Company Quick10K Filing
Quick10K
IDEX
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$143.17 77 $10,980
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-01-29 Earnings, Regulation FD, Exhibits
8-K 2018-10-23 Earnings, Regulation FD, Exhibits
8-K 2018-07-25 Regulation FD, Exhibits
8-K 2018-07-24 Earnings, Regulation FD, Exhibits
8-K 2018-04-30 Regulation FD, Exhibits
8-K 2018-01-30 Regulation FD, Exhibits
8-K 2018-01-29 Earnings, Exhibits
8-K 2018-01-01 Officers, Exhibits
XYL Xylem
GGG Graco
FLS Flowserve
ITT ITT
CFX Colfax
GRC Gorman Rupp
VSTO Vista Outdoor
KNDI Kandi Technologies Group
AP Ampco Pittsburgh
ASTC Astrotech
IEX 2018-09-30
Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits.
EX-31.1 iex-20180930xex311.htm
EX-31.2 iex-20180930xex312.htm
EX-32.1 iex-20180930xex321.htm
EX-32.2 iex-20180930xex322.htm

IDEX Earnings 2018-09-30

IEX 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 iex-20180930x10q.htm 10-Q Document

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _____________________________ 
Form 10-Q
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2018
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, Lake Forest, Illinois
 
60045
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number: (847) 498-7070
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  þ    No  ¨
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  þ    No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer  þ
 
Accelerated filer  ¨
 
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. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨   No   þ 
Number of shares of common stock of IDEX Corporation outstanding as of October 22, 2018: 76,709,717.
 



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



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, 2018
 
December 31, 2017
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
491,767

 
$
375,950

Receivables, less allowance for doubtful accounts of $7,298 at September 30, 2018 and $7,764 at December 31, 2017
324,895

 
294,166

Inventories
287,126

 
259,724

Other current assets
51,451

 
74,203

Total current assets
1,155,239

 
1,004,043

Property, plant and equipment - net
276,821

 
258,350

Goodwill
1,708,783

 
1,704,158

Intangible assets - net
395,497

 
414,746

Other noncurrent assets
18,467

 
18,331

Total assets
$
3,554,807

 
$
3,399,628

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities
 
 
 
Trade accounts payable
$
141,178

 
$
147,067

Accrued expenses
185,453

 
184,705

Short-term borrowings
536

 
258

Dividends payable
33,046

 
28,945

Total current liabilities
360,213

 
360,975

Long-term borrowings
848,246

 
858,788

Deferred income taxes
131,149

 
137,638

Other noncurrent liabilities
154,625

 
155,685

Total liabilities
1,494,233

 
1,513,086

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: 90,113,901 shares at September 30, 2018 and 90,162,211 shares at December 31, 2017
902

 
902

Additional paid-in capital
732,941

 
716,906

Retained earnings
2,276,634

 
2,057,915

Treasury stock at cost: 13,262,072 shares at September 30, 2018 and 13,468,675 shares at December 31, 2017
(835,801
)
 
(799,674
)
Accumulated other comprehensive income (loss)
(114,102
)
 
(89,507
)
Total shareholders’ equity
2,060,574

 
1,886,542

Total liabilities and shareholders’ equity
$
3,554,807

 
$
3,399,628

See Notes to Condensed Consolidated Financial Statements

1


IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Net sales
$
622,888

 
$
574,490

 
$
1,869,572

 
$
1,701,408

Cost of sales
342,655

 
316,560

 
1,025,320

 
935,612

Gross profit
280,233

 
257,930

 
844,252

 
765,796

Selling, general and administrative expenses
130,479

 
131,426

 
406,354

 
393,691

Restructuring expenses
4,621

 

 
8,251

 
4,797

Operating income
145,133

 
126,504

 
429,647

 
367,308

Other (income) expense - net
934

 
1,653

 
(3,565
)
 
1,717

Interest expense
10,958

 
11,064

 
33,098

 
33,920

Income before income taxes
133,241

 
113,787

 
400,114

 
331,671

Provision for income taxes
26,889

 
30,019

 
87,678

 
88,160

Net income
$
106,352

 
$
83,768

 
$
312,436

 
$
243,511

 
 
 
 
 
 
 
 
Basic earnings per common share
$
1.39

 
$
1.09

 
$
4.07

 
$
3.19

Diluted earnings per common share
$
1.37

 
$
1.08

 
$
4.02

 
$
3.15

 
 
 
 
 
 
 
 
Share data:
 
 
 
 
 
 
 
Basic weighted average common shares outstanding
76,562

 
76,309

 
76,507

 
76,215

Diluted weighted average common shares outstanding
77,709

 
77,523

 
77,717

 
77,246

See Notes to Condensed Consolidated Financial Statements

2


IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
106,352

 
$
83,768

 
$
312,436

 
$
243,511

Other comprehensive income (loss):
 
 
 
 
 
 
 
Reclassification adjustments for derivatives, net of tax
1,244

 
1,054

 
3,764

 
3,159

Pension and other postretirement adjustments, net of tax
1,270

 
1,468

 
3,979

 
3,872

Cumulative translation adjustment
9,164

 
28,796

 
(25,903
)
 
97,160

Other comprehensive income (loss)
11,678

 
31,318

 
(18,160
)
 
104,191

Comprehensive income
$
118,030

 
$
115,086

 
$
294,276

 
$
347,702

See Notes to Condensed Consolidated Financial Statements

3


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, 2017
$
717,808

 
$
2,057,915

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

Net income

 
312,436

 

 

 

 

 
312,436

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

 

 
(25,903
)
 

 

 

 
(25,903
)
Net change in retirement obligations (net of tax of $1,417)

 

 

 
3,979

 

 

 
3,979

Net change on derivatives designated as cash flow hedges (net of tax of $1,105)

 

 

 

 
3,764

 

 
3,764

Issuance of 563,193 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $4,144)

 

 

 

 

 
26,793

 
26,793

Repurchase of 356,590 shares of common stock

 

 

 

 

 
(51,660
)
 
(51,660
)
Shares surrendered for tax withholding

 

 

 

 

 
(11,260
)
 
(11,260
)
Share-based compensation
16,035

 

 

 

 

 

 
16,035

Cash dividends declared — $1.29 per common share outstanding

 
(99,507
)
 

 

 

 

 
(99,507
)
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

4


IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended September 30,
 
2018
 
2017
Cash flows from operating activities
 
 
 
Net income
$
312,436

 
$
243,511

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
29,725

 
28,425

Amortization of intangible assets
29,505

 
35,381

Amortization of debt issuance expenses
998

 
989

Share-based compensation expense
19,814

 
18,143

Deferred income taxes
(1,480
)
 
1,888

Non-cash interest expense associated with forward starting swaps
4,869

 
5,004

Changes in (net of the effect from acquisitions):
 
 
 
Receivables
(34,057
)
 
(28,407
)
Inventories
(27,903
)
 
(4,869
)
Other current assets
7,635

 
(15,113
)
Trade accounts payable
(4,420
)
 
3,681

Accrued expenses
33

 
9,912

Other - net
(11,402
)
 
(1,965
)
Net cash flows provided by operating activities
325,753

 
296,580

Cash flows from investing activities
 
 
 
Purchases of property, plant and equipment
(39,856
)
 
(28,054
)
Purchase of intellectual property
(4,000
)
 

Acquisition of businesses, net of cash acquired
(20,205
)
 

Proceeds from disposal of fixed assets
211

 
5,159

Other - net
(1,180
)
 
(337
)
Net cash flows used in investing activities
(65,030
)
 
(23,232
)
Cash flows from financing activities
 
 
 
Borrowings under revolving credit facilities

 
33,000

Payments under revolving credit facilities
(11,128
)
 
(181,692
)
Dividends paid
(94,913
)
 
(82,869
)
Proceeds from stock option exercises
26,793

 
18,980

Purchases of common stock
(50,654
)
 
(22,650
)
Shares surrendered for tax withholding
(11,260
)
 
(5,903
)
Settlement of foreign exchange contracts
6,593

 
4,406

Net cash flows used in financing activities
(134,569
)
 
(236,728
)
Effect of exchange rate changes on cash and cash equivalents
(10,337
)
 
30,707

Net increase (decrease) in cash
115,817

 
67,327

Cash and cash equivalents at beginning of year
375,950

 
235,964

Cash and cash equivalents at end of period
$
491,767

 
$
303,291

 
 
 
 
Supplemental cash flow information
 
 
 
Cash paid for:
 
 
 
Interest
$
18,547

 
$
19,406

Income taxes - net
73,138

 
78,629

Significant non-cash activities:
 
 
 
Capital expenditures for construction of new leased facility
11,616

 

Contingent consideration for acquisition
3,375

 

See Notes to Condensed Consolidated Financial Statements

5


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, 2018 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, 2017.
Recently Adopted Accounting Standards
In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which requires an entity to disclose its accounting policy related to releasing income tax effects from accumulated other comprehensive income (loss), whether it has elected to reclassify the stranded tax effects in accumulated other comprehensive income (loss) to retained earnings in the statement of shareholders’ equity and if it has elected to reclassify the stranded tax effects in accumulated other comprehensive income (loss) to retained earnings, what the reclassification encompasses. The Company early adopted this standard on a retrospective basis on January 1, 2018. The adoption resulted in an increase of $6.4 million to Retained earnings and a corresponding change of $6.4 million to Accumulated other comprehensive income (loss) at January 1, 2018.
In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which clarifies the definition of a business and assists entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Under this guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The amended guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in the FASB guidance for revenue recognition. The Company adopted this standard on January 1, 2018 and accounted for the purchase of the intellectual property assets from Phantom Controls utilizing this guidance. See Note 7 for further information.
In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which amends Accounting Standards Codification (“ASC”) 740, Income Taxes.  This ASU requires that the income tax consequences of an intra-entity asset transfer other than inventory are recognized at the time of the transfer. An entity will continue to recognize the income tax consequences of an intercompany transfer of inventory when the inventory is sold to a third party. The Company adopted this standard on a modified retrospective basis on January 1, 2018. The adoption resulted in a decrease of $7.3 million to Other current assets, a decrease of $6.7 million to Deferred income taxes and a decrease of $0.6 million to Retained earnings at January 1, 2018.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force). This ASU addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The Company adopted this standard on January 1, 2018. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which replaces numerous requirements in U.S. GAAP, including industry-specific requirements, and provides companies with a new five-step model for recognizing revenue from contracts with customers. Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing,

6


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

and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The FASB has also issued the following standards which clarify ASU 2014-09 and have the same effective date as the original standard: ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net); ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing; ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients; and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.
In 2016, we established an implementation team and analyzed the impact of the standard by surveying business units and performing extensive contract reviews to identify potential differences that may result from applying the requirements of the new standard. The contract reviews generally supported the recognition of revenue at a point in time, which is consistent with the current revenue recognition model used by most of our business units. As a result, revenue recognition remains unchanged under the new standard. For our business units that currently recognize revenue under a percentage of completion model, revenue recognition also remains unchanged as the contract reviews supported the recognition of revenue over time. The Company has implemented the appropriate changes to its processes, systems and controls to comply with the new guidance. The Company adopted this standard on January 1, 2018 using the modified retrospective approach applied to contracts that were not completed as of January 1, 2018. The adoption of this standard did not have an impact on our condensed consolidated financial statements, except to provide additional disclosures. The Company elected the following practical expedients: significant financing component, sales tax presentation, contract costs, shipping and handling activities and disclosures. See Note 4 for further details on revenue.
Recently Issued Accounting Standards
In February 2016, the FASB issued 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). The standard introduces a new lessee model that will require most leases to be recorded on the balance sheet and eliminates the required use of bright line tests in current U.S. GAAP for determining lease classification. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. This standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Companies are permitted to adopt the standard early. Upon adoption, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The FASB has also issued the following standards which clarify ASU 2016-02 and have the same effective date as the original standard: ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements.
The Company has selected its lease software solution and is in the process of identifying changes to its business processes, systems and controls to support adoption of the new standard in 2019. The Company is currently evaluating the impact of adopting the new standard on its condensed consolidated financial statements. While the Company is unable to quantify the impact at this time, it expects the adoption of the new standard to result in a significant right of use asset and lease liability while expense recognition will be similar to the previously required straight-line expense treatment as the majority of its leases will remain operating in nature.

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 did not incur any acquisition-related transaction costs in the three months ended September 30, 2018. The Company did incur $0.5 million in the three months ended September 30, 2017 and $1.5 million and $0.7 million in the nine months ended September 30, 2018 and 2017, respectively. 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.


7


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 $11.9 million and $8.1 million, respectively. The goodwill is deductible for tax purposes.

The Company made an initial 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. As the Company continues to obtain additional information about these assets and liabilities, and continues to learn more about the newly acquired business, 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 the appropriate adjustments to the purchase price allocation prior to the completion of the measurement period, as required.

2017 Acquisition

On December 8, 2017, the Company acquired the stock of thinXXS Microtechnology AG (“thinXXS”), a leader in the design, manufacture and sale of microfluidic components serving the point of care, veterinary and life science markets. The business was acquired to complement our existing CiDRA Precision Services business and expand on our microfluidic and nanofluidic capabilities. Headquartered in Zweibrücken, Germany, thinXXS operates in our Health & Science Technologies segment. thinXXS was acquired for cash consideration of $38.2 million and the assumption of $1.2 million of debt. The purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of the transaction were $25.1 million and $10.6 million, respectively. The goodwill is not deductible for tax purposes.

The Company made an initial allocation of the purchase price for the thinXXS 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. The Company is continuing to evaluate the valuation of certain income tax liabilities associated with the thinXXS acquisition and is in the process of finalizing the purchase price allocation. The Company will make appropriate adjustments to the purchase price allocation prior to the completion of the measurement period, as required. Only items identified as of the acquisition date will be considered for subsequent adjustment.

2017 Divestiture

The Company periodically reviews its operations for businesses which may no longer be aligned with its strategic objectives and focuses on its core business and customers. Any resulting gain or loss recognized due to divestitures is recorded within the Condensed Consolidated Statements of Operations. The Company concluded that the divestiture that took place during the year ended December 31, 2017 did not meet the criteria for reporting discontinued operations.
 
On October 31, 2017, the Company completed the sale of its Faure Herman subsidiary for $21.8 million in cash, which resulted in a pre-tax gain on the sale of $9.3 million that was recognized in the fourth quarter of 2017. There was no income tax expense associated with this transaction. The results of Faure Herman were reported within the Fluid & Metering Technologies segment through the date of sale.

3.    Business Segments
The Company 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.

8


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

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, 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.
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Net sales
 
 
 
 
 
 
 
Fluid & Metering Technologies
 
 
 
 
 
 
 
External customers
$
239,119

 
$
220,897

 
$
714,135

 
$
658,675

Intersegment sales
94

 
56

 
211

 
230

Total segment sales
239,213

 
220,953

 
714,346

 
658,905

Health & Science Technologies
 
 
 
 
 
 
 
External customers
222,351

 
207,018

 
670,685

 
610,890

Intersegment sales
75

 
109

 
219

 
325

Total segment sales
222,426

 
207,127

 
670,904

 
611,215

Fire & Safety/Diversified Products
 
 
 
 
 
 
 
External customers
161,418

 
146,575

 
484,752

 
431,843

Intersegment sales
414

 
24

 
553

 
186

Total segment sales
161,832

 
146,599

 
485,305

 
432,029

Intersegment elimination
(583
)
 
(189
)
 
(983
)
 
(741
)
Total net sales
$
622,888

 
$
574,490

 
$
1,869,572

 
$
1,701,408

Operating income
 
 
 
 
 
 
 
Fluid & Metering Technologies
$
69,755

 
$
61,988

 
$
207,149

 
$
179,830

Health & Science Technologies
49,144

 
46,073

 
153,519

 
134,605

Fire & Safety/Diversified Products
44,726

 
36,199

 
130,162

 
106,022

Corporate office
(18,492
)
 
(17,756
)
 
(61,183
)
 
(53,149
)
Total operating income
145,133

 
126,504

 
429,647

 
367,308

Interest expense
10,958

 
11,064

 
33,098

 
33,920

Other (income) expense - net
934

 
1,653

 
(3,565
)
 
1,717

Income before income taxes
$
133,241

 
$
113,787

 
$
400,114

 
$
331,671



9


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

 
September 30,
2018
 
December 31,
2017
Assets
 
 
 
Fluid & Metering Technologies
$
1,141,116

 
$
1,101,580

Health & Science Technologies
1,352,886

 
1,323,373

Fire & Safety/Diversified Products
769,615

 
744,515

Corporate office
291,190

 
230,160

Total assets
$
3,554,807

 
$
3,399,628


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. The Company’s revenue is accounted for under ASC 606, Revenue from Contracts with Customers, which we adopted on January 1, 2018 using the modified retrospective method.

Revenue is recognized when control of the promised 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 nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Geographical region is based on the location of the customer. The following tables present our revenue disaggregated by reporting unit and geographical region.

10


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


Revenue by reporting unit for the three and nine months ended September 30, 2018 was as follows:
 
Three Months Ended 
 September 30, 2018
 
Nine Months Ended 
 September 30, 2018
Energy
$
42,403

 
$
121,941

Valves
30,972

 
85,831

Water
63,989

 
188,000

Pumps
81,605

 
245,006

Agriculture
20,244

 
73,568

Intersegment elimination
(94
)
 
(211
)
Fluid & Metering Technologies
239,119

 
714,135

Scientific Fluidics & Optics
106,917

 
310,530

Sealing Solutions
48,787

 
154,123

Gast
33,574

 
92,989

Micropump
8,801

 
27,899

Material Processing Technologies
24,347

 
85,363

Intersegment elimination
(75
)
 
(219
)
Health & Science Technologies
222,351

 
670,685

Fire & Safety
102,589

 
298,741

Band-It
25,437

 
79,892

Dispensing
33,806

 
106,672

Intersegment elimination
(414
)
 
(553
)
Fire & Safety/Diversified Products
161,418

 
484,752

Total net sales
$
622,888

 
$
1,869,572


Revenue by geographical region for the three and nine months ended September 30, 2018 was as follows:
 
Three Months Ended September 30, 2018
 
FMT
 
HST
 
FSDP
 
IDEX
U.S.
$
131,403

 
$
99,474

 
$
78,902

 
$
309,779

Europe
46,895

 
66,762

 
36,824

 
150,481

Asia
28,358

 
46,634

 
30,265

 
105,257

Rest of world (1)
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, 2018
 
FMT
 
HST
 
FSDP
 
IDEX
U.S.
$
403,903

 
$
290,826

 
$
227,146

 
$
921,875

Europe
130,591

 
214,564

 
127,645

 
472,800

Asia
89,655

 
139,422

 
84,563

 
313,640

Rest of world (1)
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) Rest of world includes: North America (excluding U.S.), South America, Middle East, Australia and Africa.

11


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 results in customer receivables, advance payments and billings in excess of revenue recognized. Customer receivables include 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 in accordance with contractual terms. 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 amounts less an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses as a result of customers’ inability to make required payments. Management evaluates the aging of the 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, 
 2018
 
January 1, 
 2018
Billed receivables
$
312,406

 
$
285,800

Unbilled receivables
14,435

 
11,996

Total customer receivables
$
326,841

 
$
297,796


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 and billings in excess of revenue recognized 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. Billings in excess of revenue recognized 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. We generally receive advance payments from customers related to maintenance services which we recognize ratably over the service term. Contract liabilities are derecognized when revenue is recognized and the performance obligation is satisfied.

The composition of Deferred revenue was as follows:
 
September 30, 
 2018
 
January 1, 
 2018
Deferred revenue - current
$
10,271

 
$
11,031

Deferred revenue - noncurrent
3,271

 
3,297

Total deferred revenue
$
13,542

 
$
14,328


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 distinct 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 that are not separately identifiable from other promises in the contract and, therefore, not distinct, 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

12


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

generally represents a distinct performance obligation. In such cases, the observable standalone 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 services 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% in both the three and nine months ended September 30, 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% in both the three and nine months ended September 30, 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, product returns and customer incentives at the time of sale as a reduction of revenue as such allowances can be reliably estimated based on historical experience and known trends. The Company also offers product warranties (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.

13


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,
 
2018
 
2017
 
2018
 
2017
Basic weighted average common shares outstanding
76,562

 
76,309

 
76,507

 
76,215

Dilutive effect of stock options, restricted stock and performance share units
1,147

 
1,214

 
1,210

 
1,031

Diluted weighted average common shares outstanding
77,709

 
77,523

 
77,717

 
77,246

Options to purchase approximately 0.3 million and zero shares of common stock for the three months ended September 30, 2018 and 2017, respectively, and 0.3 million and 0.4 million shares of common stock for the nine months ended September 30, 2018 and 2017, 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, 2018 and December 31, 2017 were:
 
September 30,
2018
 
December 31,
2017
Raw materials and component parts
$
185,764

 
$
169,676

Work in process
37,094

 
33,668

Finished goods
64,268

 
56,380

Total inventories
$
287,126

 
$
259,724

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, 2018, by reportable business segment, were as follows:
 
FMT
 
HST
 
FSDP
 
IDEX
Balance at December 31, 2017
$
586,064

 
$
740,032

 
$
378,062

 
$
1,704,158

Foreign currency translation
(2,423
)
 
(2,765
)
 
(3,259
)
 
(8,447
)
Acquisitions

 
11,920

 

 
11,920

Acquisition adjustments

 
1,152

 

 
1,152

Balance at September 30, 2018
$
583,641

 
$
750,339

 
$
374,803

 
$
1,708,783


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 2018, 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, 2017, all reporting units had fair values in excess of their carrying values.


14


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, 2018 and December 31, 2017:
 
At September 30, 2018
 
 
 
At December 31, 2017
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
 
Weighted
Average
Life
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Amortized intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Patents
$
9,640

 
$
(7,789
)
 
$
1,851

 
12
 
$
9,633

 
$
(7,143
)
 
$
2,490

Trade names
116,895

 
(55,799
)
 
61,096

 
16
 
117,206

 
(50,604
)
 
66,602

Customer relationships
258,789

 
(81,485
)
 
177,304

 
14
 
317,316

 
(124,566
)
 
192,750

Unpatented technology
98,151

 
(34,015
)
 
64,136

 
12
 
91,166

 
(29,428
)
 
61,738

Other
700

 
(490
)
 
210

 
10
 
839

 
(573
)
 
266

Total amortized intangible assets
484,175

 
(179,578
)
 
304,597

 
 
 
536,160

 
(212,314
)
 
323,846

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
$
575,075

 
$
(179,578
)
 
$
395,497

 
 
 
$
627,060

 
$
(212,314
)
 
$
414,746


On June 22, 2018, the Company acquired the intellectual property assets of Phantom Controls (“Phantom”) for cash consideration of $4.0 million. The operational capabilities and innovative pump operation of Phantom’s technology complements our existing water-flow expertise of Hale, Akron Brass and Class 1 to improve fire ground safety and reduce operational complexity during mission critical response. This acquisition of intellectual property assets did not meet the definition of a business under ASU 2017-01 and thus the Company recorded the entire purchase price to the Unpatented technology class of intangible assets on the Condensed Consolidated Balance Sheets.
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 2018, there were no events or circumstances that would have required an interim impairment test. 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.
Amortization of intangible assets was $8.8 million and $29.5 million for the three and nine months ended September 30, 2018, respectively. Amortization of intangible assets was $11.5 million and $35.4 million for the three and nine months ended September 30, 2017, respectively. Based on the intangible asset balances as of September 30, 2018, amortization expense is expected to approximate $9.0 million for the remaining three months of 2018, $36.4 million in 2019, $35.2 million in 2020, $34.3 million in 2021 and $32.6 million in 2022.


15


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, 2018 and December 31, 2017 were:
 
September 30,
2018
 
December 31,
2017
Payroll and related items
$
73,121

 
$
75,869

Management incentive compensation
18,962

 
24,320

Income taxes payable
25,753

 
28,033

Insurance
9,929

 
9,424

Warranty
5,852

 
6,281

Deferred revenue
10,271

 
11,031

Restructuring
6,391

 
4,180

Liability for uncertain tax positions
1,296

 
1,745

Accrued interest
10,443

 
1,759

Other
23,435

 
22,063

Total accrued expenses
$
185,453

 
$
184,705


9.    Other Noncurrent Liabilities

The components of other noncurrent liabilities as of September 30, 2018 and December 31, 2017 were:
 
September 30,
2018
 
December 31,
2017
Pension and retiree medical obligations
$
85,743

 
$
99,646

Transition tax payable
25,510

 
27,877

Liability for uncertain tax positions
1,047

 
1,047

Deferred revenue
3,271

 
3,297

Liability for construction of new leased facility
11,616

 

Contingent consideration for acquisition
3,375

 

Other
24,063

 
23,818

Total other noncurrent liabilities
$
154,625

 
$
155,685



16


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, 2018 and December 31, 2017 consisted of the following: 
 
September 30,
2018
 
December 31,
2017
Revolving Facility
$

 
$
10,740

4.5% Senior Notes, due December 2020
300,000

 
300,000

4.2% Senior Notes, due December 2021
350,000

 
350,000

3.2% Senior Notes, due June 2023
100,000

 
100,000

3.37% Senior Notes, due June 2025
100,000

 
100,000

Other borrowings
1,264

 
1,446

Total borrowings
851,264

 
862,186

Less current portion
536

 
258

Less deferred debt issuance costs
1,746

 
2,204

Less unaccreted debt discount
736

 
936

Total long-term borrowings
$
848,246

 
$
858,788

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 payment event of default, any holder of the Notes affected thereby may declare all 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 June 23, 2015, 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 replaced the Company’s existing five-year, $700 million credit agreement dated as of June 27, 2011, which was due to expire on June 27, 2016.
The Credit Agreement consists of a revolving credit facility (the “Revolving Facility”) in an aggregate principal amount of $700 million, with a final maturity date of June 23, 2020. The maturity date may be extended under certain conditions for an additional one-year term. Up to $75 million of the Revolving Facility 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.
Proceeds of the Revolving Facility are available for use by the Borrowers for acquisitions, 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 $350 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.

17


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

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 Company’s senior, unsecured long-term debt rating and can range from .005% to 1.50%. Based on the Company’s credit rating at September 30, 2018, the applicable margin was 1.10%. Interest is payable (a) in the case of base rate loans, quarterly, and (b) in the case of LIBOR rate loans, on the maturity date of the borrowing or quarterly from the effective date for borrowings exceeding three months.
The Credit Agreement requires payment to the lenders of a facility fee based upon (a) the amount of the lenders’ commitments under the credit facility from time to time and (b) the applicable corporate credit ratings of the Company. Voluntary prepayments of any loans and voluntary reductions of the unutilized portion of the commitments under the credit facility are permissible without penalty, subject to break funding payments and minimum notice and minimum reduction amount requirements.
The negative covenants include, among other things, limitations (each of which is subject to customary exceptions for financings of this type) on our ability to grant liens; enter into transactions resulting in fundamental changes (such as mergers or sales of all or substantially all of the assets of the Company); restrict subsidiary dividends or other subsidiary distributions; enter into transactions with the Company’s affiliates; and incur certain additional subsidiary debt.
The Credit Agreement also contains customary events of default (subject to grace periods, as appropriate) including among others: nonpayment of principal, interest or fees; breach of the representations or warranties in any material respect; breach of the financial, affirmative or negative covenants; payment default on, or acceleration of, other material indebtedness; bankruptcy or insolvency; material judgments entered against the Company or any of its subsidiaries; certain specified events under the Employee Retirement Income Security Act of 1974, as amended; certain changes in control of the Company; and the invalidity or unenforceability of the Credit Agreement or other documents associated with the Credit Agreement.
At September 30, 2018, there was no balance outstanding under the Revolving Facility and $9.0 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Facility at September 30, 2018 of approximately $691.0 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 3.0 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. At September 30, 2018, 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 and interest rate exchange agreements that effectively convert a portion of floating-rate debt to fixed-rate debt and are designed to reduce the impact of interest rate changes on future interest expense.

The effective portion of gains or losses on interest rate exchange agreements is reported in accumulated other comprehensive income (loss) in shareholders’ equity and reclassified into net income in the same period or periods in which the hedged transaction affects net income. The remaining gain or loss in excess of the cumulative change in the present value of future cash flows or the hedged item, if any, is recognized in net income during the period of change. See Note 14 for the amount of loss reclassified into net income for interest rate contracts for the three and nine months ended September 30, 2018 and 2017. As of September 30, 2018, 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 term of the debt instruments. Approximately $6.3 million of the pre-tax amount included in Accumulated other comprehensive income (loss) in shareholders’ equity at September 30, 2018 will be recognized in net income over the next 12 months as the underlying hedged transactions are realized.

At December 31, 2017, 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

18


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

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 did record a gain of $0.9 million during the nine months ended September 30, 2018 and a gain of $9.3 million and $14.8 million, respectively, during the three and nine months ended September 30, 2017. 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 and a foreign currency transaction loss of $10.0 million and $15.2 million, respectively during the three and nine months ended September 30, 2017. 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.

The following table sets forth the fair value amounts of derivative instruments held by the Company as of September 30, 2018 and December 31, 2017:
 
Fair Value Assets
 
 
 
September 30, 2018
 
December 31, 2017
 
Balance Sheet Caption
Foreign currency exchange contracts
$

 
$
5,779

 
Other current assets

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.
The following table summarizes the basis used to measure the Company’s financial assets at fair value on a recurring basis in the balance sheets at September 30, 2018 and December 31, 2017:
 
Basis of Fair Value Measurements
 
Balance at 
 September 30, 2018
 
Level 1
 
Level 2
 
Level 3
Available for sale securities
$
8,081

 
$
8,081

 
$

 
$

Foreign currency exchange contracts
$

 
$

 
$

 
$

Contingent consideration

$
3,375

 
$

 
$

 
$
3,375


19


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

 
 
Basis of Fair Value Measurements
 
Balance at 
 December 31, 2017
 
Level 1
 
Level 2
 
Level 3
Available for sale securities
$
6,742

 
$
6,742

 
$

 
$

Foreign currency exchange contracts
$
5,779

 
$

 
$
5,779

 
$

Contingent consideration
$

 
$

 
$

 
$


There were no transfers of assets or liabilities between Level 1 and Level 2 during the three and nine months ended September 30, 2018 or the year ended December 31, 2017.

The Company utilized a Monte Carlo Simulation during the earn-out period to determine the fair value of the contingent consideration associated with the acquisition of FLI. 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, 2018, the $3.4 million of contingent consideration is included in Other noncurrent liabilities 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, 2018, the fair value of the outstanding indebtedness under our Revolving Facility, 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 $851.8 million compared to the carrying value of $850.5 million. This fair value measurement is classified as Level 2 within the fair value hierarchy since it is 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.

13.    Restructuring
During the three and nine months ended September 30, 2018, the Company recorded $4.6 million and $8.3 million, respectively, of restructuring costs as part of restructuring initiatives that support the implementation of key strategic efforts designed to facilitate long-term, sustainable growth through cost reduction actions, primarily consisting of employee reductions and facility rationalization. The restructuring costs included severance benefits and exit costs 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 asset disposals or impairments and lease exit and contract termination costs.
Pre-tax restructuring expenses by segment for the three and nine months ended September 30, 2018 were as follows:
 
Three Months Ended September 30, 2018
 
Severance Costs
 
Exit Costs
 
Total
Fluid & Metering Technologies
$
809

 
$
18

 
$
827

Health & Science Technologies
2,951

 
165

 
3,116

Fire & Safety/Diversified Products
60

 

 
60

Corporate/Other
618

 

 
618

Total restructuring costs
$
4,438

 
$
183

 
$
4,621


20


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

 
Nine Months Ended September 30, 2018
 
Severance Costs
 
Exit Costs
 
Total
Fluid & Metering Technologies
$
1,160

 
$
153

 
$
1,313

Health & Science Technologies
4,950

 
348

 
5,298

Fire & Safety/Diversified Products
427

 

 
427

Corporate/Other
1,213

 

 
1,213

Total restructuring costs
$
7,750

 
$
501

 
$
8,251


Restructuring accruals of $6.4 million and $4.2 million at September 30, 2018 and December 31, 2017, respectively, are recorded in Accrued expenses on the Condensed Consolidated Balance Sheets. Severance benefits are expected to be paid within the next twelve months using cash from operations. The changes in the restructuring accrual for the nine months ended September 30, 2018 are as follows:
 
Restructuring
Balance at January 1, 2018
$
4,180

Restructuring expenses
8,251

Payments, utilization and other
(6,040
)
Balance at September 30, 2018
$
6,391


14.    Other Comprehensive Income (Loss)
The components of other comprehensive income (loss) are as follows:
 
Three Months Ended 
 September 30, 2018
 
Three Months Ended 
 September 30, 2017
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Cumulative translation adjustment
$
9,164

 
$

 
$
9,164

 
$
28,796

 
$

 
$
28,796

Pension and other postretirement adjustments
1,725

 
(455
)
 
1,270

 
2,075

 
(607
)
 
1,468

Reclassification adjustments for derivatives
1,610

 
(366
)
 
1,244

 
1,681

 
(627
)
 
1,054

Total other comprehensive income (loss)
$
12,499

 
$
(821
)
 
$
11,678

 
$
32,552

 
$
(1,234
)
 
$
31,318

 
Nine Months Ended 
 September 30, 2018
 
Nine Months Ended 
 September 30, 2017
 
Pre-tax
 
Tax
 
Net of tax
 
Pre-tax
 
Tax
 
Net of tax
Cumulative translation adjustment
$
(25,903
)
 
$

 
$
(25,903
)
 
$
97,160

 
$

 
$
97,160

Pension and other postretirement adjustments
5,396

 
(1,417
)
 
3,979

 
5,625

 
(1,753
)
 
3,872

Reclassification adjustments for derivatives
4,869

 
(1,105
)
 
3,764

 
5,004

 
(1,845
)
 
3,159

Total other comprehensive income (loss)
$
(15,638
)
 
$
(2,522
)
 
$
(18,160
)
 
$
107,789

 
$
(3,598
)
 
$
104,191



21


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

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, 2018 and 2017:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Pension and other postretirement plans:
 
 
 
 
 
 
 
Amortization of service cost
$
1,725

 
$
2,075

 
$
5,396

 
$
5,625

Total before tax
1,725

 
2,075

 
5,396

 
5,625

Provision for income taxes
(455
)
 
(607
)
 
(1,417
)
 
(1,753
)
Total net of tax
$
1,270

 
$
1,468

 
$
3,979

 
$
3,872

Derivatives:
 
 
 
 
 
 
 
Reclassification adjustments
$
1,610

 
$
1,681

 
$
4,869

 
$
5,004

Total before tax
1,610

 
1,681

 
4,869

 
5,004

Provision for income taxes
(366
)
 
(627
)
 
(1,105
)
 
(1,845
)
Total net of tax
$
1,244

 
$
1,054

 
$
3,764

 
$
3,159


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.

15.    Common and Preferred Stock

On December 1, 2015, the Company’s Board of Directors approved a $300.0 million increase in the authorized level for repurchases of common stock. 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, 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. During the nine months ended September 30, 2017, the Company repurchased a total of 222 thousand shares at a cost of $23.6 million, of which $1.0 million was settled in October 2017. As of September 30, 2018, the amount of share repurchase authorization remaining was $499.3 million.

At September 30, 2018 and December 31, 2017, 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, 2018 or December 31, 2017.

16.    Share-Based Compensation

Stock Options
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,
 
2018
 
2017
 
2018
 
2017
Weighted average fair value of grants
$40.83
 
$30.46
 
$38.14
 
$24.17
Dividend yield
1.14%
 
1.27%
 
1.07%
 
1.45%
Volatility
27.81%
 
29.35%
 
28.47%
 
29.41%
Risk-free interest rate
2.47% - 3.07%
 
1.24% - 2.80%
 
2.02% - 3.17%
 
0.83% - 3.04%
Expected life (in years)
5.81
 
5.83
 
5.83
 
5.83


22


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

Total compensation cost for stock options is as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Cost of goods sold
$
91

 
$
67

 
$
388

 
$
341

Selling, general and administrative expenses
1,929

 
1,721

 
6,334

 
5,604

Total expense before income taxes
2,020

 
1,788

 
6,722

 
5,945

Income tax benefit
(385
)
 
(593
)
 
(1,219
)
 
(1,887
)
Total expense after income taxes
$
1,635

 
$
1,195

 
$
5,503

 
$
4,058

A summary of the Company’s stock option activity as of September 30, 2018, and changes during the nine months ended September 30, 2018, are presented in the following table:
Stock Options
Shares
 
Weighted
Average
Price
 
Weighted-Average
Remaining
Contractual Term
 
Aggregate
Intrinsic
Value
Outstanding at January 1, 2018
1,924,683

 
$
71.07

 
6.87
 
$
117,209,218

Granted
310,675

 
138.38

 
 
 
 
Exercised
(438,500
)
 
61.10

 
 
 
 
Forfeited
(57,876
)
 
97.29

 
 
 
 
Outstanding at September 30, 2018
1,738,982

 
$
84.74

 
6.92
 
$
114,648,578

Vested and expected to vest as of September 30, 2018
1,642,142

 
$
83.24

 
6.82
 
$
110,726,803

Exercisable at September 30, 2018
841,746

 
$
65.82

 
5.44
 
$
71,413,569


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, 2018, and changes during the nine months ended September 30, 2018, are presented as follows:
Restricted Stock
Shares
 
Weighted-Average
Grant Date Fair
Value
Unvested at January 1, 2018
182,023

 
$
83.37

Granted
41,570

 
138.57

Vested
(62,580
)
 
78.57

Forfeited
(10,760
)
 
95.64

Unvested at September 30, 2018
150,253

 
$
99.76


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.


23


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

Total compensation cost for restricted shares is as follows:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2018
 
2017
 
2018
 
2017
Cost of goods sold
$
77

 
$
46

 
$
316

 
$
265

Selling, general and administrative expenses
902

 
1,163

 
3,155

 
3,722

Total expense before income taxes
979

 
1,209

 
3,471

 
3,987

Income tax benefit
(177
)
 
(370
)
 
(620
)
 
(1,295
)
Total expense after income taxes
$
802

 
$
839

 
$
2,851

 
$
2,692


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. A summary of the Company’s unvested cash-settled restricted stock activity as of September 30, 2018, and changes during the nine months ended September 30, 2018, are presented in the following table:
Cash-Settled Restricted Stock
Shares
 
Weighted-Average
Fair Value
Unvested at January 1, 2018
94,730

 
$
131.97

Granted
28,925

 
138.08

Vested
(27,880
)
 
137.11

Forfeited
(6,835
)
 
150.66

Unvested at September 30, 2018
88,940

 
$
150.66

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,
 
2018
 
2017
 
2018
 
2017
Cost of goods sold
$
381

 
$
327

 
$
896

 
$
963

Selling, general and administrative expenses
1,064

 
696

 
2,776

 
2,203

Total expense before income taxes