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Table of Contents


 
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, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10235
IDEX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
 
 
Delaware
 
36-3555336
 
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
 
 
1925 West Field Court,
Suite 200,
Lake Forest,
Illinois
 
60045
 
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number: (847498-7070
Title of Each Class
 
Trading Symbol(s)
 
Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share
 
IEX
 
New York Stock Exchange
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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
 
Accelerated filer  
 
Non-accelerated filer 
 
Smaller reporting company
 
 
 
 
 
 
 
Emerging growth company
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 



Table of Contents


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes     No   
Number of shares of common stock of IDEX Corporation outstanding as of October 23, 2019: 76,059,867.
 


Table of Contents


TABLE OF CONTENTS
 
 
Item 1.
 
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
Item 4.
 
 
 
Item 1.
Item 2.
Item 6.


Table of Contents


PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

IDEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share amounts)
(unaudited)
 
 
September 30, 2019
 
December 31, 2018
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
515,985

 
$
466,407

Receivables, less allowance for doubtful accounts of $6,311 at September 30, 2019 and $6,709 at December 31, 2018
317,305

 
312,192

Inventories
303,494

 
279,995

Other current assets
53,840

 
33,938

Total current assets
1,190,624

 
1,092,532

Property, plant and equipment - net
273,330

 
281,220

Goodwill
1,774,390

 
1,697,955

Intangible assets - net
390,908

 
383,327

Other noncurrent assets
84,643

 
18,823

Total assets
$
3,713,895

 
$
3,473,857

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Trade accounts payable
$
147,079

 
$
143,196

Accrued expenses
185,156

 
187,536

Short-term borrowings
417

 
483

Dividends payable
38,018

 
33,446

Total current liabilities
370,670

 
364,661

Long-term borrowings
848,728

 
848,335

Deferred income taxes
162,017

 
128,007

Other noncurrent liabilities
169,427

 
138,214

Total liabilities
1,550,842

 
1,479,217

Commitments and contingencies

 

Shareholders’ equity
 
 
 
Preferred stock:
 
 
 
Authorized: 5,000,000 shares, $.01 per share par value; Issued: None

 

Common stock:
 
 
 
Authorized: 150,000,000 shares, $.01 per share par value
 
 
 
Issued: 89,935,175 shares at September 30, 2019 and 90,112,028 shares at December 31, 2018
899

 
901

Additional paid-in capital
754,702

 
738,339

Retained earnings
2,556,423

 
2,342,079

Treasury stock at cost: 13,898,506 shares at September 30, 2019 and 14,159,251 shares at December 31, 2018
(989,110
)
 
(957,454
)
Accumulated other comprehensive income (loss)
(159,861
)
 
(129,225
)
Total shareholders’ equity
2,163,053

 
1,994,640

Total liabilities and shareholders’ equity
$
3,713,895

 
$
3,473,857

See Notes to Condensed Consolidated Financial Statements

1

Table of Contents


IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net sales
$
624,246

 
$
622,888

 
$
1,888,576

 
$
1,869,572

Cost of sales
342,268

 
342,655

 
1,030,427

 
1,025,320

Gross profit
281,978

 
280,233

 
858,149

 
844,252

Selling, general and administrative expenses
128,257

 
130,479

 
399,237

 
406,354

Restructuring expenses
11,956

 
4,621

 
14,082

 
8,251

Operating income
141,765

 
145,133

 
444,830

 
429,647

Other (income) expense - net
1,219

 
934

 
701

 
(3,565
)
Interest expense
11,330

 
10,958

 
33,262

 
33,098

Income before income taxes
129,216

 
133,241

 
410,867

 
400,114

Provision for income taxes
24,022

 
26,889

 
82,196

 
87,678

Net income
$
105,194

 
$
106,352

 
$
328,671

 
$
312,436

 
 
 
 
 
 
 
 
Basic earnings per common share
$
1.39

 
$
1.39

 
$
4.34

 
$
4.07

Diluted earnings per common share
$
1.37

 
$
1.37

 
$
4.30

 
$
4.02

 
 
 
 
 
 
 
 
Share data:
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
75,698

 
76,562

 
75,532

 
76,507

Diluted weighted average common shares outstanding
76,577

 
77,709

 
76,415

 
77,717

See Notes to Condensed Consolidated Financial Statements

2

Table of Contents


IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
105,194

 
$
106,352

 
$
328,671

 
$
312,436

Other comprehensive income (loss):
 
 
 
 
 
 
 
Reclassification adjustments for derivatives, net of tax
1,210

 
1,244

 
3,661

 
3,764

Pension and other postretirement adjustments, net of tax
1,663

 
1,270

 
4,181

 
3,979

Cumulative translation adjustment
(37,825
)
 
9,164

 
(38,478
)
 
(25,903
)
Other comprehensive income (loss)
(34,952
)
 
11,678

 
(30,636
)
 
(18,160
)
Comprehensive income
$
70,242

 
$
118,030

 
$
298,035

 
$
294,276

See Notes to Condensed Consolidated Financial Statements

3

Table of Contents


IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands except share amounts)
(unaudited)
 
 
 
 
 
Accumulated Other Comprehensive
Income (Loss)
 
 
 
 
 
Common
Stock and
Additional
Paid-In Capital
 
Retained
Earnings
 
Cumulative
Translation
Adjustment
 
Retirement
Benefits
Adjustment
 
Cumulative
Unrealized Gain (Loss) on
Derivatives
 
Treasury
Stock
 
Total
Shareholders’
Equity
Balance, December 31, 2018
$
739,240

 
$
2,342,079

 
$
(94,420
)
 
$
(22,740
)
 
$
(12,065
)
 
$
(957,454
)
 
$
1,994,640

Net income

 
110,268

 

 

 

 

 
110,268

Adjustment for adoption of ASU 2016-02

 
28

 

 

 

 

 
28

Cumulative translation adjustment

 

 
(3,281
)
 

 

 

 
(3,281
)
Net change in retirement obligations (net of tax of $438)

 

 

 
1,262

 

 

 
1,262

Net change on derivatives designated as cash flow hedges (net of tax of $361)

 

 

 

 
1,227

 

 
1,227

Issuance of 264,090 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $3,415)

 

 

 

 

 
8,870

 
8,870

Repurchase of 369,810 shares of common stock

 

 

 

 

 
(51,706
)
 
(51,706
)
Shares surrendered for tax withholding

 

 

 

 

 
(11,479
)
 
(11,479
)
Share-based compensation
5,403

 

 

 

 

 

 
5,403

Balance, March 31, 2019
$
744,643

 
$
2,452,375

 
$
(97,701
)
 
$
(21,478
)
 
$
(10,838
)
 
$
(1,011,769
)
 
$
2,055,232

Net income

 
113,209

 

 

 

 

 
113,209

Cumulative translation adjustment

 

 
2,628

 

 

 

 
2,628

Net change in retirement obligations (net of tax of $435)

 

 

 
1,256

 

 

 
1,256

Net change on derivatives designated as cash flow hedges (net of tax of $359)

 

 

 

 
1,224

 

 
1,224

Issuance of 169,785 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $679)

 

 

 

 

 
11,891

 
11,891

Repurchase of 19,143 shares of common stock

 

 

 

 

 
(2,962
)
 
(2,962
)
Shares surrendered for tax withholding

 

 

 

 

 
(30
)
 
(30
)
Share-based compensation
5,266

 

 

 

 

 

 
5,266

Cash dividends declared - $1.00 per common share outstanding

 
(75,673
)
 

 

 

 

 
(75,673
)
Balance, June 30, 2019
$
749,909

 
$
2,489,911

 
$
(95,073
)
 
$
(20,222
)
 
$
(9,614
)
 
$
(1,002,870
)
 
$
2,112,041

Net income

 
105,194

 

 

 

 

 
105,194

Cumulative translation adjustment

 

 
(37,825
)
 

 

 

 
(37,825
)
Net change in retirement obligations (net of tax of $525)

 

 

 
1,663

 

 

 
1,663

Net change on derivatives designated as cash flow hedges (net of tax of $356)

 

 

 

 
1,210

 

 
1,210

Issuance of 215,823 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $1,171)

 

 

 

 

 
14,834

 
14,834

Shares surrendered for tax withholding

 

 

 

 

 
(1,074
)
 
(1,074
)
Share-based compensation
5,692

 

 

 

 

 

 
5,692

Cash dividends declared - $0.50 per common share outstanding

 
(38,682
)
 

 

 

 

 
(38,682
)
Balance, September 30, 2019
$
755,601

 
$
2,556,423

 
$
(132,898
)
 
$
(18,559
)
 
$
(8,404
)
 
$
(989,110
)
 
$
2,163,053

See Notes to Condensed Consolidated Financial Statements


4

Table of Contents


IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)
(in thousands except share amounts)
(unaudited)

 
 
 
 
 
Accumulated Other Comprehensive
Income (Loss)
 
 
 
 
 
Common
Stock and
Additional
Paid-In Capital
 
Retained
Earnings
 
Cumulative
Translation
Adjustment
 
Retirement
Benefits
Adjustment
 
Cumulative
Unrealized Gain (Loss) on
Derivatives
 
Treasury
Stock
 
Total
Shareholders’
Equity
Balance, December 31, 2017
$
717,808

 
$
2,057,915

 
$
(46,306
)
 
$
(29,154
)
 
$
(14,047
)
 
$
(799,674
)
 
$
1,886,542

Net income

 
98,958

 

 

 

 

 
98,958

Adjustment for adoption of ASU 2016-16

 
(645
)
 

 

 

 

 
(645
)
Adjustment for adoption of ASU 2018-02

 
6,435

 

 
(3,411
)
 
(3,024
)
 

 

Cumulative translation adjustment

 

 
27,578

 

 

 

 
27,578

Net change in retirement obligations (net of tax of $505)

 

 

 
1,413

 

 

 
1,413

Net change on derivatives designated as cash flow hedges (net of tax of $371)

 

 

 

 
1,261

 

 
1,261

Issuance of 227,932 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $2,934)

 

 

 

 

 
6,590

 
6,590

Shares surrendered for tax withholding

 

 

 

 

 
(10,750
)
 
(10,750
)
Share-based compensation
5,938

 

 

 

 

 

 
5,938

Balance, March 31, 2018
$
723,746

 
$
2,162,663

 
$
(18,728
)
 
$
(31,152
)
 
$
(15,810
)
 
$
(803,834
)
 
$
2,016,885

Net income

 
107,126

 

 

 

 

 
107,126

Cumulative translation adjustment

 

 
(62,645
)
 

 

 

 
(62,645
)
Net change in retirement obligations (net of tax of $457)

 

 

 
1,296

 

 

 
1,296

Net change on derivatives designated as cash flow hedges (net of tax of $368)

 

 

 

 
1,259

 

 
1,259

Issuance of 96,981 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $351)

 

 

 

 

 
7,026

 
7,026

Repurchase of 147,490 shares of common stock

 

 

 

 

 
(20,494
)
 
(20,494
)
Share-based compensation
5,014

 

 

 

 

 

 
5,014

Cash dividends declared - $0.86 per common share outstanding

 
(66,316
)
 

 

 

 

 
(66,316
)
Balance, June 30, 2018
$
728,760

 
$
2,203,473

 
$
(81,373
)
 
$
(29,856
)
 
$
(14,551
)
 
$
(817,302
)
 
$
1,989,151

Net income

 
106,352

 

 

 

 

 
106,352

Cumulative translation adjustment

 

 
9,164

 

 

 

 
9,164

Net change in retirement obligations (net of tax of $455)

 

 

 
1,270

 

 

 
1,270

Net change on derivatives designated as cash flow hedges (net of tax of $366)

 

 

 

 
1,244

 

 
1,244

Issuance of 238,280 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $859)

 

 

 

 

 
13,177

 
13,177

Repurchase of 209,100 shares of common stock

 

 

 

 

 
(31,166
)
 
(31,166
)
Shares surrendered for tax withholding

 

 

 

 

 
(510
)
 
(510
)
Share-based compensation
5,083

 

 

 

 

 

 
5,083

Cash dividends declared - $0.43 per common share outstanding

 
(33,191
)
 

 

 

 

 
(33,191
)
Balance, September 30, 2018
$
733,843

 
$
2,276,634

 
$
(72,209
)
 
$
(28,586
)
 
$
(13,307
)
 
$
(835,801
)
 
$
2,060,574

See Notes to Condensed Consolidated Financial Statements

5

Table of Contents


IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
Cash flows from operating activities
 
 
 
Net income
$
328,671

 
$
312,436

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Asset impairments
9,680

 

Depreciation and amortization
29,599

 
29,725

Amortization of intangible assets
27,747

 
29,505

Amortization of debt issuance expenses
1,013

 
998

Share-based compensation expense
20,620

 
19,814

Deferred income taxes
11,528

 
(1,480
)
Non-cash interest expense associated with forward starting swaps
4,737

 
4,869

Changes in (net of the effect from acquisitions):
 
 
 
Receivables
(2,071
)
 
(34,057
)
Inventories
(16,987
)
 
(27,903
)
Other current assets
(19,186
)
 
7,635

Trade accounts payable
2,807

 
(4,420
)
Accrued expenses
(23,222
)
 
33

Other - net
1,966

 
(11,402
)
Net cash flows provided by operating activities
376,902

 
325,753

Cash flows from investing activities
 
 
 
Purchases of property, plant and equipment
(36,773
)
 
(39,856
)
Purchase of intellectual property

 
(4,000
)
Acquisition of businesses, net of cash acquired
(87,180
)
 
(20,205
)
Proceeds from disposal of fixed assets
957

 
211

Other - net
407

 
(1,180
)
Net cash flows used in investing activities
(122,589
)
 
(65,030
)
Cash flows from financing activities
 
 
 
Payments under revolving credit facilities

 
(11,128
)
Payments under other long-term borrowings
(49,923
)
 

Dividends paid
(109,227
)
 
(94,913
)
Proceeds from stock option exercises
35,595

 
26,793

Repurchases of common stock
(54,668
)
 
(50,654
)
Shares surrendered for tax withholding
(12,583
)
 
(11,260
)
Settlement of foreign exchange contracts

 
6,593

Other - net
(1,865
)
 

Net cash flows used in financing activities
(192,671
)
 
(134,569
)
Effect of exchange rate changes on cash and cash equivalents
(12,064
)
 
(10,337
)
Net increase in cash
49,578

 
115,817

Cash and cash equivalents at beginning of year
466,407

 
375,950

Cash and cash equivalents at end of period
$
515,985

 
$
491,767

 
 
 
 
Supplemental cash flow information
 
 
 
Cash paid for:
 
 
 
Interest
$
18,832

 
$
18,547

Income taxes
84,326

 
73,138

Significant non-cash activities:
 
 
 
Capital expenditures for construction of new leased facility

 
11,616

Contingent consideration for acquisition

 
3,375

Debt acquired with acquisition of business
51,130

 


See Notes to Condensed Consolidated Financial Statements

6

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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)


1.    Basis of Presentation and Significant Accounting Policies

The Condensed Consolidated Financial Statements of IDEX Corporation (“IDEX,” “we,” “our,” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) applicable to interim financial information and the instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended. The statements are unaudited but include all adjustments, consisting only of recurring items, except as noted, that the Company considers necessary for a fair presentation of the information set forth herein. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the entire year.

The Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in this report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). This standard introduced a new lessee model that requires most leases to be recorded on the balance sheet and eliminates the required use of bright line tests for determining lease classification from U.S. GAAP. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements, which clarified ASU 2016-02 and had the same effective date as the original standard. ASU 2018-11 included an option to use the effective date of ASU 2016-02 as the date of initial application of transition as well as an option not to restate comparative periods in transition. In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements, which also clarified ASU 2016-02 and is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.

The Company adopted this standard on January 1, 2019 using the optional transition method provided by the FASB in ASU 2018-11. As we did not restate comparative periods, the adoption had no impact on our previously reported results. We elected to use the practical expedient that allowed us not to reassess: (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases and the practical expedient that allows us to treat the lease and non-lease components as a single lease component for all asset classes. We also elected to account for short-term leases in accordance with Accounting Standards Codification (“ASC”) 842-20-25-2. The adoption of this standard had a material impact on our condensed consolidated balance sheet due to the recognition of right of use assets and lease liabilities. Upon adoption, we recognized right of use assets and lease liabilities of approximately $68 million that reflected the present value of future lease payments. The adoption of this standard did not have a material impact on our condensed consolidated results of operations or cash flows. See Note 13 for further information.

2.    Acquisitions and Divestitures

All of the Company’s acquisitions of businesses have been accounted for under ASC 805, Business Combinations. Accordingly, the accounts of the acquired companies, after adjustments to reflect the fair values assigned to assets and liabilities, have been included in the Company’s condensed consolidated financial statements from their respective dates of acquisition. The results of operations of the acquired companies have been included in the Company’s condensed consolidated results since the date of each acquisition.

The Company incurred acquisition-related transaction costs of $0.6 million in the three months ended September 30, 2019 and $1.3 million and $1.5 million in the nine months ended September 30, 2019 and 2018, respectively. The Company did not incur any acquisition-related transaction costs in the three months ended September 30, 2018. These costs were recorded in Selling, general and administrative expenses and were related to completed transactions, pending transactions and potential transactions, including transactions that ultimately were not completed. The Company also incurred a $3.3 million fair value inventory step-up charge associated with the completed 2019 acquisition in the three and nine months ended September 30, 2019. This charge was recorded in Cost of sales.


7

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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

2019 Acquisition

On July 18, 2019, the Company acquired the stock of Velcora Holding AB (“Velcora”) and its operating subsidiaries, Roplan and Steridose. Roplan is a global manufacturer of custom mechanical and shaft seals for a variety of end markets including food and beverage, marine, chemical, wastewater and water treatment. Steridose develops engineered hygienic mixers and valves for the global biopharmaceutical industry. Both companies are headquartered in Sweden, with operations in China, the United Kingdom and the United States. Roplan and Steridose had combined annual revenues in their most recent fiscal year of approximately $40 million and operate in our Health & Science Technologies segment. Velcora was acquired for cash consideration of $87.2 million and the assumption of $51.1 million of debt. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $97.4 million and $47.5 million, respectively. The goodwill is not deductible for tax purposes.

The Company made an initial allocation of the purchase price for the Velcora acquisition as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy. As the Company continues to obtain additional information about these assets and liabilities, including intangible asset appraisals, and continues to learn more about the newly acquired businesses, we will refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company will make appropriate adjustments to the purchase price allocation prior to the completion of the measurement period, as required.

The preliminary allocation of the acquisition costs to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, is as follows:
(In thousands)
Total
Current assets, net of cash acquired
$
19,047

Property, plant and equipment
3,251

Goodwill
97,352

Intangible assets
47,501

Other noncurrent assets
791

Total assets acquired
167,942

Current liabilities
(6,074
)
Long-term borrowings
(51,130
)
Deferred income taxes
(23,103
)
Other noncurrent liabilities
(455
)
Net assets acquired
$
87,180


Acquired intangible assets consist of trade names, customer relationships and unpatented technology. The goodwill recorded for the acquisition reflects the strategic fit, revenue and earnings growth potential of these businesses.

The acquired intangible assets and weighted average amortization periods are as follows:
(In thousands, except weighted average life)
Total
 
Weighted Average Life
Trade names
$
6,411

 
15
Customer relationships
34,673

 
12
Unpatented technology
6,417

 
9
Acquired intangible assets
$
47,501

 
 


On September 3, 2019, the Company settled the debt assumed in the Velcora acquisition and incurred a loss on early retirement of $0.7 million which was recorded in Other (income) expense - net in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019.

8

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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)


2018 Acquisition

On July 23, 2018, the Company acquired Finger Lakes Instrumentation (“FLI”), a technology leader in the design, development and production of low-noise cooled CCD and high speed, high-sensitivity Scientific CMOS cameras for the astronomy and life science markets. Headquartered in Lima, NY, FLI operates in our Health & Sciences Technologies segment. FLI was acquired for an aggregate purchase price of $23.6 million, consisting of $20.2 million in cash and contingent consideration valued at $3.4 million as of the opening balance sheet date. The contingent consideration is based on the achievement of financial objectives during the 24-month period following the close of the transaction. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $12.6 million and $7.9 million, respectively. Acquired intangible assets consist of trade names, customer relationships and unpatented technology. The goodwill recorded for the acquisition reflects the strategic fit, revenue and earnings growth potential of this business. The goodwill is deductible for tax purposes.

The Company finalized its allocation of the purchase price for the FLI acquisition as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy.

3.    Business Segments

IDEX has three reportable business segments: Fluid & Metering Technologies (“FMT”), Health & Science Technologies (“HST”) and Fire & Safety/Diversified Products (“FSDP”).

The Fluid & Metering Technologies segment designs, produces and distributes positive displacement pumps, flow meters, injectors and other fluid-handling pump modules and systems and provides flow monitoring and other services for the food, chemical, general industrial, water and wastewater, agriculture and energy industries.

The Health & Science Technologies segment designs, produces and distributes a wide range of precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems used in beverage, food processing, pharmaceutical and cosmetics, pneumatic components and sealing solutions, including very high precision, low-flow rate pumping solutions required in analytical instrumentation, clinical diagnostics and drug discovery, high performance molded and extruded sealing components, custom mechanical and shaft seals for a variety of end markets including food and beverage, marine, chemical, wastewater and water treatment, engineered hygienic mixers and valves for the global biopharmaceutical industry, biocompatible medical devices and implantables, air compressors used in medical, dental and industrial applications, optical components and coatings for applications in the fields of scientific research, defense, biotechnology, aerospace, telecommunications and electronics manufacturing, laboratory and commercial equipment used in the production of micro and nano scale materials, precision photonic solutions used in life sciences, research and defense markets and precision gear and peristaltic pump technologies that meet exacting original equipment manufacturer specifications.

The Fire & Safety/Diversified Products segment designs, produces and distributes firefighting pumps, valves and controls, rescue tools, lifting bags and other components and systems for the fire and rescue industry, engineered stainless steel banding and clamping devices used in a variety of industrial and commercial applications and precision equipment for dispensing, metering and mixing colorants and paints used in a variety of retail and commercial businesses around the world.

Information on the Company’s business segments is presented below based on the nature of products and services offered. The Company evaluates performance based on several factors, of which sales, operating income and operating margin are the primary financial measures. Intersegment sales are accounted for at fair value as if the sales were to third parties.


9

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Net sales
 
 
 
 
 
 
 
Fluid & Metering Technologies
 
 
 
 
 
 
 
External customers
$
240,758

 
$
239,119

 
$
729,205

 
$
714,135

Intersegment sales
103

 
94

 
367

 
211

Total segment sales
240,861

 
239,213

 
729,572

 
714,346

Health & Science Technologies
 
 
 
 
 
 
 
External customers
228,988

 
222,351

 
685,848

 
670,685

Intersegment sales
622

 
75

 
1,305

 
219

Total segment sales
229,610

 
222,426

 
687,153

 
670,904

Fire & Safety/Diversified Products
 
 
 
 
 
 
 
External customers
154,500

 
161,418

 
473,523

 
484,752

Intersegment sales
43

 
414

 
1,222

 
553

Total segment sales
154,543

 
161,832

 
474,745

 
485,305

Intersegment elimination
(768
)
 
(583
)
 
(2,894
)
 
(983
)
Total net sales
$
624,246

 
$
622,888

 
$
1,888,576

 
$
1,869,572

Operating income
 
 
 
 
 
 
 
Fluid & Metering Technologies
$
77,481

 
$
69,755

 
$
223,493

 
$
207,149

Health & Science Technologies
40,170

 
49,144

 
151,087

 
153,519

Fire & Safety/Diversified Products
41,967

 
44,726

 
125,909

 
130,162

Corporate office
(17,853
)
 
(18,492
)
 
(55,659
)
 
(61,183
)
Total operating income
141,765

 
145,133

 
444,830

 
429,647

Interest expense
11,330

 
10,958

 
33,262

 
33,098

Other (income) expense - net
1,219

 
934

 
701

 
(3,565
)
Income before income taxes
$
129,216

 
$
133,241

 
$
410,867

 
$
400,114

 
September 30,
2019
 
December 31,
2018
Assets
 
 
 
Fluid & Metering Technologies
$
1,121,170

 
$
1,107,777

Health & Science Technologies
1,510,210

 
1,329,368

Fire & Safety/Diversified Products
812,798

 
806,075

Corporate office
269,717

 
230,637

Total assets
$
3,713,895

 
$
3,473,857



4.    Revenue

IDEX is an applied solutions company specializing in the manufacture of fluid and metering technologies, health and science technologies and fire, safety and other diversified products built to customers’ specifications. The Company’s products include industrial pumps, compressors, flow meters, injectors, valves and related controls for use in a wide variety of process applications; precision fluidics solutions, including pumps, valves, degassing equipment, corrective tubing, fittings and complex manifolds, optical filters and specialty medical equipment and devices for use in life science applications; precision-engineered equipment for dispensing, metering and mixing paints; and engineered products for industrial and commercial markets, including fire and rescue, transportation equipment, oil and gas, electronics and communications.


10

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

Revenue is recognized when control of products or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those products or providing those services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable. We determine the appropriate revenue recognition for our contracts with customers by analyzing the type, terms and conditions of each contract or arrangement with a customer.

Disaggregation of Revenue

We have a comprehensive offering of products, including technologies, built to customers’ specifications that are sold in niche markets throughout the world. We disaggregate our revenue from contracts with customers by reporting unit and geographical region for each of our segments as we believe it best depicts how the amount, nature, timing and uncertainty of our revenue and cash flows are affected by economic factors. Revenue was attributed to geographical region based on the location of the customer. The following tables present our revenue disaggregated by reporting unit and geographical region.

Revenue by reporting unit for the three and nine months ended September 30, 2019 and 2018 was as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Energy
$
42,876

 
$
42,403

 
$
122,882

 
$
121,941

Valves
30,764

 
30,972

 
89,955

 
85,831

Water
62,611

 
63,989

 
188,891

 
188,000

Pumps
84,936

 
81,605

 
260,321

 
245,006

Agriculture
19,674

 
20,244

 
67,523

 
73,568

Intersegment elimination
(103
)
 
(94
)
 
(367
)
 
(211
)
Fluid & Metering Technologies
240,758

 
239,119

 
729,205

 
714,135

Scientific Fluidics & Optics
108,869

 
106,917

 
325,731

 
310,530

Sealing Solutions
51,389

 
48,787

 
148,326

 
154,123

Gast
32,699

 
33,574

 
104,007

 
92,989

Micropump
8,273

 
8,801

 
25,299

 
27,899

Material Processing Technologies
28,380

 
24,347

 
83,790

 
85,363

Intersegment elimination
(622
)
 
(75
)
 
(1,305
)
 
(219
)
Health & Science Technologies
228,988

 
222,351

 
685,848

 
670,685

Fire & Safety
100,389

 
102,589

 
303,094

 
298,741

BAND-IT
26,087

 
25,437

 
81,757

 
79,892

Dispensing
28,067

 
33,806

 
89,894

 
106,672

Intersegment elimination
(43
)
 
(414
)
 
(1,222
)
 
(553
)
Fire & Safety/Diversified Products
154,500

 
161,418

 
473,523

 
484,752

Total net sales
$
624,246

 
$
622,888

 
$
1,888,576

 
$
1,869,572




11

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

Revenue by geographical region for the three and nine months ended September 30, 2019 and 2018 was as follows:
 
Three Months Ended September 30, 2019
 
FMT
 
HST
 
FSDP
 
IDEX
U.S.
$
133,710

 
$
103,891

 
$
74,306

 
$
311,907

North America, excluding U.S.
13,652

 
5,450

 
6,726

 
25,828

Europe
46,830

 
65,339

 
38,078

 
150,247

Asia
30,182

 
51,378

 
26,317

 
107,877

Other (1)
16,487

 
3,552

 
9,116

 
29,155

Intersegment elimination
(103
)
 
(622
)
 
(43
)
 
(768
)
Total net sales
$
240,758

 
$
228,988

 
$
154,500

 
$
624,246

 
Three Months Ended September 30, 2018
 
FMT
 
HST
 
FSDP
 
IDEX
U.S.
$
131,403

 
$
99,474

 
$
78,902

 
$
309,779

North America, excluding U.S. (2)

 

 

 

Europe
46,895

 
66,762

 
36,824

 
150,481

Asia
28,358

 
46,634

 
30,265

 
105,257

Other (3)
32,557

 
9,556

 
15,841

 
57,954

Intersegment elimination
(94
)
 
(75
)
 
(414
)
 
(583
)
Total net sales
$
239,119

 
$
222,351

 
$
161,418

 
$
622,888

 
Nine Months Ended September 30, 2019
 
FMT
 
HST
 
FSDP
 
IDEX
U.S.
$
411,645

 
$
309,135

 
$
227,881

 
$
948,661

North America, excluding U.S.
41,337

 
15,839

 
19,124

 
76,300

Europe
134,403

 
200,509

 
124,953

 
459,865

Asia
94,452

 
149,939

 
76,621

 
321,012

Other (1)
47,735

 
11,731

 
26,166

 
85,632

Intersegment elimination
(367
)
 
(1,305
)
 
(1,222
)
 
(2,894
)
Total net sales
$
729,205

 
$
685,848

 
$
473,523

 
$
1,888,576

 
Nine Months Ended September 30, 2018
 
FMT
 
HST
 
FSDP
 
IDEX
U.S.
$
403,903

 
$
290,826

 
$
227,146

 
$
921,875

North America, excluding U.S. (2)

 

 

 

Europe
130,591

 
214,564

 
127,645

 
472,800

Asia
89,655

 
139,422

 
84,563

 
313,640

Other (3)
90,197

 
26,092

 
45,951

 
162,240

Intersegment elimination
(211
)
 
(219
)
 
(553
)
 
(983
)
Total net sales
$
714,135

 
$
670,685

 
$
484,752

 
$
1,869,572


(1) Other in 2019 includes: South America, Middle East, Australia and Africa.
(2) Revenue from North America, excluding U.S. of $15,391from FMT, $6,348 from HST and $7,544 from FSDP were included in Other for the three months ended September 30, 2018. Revenue from North America, excluding U.S. of $44,610 from FMT, $13,705 from HST and $21,450 from FSDP were included in Other for the nine months ended September 30, 2018.
(3) Other in 2018 includes: North America, excluding U.S., South America, Middle East, Australia and Africa.

12

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)


Contract Balances

The timing of revenue recognition, billings and cash collections can result in customer receivables, advance payments or billings in excess of revenue recognized. Customer receivables include both amounts billed and currently due from customers as well as unbilled amounts (contract assets) and are included in Receivables on our Condensed Consolidated Balance Sheets. Amounts are billed in accordance with contractual terms or as work progresses. Unbilled amounts arise when the timing of billing differs from the timing of revenue recognized, such as when contract provisions require specific milestones to be met before a customer can be billed. Unbilled amounts primarily relate to performance obligations satisfied over time when the cost-to-cost method is utilized and the revenue recognized exceeds the amount billed to the customer as there is not yet a right to payment in accordance with contractual terms. Unbilled amounts are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Customer receivables are recorded at face amount less an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses as a result of customers’ inability to make required payments. Management evaluates the aging of customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of customer receivables that may not be collected in the future and records the appropriate provision.

The composition of Customer receivables was as follows:
 
September 30, 2019
 
December 31, 2018
Billed receivables
$
307,180

 
$
299,227

Unbilled receivables
10,877

 
14,492

Total customer receivables
$
318,057

 
$
313,719



Advance payments and billings in excess of revenue recognized are included in Deferred revenue which is classified as current or noncurrent based on the timing of when we expect to recognize the revenue. The current portion is included in Accrued expenses and the noncurrent portion is included in Other noncurrent liabilities on our Condensed Consolidated Balance Sheets. Advance payments represent contract liabilities and are recorded when customers remit contractual cash payments in advance of us satisfying performance obligations under contractual arrangements, including those with performance obligations satisfied over time. We generally receive advance payments from customers related to maintenance services which we recognize ratably over the service term. Billings in excess of revenue recognized represent contract liabilities and primarily relate to performance obligations satisfied over time when the cost-to-cost method is utilized and revenue cannot yet be recognized as the Company has not completed the corresponding performance obligation. Contract liabilities are derecognized when revenue is recognized and the performance obligation is satisfied.

The composition of Deferred revenue was as follows:
 
September 30, 2019
 
December 31, 2018
Deferred revenue - current
$
9,823

 
$
8,055

Deferred revenue - noncurrent
2,369

 
3,027

Total deferred revenue
$
12,192

 
$
11,082



Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct product or service to the customer. A contract’s transaction price is allocated to each performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For our contracts that require complex design, manufacturing and installation activities, certain promises may not be separately identifiable from other promises in the contract and, therefore, not distinct. As a result, the entire contract is accounted for as a single performance obligation. For our contracts that include distinct products or services that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct products or services. Certain of our contracts have multiple performance obligations for which we allocate the transaction price to each performance obligation using an estimate of the standalone selling price of each distinct product or service in the contract. For product sales, each product sold to a customer generally represents a distinct performance obligation. In such cases, the observable standalone

13

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

sales are used to determine the standalone selling price. In certain cases, we may be required to estimate standalone selling price using the expected cost plus margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct product or service.

Our performance obligations are satisfied at a point in time or over time as work progresses. Performance obligations are supported by contracts with customers that provide a framework for the nature of the distinct products or service or bundle of products and services. We define service revenue as revenue from activities that are not associated with the design, development or manufacture of a product or the delivery of a software license.

Revenue from products and services transferred to customers at a point in time approximated 95% of total revenues in the three and nine months ended September 30, 2019 and 2018. Revenue recognized at a point in time relates to the majority of our product sales. Revenue on these contracts is recognized when obligations under the terms of the contract with our customer are satisfied. Generally, this occurs with the transfer of control of the asset, which is in line with shipping terms.

Revenue from products and services transferred to customers over time approximated 5% of total revenues in the three and nine months ended September 30, 2019 and 2018. Revenue earned by certain business units within the Water, Energy, Material Processing Technologies (“MPT”) and Dispensing reporting units is recognized over time because control transfers continuously to our customers. When accounting for over-time contracts, we use an input measure to determine the extent of progress towards completion of the performance obligation. For certain business units within the Water, Energy and MPT reporting units, revenue is recognized over time as work is performed based on the relationship between actual costs incurred to date for each contract and the total estimated costs for such contract at completion of the performance obligation (i.e. the cost-to-cost method). We believe this measure of progress best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Incurred cost represents work performed, which corresponds with the transfer of control to the customer. Contract costs include labor, material and overhead. Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; the performance of subcontractors; and the availability and timing of funding from the customer. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. For certain business units within the Energy and Dispensing reporting units, revenue is recognized ratably over the contract term.

As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our estimates regularly. Due to uncertainties inherent in the estimation process, it is reasonably possible that completion costs, including those arising from contract penalty provisions and final contract settlements, will be revised. Such revisions to costs and income are recognized in the period in which the revisions are determined as a cumulative catch-up adjustment. The impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize provisions for estimated losses on uncompleted contracts in the period in which such losses are determined.

The Company records allowances for discounts and product returns at the time of sale as a reduction of revenue as such allowances can be reliably estimated based on historical experience and known trends. The Company also offers product warranties (primarily assurance-type) and accrues its estimated exposure for warranty claims at the time of sale based upon the length of the warranty period, warranty costs incurred and any other related information known to the Company.

5.    Earnings Per Common Share

Earnings per common share (“EPS”) is computed by dividing net income by the weighted average number of shares of common stock (basic) plus common stock equivalents outstanding (diluted) during the period. Common stock equivalents consist of stock options, which have been included in the calculation of weighted average shares outstanding using the treasury stock method, restricted stock and performance share units.

ASC 260, Earnings Per Share, concludes that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. If awards are considered participating securities, the Company is required to apply the two-class method of computing basic and diluted earnings per share. The Company has determined that its outstanding shares of restricted stock are participating securities. Accordingly, EPS was computed using the two-class method prescribed by ASC 260.

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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)


Basic weighted average shares outstanding reconciles to diluted weighted average shares outstanding as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Basic weighted average common shares outstanding
75,698

 
76,562

 
75,532

 
76,507

Dilutive effect of stock options, restricted stock and performance share units
879

 
1,147

 
883

 
1,210

Diluted weighted average common shares outstanding
76,577

 
77,709

 
76,415

 
77,717



Options to purchase approximately 0.3 million and 0.3 million shares of common stock for the three months ended September 30, 2019 and 2018, respectively, and 0.6 million and 0.3 million shares of common stock for the nine months ended September 30, 2019 and 2018, respectively, were not included in the computation of diluted EPS because the effect of their inclusion would have been antidilutive.

6.    Inventories

The components of inventories as of September 30, 2019 and December 31, 2018 were:
 
September 30,
2019
 
December 31,
2018
Raw materials and component parts
$
189,361

 
$
178,805

Work in process
32,725

 
37,495

Finished goods
81,408

 
63,695

Total inventories
$
303,494

 
$
279,995



Inventories are stated at the lower of cost or net realizable value. Cost, which includes material, labor and factory overhead, is determined on a FIFO basis.

7.    Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the nine months ended September 30, 2019, by reportable business segment, were as follows:
 
FMT
 
HST
 
FSDP
 
IDEX
Goodwill
$
601,762

 
$
895,177

 
$
401,647

 
$
1,898,586

   Accumulated goodwill impairment losses
(20,721
)
 
(149,820
)
 
(30,090
)
 
(200,631
)
Balance at December 31, 2018
581,041

 
745,357

 
371,557

 
1,697,955

Foreign currency translation
(4,797
)
 
(10,083
)
 
(6,220
)
 
(21,100
)
Acquisitions

 
97,352

 

 
97,352

Acquisition adjustments

 
183

 

 
183

Balance at September 30, 2019
$
576,244

 
$
832,809

 
$
365,337

 
$
1,774,390



ASC 350, Goodwill and Other Intangible Assets, requires that goodwill be tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. In the first nine months of 2019, there were no events or circumstances that would have required an interim impairment test. Annually, on October 31, goodwill and other acquired intangible assets with indefinite lives are tested for impairment. Based on the results of our annual impairment test at October 31, 2018, all reporting units had fair values in excess of their carrying values.

 

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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset at September 30, 2019 and December 31, 2018:
 
At September 30, 2019
 
 
 
At December 31, 2018
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Life
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Amortized intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Patents
$
6,583

 
$
(5,135
)
 
$
1,448

 
12
 
$
6,468

 
$
(4,693
)
 
$
1,775

Trade names
120,744

 
(62,299
)
 
58,445

 
16
 
115,899

 
(57,227
)
 
58,672

Customer relationships
273,413

 
(92,692
)
 
180,721

 
14
 
256,202

 
(85,652
)
 
170,550

Unpatented technology
99,967

 
(40,713
)
 
59,254

 
12
 
96,922

 
(35,685
)
 
61,237

Other
700

 
(560
)
 
140

 
10
 
700

 
(507
)
 
193

Total amortized intangible assets
501,407

 
(201,399
)
 
300,008

 
 
 
476,191

 
(183,764
)
 
292,427

Indefinite-lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Banjo trade name
62,100

 

 
62,100

 
 
 
62,100

 

 
62,100

Akron Brass trade name
28,800

 

 
28,800

 
 
 
28,800

 

 
28,800

Total intangible assets
$
592,307

 
$
(201,399
)
 
$
390,908

 
 
 
$
567,091

 
$
(183,764
)
 
$
383,327



The Banjo trade name and the Akron Brass trade name are indefinite-lived intangible assets which are tested for impairment on an annual basis in accordance with ASC 350 or more frequently if events or changes in circumstances indicate that the assets might be impaired. In the first nine months of 2019, there were no events or circumstances that would have required an interim impairment test on these indefinite-lived intangible assets. The Company uses the relief-from-royalty method, a form of the income approach, to determine the fair value of these trade names. The relief-from-royalty method is dependent on a number of significant management assumptions, including estimates of revenues, royalty rates and discount rates.

In the second quarter of 2019, the Company began to evaluate strategic alternatives for one of its businesses in the HST segment. Prior to making a final decision on the options that were presented for this business, the business was informed in the third quarter of 2019 of the loss of its largest customer. As a result, the Company accelerated its restructuring activities for this business and a decision was made to wind down the business over time. This event required an interim impairment test be performed on certain of its definite-lived intangible assets, which resulted in an impairment charge of $7.1 million, consisting of $6.1 million related to customer relationships and $1.0 million related to unpatented technology. This charge was recorded as Restructuring expense in the Condensed Consolidated Statements of Operations. See Note 14 for further discussion.

Amortization of intangible assets was $9.7 million and $27.7 million for the three and nine months ended September 30, 2019, respectively. Amortization of intangible assets was $8.8 million and $29.5 million for the three and nine months ended September 30, 2018, respectively. Based on the intangible asset balances as of September 30, 2019, amortization expense is expected to approximate $9.5 million for the remaining three months of 2019, $37.6 million in 2020, $36.3 million in 2021, $34.7 million in 2022 and $31.8 million in 2023.


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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

8.    Accrued Expenses

The components of accrued expenses as of September 30, 2019 and December 31, 2018 were:
 
September 30,
2019
 
December 31,
2018
Payroll and related items
$
72,800

 
$
78,944

Management incentive compensation
15,052

 
25,321

Income taxes payable
16,108

 
23,844

Insurance
8,843

 
10,422

Warranty
5,131

 
5,303

Deferred revenue
9,823

 
8,055

Lease liability
13,919

 

Restructuring
3,280

 
6,170

Liability for uncertain tax positions
830

 
980

Accrued interest
10,439

 
1,759

Contingent consideration for acquisition
3,375

 

Other
25,556

 
26,738

Total accrued expenses
$
185,156

 
$
187,536



9.    Other Noncurrent Liabilities

The components of other noncurrent liabilities as of September 30, 2019 and December 31, 2018 were:
 
September 30,
2019
 
December 31,
2018
Pension and retiree medical obligations
$
72,731

 
$
80,667

Transition tax payable
17,127

 
17,127

Liability for uncertain tax positions
3,286

 
3,183

Deferred revenue
2,369

 
3,027

Liability for construction of new leased facility

 
11,616

Lease liability
53,284

 

Contingent consideration for acquisition

 
3,375

Other
20,630

 
19,219

Total other noncurrent liabilities
$
169,427

 
$
138,214




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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

10.    Borrowings

Borrowings at September 30, 2019 and December 31, 2018 consisted of the following: 
 
September 30,
2019
 
December 31,
2018
Revolving Facility
$

 
$

4.50% Senior Notes, due December 2020
300,000

 
300,000

4.20% Senior Notes, due December 2021
350,000

 
350,000

3.20% Senior Notes, due June 2023
100,000

 
100,000

3.37% Senior Notes, due June 2025
100,000

 
100,000

Other borrowings
738

 
1,078

Total borrowings
850,738

 
851,078

Less current portion
417

 
483

Less deferred debt issuance costs
1,135

 
1,593

Less unaccreted debt discount
458

 
667

Total long-term borrowings
$
848,728

 
$
848,335



On June 13, 2016, the Company completed a private placement of a $100 million aggregate principal amount of 3.20% Senior Notes due June 13, 2023 and a $100 million aggregate principal amount of 3.37% Senior Notes due June 13, 2025 (collectively, the “Notes”) pursuant to a Note Purchase Agreement dated June 13, 2016 (the “Purchase Agreement”). Each series of Notes bears interest at the stated amount per annum, which is payable semi-annually in arrears on each June 13th and December 13th. The Notes are unsecured obligations of the Company and rank pari passu in right of payment with all of the Company’s other unsecured, unsubordinated debt. The Company may at any time prepay all, or any portion of the Notes, provided that such portion is greater than 5% of the aggregate principal amount of the Notes then outstanding. In the event of a prepayment, the Company will pay an amount equal to par plus accrued interest plus a make-whole amount. In addition, the Company may repurchase the Notes by making an offer to all holders of the Notes, subject to certain conditions.

The Purchase Agreement contains certain covenants that restrict the Company’s ability to, among other things, transfer or sell assets, incur indebtedness, create liens, transact with affiliates and engage in certain mergers or consolidations or other change of control transactions. In addition, the Company must comply with a leverage ratio and interest coverage ratio, as further described below, and the Purchase Agreement also limits the outstanding principal amount of priority debt that may be incurred by the Company to 15% of consolidated assets. The Purchase Agreement provides for customary events of default. In the case of an event of default arising from specified events of bankruptcy or insolvency, all of the outstanding Notes will become due and payable immediately without further action or notice. In the case of a payment event of default, any holder of the Notes affected thereby may declare all of the Notes held by it due and payable immediately. In the case of any other event of default, a majority of the holders of the Notes may declare all of the Notes to be due and payable immediately.

On May 31, 2019, the Company entered into a credit agreement (the “Credit Agreement”) along with certain of its subsidiaries, as borrowers (the “Borrowers”), Bank of America, N.A., as administrative agent, swing line lender and an issuer of letters of credit, with other agents party thereto. The Credit Agreement replaces the Company’s existing five-year, $700 million credit agreement, dated as of June 23, 2015, which was due to expire in June 2020.

Terms and fees of the 2019 Credit Agreement are essentially the same as the 2015 credit agreement except for certain fees and interest rate pricing that are more favorable to the Company.

The Credit Agreement consists of a revolving credit facility (the “Revolving Facility”) in an aggregate principal amount of $800 million with a final maturity date of May 30, 2024. The maturity date may be extended under certain conditions for an additional one-year term. Up to $75 million of the Revolving Facility under the Credit Agreement is available for the issuance of letters of credit. Additionally, up to $50 million of the Revolving Facility is available to the Company for swing line loans, available on a same-day basis.


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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

Proceeds of the Revolving Facility are available for use by the Borrowers for working capital and other general corporate purposes, including refinancing existing debt of the Company and its subsidiaries. The Company may request increases in the lending commitments under the Credit Agreement, but the aggregate lending commitments pursuant to such increases may not exceed $400 million. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain foreign subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement.

Borrowings under the Credit Agreement bear interest, at either an alternate base rate or an adjusted LIBOR rate plus, in each case, an applicable margin. Such applicable margin is based on the better of the Company’s senior, unsecured, long-term debt rating or the Company’s applicable leverage ratio. Interest is payable (a) in the case of base rate loans, quarterly, and (b) in the case of LIBOR rate loans, on the last day of the applicable interest period selected, or every three months from the effective date of such interest period for interest periods exceeding three months.

Voluntary prepayments of any loans and voluntary reductions of the unutilized portion of the commitments under the Credit Agreement are permissible without penalty, subject to break funding payments and minimum notice and minimum reduction amount requirements.

The Credit Agreement contains affirmative and negative covenants usual and customary for such senior unsecured credit agreements, including an interest coverage ratio test and a leverage ratio test, in each case tested quarterly and, in the case of the leverage ratio, with an option to increase the ratio for 12 months in connection with certain acquisitions. The negative covenants include restrictions on the Company on granting liens, entering into transactions resulting in fundamental changes (such as mergers or sales of all or substantially all of the assets of the Company), making certain subsidiary dividends or distributions, engaging in materially different lines of businesses and allowing subsidiaries to incur certain additional debt.

The Credit Agreement also contains customary events of default (subject to grace periods, as appropriate).

At September 30, 2019, there was no balance outstanding under the Revolving Facility and $10.1 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Facility at September 30, 2019 of approximately $789.9 million.

There are two key financial covenants that the Company is required to maintain in connection with the Revolving Facility and the Notes, a minimum interest coverage ratio of 3.00 to 1 and a maximum leverage ratio of 3.50 to 1, which is the ratio of the Company’s consolidated total debt to its consolidated EBITDA. In the case of the leverage ratio, there is an option to increase the ratio to 4.00 for 12 months in connection with certain acquisitions. At September 30, 2019, the Company was in compliance with both of these financial covenants. There are no financial covenants relating to the 4.5% Senior Notes or 4.2% Senior Notes; however, both are subject to cross-default provisions.

11.    Derivative Instruments

The Company enters into cash flow hedges from time to time to reduce the exposure to variability in certain expected future cash flows. The types of cash flow hedges the Company enters into include foreign currency exchange contracts designed to minimize the earnings impact on certain intercompany loans as well as interest rate exchange agreements designed to reduce the impact of interest rate changes on future interest expense that effectively convert a portion of floating-rate debt to fixed-rate debt.

The effective portion of gains or losses on interest rate exchange agreements is reported in accumulated other comprehensive income (loss) in shareholders’ equity and reclassified into net income in the same period or periods in which the hedged transaction affects net income. The remaining gain or loss in excess of the cumulative change in the present value of future cash flows or the hedged item, if any, is recognized in net income during the period of change. See Note 15 for the amount of loss reclassified into net income for interest rate contracts for the three and nine months ended September 30, 2019 and 2018. As of September 30, 2019, the Company did not have any interest rate contracts outstanding.

In 2010 and 2011, the Company entered into two separate forward starting interest rate exchange agreements in anticipation of the issuance of the 4.2% Senior Notes and the 4.5% Senior Notes. The Company cash settled these two interest rate contracts in 2010 and 2011 for a total of $68.9 million, which is being amortized into interest expense over the 10 year terms of the respective debt instruments. Approximately $6.2 million of the pre-tax amount included in Accumulated other comprehensive income (loss)

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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

in shareholders’ equity at September 30, 2019 will be recognized in net income over the next 12 months as the underlying hedged transactions are realized.

At March 31, 2018, the Company had outstanding foreign currency exchange contracts with a combined notional value of 180 million that were not designated as hedges for accounting purposes and, as a result, the change in the fair value of these foreign currency exchange contracts and the corresponding foreign currency gain or loss on the revaluation of the intercompany loans were both recorded through earnings within Other (income) expense - net in the Condensed Consolidated Statements of Operations each period as incurred.
In April 2018, the Company settled its outstanding foreign currency exchange contracts in conjunction with its repayment of the underlying intercompany loans and did not extend these foreign currency exchange contracts. Along with the repayment of the intercompany loans, the Company was required to make a capital contribution to one of its subsidiaries, which resulted in a $2.2 million stamp duty in Switzerland which was recorded within Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
As a result of the foreign currency exchange contracts being settled in April 2018, the Company did not record a gain or loss on the foreign currency exchange contracts during the three months ended September 30, 2018. The Company recorded a gain of $0.9 million during the nine months ended September 30, 2018. The foreign currency exchange gains were recorded within Other (income) expense - net in the Condensed Consolidated Statements of Operations. The Company did not record a gain or loss on the revaluation of intercompany loans during the three months ended September 30, 2018 due to these loans being settled in April 2018. The Company did record a foreign currency transaction loss of $0.9 million during the nine months ended September 30, 2018. The losses on the revaluation of the intercompany loans were recorded within Other (income) expense - net in the Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2018, the Company received $6.6 million in settlement of the foreign currency exchange contracts.

Fair values relating to derivative financial instruments reflect the estimated amounts that the Company would receive or pay to sell or buy the contracts based on quoted market prices of comparable contracts at each balance sheet date.

12.    Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs, other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.


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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

The following table summarizes the basis used to measure the Company’s financial assets (liabilities) at fair value on a recurring basis in the balance sheets at September 30, 2019 and December 31, 2018:
 
Basis of Fair Value Measurements
 
Balance at September 30, 2019
 
Level 1
 
Level 2
 
Level 3
Available for sale securities
$
9,702

 
$
9,702

 
$

 
$

Contingent consideration
3,375

 

 

 
3,375

 
Basis of Fair Value Measurements
 
Balance at December 31, 2018
 
Level 1
 
Level 2
 
Level 3
Available for sale securities
$
7,598

 
$
7,598

 
$

 
$

Contingent consideration
3,375

 

 

 
3,375



There were no transfers of assets or liabilities between Level 1 and Level 2 during the three and nine months ended September 30, 2019 or the year ended December 31, 2018.

The Company utilized a Monte Carlo Simulation to determine the fair value of the contingent consideration associated with the acquisition of FLI as of the acquisition date. The $3.4 million represents management’s best estimate of the liability, based on a range of outcomes of FLI’s two-year operating results, from August 1, 2018 to July 31, 2020, and is expected to be paid during the third quarter of 2020. As of September 30, 2019, the $3.4 million of contingent consideration is included in Accrued expenses on the Condensed Consolidated Balance Sheets.
 
The carrying values of our cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair values because of the short term nature of these instruments. At September 30, 2019, the fair value of the outstanding indebtedness under our 3.2% Senior Notes, 3.37% Senior Notes, 4.5% Senior Notes, 4.2% Senior Notes and other borrowings based on quoted market prices and current market rates for debt with similar credit risk and maturity was approximately $875.9 million compared to the carrying value of $850.3 million. At December 31, 2018, the fair value of the outstanding indebtedness under our 3.2% Senior Notes, 3.37% Senior Notes, 4.5% Senior Notes, 4.2% Senior Notes and other borrowings based on quoted market prices and current market rates for debt with similar credit risk and maturity was approximately $851.5 million compared to the carrying value of $850.4 million. These fair value measurements are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions to entities with a credit rating similar to ours.


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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

13.    Leases

The Company leases certain office facilities, warehouses, manufacturing plants, equipment (which includes both office and plant equipment) and vehicles under operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Certain leases include one or more options to renew. The exercise of lease renewal options is at the Company’s sole discretion. There are currently no renewal periods included in any of the leases’ respective lease terms as they are not reasonably certain of being exercised. The Company does not have any material purchase options.

Certain of our lease agreements have rental payments that are adjusted periodically for inflation or that are based on usage. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Supplemental balance sheet information related to leases as of September 30, 2019 was as follows:
 
Balance Sheet Caption
September 30, 2019
Operating leases:
 
 
Building right-of-use assets - net
Other noncurrent assets
$
58,183

Equipment right-of-use assets - net
Other noncurrent assets
6,677

Total right-of-use assets - net
 
$
64,860

Operating leases:
 
 
Current lease liabilities
Accrued expenses
$
13,919

Noncurrent lease liabilities
Other noncurrent liabilities
53,284

Total lease liabilities
 
$
67,203



In the second quarter of 2019, the Company began to evaluate strategic alternatives for one of its businesses in the HST segment. Prior to making a final decision on the options that were presented for this business, the business was informed in the third quarter of 2019 of the loss of its largest customer. As a result, the Company accelerated its restructuring activities for this business and a decision was made to wind down the business over time. This event required an interim impairment test be performed on its long-lived assets, which resulted in an impairment charge of $0.6 million related to its building right-of-use asset. This charge was recorded as Restructuring expense in the Condensed Consolidated Statements of Operations. See Note 14 for further discussion.

As part of the adoption of the new lease standard, the Company derecognized its liability for the construction of a new leased facility that was recorded in Other noncurrent liabilities on the Condensed Consolidated Balance Sheets and recorded it as a right of use asset in Other noncurrent assets on the Condensed Consolidated Balance Sheets with a corresponding lease liability in Accrued expenses and Other noncurrent liabilities on the Condensed Consolidated Balance Sheets.

The components of lease cost for the three and nine months ended September 30, 2019 were as follows:
 
Three Months Ended September 30, 2019
 
Nine Months Ended September 30, 2019
Operating lease cost (1)
$
4,817

 
$
16,387

Variable lease cost
436

 
1,654

Total lease expense
$
5,253

 
$
18,041


(1) Includes short-term leases, which are immaterial.


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IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

Supplemental cash flow information related to leases for the nine months ended September 30, 2019 was as follows:
 
Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of operating lease liabilities
$
15,813

Right-of-use assets obtained in exchange for new operating lease liabilities
6,899



Other supplemental information related to leases as of September 30, 2019 was as follows:
Lease Term and Discount Rate
September 30, 2019
Weighted-average remaining lease term (years):
 
Operating leases - building and equipment
7.97

Operating leases - vehicles
2.23

Weighted-average discount rate:
 
Operating leases - building and equipment
4.02
%
Operating leases - vehicles
3.09
%


The Company uses the implicit rate to determine the present value of the lease payments. If the implicit rate is not defined in the lease, the Company uses its incremental borrowing rate to determine the present value of the lease payments. The Company used either the implicit rate or the incremental borrowing rate based on the information available at the transition date to determine the present value of the lease payments as of January 1, 2019.

Total lease liabilities at September 30, 2019 have scheduled maturities as follows:
Maturity of Lease Liabilities
Operating Leases (1)
2019 (excluding the nine months ended September 30, 2019)
$
4,356

2020
15,324

2021
12,373

2022
9,373

2023
7,083

Thereafter
31,199

Total lease payments
79,708

Less: Imputed interest
(12,505
)
Present value of lease liabilities
$
67,203


(1) Excludes $31.3 million of legally binding minimum lease payments for leases signed but not yet commenced.

Total lease liabilities at December 31, 2018 had scheduled maturities as follows:
Maturity of Lease Liabilities
Operating Leases
2019
$
17,509

2020
13,162

2021
10,516

2022
7,979

2023
6,535

Thereafter
29,658

Total lease payments
$
85,359




23

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

14.    Restructuring

During the year ended December 31, 2018 and the three and nine months ended September 30, 2019, the Company recorded accruals for restructuring costs incurred as part of restructuring initiatives that supported the implementation of key strategic efforts designed to facilitate long-term, sustainable growth through cost reduction actions, consisting of employee reductions and facility rationalization. The restructuring costs included severance benefits, exit costs and asset impairments which were included in Restructuring expenses in the Condensed Consolidated Statements of Operations. Severance costs primarily consisted of severance benefits through payroll continuation, COBRA subsidies, outplacement services, conditional separation costs and employer tax liabilities, while exit costs primarily consisted of lease exit and contract termination costs.

In the second quarter of 2019, the Company began to evaluate strategic alternatives for one of its businesses in the HST segment. Prior to making a final decision on the options that were presented for this business, the business was informed in the third quarter of 2019 of the loss of its largest customer. As a result, the Company accelerated its restructuring activities for this business and a decision was made to wind down the business over time. This event required an interim impairment test be performed on the long-lived tangible and intangible assets of the business, which resulted in an impairment charge of $9.7 million, consisting of $6.1 million related to a customer relationships intangible asset, $1.0 million related to an unpatented technology intangible asset, $2.0 million related to property, plant and equipment and $0.6 million related to a building right-of-use asset. This charge was recorded as Restructuring expense in the Condensed Consolidated Statements of Operations.

Pre-tax restructuring expenses by segment for the three and nine months ended September 30, 2019 were as follows:
 
Three Months Ended September 30, 2019
 
Severance Costs
 
Exit Costs
 
Asset Impairment
 
Total
Fluid & Metering Technologies
$

 
$

 
$

 
$

Health & Science Technologies
1,164

 
352

 
9,680

 
11,196

Fire & Safety/Diversified Products
104

 

 

 
104

Corporate/Other
656

 

 

 
656

Total restructuring costs
$
1,924

 
$
352

 
$
9,680

 
$
11,956


 
Nine Months Ended September 30, 2019
 
Severance Costs
 
Exit Costs
 
Asset Impairment
 
Total
Fluid & Metering Technologies
$
930

 
$

 
$

 
$
930

Health & Science Technologies
1,210

 
636

 
9,680

 
11,526

Fire & Safety/Diversified Products
923

 

 

 
923

Corporate/Other
703

 

 

 
703

Total restructuring costs
$
3,766

 
$
636

 
$
9,680

 
$
14,082



Restructuring accruals of $3.3 million and $6.2 million at September 30, 2019 and December 31, 2018, respectively, are recorded in Accrued expenses on the Condensed Consolidated Balance Sheets. Severance benefits are expected to be paid by the end of the year using cash from operations. The changes in the restructuring accrual for the nine months ended September 30, 2019 are as follows:
 
Restructuring
Balance at January 1, 2019
$
6,170

Restructuring expenses
4,402

Payments, utilization and other
(7,292
)
Balance at September 30, 2019
$
3,280




24

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

15.    Other Comprehensive Income (Loss)

The components of Other comprehensive income (loss) are as follows:
 
Three Months Ended September 30, 2019
 
Three Months Ended September 30, 2018
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Cumulative translation adjustment
$
(37,825
)
 
$

 
$
(37,825
)
 
$
9,164

 
$

 
$
9,164

Pension and other postretirement adjustments
2,188

 
(525
)
 
1,663

 
1,725

 
(455
)
 
1,270

Reclassification adjustments for derivatives
1,566

 
(356
)
 
1,210

 
1,610

 
(366
)
 
1,244

Total other comprehensive income (loss)
$
(34,071
)
 
$
(881
)
 
$
(34,952
)
 
$
12,499

 
$
(821
)
 
$
11,678

 
Nine Months Ended September 30, 2019
 
Nine Months Ended September 30, 2018
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Cumulative translation adjustment
$
(38,478
)
 
$

 
$
(38,478
)
 
$
(25,903
)
 
$

 
$
(25,903
)
Pension and other postretirement adjustments
5,579

 
(1,398
)
 
4,181

 
5,396

 
(1,417
)
 
3,979

Reclassification adjustments for derivatives
4,737

 
(1,076
)
 
3,661

 
4,869

 
(1,105
)
 
3,764

Total other comprehensive income (loss)
$
(28,162
)
 
$
(2,474
)
 
$
(30,636
)
 
$
(15,638
)
 
$
(2,522
)
 
$
(18,160
)


The following table summarizes the amounts reclassified from accumulated other comprehensive income (loss) to net income during the three and nine months ended September 30, 2019 and 2018:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Income Statement Caption
Pension and other postretirement plans:
 
 
 
 
 
 
 
 
Amortization of net (gain) loss
$
2,188

 
$
1,725

 
$
5,579

 
$
5,396

Other (income) expense - net
Total before tax
2,188

 
1,725

 
5,579

 
5,396

 
Provision for income taxes
(525
)
 
(455
)
 
(1,398
)
 
(1,417
)
 
Total net of tax
$
1,663

 
$
1,270

 
$
4,181

 
$
3,979

 
Derivatives:
 
 
 
 
 
 
 
 
Reclassification adjustments
$
1,566

 
$
1,610

 
$
4,737

 
$
4,869

Interest expense
Total before tax
1,566

 
1,610

 
4,737

 
4,869

 
Provision for income taxes
(356
)
 
(366
)
 
(1,076
)
 
(1,105
)
 
Total net of tax
$
1,210

 
$
1,244

 
$
3,661

 
$
3,764

 


The Company recognizes the service cost component in both Selling, general and administrative expenses and Cost of sales in the Condensed Consolidated Statements of Operations depending on the functional area of the underlying employees included in the plans.


25

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

16.    Common and Preferred Stock

On December 1, 2015, the Company’s Board of Directors approved an increase of $300.0 million in the authorized level of repurchases of common stock. This followed the prior Board of Directors approved repurchase authorization of $400.0 million that was announced by the Company on November 6, 2014. These authorizations have no expiration date. Repurchases under the program will be funded with future cash flow generation or borrowings available under the Revolving Facility. During the nine months ended September 30, 2019, the Company repurchased a total of 389 thousand shares at a cost of $54.7 million. During the nine months ended September 30, 2018, the Company repurchased a total of 357 thousand shares at a cost of $51.7 million, of which $1.0 million was settled in October 2018. As of September 30, 2019, the amount of share repurchase authorization remaining was $322.3 million.

At September 30, 2019 and December 31, 2018, the Company had 150 million shares of authorized common stock, with a par value of $.01 per share, and 5 million shares of authorized preferred stock, with a par value of $.01 per share. No preferred stock was outstanding at September 30, 2019 or December 31, 2018.

17.    Share-Based Compensation

The Company typically grants equity awards annually at its regularly scheduled first quarter meeting of the Board of Directors based on their recommendation from the Compensation Committee.

Stock Options

Stock options generally vest ratably over four years. Weighted average option fair values and assumptions for the periods specified are disclosed below. The fair value of each option grant was estimated on the date of the grant using the Binomial lattice option pricing model.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Weighted average fair value of grants
$27.72
 
$40.83
 
$35.15
 
$38.14
Dividend yield
1.27%
 
1.14%
 
1.18%
 
1.07%
Volatility
22.33%
 
27.81%
 
24.78%
 
28.47%
Risk-free interest rate
1.75% - 1.77%
 
2.47% - 3.07%
 
2.53% - 3.04%
 
2.02% - 3.17%
Expected life (in years)
4.65
 
5.81
 
5.87
 
5.83


Total compensation cost for stock options is as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Cost of goods sold
$
74

 
$
91

 
$
356

 
$
388

Selling, general and administrative expenses
2,137

 
1,929

 
6,663

 
6,334

Total expense before income taxes
2,211

 
2,020

 
7,019

 
6,722

Income tax benefit
(288
)
 
(385
)
 
(940
)
 
(1,219
)
Total expense after income taxes
$
1,923

 
$
1,635

 
$
6,079

 
$
5,503



26

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)


A summary of the Company’s stock option activity as of September 30, 2019 and changes during the nine months ended September 30, 2019 are presented in the following table:
Stock Options
Shares
 
Weighted
Average
Price
 
Weighted-Average
Remaining
Contractual Term
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2019
1,714,003

 
$
85.08

 
6.70
 
$
74,191,783

Granted
335,095

 
144.91

 
 
 
 
Exercised
(513,317
)
 
69.34

 
 
 
 
Forfeited
(90,067
)
 
114.85

 
 
 
 
Outstanding at September 30, 2019
1,445,714

 
$
102.69

 
7.13
 
$
88,375,713

Vested and expected to vest as of September 30, 2019
1,346,871

 
$
100.97

 
7.04
 
$
84,725,335

Exercisable at September 30, 2019
649,766

 
$
78.22

 
5.69
 
$
55,657,413



Restricted Stock

Restricted stock awards generally cliff vest after three years for employees and non-employee directors. Unvested restricted stock carries dividend and voting rights and the sale of the shares is restricted prior to the date of vesting. A summary of the Company’s restricted stock activity as of September 30, 2019 and changes during the nine months ended September 30, 2019 are presented as follows:
Restricted Stock
Shares
 
Weighted-Average
Grant Date Fair
Value
Unvested at January 1, 2019
148,041

 
$
101.50

Granted
41,780

 
143.13

Vested
(50,892
)
 
80.51

Forfeited
(12,390
)
 
122.52

Unvested at September 30, 2019
126,539

 
$
122.69



Dividends are paid on restricted stock awards whose fair value is equal to the market price of the Company’s stock at the date of the grant.

Total compensation cost for restricted shares is as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Cost of goods sold
$
(10
)
 
$
77

 
$
192

 
$
316

Selling, general and administrative expenses
1,094

 
902

 
3,419

 
3,155

Total expense before income taxes
1,084

 
979

 
3,611

 
3,471

Income tax benefit
(204
)
 
(177
)
 
(684
)
 
(620
)
Total expense after income taxes
$
880

 
$
802

 
$
2,927

 
$
2,851




27

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

Cash-Settled Restricted Stock

The Company also maintains a cash-settled share based compensation plan for certain employees. Cash-settled restricted stock awards generally cliff vest after three years. Cash-settled restricted stock awards are recorded at fair value on a quarterly basis using the market price of the Company’s stock on the last day of the quarter. A summary of the Company’s unvested cash-settled restricted stock activity as of September 30, 2019 and changes during the nine months ended September 30, 2019 are presented in the following table:
Cash-Settled Restricted Stock
Shares
 
Weighted-Average
Fair Value
Unvested at January 1, 2019
88,225

 
$
126.26

Granted
25,950

 
143.14

Vested
(28,150
)
 
144.27

Forfeited
(9,040
)
 
159.68

Unvested at September 30, 2019
76,985

 
$
172.08



Dividend equivalents are paid on certain cash-settled restricted stock awards. Total compensation cost for cash-settled restricted stock is as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Cost of goods sold
$
118

 
$
381

 
$
954

 
$
896

Selling, general and administrative expenses
435

 
1,064

 
3,132

 
2,776

Total expense before income taxes
553

 
1,445

 
4,086

 
3,672

Income tax benefit
(67
)
 
(158
)
 
(413
)
 
(368
)
Total expense after income taxes
$
486

 
$
1,287

 
$
3,673

 
$
3,304



Performance Share Units

Weighted average performance share unit fair values and assumptions for the period specified are disclosed below. The performance share units are market condition awards and have been assessed at fair value on the date of grant using a Monte Carlo simulation model.
 
Nine Months Ended September 30,
 
2019
 
2018
Weighted average fair value of grants
$207.26
 
$216.59
Dividend yield
%
 
%
Volatility
19.11%
 
17.42%
Risk-free interest rate
2.49%
 
2.40%
Expected life (in years)
2.83
 
2.85



28

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

A summary of the Company’s performance share unit activity as of September 30, 2019 and changes during the nine months ended September 30, 2019 are presented in the following table:
Performance Share Units
Shares
 
Weighted-Average
Grant Date Fair
Value
Unvested at January 1, 2019
111,155

 
$
142.42

Granted
56,860

 
207.26

Vested

 

Forfeited
(12,895
)
 
125.03

Unvested at September 30, 2019
155,120

 
$
178.97



On December 31, 2018, 69,995 performance share units vested. Based on the Company’s relative total shareholder return rank during the three year period ended December 31, 2018, the Company achieved a 250% payout factor and issued 174,994 common shares in February 2019.

Total compensation cost for performance share units is as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Cost of goods sold
$

 
$

 
$

 
$

Selling, general and administrative expenses
2,359

 
2,118

 
5,904

 
5,949

Total expense before income taxes
2,359

 
2,118

 
5,904

 
5,949

Income tax benefit
(196
)
 
(418
)
 
(447
)
 
(1,123
)
Total expense after income taxes
$
2,163

 
$
1,700

 
$
5,457

 
$
4,826



The Company’s policy is to recognize compensation cost on a straight-line basis, assuming forfeitures, over the requisite service period for the entire award. Classification of stock compensation cost within the Condensed Consolidated Statements of Operations is consistent with classification of cash compensation for the same employees.

As of September 30, 2019, there was $15.2 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.4 years, $6.2 million of total unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 1.1 years, $4.3 million of total unrecognized compensation cost related to cash-settled restricted shares that is expected to be recognized over a weighted-average period of 1.0 years and $10.8 million of total unrecognized compensation cost related to performance share units that is expected to be recognized over a weighted-average period of 1.0 years.


29

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

18.    Retirement Benefits

The Company sponsors several qualified and nonqualified defined benefit and defined contribution pension plans and other postretirement plans for its employees. The following tables provide the components of net periodic benefit cost for its major defined benefit plans and its other postretirement plans.
 
Pension Benefits
 
Three Months Ended September 30,
 
2019
 
2018
 
U.S.
 
Non-U.S.
 
U.S.
 
Non-U.S.
Service cost
$
484

 
$
462

 
$
156

 
$
520

Interest cost
764

 
355

 
669

 
341

Expected return on plan assets
(801
)
 
(258
)
 
(991
)
 
(276
)
Settlement loss recognized
486

 

 

 

Net amortization
487

 
276

 
664

 
312

Net periodic benefit cost
$
1,420

 
$
835

 
$
498

 
$
897

 
Pension Benefits
 
Nine Months Ended September 30,
 
2019
 
2018
 
U.S.
 
Non-U.S.
 
U.S.
 
Non-U.S.
Service cost
$
901

 
$
1,386

 
$
665

 
$
1,592

Interest cost
2,292

 
1,081

 
1,975

 
1,053

Expected return on plan assets
(2,403
)
 
(784
)
 
(2,957
)
 
(848
)
Settlement loss recognized
486

 

 

 

Net amortization
1,460

 
840

 
2,034

 
964

Net periodic benefit cost
$
2,736

 
$
2,523

 
$
1,717

 
$
2,761


 
Other Postretirement Benefits
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Service cost
$
141

 
$
167

 
$
421

 
$
502

Interest cost
212

 
202

 
636

 
608

Net amortization
(159
)
 
(185
)
 
(476
)
 
(553
)
Net periodic benefit cost
$
194

 
$
184

 
$
581

 
$
557



The Company previously disclosed in its financial statements for the year ended December 31, 2018, that it expected to contribute approximately $0.6 million to its defined benefit plans and $1.1 million to its other postretirement benefit plans in 2019. During the first nine months of 2019, the Company contributed a total of $0.1 million to fund these plans.

Effective September 30, 2019, the IDEX Corporation Retirement Plan (“Plan”) was amended to freeze the accrual of retirement benefits for all participants. This action impacted fewer than 60 participants, as the Plan had been closed to new entrants and frozen as of December 31, 2005 for all but certain older, longer service participants. The overall financial impact of the freeze was to reduce the Plan liabilities by approximately $1.2 million. In addition, the Company recorded a settlement charge of $0.5 million which was recorded in Other (income) expense - net in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019.


30

Table of Contents

IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data and where otherwise indicated)
(unaudited)

19.    Legal Proceedings

The Company and certain of its subsidiaries are involved in pending and threatened legal, regulatory and other proceedings arising in the ordinary course of business. These proceedings may pertain to matters such as product liability or contract disputes, and may also involve governmental inquiries, inspections, audits or investigations relating to issues such as tax matters, intellectual property, environmental, health and safety issues, governmental regulations, employment and other matters. Although the results of such legal proceedings cannot be predicted with certainty, the Company believes that the ultimate disposition of these matters will not have a material adverse effect, individually or in the aggregate, on the Company’s business, financial condition, results of operations or cash flows.

20.    Income Taxes

The Company’s provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes decreased to $24.0 million for the three months ended September 30, 2019 from $26.9 million during the same period in 2018. The effective tax rate decreased to 18.6% for the three months ended September 30, 2019 compared 20.2% to during the same period in 2018 due to a decrease in the impact of Global Intangible Low-Taxed Income (“GILTI”) related to U.S. Treasury regulations as well as the mix of global pre-tax income among jurisdictions.

The provision for income taxes decreased to $82.2 million for the nine months ended September 30, 2019 from $87.7 million during the same period in 2018. The effective tax rate decreased to 20.0% for the nine months ended September 30, 2019 compared to 21.9% during the same period in 2018 due to a decrease in the impact of GILTI related to U.S. Treasury regulations, the excess tax benefits related to share-based compensation as well as the mix of global pre-tax income among jurisdictions.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Due to the potential for resolution of federal, state and foreign examinations and the expiration of various statutes of limitation, it is reasonably possible that the Company’s gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $0.8 million.

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Under the Private Securities Litigation Reform Act

This quarterly report on Form 10-Q, including the “Overview and Outlook” and “Liquidity and Capital Resources” sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements may relate to, among other things, capital expenditures, acquisitions, cost reductions, cash flow, revenues, earnings, market conditions, global economies and operating improvements, and are indicated by words or phrases such as “anticipates,” “estimates,” “plans,” “expects,” “projects,” “forecasts,” “should,” “could,” “will,” “management believes,” “the Company believes,” “the Company intends,” and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this report. The risks and uncertainties include, but are not limited to, the following: economic and political consequences resulting from terrorist attacks and wars; levels of industrial activity and economic conditions in the U.S. and other countries around the world; pricing pressures and other competitive factors and levels of capital spending in certain industries, all of which could have a material impact on order rates and the Company’s results, particularly in light of the low levels of order backlogs it typically maintains; the Company’s ability to make acquisitions and to integrate and operate acquired businesses on a profitable basis; the relationship of the U.S. dollar to other currencies and its impact on pricing and cost competitiveness; political and economic conditions in foreign countries in which the Company operates; developments with respect to trade policy and tariffs; interest rates; capacity utilization and the effect this has on costs; labor markets; market conditions and material costs; and developments with respect to contingencies, such as litigation and environmental matters. The forward-looking statements included here are only made as of the date of this report, and management undertakes no obligation to publicly update them to reflect subsequent events or circumstances, except as may be required by law. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented here.


31

Table of Contents


Overview and Outlook

IDEX is an applied solutions company specializing in the manufacture of fluid and metering technologies, health and science technologies and fire, safety and other diversified products built to customers’ specifications. IDEX’s products are sold in niche markets across a wide range of industries throughout the world. Accordingly, IDEX’s businesses are affected by levels of industrial activity and economic conditions in the U.S. and in other countries where it does business and by the relationship of the U.S. Dollar to other currencies. Levels of capacity utilization and capital spending in certain industries and overall industrial activity are important factors that influence the demand for IDEX’s products.

The Company has three reportable business segments: Fluid & Metering Technologies, Health & Science Technologies and Fire & Safety/Diversified Products. Within our three reportable segments, the Company maintains 13 platforms, where we focus on organic growth and strategic acquisitions. Each of our 13 platforms is also a reporting unit that we annually test goodwill for impairment.

The Fluid & Metering Technologies segment designs, produces and distributes positive displacement pumps, flow meters, injectors and other fluid-handling pump modules and systems and provides flow monitoring and other services for the food, chemical, general industrial, water and wastewater, agriculture and energy industries. The Fluid & Metering Technologies segment contains the Energy platform (comprised of Corken, Liquid Controls, SAMPI and Toptech), the Valves platform (comprised of Alfa Valvole, Richter and Aegis), the Water platform (comprised of Pulsafeeder, OBL, Knight, ADS, Trebor and iPEK), the Pumps platform (comprised of Viking and Warren Rupp) and the Agriculture platform (comprised of Banjo).

The Health & Science Technologies segment designs, produces and distributes a wide range of precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems used in beverage, food processing, pharmaceutical and cosmetics, pneumatic components and sealing solutions, including very high precision, low-flow rate pumping solutions required in analytical instrumentation, clinical diagnostics and drug discovery, high performance molded and extruded sealing components, custom mechanical and shaft seals for a variety of end markets including food and beverage, marine, chemical, wastewater and water treatment, engineered hygienic mixers and valves for the global biopharmaceutical industry, biocompatible medical devices and implantables, air compressors used in medical, dental and industrial applications, optical components and coatings for applications in the fields of scientific research, defense, biotechnology, aerospace, telecommunications and electronics manufacturing, laboratory and commercial equipment used in the production of micro and nano scale materials, precision photonic solutions used in life sciences, research and defense markets and precision gear and peristaltic pump technologies that meet exacting original equipment manufacturer specifications. The Health & Science Technologies segment contains the Scientific Fluidics & Optics platform (comprised of Eastern Plastics, Rheodyne, Sapphire Engineering, Upchurch Scientific, ERC, CiDRA Precision Services, thinXXS, CVI Melles Griot, Semrock, Advanced Thin Films and FLI), the Sealing Solutions platform (comprised of Precision Polymer Engineering, FTL Seals Technology, Novotema, SFC Koenig and Velcora), the Gast platform, the Micropump platform and the Material Processing Technologies platform (comprised of Quadro, Fitzpatrick, Microfluidics and Matcon).

The Fire & Safety/Diversified Products segment designs, produces and develops firefighting pumps, valves and controls, rescue tools, lifting bags and other components and systems for the fire and rescue industry, engineered stainless steel banding and clamping devices used in a variety of industrial and commercial applications and precision equipment for dispensing, metering and mixing colorants and paints used in a variety of retail and commercial businesses around the world. The Fire & Safety/Diversified Products segment is comprised of the Fire & Safety platform (comprised of Class 1, Hale, Akron Brass, AWG Fittings, Godiva, Dinglee, Hurst Jaws of Life, Lukas and Vetter), the BAND-IT platform and the Dispensing platform.

Management’s primary measurements of segment performance are sales, operating income and operating margin. In addition, due to the highly acquisitive nature of the Company, the determination of operating income includes amortization of acquired intangible assets and as a result, management reviews depreciation and amortization as a percentage of sales. These measures are monitored by management and significant changes in operating results versus current trends in end markets and variances from forecasts are analyzed with segment management.

This report references organic sales, a non-GAAP measure, that refers to sales from continuing operations calculated according to generally accepted accounting principles in the United States of America (“U.S. GAAP”) but excludes (1) the impact of foreign currency translation and (2) sales from acquired or divested businesses during the first twelve months of ownership or divestiture. The portion of sales attributable to foreign currency translation is calculated as the difference between (a) the period-to-period change in organic sales and (b) the period-to-period change in organic sales after applying prior period foreign exchange rates to the current year period. Management believes that reporting organic sales provides useful information to investors by helping identify underlying growth trends in our business and facilitating easier comparisons of our revenue performance with prior and future periods and to our peers. The Company excludes the effect of foreign currency translation from organic sales because foreign currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. The

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Company excludes the effect of acquisitions and divestitures because they can obscure underlying business trends and make comparisons of long term performance difficult due to the varying nature, size and number of transactions from period to period and between the Company and its peers.

EBITDA means earnings before interest, income taxes, depreciation and amortization. Given the acquisitive nature of the Company, which results in a higher level of amortization expense from recently acquired businesses, management uses EBITDA as an internal operating metric to provide another representation of the businesses’ performance across our three segments and for enterprise valuation purposes. Management believes that EBITDA is useful to investors as an indicator of the strength and performance of the Company and a way to evaluate and compare operating performance and value companies within our industry. Management believes that EBITDA margin is useful for the same reason as EBITDA. EBITDA is also used to calculate certain financial covenants, as discussed in Note 10 in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Statements.”

Organic sales have been reconciled to net sales and EBITDA has been reconciled to net income in Item 2 under the heading “Non-GAAP Disclosures.” The reconciliation of segment EBITDA to net income was performed on a consolidated basis due to the fact that we do not allocate consolidated interest expense or the consolidated provision for income taxes to our segments.

Management uses Adjusted operating income, Adjusted net income, Adjusted EBITDA and Adjusted EPS as metrics by which to measure performance of the Company since they exclude items that are not reflective of ongoing operations, such as restructuring expenses and a fair value inventory step-up charge.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures prepared in accordance with U.S. GAAP. The financial results prepared in accordance with U.S. GAAP and the reconciliations from these results should be carefully evaluated.

Some of our key financial results for the three months ended September 30, 2019 when compared to the same period in the prior year are as follows:

Sales of $624.2 million were flat; organic sales (which excludes acquisitions and foreign currency translation) were also flat.
Operating income of $141.8 million decreased 2%. Adjusted for a $3.3 million fair value inventory step-up charge and $12.0 million of restructuring expenses, adjusted operating income increased 5% to $157.1 million.
Net income of $105.2 million decreased 1%. Adjusted for a $2.6 million fair value inventory step-up charge and $9.2 million of restructuring expenses, net of tax benefit, adjusted net income increased 6% to $117.0 million.
EBITDA of $160.1 million was 26% of sales and covered interest expense by 14 times. Adjusted EBITDA of $175.4 million was 28% of sales and covered interest expense by over 15 times.
Diluted EPS of $1.37 was flat. Adjusted EPS of $1.52 increased 11 cents, or 8%.

Some of our key financial results for the nine months ended September 30, 2019 when compared to the same period in the prior year are as follows:

Sales of $1,888.6 million increased 1%; organic sales (which excludes acquisitions and foreign currency translation) were up 2%.
Operating income of $444.8 million increased 4%. Adjusted for a $3.3 million fair value inventory step-up charge and $14.1 million of restructuring expenses, adjusted operating income increased 6% to $462.2 million.
Net income of $328.7 million increased 5%. Adjusted for a $2.6 million fair value inventory step-up charge and $10.7 million of restructuring expenses, net of tax benefit, adjusted net income increased 7% to $342.0 million.
EBITDA of $501.5 million was 27% of sales and covered interest expense by over 15 times. Adjusted EBITDA of $518.9 million was 27% of sales and covered interest expense by almost 16 times.
Diluted EPS of $4.30 increased 28 cents, or 7%. Adjusted EPS of $4.47 increased 37 cents, or 9%.

Given the Company’s current outlook, we are projecting fourth quarter 2019 EPS in the range of $1.33 to $1.35 with full year 2019 adjusted EPS of $5.80 to $5.82. We are also projecting fourth quarter organic revenue growth to be flat with full year organic revenue growth of 2%.


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Results of Operations

The following is a discussion and analysis of our results of operations for the three and nine months ended September 30, 2019 and 2018. Segment operating income and EBITDA exclude unallocated corporate operating expenses of $17.9 million and $18.5 million for the three months ended September 30, 2019 and 2018, respectively, and $55.7 million and $61.2 million for the nine months ended September 30, 2019 and 2018, respectively.

Consolidated Results for the Three Months Ended September 30, 2019 Compared with the Same Period in 2018
(In thousands)
Three Months Ended September 30,
 
2019
 
2018
Net sales
$
624,246

 
$
622,888

Operating income
141,765

 
145,133

Operating margin
22.7
%
 
23.3
%

For the three months ended September 30, 2019, Fluid & Metering Technologies contributed 38% of sales, 49% of operating income and 47% of EBITDA; Health & Science Technologies contributed 37% of sales, 25% of operating income and 28% of EBITDA; and Fire & Safety/Diversified Products contributed 25% of sales, 26% of operating income and 25% of EBITDA. These percentages are calculated on the basis of total segment (not total Company) sales, operating income and EBITDA.

Sales in the third quarter of 2019 were $624.2 million, which was flat compared to the same period in 2018. This reflects flat organic sales and a 1% increase from acquisitions (Velcora - July 2019 and Finger Lakes - July 2018), offset by a 1% unfavorable impact from foreign currency translation. Sales to customers outside the U.S. represented approximately 50% of total sales in both the third quarters of 2019 and 2018.

Gross profit of $282.0 million in the third quarter of 2019 increased $1.7 million, or 1%, compared to the same period in 2018, and gross margin of 45.2% in the third quarter of 2019 increased 20 basis points from 45.0% during the same period in 2018. Both gross profit and gross margin increased compared to the prior year period primarily due to price and productivity initiatives, partially offset by a fair value inventory step-up charge included in the current year period and higher engineering investments.

Selling, general and administrative expenses decreased to $128.3 million in the third quarter of 2019 from $130.5 million during the same period in 2018. The decrease is primarily due to lower variable compensation costs and an overall tighter cost control environment in 2019. Corporate costs of $17.2 million in the third quarter of 2019 decreased to $17.9 million in the same period of 2018 primarily due to lower variable compensation costs. As a percentage of sales, selling, general and administrative expenses were 20.6% for the third quarter of 2019, down 40 basis points compared to 21.0% during the same period in 2018.

The Company incurred $12.0 million of restructuring expenses in the third quarter of 2019 compared with $4.6 million during the same period in 2018. The restructuring expenses included severance benefits of $1.9 million and exit costs of $0.4 million as well as an asset impairment charge of $9.7 million. In the second quarter of 2019, the Company began to evaluate strategic alternatives for one of its businesses in the HST segment. Prior to making a final decision on the options that were presented for this business, the business was informed in the third quarter of 2019 of the loss of its largest customer. As a result, the Company accelerated its restructuring activities for this business and a decision was made to wind down the business over time, requiring the asset impairment charge.

Operating income of $141.8 million and operating margin of 22.7% in the third quarter of 2019 were down from the $145.1 million and 23.3%, respectively, recorded during the same period in 2018. The decrease in operating income and margin is primarily due to a fair value inventory step-up charge and higher restructuring expenses in 2019, partially offset by gross margin expansion and reduced selling, general and administrative expenses in 2019.

Other (income) expense - net increased to $1.2 million of expense in the third quarter of 2019 compared to $0.9 million of expense during the same period in 2018, primarily due to a loss on early retirement of debt assumed in the Velcora acquisition and a tax refund received in 2018 that did not reoccur in 2019, partially offset by lower foreign currency transaction losses in 2019 compared to the same period in 2018.

Interest expense of $11.3 million in the third quarter of 2019 was higher than the $11.0 million in the same period of 2018 due to debt assumed in the Velcora acquisition.


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The Company’s provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes decreased to $24.0 million in the third quarter of 2019 compared to $26.9 million during the same period in 2018. The effective tax rate decreased to 18.6% for the third quarter of 2019 compared to 20.2% for the same period in 2018 due to a decrease in the impact of Global Intangible Low-Taxed Income (“GILTI”) related to U.S. Treasury regulations as well as the mix of global pre-tax income among jurisdictions.

Net income in the third quarter of 2019 of $105.2 million decreased from $106.4 million during the same period in 2018. Diluted earnings per share in the third quarter of 2019 of $1.37 was flat compared to the same period in 2018.

Fluid & Metering Technologies Segment
(In thousands)
Three Months Ended September 30,
 
2019
 
2018
Net sales
$
240,861

 
$
239,213

Operating income
77,481

 
69,755

Operating margin
32.2
%
 
29.2
%

Sales of $240.9 million increased $1.6 million, or 1%, in the third quarter of 2019 compared to the same period in 2018. This reflects a 2% increase in organic sales, partially offset by a 1% unfavorable impact from foreign currency translation. In the third quarter of 2019, sales increased 2% domestically and decreased 1% internationally compared to the same period in 2018. Sales to customers outside the U.S. were approximately 45% of total segment sales in both the third quarters of 2019 and 2018.

Sales within our Pumps platform increased in the third quarter of 2019 compared to the same period in 2018 due to strength in LACT (lease automatic custody transfer) projects and strong OEM activity. Sales within our Energy platform increased slightly in the third quarter of 2019 compared to the same period in 2018 due to strength in Latin America. Sales within our Valves platform were relatively flat in the third quarter of 2019 compared to the same period in 2018 due to the softening global industrial landscape. Sales within our Water platform decreased compared to the same period in 2018, primarily due to weakness within the European and Asian distribution markets and project delays in the U.S. Sales within our Agriculture platform decreased in the third quarter of 2019 compared to the same period in 2018 due to decreased demand across both the agriculture and industrial OEM markets.

Operating income of $77.5 million and operating margin of 32.2% in the third quarter of 2019 were higher than the $69.8 million and 29.2%, respectively, recorded during the same period in 2018, primarily due to price and productivity initiatives, partially offset by higher engineering investments.

Health & Science Technologies Segment
(In thousands)
Three Months Ended September 30,
 
2019
 
2018
Net sales
$
229,610

 
$
222,426

Operating income
40,170

 
49,144

Operating margin
17.5
%
 
22.1
%

Sales of $229.6 million increased $7.2 million, or 3%, in the third quarter of 2019 compared to the same period in 2018. This reflects a 1% increase in organic sales and a 3% increase from acquisitions (Velcora - July 2019 and FLI - July 2018), partially offset by a 1% unfavorable impact from foreign currency translation. In the third quarter of 2019, sales increased 4% domestically and 2% internationally compared to the same period in 2018. Sales to customers outside the U.S. were approximately 55% of total segment sales in both the third quarters of 2019 and 2018.

Sales within our Material Processing Technologies platform increased in the third quarter of 2019 compared to the same period in 2018, primarily due to timing of projects and strength in the pharma market. Sales within our Sealing Solutions platform increased in the third quarter of 2019 compared to the same period in 2018, primarily due to the Velcora acquisition, partially offset by continued softness in the semiconductor and automotive end markets. Sales within our Scientific Fluidics & Optics platform increased in the third quarter of 2019 compared to the same period in 2018 due to new products, market share wins, solid demand in our primary end markets and the FLI acquisition. Sales within our Gast platform decreased in the third quarter of 2019 compared to the same period in 2018, primarily due to a slowdown across various industrial end markets. Sales within our Micropump

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platform decreased in the third quarter of 2019 compared to the same period in 2018 due to weakness in core printing and industrial distribution.

Operating income of $40.2 million in the third quarter of 2019 was lower than the $49.1 million recorded during the same period in 2018 and operating margin of 17.5% in the third quarter of 2019 was lower than the 22.1% recorded during the same period in 2018, primarily due to higher restructuring expenses (including the asset impairment) in 2019, the fair value inventory step-up charge related to the Velcora acquisition and higher engineering investments and amortization, partially offset by higher volume and price.

Fire & Safety/Diversified Products Segment
(In thousands)
Three Months Ended September 30,
 
2019
 
2018
Net sales
$
154,543

 
$
161,832

Operating income
41,967

 
44,726

Operating margin
27.2
%
 
27.6
%

Sales of $154.5 million decreased $7.3 million, or 5%, in the third quarter of 2019 compared to the same period in 2018. This reflects a 3% decrease in organic sales and a 2% unfavorable impact from foreign currency translation. In the third quarter of 2019, sales decreased 6% domestically and 3% internationally compared to the same period in 2018. Sales to customers outside the U.S. were approximately 52% of total segment sales in the third quarter of 2019 compared to 51% during the same period in 2018.

Sales within our Dispensing platform decreased in the third quarter of 2019 compared to the same period in 2018 primarily due to large projects in the U.S. from 2018 not repeating in 2019, weakness in Asian markets and unfavorable foreign currency translation. Sales within our Fire & Safety platform decreased in the third quarter of 2019 compared to the same period in 2018 due to lower large project tenders globally. Sales within our Band-It platform increased in the third quarter of 2019 compared to the same period in 2018 due to strength in the transportation market.

Operating income $42.0 million and operating margin of 27.2% in the third quarter of 2019 were lower than the $44.7 million and 27.6%, respectively, recorded during the same period in 2018, mainly due to reduced volume.

Consolidated Results for the Nine Months Ended September 30, 2019 Compared with the Same Period in 2018
(In thousands)
Nine Months Ended September 30,
 
2019
 
2018
Net sales
$
1,888,576

 
$
1,869,572

Operating income
444,830

 
429,647

Operating margin
23.6
%
 
23.0
%

For the nine months ended September 30, 2019, Fluid & Metering Technologies contributed 39% of sales, 45% of operating income and 43% of EBITDA; Health & Science Technologies contributed 36% of sales, 30% of operating income and 32% of EBITDA; and Fire & Safety/Diversified Products contributed 25% of sales, 25% of operating income and 25% of EBITDA. These percentages are calculated on the basis of total segment (not total Company) sales, operating income and EBITDA.

Sales in the first nine months of 2019 were $1,888.6 million, which was a 1% increase compared to the same period in 2018. This reflects a 2% increase in organic sales and a 1% increase from acquisitions (Velcora - July 2019 and Finger Lakes - July 2018), partially offset by a 2% unfavorable impact from foreign currency translation. Sales to customers outside the U.S. represented approximately 50% of total sales in the first nine months of 2019 compared to 51% during the same period in 2018.

Gross profit of $858.1 million in the first nine months of 2019 increased $13.9 million, or 2%, compared to the same period in 2018, while gross margin of 45.4% in the first nine months of 2019 increased 20 basis points from 45.2% during the same period in 2018. Both gross profit and gross margin increased compared to the prior year period primarily due to price, volume leverage and productivity initiatives, partially offset by a fair value inventory step-up charge and higher engineering costs.

Selling, general and administrative expenses decreased to $399.2 million in the first nine months of 2019 from $406.4 million during the same period in 2018, primarily due to lower variable compensation costs and amortization in 2019 as well as the stamp

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duty charge in 2018. Corporate costs decreased to $55.0 million in the first nine months of 2019 compared to $60.0 million during the same period in 2018 primarily due to lower variable compensation costs as well as the stamp duty charge in 2018. As a percentage of sales, selling, general and administrative expenses were 21.1% for the first nine months of 2019, down 70 basis points compared to 21.8% during the same period in 2018.

The Company incurred $14.1 million of restructuring expenses in the first nine months of 2019 compared with $8.3 million during the same period in 2018. The restructuring expenses included severance benefits of $3.8 million and exit costs of $0.6 million as well as an asset impairment charge of $9.7 million. In the second quarter of 2019, the Company began to evaluate strategic alternatives for one of its businesses in the HST segment. Prior to making a final decision on the options that were presented for this business, the business was informed in the third quarter of 2019 of the loss of its largest customer. As a result, the Company accelerated its restructuring activities for this business and a decision was made to wind down the business over time, requiring the asset impairment charge.

Operating income of $444.8 million and operating margin of 23.6% in the first nine months of 2019 were up from the $429.6 million and 23.0%, respectively, recorded during the same period in 2018. The increases in operating income and operating margin are primarily due to gross margin expansion and lower selling, general and administrative expenses, partially offset by a fair value inventory step-up charge and higher restructuring expenses in 2019.

Other (income) expense - net was $0.7 million of expense in the first nine months of 2019 compared to $3.6 million of income during the same period in 2018, primarily due to foreign currency transaction gains in 2018 that did not repeat in 2019 as well as a pension settlement charge in 2019.

Interest expense of $33.3 million in the first nine months of 2019 was essentially flat compared to the same period in 2018.

The provision for income taxes decreased to $82.2 million in the first nine months of 2019 compared to $87.7 million during the same period in 2018. The effective tax rate decreased to 20.0% in the first nine months of 2019 compared to 21.9% during the same period in 2018 due to a decrease in the impact of GILTI related to U.S. Treasury regulations, the excess tax benefits related to share-based compensation as well as the mix of global pre-tax income among jurisdictions.

Net income of $328.7 million in the first nine months of 2019 increased from $312.4 million during the same period in 2018. Diluted earnings per share of $4.30 in the first nine months of 2019 increased $0.28, or 7%, compared to the same period in 2018.

Fluid & Metering Technologies Segment
(In thousands)
Nine Months Ended September 30,
 
2019
 
2018
Net sales
$
729,572

 
$
714,346

Operating income
223,493

 
207,149

Operating margin
30.6
%
 
29.0
%

Sales of $729.6 million increased $15.2 million, or 2%, in the first nine months of 2019 compared to the same period in 2018. This reflects a 4% increase in organic sales, partially offset by a 2% unfavorable impact from foreign currency translation. In the first nine months of 2019, sales increased 2% both domestically and internationally compared to the same period in 2018. Sales to customers outside the U.S. were approximately 44% of total segment sales in the first nine months of both 2019 and 2018.

Sales within our Pumps platform increased in the first nine months of 2019 compared to the same period in 2018 due to strength in OEM activity and LACT projects. Sales within our Valves platform increased in the first nine months of 2019 compared to the same period in 2018 primarily due to strong demand within the chemical end market. Sales within our Water platform increased slightly in the first nine months of 2019 compared to the same period in 2018 due to increased project demand. Sales within our Energy platform increased slightly in the first nine months of 2019 compared to the same period in 2018 due to new product launches. Sales within our Agriculture platform decreased in the first nine months of 2019 compared to the same period in 2018 due to decreased demand across both OEM and distribution channels in North America and Europe.
 
Operating income of $223.5 million and operating margin of 30.6% in the first nine months of 2019 were higher than the $207.1 million and 29.0%, respectively, recorded in the first nine months of 2018, primarily due to higher volume and productivity initiatives, partially offset by higher engineering investments.

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Health & Science Technologies Segment
(In thousands)
Nine Months Ended September 30,
 
2019
 
2018
Net sales
$
687,153

 
$
670,904

Operating income
151,087

 
153,519

Operating margin
22.0
%
 
22.9
%

Sales of $687.2 million increased $16.2 million, or 2%, in the first nine months of 2019 compared to the same period in 2018. This reflects a 2% increase in organic sales and a 2% increase from acquisitions (Velcora - July 2019 and FLI - July 2018), partially offset by a 2% unfavorable impact from foreign currency translation. In the first nine months of 2019, sales increased 6% domestically and decreased 1% internationally compared to the same period in 2018. Sales to customers outside the U.S. were approximately 55% of total segment sales in the first nine months of 2019 compared to 57% during the same period in 2018.

Sales within our Gast platform increased in the first nine months of 2019 compared to the same period in 2018 primarily due to new product introductions in the food and beverage market. Sales within our Scientific Fluidics & Optics platform increased in the first nine months of 2019 compared to the same period in 2018 due to new product introductions, increased demand for IVD, biotechnology, DNA sequencing and defense and the FLI acquisition. Sales within our Material Processing Technologies platform decreased in the first nine months of 2019 compared to the same period in 2018 primarily due to timing of large projects in 2019 as compared to 2018. Sales within our Sealing Solutions platform decreased in the first nine months of 2019 compared to the same period in 2018 due to market softness in the semiconductor and automotive end markets, partially offset by the Velcora acquisition. Sales within our Micropump platform decreased in the first nine months of 2019 compared to the same period in 2018 due to industrial distribution softness.
    
Operating income of $151.1 million and operating margin of 22.0% in the first nine months of 2019 were lower than the $153.5 million and 22.9%, respectively, recorded during the same period in 2018, primarily due to higher restructuring expenses (including the asset impairment) in 2019, the fair value inventory step-up charge related to the Velcora acquisition and higher engineering investments, partially offset by higher volume and lower amortization.

Fire & Safety/Diversified Products Segment
(In thousands)
Nine Months Ended September 30,
 
2019
 
2018
Net sales
$
474,745

 
$
485,305

Operating income
125,909

 
130,162

Operating margin
26.5
%
 
26.8
%

Sales of $474.7 million decreased $10.6 million, or 2%, in the first nine months of 2019 compared to the same period in 2018. This reflects flat organic sales offset by a 2% unfavorable impact from foreign currency translation. In the first nine months of 2019, sales were flat domestically and decreased 4% internationally compared to the same period in 2018. Sales to customers outside the U.S. were approximately 52% of total segment sales in the first nine months of 2019 compared with 53% during the same period in 2018.

Sales within our Dispensing platform decreased in the first nine months of 2019 compared to the same period in 2018 due to large projects in the U.S. from 2018 not repeating in 2019. Sales within our BAND-IT platform increased in the first nine months of 2019 compared to the same period in 2018 due to strength in the transportation market. Sales within our Fire & Safety platform increased in the first nine months of 2019 compared to the same period in 2018 primarily due to elevated OEM backlog and strong demand for rescue tools.

Operating income of $125.9 million and operating margin of 26.5% in the first nine months of 2019 were lower than the $130.2 million and 26.8%, respectively, recorded during the same period in 2018, primarily due to lower volume at Dispensing and higher engineering investments.

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Liquidity and Capital Resources

Operating Activities

Cash flows from operating activities for the first nine months of 2019 increased $51.1 million, or 16%, to $376.9 million compared to the first nine months of 2018 due to higher earnings and favorable operating working capital, partially offset by higher prepaid taxes and accrued expenses. At September 30, 2019, working capital was $820.0 million and the Company’s current ratio was 3.2 to 1. At September 30, 2019, the Company’s cash and cash equivalents totaled $516.0 million, of which $373.2 million was held outside of the United States.
 
Investing Activities

Cash flows used in investing activities for the first nine months of 2019 increased $57.6 million to $122.6 million compared to the same period in 2018 primarily due to $87.2 million spent on the acquisition of Velcora in 2019 compared to $20.2 million spent on the acquisition of FLI in 2018, partially offset by lower capital expenditures in 2019 and $4.0 million spent on the purchase of intellectual property assets from Phantom in 2018.

Cash flows from operations were more than adequate to fund capital expenditures of $36.8 million and $39.9 million in the first nine months of 2019 and 2018, respectively. Capital expenditures were generally for machinery and equipment that supported growth, improved productivity, tooling, business system technology, replacement of equipment and investments in new facilities. Management believes that the Company has ample capacity in its plants and equipment to meet demand increases for future growth in the intermediate term.

Financing Activities

Cash flows used in financing activities for the first nine months of 2019 were $192.7 million compared to $134.6 million during the same period in 2018, primarily as a result of higher debt repayments due to the repayment of debt assumed in the Velcora acquisition as well as higher share repurchases and dividends paid in 2019.

On June 13, 2016, the Company completed a private placement of a $100 million aggregate principal amount of 3.20% Senior Notes due June 13, 2023 and a $100 million aggregate principal amount of 3.37% Senior Notes due June 13, 2025 (collectively, the “Notes”) pursuant to a Note Purchase Agreement, dated June 13, 2016 (the “Purchase Agreement”). Each series of Notes bears interest at the stated amount per annum, which is payable semi-annually in arrears on each June 13th and December 13th. The Notes are unsecured obligations of the Company and rank pari passu in right of payment with all of the Company’s other unsecured, unsubordinated debt. The Company may at any time prepay all, or any portion of the Notes; provided that such portion is greater than 5% of the aggregate principal amount of the Notes then outstanding. In the event of a prepayment, the Company will pay an amount equal to par plus accrued interest plus a make-whole amount. In addition, the Company may repurchase the Notes by making an offer to all holders of the Notes, subject to certain conditions.

On May 31, 2019, the Company entered into a credit agreement (the “Credit Agreement”) along with certain of its subsidiaries, as borrowers (the “Borrowers”), Bank of America, N.A., as administrative agent, swing line lender and an issuer of letters of credit, with other agents party thereto. The Credit Agreement consists of a revolving credit facility (the “Revolving Facility”), which is an $800.0 million unsecured, multi-currency bank credit facility expiring on May 30, 2024. The Credit Agreement replaces the Company’s existing five-year, $700 million credit agreement, dated as of June 23, 2015, which was due to expire in June 2020. At September 30, 2019, there was no balance outstanding under the Revolving Facility and $10.1 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Facility of $789.9 million.

Borrowings under the Revolving Facility bear interest, at either an alternate base rate or an adjusted LIBOR rate plus, in each case, an applicable margin. Such applicable margin is based on the better of the Company’s senior, unsecured, long-term debt rating or the Company’s applicable leverage ratio. Interest is payable (a) in the case of base rate loans, quarterly, and (b) in the case of LIBOR rate loans, on the last day of the applicable interest period selected, or every three months from the effective date of such interest period for interest periods exceeding three months. The Company may request increases in the lending commitments under the Credit Agreement, but the aggregate lending commitments pursuant to such increases may not exceed $400 million.

The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain foreign subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement.


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There are two key financial covenants that the Company is required to maintain in connection with the Revolving Facility and the Notes, a minimum interest coverage ratio of 3.00 to 1 and a maximum leverage ratio of 3.50 to 1. In the case of the leverage ratio, there is an option to increase the ratio to 4.00 for 12 months in connection with certain acquisitions. At September 30, 2019, the Company was in compliance with both of these financial covenants, as the Company’s interest coverage ratio was 15.96 to 1 and the leverage ratio was 1.24 to 1. There are no financial covenants relating to the 4.5% Senior Notes or 4.2% Senior Notes; however, both are subject to cross-default provisions.

On December 1, 2015, the Company’s Board of Directors approved an increase of $300.0 million in the authorized level for repurchases of common stock. This followed the prior Board of Directors approved repurchase authorization of $400.0 million that was announced by the Company on November 6, 2014. Repurchases under the program will be funded with future cash flow generation or borrowings available under the Revolving Facility. During the nine months ended September 30, 2019, the Company repurchased a total of 389 thousand shares at a cost of $54.7 million. During the nine months ended September 30, 2018, the Company repurchased a total of 357 thousand shares at a cost of $51.7 million, of which $1.0 million settled in October 2018. As of September 30, 2019, the amount of share repurchase authorization remaining is $322.3 million.

The Company believes current cash, cash from operations and cash available under the Revolving Facility will be sufficient to meet its operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and postretirement funding requirements, authorized share repurchases and annual dividend payments to holders of the Company’s common stock for the remainder of 2019. Additionally, in the event that suitable businesses are available for acquisition upon acceptable terms, the Company may obtain all or a portion of the financing for these acquisitions through the incurrence of additional borrowings.

Non-GAAP Disclosures

Set forth below are reconciliations of Adjusted gross profit, Adjusted operating income, Adjusted net income, Adjusted EPS, EBITDA and Adjusted EBITDA to the comparable measures of gross profit, operating income and net income, as determined in accordance with U.S. GAAP. We have reconciled Adjusted gross profit to Gross profit, Adjusted operating income to Operating income; Adjusted net income to Net income; Adjusted EPS to EPS; and consolidated EBITDA, segment EBITDA, Adjusted EBITDA and Adjusted segment EBITDA to Net income. The reconciliation of segment EBITDA to net income was performed on a consolidated basis due to the fact that we do not allocate consolidated interest expense or the consolidated provision for income taxes to our segments.

EBITDA means earnings before interest, income taxes, depreciation and amortization. Given the acquisitive nature of the Company, which results in a higher level of amortization expense from recently acquired businesses, management uses EBITDA as an internal operating metric to provide another representation of the businesses’ performance across our three segments and for enterprise valuation purposes. Management believes that EBITDA is useful to investors as an indicator of the strength and performance of the Company and a way to evaluate and compare operating performance and value companies within our industry. Management believes that EBITDA margin is useful for the same reason as EBITDA. EBITDA is also used to calculate certain financial covenants, as discussed in Note 10 in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1, “Financial Statements.”

This report references organic sales, a non-GAAP measure, that refers to sales from continuing operations calculated according to U.S. GAAP but excludes (1) the impact of foreign currency translation and (2) sales from acquired or divested businesses during the first twelve months of ownership or divestiture. The portion of sales attributable to foreign currency translation is calculated as the difference between (a) the period-to-period change in organic sales and (b) the period-to-period change in organic sales after applying prior period foreign exchange rates to the current year period. Management believes that reporting organic sales provides useful information to investors by helping identify underlying growth trends in our business and facilitating easier comparisons of our revenue performance with prior and future periods and to our peers. The Company excludes the effect of foreign currency translation from organic sales because foreign currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. The Company excludes the effect of acquisitions and divestitures because they can obscure underlying business trends and make comparisons of long term performance difficult due to the varying nature, size and number of transactions from period to period and between the Company and its peers.

Management uses Adjusted gross profit, Adjusted operating income, Adjusted net income, Adjusted EBITDA and Adjusted EPS as metrics by which to measure performance of the Company since they exclude items that are not reflective of ongoing operations, such as restructuring expenses and a fair value inventory step-up charge. Management also supplements its U.S. GAAP financial statements with adjusted information to provide investors with greater insight, transparency and a more comprehensive understanding of the information used by management in its financial and operational decision making.


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Table of Contents


In addition to measuring our cash flow generation and usage based upon the operating, investing and financing classifications included in the Condensed Consolidated Statements of Cash Flows, we also measure free cash flow (a non-GAAP measure) which represents net cash provided by operating activities minus capital expenditures. We believe that free cash flow is an important measure of operating performance because it provides management a measurement of cash generated from operations that is available for mandatory payment obligations and investment opportunities, such as funding acquisitions, paying dividends, repaying debt and repurchasing our common stock.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures prepared in accordance with U.S. GAAP. The financial results prepared in accordance with U.S. GAAP and the reconciliations from these results should be carefully evaluated.
1. Reconciliations of the Change in Net Sales to Organic Net Sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2019
 
FMT
 
HST
 
FSDP
 
IDEX
Change in net sales
1
 %
 
3
 %
 
(5
)%
 
 %
- Impact from acquisitions/divestitures
 %
 
3
 %
 
 %
 
1
 %
- Impact from foreign currency
(1
)%
 
(1
)%
 
(2
)%
 
(1
)%
Change in organic net sales
2
 %
 
1
 %
 
(3
)%
 
 %
 
Nine Months Ended September 30, 2019
 
FMT
 
HST
 
FSDP
 
IDEX
Change in net sales
2
 %
 
2
 %
 
(2
)%
 
1
 %
- Impact from acquisitions/divestitures
 %
 
2
 %
 
 %
 
1
 %
- Impact from foreign currency
(2
)%
 
(2
)%
 
(2
)%
 
(2
)%
Change in organic net sales
4
 %
 
2
 %
 
 %
 
2
 %

2. Reconciliations of Reported-to-Adjusted Gross Profit and Margin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Gross profit
$
281,978

 
$
280,233

 
$
858,149

 
$
844,252

+ Fair value inventory step-up charge
3,340

 

 
3,340

 

Adjusted gross profit
$
285,318

 
$
280,233

 
$
861,489

 
$
844,252

 
 
 
 
 
 
 
 
Net Sales
$
624,246

 
$
622,888

 
$
1,888,576

 
$
1,869,572

 
 
 
 
 
 
 
 
Gross profit margin
45.2
%
 
45.0
%
 
45.4
%
 
45.2
%
Adjusted gross profit margin
45.7
%
 
45.0
%
 
45.6
%
 
45.2
%


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Table of Contents


3. Reconciliations of Reported-to-Adjusted Operating Income and Margin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands)
Three Months Ended September 30, 2019
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Reported operating income (loss)
$
77,481

 
$
40,170

 
$
41,967

 
$
(17,853
)
 
$
141,765

 + Restructuring expenses

 
11,196

 
104

 
656

 
11,956

 + Fair value inventory step-up charge

 
3,340

 

 

 
3,340

Adjusted operating income (loss)
$
77,481

 
$
54,706

 
$
42,071

 
$
(17,197
)
 
$
157,061

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
240,861

 
$
229,610

 
$
154,543

 
$
(768
)
 
$
624,246

 
 
 
 
 
 
 
 
 
 
Operating margin
32.2
%
 
17.5
%
 
27.2
%
 
n/m

 
22.7
%
Adjusted operating margin
32.2
%
 
23.8
%
 
27.2
%
 
n/m

 
25.2
%
 
Three Months Ended September 30, 2018
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Reported operating income (loss)
$
69,755

 
$
49,144

 
$
44,726

 
$
(18,492
)
 
$
145,133

 + Restructuring expenses
827

 
3,116

 
60

 
618

 
4,621

Adjusted operating income (loss)
$
70,582

 
$
52,260

 
$
44,786

 
$
(17,874
)
 
$
149,754

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
239,213

 
$
222,426

 
$
161,832

 
$
(583
)
 
$
622,888

 
 
 
 
 
 
 
 
 
 
Operating margin
29.2
%
 
22.1
%
 
27.6
%
 
n/m

 
23.3
%
Adjusted operating margin
29.5
%
 
23.5
%
 
27.7
%
 
n/m

 
24.0
%
 
Nine Months Ended September 30, 2019
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Reported operating income (loss)
$
223,493

 
$
151,087

 
$
125,909

 
$
(55,659
)
 
$
444,830

 + Restructuring expenses
930

 
11,526

 
923

 
703

 
14,082

 + Fair value inventory step-up charge

 
3,340

 

 

 
3,340

Adjusted operating income (loss)
$
224,423

 
$
165,953

 
$
126,832

 
$
(54,956
)
 
$
462,252

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
729,572

 
$
687,153

 
$
474,745

 
$
(2,894
)
 
$
1,888,576

 
 
 
 
 
 
 
 
 
 
Operating margin
30.6
%
 
22.0
%
 
26.5
%
 
n/m

 
23.6
%
Adjusted operating margin
30.8
%
 
24.2
%
 
26.7
%
 
n/m

 
24.5
%
 
Nine Months Ended September 30, 2018
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Reported operating income (loss)
$
207,149

 
$
153,519

 
$
130,162

 
$
(61,183
)
 
$
429,647

 + Restructuring expenses
1,313

 
5,298

 
427

 
1,213

 
8,251

Adjusted operating income (loss)
$
208,462

 
$
158,817

 
$
130,589

 
$
(59,970
)
 
$
437,898

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
714,346

 
$
670,904

 
$
485,305

 
$
(983
)
 
$
1,869,572

 
 
 
 
 
 
 
 
 
 
Operating margin
29.0
%
 
22.9
%
 
26.8
%
 
n/m

 
23.0
%
Adjusted operating margin
29.2
%
 
23.7
%
 
26.9
%
 
n/m

 
23.4
%

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4. Reconciliations of Reported-to-Adjusted Net Income and EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except EPS)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Reported net income
$
105,194

 
$
106,352

 
$
328,671

 
$
312,436

 + Restructuring expenses
11,956

 
4,621

 
14,082

 
8,251

 + Tax impact on restructuring expenses
(2,776
)
 
(1,130
)
 
(3,336
)
 
(2,003
)
 + Fair value inventory step-up charge
3,340

 

 
3,340

 

 + Tax impact on fair value inventory step-up charge
(735
)
 

 
(735
)
 

Adjusted net income
$
116,979

 
$
109,843

 
$
342,022

 
$
318,684

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Reported EPS
$
1.37

 
$
1.37

 
$
4.30

 
$
4.02

 + Restructuring expenses
0.16

 
0.06

 
0.18

 
0.11

 + Tax impact on restructuring expenses
(0.04
)
 
(0.02
)
 
(0.04
)
 
(0.03
)
 + Fair value inventory step-up charge
0.04

 

 
0.04

 

 + Tax impact on fair value inventory step-up charge
(0.01
)
 

 
(0.01
)
 

Adjusted EPS
$
1.52

 
$
1.41

 
$
4.47

 
$
4.10

 
 
 
 
 
 
 
 
Diluted weighted average shares
76,577

 
77,709

 
76,415

 
77,717

5. Reconciliations of EBITDA to Net Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands)
Three Months Ended September 30, 2019
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Operating income (loss)
$
77,481

 
$
40,170

 
$
41,967

 
$
(17,853
)
 
$
141,765

- Other (income) expense - net
295

 
1,272

 
(92
)
 
(256
)
 
1,219

+ Depreciation and amortization
5,507

 
10,296

 
3,566

 
154

 
19,523

EBITDA
82,693

 
49,194

 
45,625

 
(17,443
)
 
160,069

- Interest expense
 
 
 
 
 
 
 
 
11,330

- Provision for income taxes
 
 
 
 
 
 
 
 
24,022

- Depreciation and amortization
 
 
 
 
 
 
 
 
19,523

Net income

 

 

 
 
 
$
105,194

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
240,861

 
$
229,610

 
$
154,543

 
$
(768
)
 
$
624,246

Operating margin
32.2
%
 
17.5
%
 
27.2
%
 
n/m

 
22.7
%
EBITDA margin
34.3
%
 
21.4
%
 
29.5
%
 
n/m

 
25.6
%

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Table of Contents


 
Three Months Ended September 30, 2018
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Operating income (loss)
$
69,755

 
$
49,144

 
$
44,726

 
$
(18,492
)
 
$
145,133

- Other (income) expense - net
411

 
780

 
342

 
(599
)
 
934

+ Depreciation and amortization
5,500

 
9,381

 
3,541

 
184

 
18,606

EBITDA
74,844

 
57,745

 
47,925

 
(17,709
)
 
162,805

- Interest expense
 
 
 
 
 
 
 
 
10,958

- Provision for income taxes
 
 
 
 
 
 
 
 
26,889

- Depreciation and amortization
 
 
 
 
 
 
 
 
18,606

Net income
 
 
 
 
 
 
 
 
$
106,352

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
239,213

 
$
222,426

 
$
161,832

 
$
(583
)
 
$
622,888

Operating margin
29.2
%
 
22.1
%
 
27.6
%
 
n/m

 
23.3
%
EBITDA margin
31.3
%
 
26.0
%
 
29.6
%
 
n/m

 
26.1
%
 
Nine Months Ended September 30, 2019
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Operating income (loss)
$
223,493

 
$
151,087

 
$
125,909

 
$
(55,659
)
 
$
444,830

- Other (income) expense - net
612

 
1,636

 
273

 
(1,820
)
 
701

+ Depreciation and amortization
16,653

 
29,438

 
10,745

 
510

 
57,346

EBITDA
239,534

 
178,889

 
136,381

 
(53,329
)
 
501,475

- Interest expense
 
 
 
 
 
 
 
 
33,262

- Provision for income taxes
 
 
 
 
 
 
 
 
82,196

- Depreciation and amortization
 
 
 
 
 
 
 
 
57,346

Net income
 
 
 
 
 
 
 
 
$
328,671

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
729,572

 
$
687,153

 
$
474,745

 
$
(2,894
)
 
$
1,888,576

Operating margin
30.6
%
 
22.0
%
 
26.5
%
 
n/m

 
23.6
%
EBITDA margin
32.8
%
 
26.0
%
 
28.7
%
 
n/m

 
26.6
%
 
Nine Months Ended September 30, 2018
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Operating income (loss)
$
207,149

 
$
153,519

 
$
130,162

 
$
(61,183
)
 
$
429,647

- Other (income) expense - net
1,056

 
(280
)
 
(3,324
)
 
(1,017
)
 
(3,565
)
+ Depreciation and amortization
16,901

 
30,860

 
10,912

 
557

 
59,230

EBITDA
222,994

 
184,659

 
144,398

 
(59,609
)
 
492,442

- Interest expense
 
 
 
 
 
 
 
 
33,098

- Provision for income taxes
 
 
 
 
 
 
 
 
87,678

- Depreciation and amortization
 
 
 
 
 
 
 
 
59,230

Net income
 
 
 
 
 
 
 
 
$
312,436

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
714,346

 
$
670,904

 
$
485,305

 
$
(983
)
 
$
1,869,572

Operating margin
29.0
%
 
22.9
%
 
26.8
%
 
n/m

 
23.0
%
EBITDA margin
31.2
%
 
27.5
%
 
29.8
%
 
n/m

 
26.3
%

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Table of Contents


6. Reconciliations of EBITDA to Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in thousands)
Three Months Ended September 30, 2019
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
EBITDA
$
82,693

 
$
49,194

 
$
45,625

 
$
(17,443
)
 
$
160,069

+ Restructuring expenses

 
11,196

 
104

 
656

 
11,956

+ Fair value inventory step-up charge

 
3,340

 

 

 
3,340

Adjusted EBITDA
$
82,693

 
$
63,730

 
$
45,729

 
$
(16,787
)
 
$
175,365

 

 

 

 
 
 

Adjusted EBITDA margin
34.3
%
 
27.8
%
 
29.6
%
 
n/m

 
28.1
%
 
Three Months Ended September 30, 2018
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
EBITDA
$
74,844

 
$
57,745

 
$
47,925

 
$
(17,709
)
 
$
162,805

+ Restructuring expenses
827

 
3,116

 
60

 
618

 
4,621

Adjusted EBITDA
$
75,671

 
$
60,861

 
$
47,985

 
$
(17,091
)
 
$
167,426

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
31.6
%
 
27.4
%
 
29.7
%
 
n/m

 
26.9
%
 
Nine Months Ended September 30, 2019
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
EBITDA
$
239,534

 
$
178,889

 
$
136,381

 
$
(53,329
)
 
$
501,475

+ Restructuring expenses
930

 
11,526

 
923

 
703

 
14,082

+ Fair value inventory step-up charge

 
3,340

 

 

 
3,340

Adjusted EBITDA
$
240,464

 
$
193,755

 
$
137,304

 
$
(52,626
)
 
$
518,897

 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA margin
33.0
%
 
28.2
%
 
28.9
%
 
n/m

 
27.5
%
 
Nine Months Ended September 30, 2018
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
EBITDA
$
222,994

 
$
184,659

 
$
144,398

 
$
(59,609
)
 
$
492,442

+ Restructuring expenses
1,313

 
5,298

 
427

 
1,213

 
8,251

Adjusted EBITDA
$
224,307

 
$
189,957

 
$
144,825

 
$
(58,396
)
 
$
500,693

 

 
 
 
 
 
 
 
 
Adjusted EBITDA margin
31.4
%
 
28.3
%
 
29.8
%
 
n/m

 
26.8
%

7. Reconciliations of Cash Flows from Operating Activities to Free Cash Flow
 
 
 
 
 
 
 
 
 
 
(dollars in thousands)
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
Cash flows from operating activities
$
157,064

 
$
133,327

 
$
376,902

 
$
325,753

- Capital expenditures
11,031

 
18,888

 
36,773

 
39,856

Free cash flow
$
146,033

 
$
114,439

 
$
340,129

 
$
285,897



45

Table of Contents


Critical Accounting Policies

As discussed in the Annual Report on Form 10-K for the year ended December 31, 2018, the preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. See Part 1, Notes to the Condensed Consolidated Financial Statements, Note 1 Basis of Presentation and Significant Accounting Policies. The adoption of recent accounting standards as described in Note 1 had a material impact on our condensed consolidated balance sheet due to the recognition of right of use assets and lease liabilities but did not have and is not expected to have a material impact on our condensed consolidated results of operations or cash flows. Aside from recent accounting standards adopted as described in Note 1, there have been no changes to the Company’s critical accounting policies described in the Annual Report on Form 10-K for the year ended December 31, 2018 that have a material impact on our condensed consolidated financial statements.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to market risk associated with changes in foreign currency exchange rates and interest rates. The Company may, from time to time, enter into foreign currency forward contracts and interest rate swaps on its debt when it believes there is a financial advantage in doing so. A treasury risk management policy, adopted by the Board of Directors, describes the procedures and controls over derivative financial and commodity instruments, including foreign currency forward contracts and interest rate swaps. Under the policy, the Company does not use financial or commodity derivative instruments for trading purposes, and the use of these instruments is subject to strict approvals by senior officers. Typically, the use of derivative instruments is limited to foreign currency forward contracts and interest rate swaps on the Company’s outstanding long-term debt. As of September 30, 2019, the Company did not have any derivative instruments outstanding.

Foreign Currency Exchange Rates

The Company’s foreign currency exchange rate risk is limited principally to the Euro, Swiss Franc, British Pound, Canadian Dollar, Indian Rupee, Chinese Renminbi and Swedish Krona. The Company manages its foreign exchange risk principally through invoicing customers in the same currency as the source of products. The effect of transaction gains and losses is reported within Other (income) expense-net in the Condensed Consolidated Statements of Operations.

Interest Rate Fluctuation

The Company does not have significant interest rate exposure due to substantially all of the $849.1 million of debt outstanding as of September 30, 2019 being fixed rate debt.

Item 4.    Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) promulgated under the Securities Exchange Act, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded as of September 30, 2019, that the Company’s disclosure controls and procedures were effective.

There has been no change in the Company’s internal controls over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


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PART II. OTHER INFORMATION
 
Item 1.    Legal Proceedings

The Company and its subsidiaries are party to legal proceedings as described in Note 19 in Part I, Item 1, “Legal Proceedings,” and such disclosure is incorporated by reference into this Item 1, “Legal Proceedings.” In addition, the Company and six of its subsidiaries are presently named as defendants in a number of lawsuits claiming various asbestos-related personal injuries, allegedly as a result of exposure to products manufactured with components that contained asbestos. These components were acquired from third party suppliers and were not manufactured by the Company or any of the defendant subsidiaries. To date, the majority of the Company’s settlements and legal costs, except for costs of coordination, administration, insurance investigation and a portion of defense costs, have been covered in full by insurance, subject to applicable deductibles. However, the Company cannot predict whether and to what extent insurance will be available to continue to cover these settlements and legal costs, or how insurers may respond to claims that are tendered to them. Claims have been filed in jurisdictions throughout the United States and the United Kingdom. Most of the claims resolved to date have been dismissed without payment. The balance of the claims have been settled for various immaterial amounts. Only one case has been tried, resulting in a verdict for the Company’s business unit. No provision has been made in the financial statements of the Company, other than for insurance deductibles in the ordinary course, and the Company does not currently believe the asbestos-related claims will have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about the Company’s purchases of its common stock during the quarter ended September 30, 2019:
Period
Total Number of
Shares Purchased
 
Average Price
Paid per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs(1)
 
Maximum Dollar
Value that May Yet
be Purchased
Under the Plans
or Programs(1)
July 1, 2019 to July 31, 2019

 
$

 

 
$
322,342,564

August 1, 2019 to August 31, 2019

 

 

 
322,342,564

September 1, 2019 to September 30, 2019

 

 

 
322,342,564

Total

 
$

 

 
$
322,342,564

 
(1)
On December 1, 2015, the Company’s Board of Directors approved an increase of $300.0 million in the authorized level of repurchases of common stock. This followed the prior Board of Directors approved repurchase authorization of $400.0 million that was announced by the Company on November 6, 2014. These authorizations have no expiration date.


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Table of Contents


Item 6.    Exhibits.

Exhibit
Number
 
Description
 
 
 
*31.1
 
 
 
*31.2
 
 
 
*32.1
 
 
 
*32.2
 
 
 
*101
 
The following financial information from IDEX Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 formatted in Inline XBRL (Extensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Shareholders’ Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements.
 
 
 
*104
 
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
 
 
 
* Filed herewith



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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.
 
 
IDEX Corporation
 
 
 
 
By:
/s/ WILLIAM K. GROGAN
 
 
William K. Grogan
 
 
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
By:
/s/ MICHAEL J. YATES
 
 
Michael J. Yates
 
 
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Date: October 30, 2019

49
Exhibit


Exhibit 31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Andrew K. Silvernail, certify that:
1. I have reviewed this quarterly report on Form 10-Q of IDEX Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
 
 
 
 
/s/ ANDREW K. SILVERNAIL
 
 
Andrew K. Silvernail
 
 
Chairman of the Board and Chief Executive Officer
Date: October 30, 2019


Exhibit


Exhibit 31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, William K. Grogan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of IDEX Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
 
 
 
 
/s/ WILLIAM K. GROGAN
 
 
William K. Grogan
 
 
Senior Vice President and Chief Financial Officer
Date: October 30, 2019


Exhibit


Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of IDEX Corporation (the “Company”) hereby certifies, to such officer's knowledge, that:
(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
 
 
 
/s/ ANDREW K. SILVERNAIL
 
 
Andrew K. Silvernail
 
 
Chairman of the Board and Chief Executive Officer
Date: October 30, 2019



Exhibit


Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of IDEX Corporation (the “Company”) hereby certifies, to such officer's knowledge, that:
(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
 
 
 
/s/ WILLIAM K. GROGAN
 
 
William K. Grogan
 
 
Senior Vice President and Chief Financial Officer
Date: October 30, 2019