we've across of already. buying We stuff region,

actually places in we production. side, So, where opportunity some pockets we of moving other and can we few a of doing are the consolidate then, where it. And have we're on

not with be some it's production into So, big you, numbers. big, to we're It's not regions clear others. moving from

But of being closer we to and just the some that's that base, we something production tariff. are from are not we know actually by get impacted negatively customer do. You taking places opportunity a where to that moving regions have can that

but bit So, sides, they're Bill, we're Allison. that? big both anything numbers, add to not to a little doing on

William K. Grogan

No.

you hit streams. think major work I two the

Andrew K. Silvernail

Okay. Yeah.

Allison A. Poliniak-Cusic

supply they little and And challenges maybe Fire looked color Are on then any coming that? it. are point, first in worsen, OEM side. had the Got bit to of those had that in the touched around this it kind then, like chain half, a you you starting stable on at you the

Andrew K. Silvernail

Yeah. To was actually our about chain issues they're specific customers. supply Fire the who Allison, be to OEMs are specific talking Fire, I and clear, are to the that

to slowing deliver issues they're we're So, to that's them, but relative supply a to having down other able chain shipment.

build the you're backlog seeing in that base. So, customer substantially

did So, to – that business. our slows just roll down that the it ability fact that

but a they ability their have backlog. that, of out see pull we'll to So, huge

backlog. in look big the truck U.S. you builders If in they've main got the particular, a at

Allison A. Poliniak-Cusic

do guess, numbers volatility that? the that in could some, point, on Fire you because see quarter-to-quarter guess, visibility that I of business have I or we in

Andrew K. Silvernail

think don't so. I

they you shipping. near-term if if them going actually positive of any don't better get in going think XX% – to by the or to increase is I think volatility But I their out factory. their at see you're coming be volume XX%

it's be to marginal. think going I So,

William K. Grogan

anything, bit... it stabilizes if a Yeah,

Andrew K. Silvernail

Right.

William K. Grogan

that is going there they're backlog macro work a the downturn, to off as slows. ...if economy because

Allison A. Poliniak-Cusic

it. Thank you. Got

Andrew K. Silvernail

Allison. bet, You

Operator

question next proceed. Stifel. Please is Nathan with Jones Our from

Nathan Hardie Jones

everyone. morning, Good

Andrew K. Silvernail

morning. Good

Andrew K. Silvernail

talked worst macro bit fear the of recession with you little – Andy, what of of economy in a being could inflation happen about So, or stagflation here there kind about a environment it. that as in your kind

Andrew K. Silvernail

Yeah.

Nathan Hardie Jones

maintaining XX to these point inflationary a pressures. point talked spread XX basis You above guys basis about have

demand, how that's say possible to can strong do. the you Given

be If outcome you Do the customers? of businesses possible your spread, market here, you the got in critical to you spread maintain environment? still high able could of kind You've think shares. still to into enough with that of that worst kind are you maintain got environment kind that would nichey businesses

Andrew K. Silvernail

do, I Nathan.

that in it what describing kind – two in that or possible quarter is seen a radical of XX a right? I is we you're in that think, environment haven't years,

Nathan Hardie Jones

Yeah.

Andrew K. Silvernail

I there's it if there – But you would Certainly, you any of it that a be if period we'd really a we keep window, – behind go that, for tight? history I don't it'd think year-long don't quarter I sustained time. when lot I would you any that Yeah, got of meaningful a matter a IDEX believe would in be look be and But time in work curve in could way tighter. in be there's it. would itself that two. a out get at a have. or that don't believe we think we been Would negative, environment

Nathan Hardie Jones

about to a inflation that half the know what That's that... you I moment expected inflation terms XXXX talk you you it the given of talked and the expect that like it guys and know of sounds hit at to to helpful. understanding and that get in worse you're have you now expecting for signaled – in in year, maybe this XXXX. back while Can get P&L everything inflation And in worse about we've you

Andrew K. Silvernail

Yeah.

Nathan Hardie Jones

a target? ...that's moving

Andrew K. Silvernail

second, core and and so, actually what that's starting then other stabilize. obviously in to let's they – think in I So, – come inflation, for But, inflation, tariffs total inflation. a together separate let's a back I'd call

generally look destabilizes and at happens, pretty our concerned spaces, bullets behave I happening meaningful. And on X, demand are look it assuming where then, guns going another I think going are, is if there you're So, in all January to what on of is The that, if to get And that market wildcard our how and enacted actors with tariffs. this what's in stabilize. whose impact at supply left what's be that that based that that. seeing I you you is think

the actors turn down and many that given that with to can have left, start like also stuff regulatory inflationary they issues. slow that, to fact bullets work to so, certain into And ability the issues, with can they permitting work start right, don't

that to XXXX, inflation incremental and going what into that is the environment now my have demand point tariff-driven irrational, how if that, assuming don't is because – know wildcard be people so, just we that's we And we know the of a don't view we as go or going to be are don't that's just essentially to we know. going just is – rational people are

Nathan Hardie Jones

much. very That's Okay. I got. Thanks all

Andrew K. Silvernail

Nathan. Thanks, Okay.

Operator

Our proceed. next Matt is from with Please question Summerville Davidson. D.A.

Matt J. Summerville

Thanks. Couple of questions.

or in more you any terms organically the in you in can have geographic whether a First, into little specifically, give discernible experienced business change October? China regions you and specificity tempo bit not, seen of what across

Andrew K. Silvernail

Yeah.

– of terrific China and Europe on at would China then earlier growth. So, in that story were XX, if a U.S. and last were seeing last ability I majority execute. year, But really look months, has XX driven would to been our here compared but be softened the put our for still you it, to turnaround generally, it and nice positive, vast for we strength India very strong be It's has The us. year. clear, has next, the late this to has softened. us what

how that's So, rack kind stack of and them. I

we've way a softened, our conditions, numbers going I overall In in think here it is that independently initiatives there there conditions the pretty terms lot us see softened. to we're and are of in continue lot of talk when that concern China When for I the about But of China, and is slowdown to drive going a has concern, lot big specifically, you people in that I a to in it the in see is underlying of because China you you talk to that experiencing. have that the clear got growth they are think a think folks to just near-term. don't do underlying right.

Matt J. Summerville

being would call either out Europe spots softer China you that Andy, out into that markets, end to specific XXXX in you? as stick or we may any head as for there potentially you maybe Are

Andrew K. Silvernail

think you specific call anything to would Bill, out?

William K. Grogan

mean, side. Municipal little the I on No, bit

Andrew K. Silvernail

Yes. too. That's what thinking I Yeah. was

William K. Grogan

point probably I'd to. one the be would That

Andrew K. Silvernail

softened Yeah. susceptible to and government generally Muni that's very has spending.

So, that's one.

pretty been those So and gas indicators, we those – chemical, quickly I'm but oil those more early seen cyclical far, the projects. have thinking good, are with slowing Mike's down question haven't can and on, some and really to pause businesses, that so back

carefully. singular there pretty other Municipal. industry So, not finger our got maybe – say that pulse isn't jumps that a on of out would But the that we've I than

William K. Grogan

I it's say, year, this so think... would positive I then, really been And

Andrew K. Silvernail

Yeah.

William K. Grogan

slow next will year. ...it

Andrew K. Silvernail

Yeah.

Matt J. Summerville

ahead And things, their actually are comments then, Are of some how you terms or and in of that? seeing ramp-up, ahead concern including that potential of a to on tariffs, you to made these ramp trying suggest follow-up incremental people would they're further get buy customer the X? customers how any just Andy, of on the earlier, January trying behavior

Andrew K. Silvernail

August can't of we some it. what a that. We could. that, here in see because again, configured, look is of – bit buy harder And, we timeframe. in early folks so to prove of in you're We accelerating did not point see that but talking business see it's our demonstrate do or we think We the were that's of July the a generally, we points. much little we did we or can't little pre-January? two but yeah, We thing don't But do I some like behavior bit quarter to us it did a think it, could, but that a could do five saw there, and

William K. Grogan

be of to to get anyone let We the they to we for purchases. didn't time of to in buy PO annual try them on amount that. And next going were anything ahead consolidated did do year, able an put who ahead

Andrew K. Silvernail

Yeah.

Matt J. Summerville

it. Got Thank guys. you,

Andrew K. Silvernail

Thanks, Matt.

Operator

Our with Research is from next Linzey question Please Brett proceed. Partners. Vertical

Brett Logan Linzey

guys. morning, Good Hi.

Andrew K. Silvernail

morning. Good

Brett Logan Linzey

Hey.

activity a of then, And seeing but out Energy out had more upstream bit maybe your as scope some pace little in of little engagements projects as markets? of a size the color follow-up bit strong, talk some that of called just you you're there. You commentary the to in on and of the chemical the maybe just mid well, or versus

Andrew K. Silvernail

Yeah.

to have ability benefiting in Corken run done continue. had real job to from third the a products strength good. great a our we is remember, that And truck in and We the has So, pick-up, the play case. and knew quarter, that LC but overall again, places market, and and on nice in be business, most business also that we're year The been customers was the the LC you those here we of they're recall, side, oil in to and at seeing differentiated. going have of think our our new expect Both some later where of Corken the this The builds overall terms to brands. you the for got their been more we and are two that as they've kind that play. midstream, serve I really

really So, some I think no change. the overall markets, they're chemical there. In winning share

the going in all expect I stable we some and book we that The CapEx. by and really seeing to hadn't and seen happens it think to is bill be you're it's driven with time. what business be, CapEx

Brett Logan Linzey

the just spending out flattening comment? overall and of are on different I think just to then, stable. Muni, Are your of just in suggesting business Okay, a prepared slowing your dollar here, a maybe growth is bit sort you metrics said revenues context was of great. little maybe of bit issuances... shifting with remarks And that you then, rate and And little the state

Andrew K. Silvernail

Yeah.

Brett Logan Linzey

...starting here? to moderate

Andrew K. Silvernail

low-single-digit, our pretty the here. after good Western that more world a the rate a run is market to view moving So, normalized growth is Muni in

looking an seeing, a in regard. we're receipts everything XXXX we don't the low, that we that tax it's go And in at it Obviously, as to of about we low-single-digit so, or data anything that our the view. period. that further all point the enforcement so own we're see and whether expect projects suggests think into from U.S., around out as And strat we think growth and supports at even is planning pick-up all-time that

entered into we've overall think impacted gets we the that economic by so, condition. environment And a pretty normalized

I we bit, of if And that So, it think X-ish-percent don't relatively either growth if the good, way markets. a of up big that a the a get kind economy from but this side growth rate. think in I little we in pick-up, overall picks remains see moves

Brett Logan Linzey

along. it pass I'll great, Okay,

Andrew K. Silvernail

Thank you.

Operator

Brady is question SunTrust from Humphrey. proceed. Please next Our with Charley Robinson

Charles Brady

Hey, thanks. morning, Good guys.

Andrew K. Silvernail

Good morning, Charley.

Charles Brady

comments little around that sounds Can semiconductor, some that? more slowdown. maybe it a seeing put you you're just bit actually area had little like color a You on more the only

Andrew K. Silvernail

Yeah.

a concentration look, you in if we don't semi. So, have large

great business. points You're our a of talking about a there. had we've run overall few But

look at the Part semiconductor it's you had strength businesses, a Seals nice in If to been we've the run look continued business, Pump take with if and of really of you really, marketplace, then, share. here. we've overall market our our

us. for And it's a so, been new story good

Our the do story capacity I you that idea been real, is the expectation that but semiconductor that it's going have that's been the secular secular and on you're there's think even into don't world to, growth much into, buy which though come is not so to has I I cyclical. have story, right, buy the growth in

overall bit we're And so, the story one. will going there's digestion a But secular if think rates – that's good little the on, I cyclical just growth – a of a come think CapEx downturn, seeing we're all I me. to is won't some of I slow, the think surprise and I of

Charles Brady

Great, thanks. Appreciate color. that

Andrew K. Silvernail

bet, Charley. You

Charles Brady

on big It obviously product me. for new always more are one R&D guys you Just spending... sounds development,

Andrew K. Silvernail

Yeah

Charles Brady

little may we've that I'm trying or your stepped typical just of some to maybe the bit, is and made from sounds just seen IDEX that you've up I'm reading it historically? it if have correctly, commentary ...but see investments a that

Andrew K. Silvernail

it but I – a and thing. up new think, not it's hasn't Charley, it we have some, stepped been –

called where the segments, real the way you If and advantage year can that, ago, those to those things. we within capital really we've And really the have that to done better done disproportionately around grow investments doing incremental in understand we out of faster job some people our a and we work have applications little investments a a and moved surprised better couple guided went we we people think years have that for I bit. businesses the when of even a segmenting back

we're the and it's fun we're And here see we've really our great, strategic so, been three a the making, with larger next bigger it's are aligning organization plan looking that for through those. weeks, that of that bets of of and capital here at couple to years, as number kind in last

ability the so, that? or we – And outgrow we hundred you I we growth can our couple market think you basis that. when about our can't rate by to can forget confidence that do can increasing points, want, about I pick markets do have that

boy, So, I hope go if X%, kind in and from you of there. in we up deliver – a then world with we end can XXXX, can X% a

good scratch. multiple feel we're I this like and already, really so into So, the at starting we're alignment, actions and years the journey about not from it's

Charles Brady

Got it. Thanks much. very

Andrew K. Silvernail

bet. You

Operator

& with next question Our Company. Cowen from Giordano proceed. Please Joe is

Tristan Margot

Hey, guys. for Good taking in for thanks Joe, morning. This is Tristan the question.

Andrew K. Silvernail

bet. You

Tristan Margot

quarter growth order much inventory the bit inventory about for Could of distribution if levels you network how in due talk to especially your and a little FMT, any? of the was levels, then maybe

Andrew K. Silvernail

I of look we the And shape. into don't piece think sell-through it get only a rates, stuff industrial our We FMT that we been anyway. don't that buildup. around pretty that a have business, POS you distribution. mostly really the a distributors where good and large think places in – in at don't our good indicates if any, lot we're yeah. – Tristan, really visibility I of stock don't is We there's

a of those lot kind get of bump and the up or we don't don't of – lot things head down. see I a So, hit benefit or on a – when you

So, generally, it. good I about feel pretty

Tristan Margot

then, one. Great. another just Thanks. And quick

markets. to appear obviously outperforming your You a lot be of

much your right the how much your due to having I So, wondering to this simply sales is was how is force of or ability product? target

Andrew K. Silvernail

segmentation, us, it when for alignment of I resources. Tristan, your about an is think of all

you clear where one, an you number and have of to it's advantage. want a So, choice where play

sales, is application serve So, aligning key. your to engineering, me too. is you're then ability development, you're you're aligning That the and new aligning obviously to product aligning

our it's organization, differentiate. focus allocation, segmentation, of that it's a allows and to time at So, around I application piece just think resource ability us not the to an one

Tristan Margot

Great. Thanks.

Andrew K. Silvernail

Thank you.

Operator

and remarks. to conference reached would Ladies closing turn we I the of the question-and-answer our end to have like over gentlemen, back management session. for

Andrew K. Silvernail

time you great looking Thank that to all interest you Well, I at. thank all obviously volatile much, all, want first company. pretty Sherry. We're your for in feel about But we're of I very living IDEX. a of our in

And to and got finally, about This accelerated to folks I have air across – any team pace business, that, being good everybody. pocket, I England, of so before New to the to of people who And we've a growing day-out, and say great run just business, want moving a at are thank with we one, feel that. Sox. very heart I up environments, it's We I Red it's is thank well-positioned know and go, at consistently Mainer people Go, deliver day-in IDEX. to things built in how an understands exceptional whether at deal forward either an a that then we want here hit deliver to team how our an this or with outperformance, we X,XXX and these

days. in look talking So, forward thank to you you I very to next much, the everybody. XX

Operator

conference. you. concludes Thank today's This

your this thank your lines at participation. for you time, disconnect and You may

IDEX (IEX) 24 Oct 182018 Q3 Earnings call transcript