U.S. Markets closed

Edited Transcript of IEX earnings conference call or presentation 20-Apr-17 2:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 IDEX Corp Earnings Call

LAKE FOREST Apr 22, 2017 (Thomson StreetEvents) -- Edited Transcript of IDEX Corp earnings conference call or presentation Thursday, April 20, 2017 at 2:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Andrew K. Silvernail

IDEX Corporation - Chairman, CEO and President

* Michael John Yates

IDEX Corporation - CAO and VP

* William K. Grogan

IDEX Corporation - CFO and SVP

================================================================================

Conference Call Participants

================================================================================

* Adam Michael Farley

Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst

* Allison Poliniak-Cusic

Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst

* Bhupender Singh Bohra

Jefferies LLC, Research Division - Equity Analyst

* Brett Logan Linzey

Vertical Research Partners, LLC - VP

* Jeffrey Jacob Reive

RBC Capital Markets, LLC, Research Division - Associate

* Katja Jancic

BMO Capital Markets Equity Research - Associate

* Matt J. Summerville

Alembic Global Advisors - MD and Senior Analyst

* Matthew Ian Mishan

KeyBanc Capital Markets Inc., Research Division - VP and Senior Equity Research Analyst

* Michael Patrick Halloran

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Peng Yao Wu

SunTrust Robinson Humphrey, Inc., Research Division - Associate

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Greetings, and welcome to the IDEX Corporation's First Quarter 2017 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to Mike Yates, Vice President and Chief Accounting Officer. Thank you. Please go ahead.

--------------------------------------------------------------------------------

Michael John Yates, IDEX Corporation - CAO and VP [2]

--------------------------------------------------------------------------------

Great. Thank you, Brenda. Good morning, everyone. This is Mike Yates, Vice President and Chief Accounting Officer for IDEX Corporation. Thank you for joining us for our discussion of the IDEX first quarter financial highlights.

Last night, we issued a press release outlining our company's financial and operating performance for the 3-month period ending March 31, 2017. The press release, along with the presentation slides to be used during today's webcast, can be accessed on our company's website at www.idexcorp.com.

Joining me today is Andy Silvernail, our Chairman and CEO; and Bill Grogan, our Chief Financial Officer. The format for our call today is as follows. We'll begin with Andy providing an overview of the first quarter financial results, and then update on what we've seen in the world. He will then walk you through the operating performance at each of our segments. And finally, we will wrap up with an outlook for the second quarter and full year 2017. Following the prepared remarks, we'll open the call for your questions.

If you should need to exit the call for any reason, you may access a complete replay beginning approximately 2 hours after the call concludes by dialing the toll-free number (877) 660-6853 and entering conference ID 13652253, or you may simply log on to the company's homepage for the webcast replay.

As we begin, a brief reminder. This call may contain certain forward-looking statements that are subject to the safe harbor language in today's press release and in IDEX's filings with the Securities and Exchange Commission.

With that, I'll turn the call over to our Chairman and CEO, Andy Silvernail.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [3]

--------------------------------------------------------------------------------

Thanks, Mike. Good morning, everybody. I appreciate you joining us here for our first quarter conference call. Obviously, I'm truly pleased with the results here for the quarter. It's the first time in literally 2 years that we've had this kind of strong organic revenue growth, and we did see improvement overall throughout our businesses, and the team is executing extremely well. As you know, we've been talking here for some time about the difficult market conditions, specifically in our industrial and in our energy market, and I've been very pleased how our teams have tackled this over the last couple of years in this industrial recession. They faced these pressures. They've delivered good results in the face of the challenges, and we are starting to see some recovery. In the first quarter, we saw evidence of this -- really started in the third quarter of last year, we started to see a little bit of rebound in the late part of the third quarter, particularly in the North American industrial markets, and the improvement that we saw here in the first quarter was broad-based across most of our market. This -- and the industrial side has been coupled with the continued strength in our life sciences and our scientific businesses. And with this -- kind of all this coming together, we have a more favorable outlook for the balance of the year. Obviously, I'm going to talk in depth here in a few minutes about what we're seeing inside of our businesses. But before that, I thought I'd take a look at what's going on in the markets in the regions.

For the first quarter, we had -- I guess, you get a really clear view of what we can deliver when you combine our ability to execute with some improved market conditions. We had organic revenue growth that was up 5%, really driven by outstanding execution in FMT, which was up 6% organically, and HST, which was up 5%. And both of these delivered robust order growth as well. We had 5% order growth -- organic order growth at FMT and 8% organic order growth at HST.

FSD, a little bit of a different picture. We had 1% organic revenue growth. We had orders down 11% on an organic basis. But if you stick through this, it's really due to some tough comps and the movement of some things late in the first quarter into the second quarter. So overall with FSD, no real concerns with the underlying order pattern.

So obviously, we're optimistic. We do remain a little bit cautious, and I'm going to talk about that in a second as some of the things that I think are out there that we just need to be mindful of. But our teams did a great job in the quarter. Overall, organic order growth was up 2% and revenue growth -- organic revenue growth was up 5%, as I'd mentioned. Op margin was at 21.8%, which was up 120 basis points. Adjusted EPS was $1.03, which was up $0.14 or 16%. Cash flow was up 21% to $75 million. And I think importantly, we did build $15 million of backlog in the quarter.

Also, in the quarter, we did have about $5 million of restructuring costs mainly around site consolidation. And this is all in support of the strategy that we've outlined about building some scale in our businesses in really driving long-term competitive advantage. And our balance sheet is in great shape. We ended the quarter at about 1.7x gross leverage and obviously, very strong free cash flow.

So taking a look at what's going on in the markets in the regions around the world. First on the industrial side. As I'd mentioned, the industrial markets have improved across our regions. Importantly, in the North American industrial distribution, we've had strength in the fourth quarter -- late in the fourth quarter that has continued throughout the first quarter, and really this is the first sustained rebound that we've seen here in some time.

Energy remains somewhat mixed. Upstream has been good, and we see that in our Band-It, in our Sealing business. But as you know, that's a pretty small part of our overall business. Now the midstream has remained pretty muted that you'll see strength in aviation, in our mobile business. But overall, as you look at truck build, those are down. Had a very warm winter, and so that's really been a mix. And that tends to lag anyway.

Agriculture, we're starting to see signs of recovery. We started at the end of last year. I think it will be a slow pace, but generally, the signs are positive.

In Scientific Fluidics, life sciences generally, continued strength in IVD, bio, analytical instrumentation and Optic. And then finally, on the municipal, the trends have continued, that kind of a Steady Eddie marketplace, and I think that will continue to be relatively easy for us.

In terms of regions, North America really led the recovery, and we saw strength across most businesses, most markets. And so those are favorable.

In Europe, the conditions are also improved. Auto and housing have really been the 2 things that have led there. And generally, we haven't seen any negative impact from Brexit. So a decent market in Europe.

And then in Asia, the good story we've had in India has continued, and we did see some positive turn in China.

So all this kind of adds up to some pretty good news and some -- and a more positive outlook, certainly than we've had in some time. But I did want to talk about, just a word of caution and -- so obviously, we're happy with the broad-based improvements in the markets. Our team is executing very well. But I do want to be clear that I'm cautious about the overall outlook, and I am because my personal view is that the financial markets and the M&A markets have really fully priced in this good news. And the good news of improving demand, confidence levels are up, obviously low interest rates. And really up until the last week or so, I would say that the policy improvements of the U.S. had also been priced in whether tax reform or infrastructure spending. What I don't think that a lot of the risks have really been fully accounted for, the potential issues that are out there, that could impact demand, and I think it's important to note where there's still political conflict or policy gridlock in the U.S. or really what has turned into a regular unpredictable U.S. domestic and foreign policy. And the reason I mentioned this is, is not that we have any control and we're certainly not experts at any of these, but I think it creates volatility. And so as I look at the back half of the year, it's still pretty hard to get your head around some of these major impacts that could happen out there. So I'm pleased to start with 2017. The outlook has improved, but I think we have to be mindful not to get over our skis for IDEX to control what we can control and understand both the upside and the downside of the full risk and reward basket.

Okay, let me talk a little bit about capital deployment. Obviously, the big piece to our overall story. And our strategy remains the same with a focus on long-term organic growth investments, disciplined M&A, consistent dividends and opportunistic share repurchases. On the organic growth side, we believe that we've meaningful outpaced our markets obviously in this quarter. But also during the industrial recession, we took share in many of our businesses until we've been committed to invest for long-term organic growth. That commitment is not going to change. We believe that superior organic growth is the key value driver in our company, and we're going to continue to invest in projects and people that make the most strategic sense to us. And that the series of investment that we talked about in detail on our last call, those have started, and we've really committed ourselves to making sure we're making these investments going forward.

In terms of dividends, our policy of being in that 30% to 35% range, we're going continue to be there over time. Share repurchases, we nibbled a little bit around the edges here in the first quarter, pretty small numbers, 82,000 shares that were bought back. And as you all know, we have a very disciplined methodology of how we think about share repurchases, think about driving long-term value for our shareholders, and we're going to keep that discipline.

In terms of M&A. The M&A funnel is solid, not different from what we talked about here a few months ago, and we're continuing to work that funnel. Price has obviously continued to be elevated, and so we're going to be selective and targeted and make sure that we put money to work in ways that are going to create shareholder value. And obviously, we're in a position with our balance sheet and our cash flow to execute that strategy fully here going forward.

All right, let me turn to the first quarter results, I'm on Slide 4. Revenue in the quarter was $554 million, which was up 10% in total, 5% organically. As I mentioned, it was driven by a 6% and 5% organic numbers at FMT and HST. It's worth mentioning, as I did earlier here, that this is the first time we've seen organic revenue growth since the end of 2014. So obviously, I'm very pleased by that. Orders were up 8% at $569 million, 2% organically. As I'd mentioned earlier, FMT was up 5%, HST was up 8%. And so the underlying businesses have nice strong order rates here as we move into the second quarter.

We also built $15 million of backlog in the quarter. The team did an excellent job of executing in March. March was a particularly strong month for us. And obviously, the team with the flow-through to the bottom line, they've done a nice job.

When you adjust for $5 million of restructuring, op margin was at 21.8%, which was up 120 basis points. And obviously, I'm pleased with that strong execution by our teams.

Cash flow was a great story, up 21%, $75 million. Net income, $75 million or $0.99 on a GAAP basis and $1.03 or up $0.14, up 16% for the year on an adjusted basis.

All right, let me turn now to the different segments. I'm on Slide 5, and we'll start with Fluid & Metering. So FMT had an excellent quarter. As I mentioned before, sales and orders were up 5% and 6%, respectively. Op margin, when you adjust for $1.6 million of restructuring, it was up 300 basis points in the quarter. Obviously, great results and you're seeing the benefit of the restructure of that overall cost structure within FMT and the impacts that you get from the volume leverage when you see the business turn.

Water continues to be a very good story. Municipal industrial markets are solid. We are seeing some seasonal trends that point towards a good second quarter for that team. And in particular, I think they've done some of the best work in the company around new product development. So we've got a couple of new products here that have been launched that I think they're going to be good news for Water here throughout 2017 and into the future.

In terms of industrial fluids, obviously all the trends that I've talked about impact that business probably as much as any within IDEX. We've seen nice increases in North America in distribution, an uptick in upstream oil and gas, albeit a small piece and then some firming in Europe and in the Gulf region. So a decent improvement there in industrial fluids.

Energy, I already mentioned earlier. Aviation business, the project funnel is very healthy and the stationary market is doing well. The mobile market, which is really around LPG, has been softer. And really should be, we expect it will be here for the balance of the year.

And then ag, as I mentioned before, nice start to the year. We have seen some improvements. So that's -- it's a good sign, but we think that will be overall relatively slow improvement.

I'm on Slide 6 now. Let's talk about Health & Science. So like FMT, strong first quarter. Organic orders are up 8%. Revenue was up 5%. If you exclude the $3 million of restructuring charges, HST had a 90 basis point increase in the quarter. One of the questions I would assume we're going to get is why that actually wasn't a bigger increase in margin, and that's really due to the mix of businesses within that portfolio here in the second quarter. But still, very nice performance obviously.

Life science and optics, the analytical instrumentation business, bio, IVD end-markets all continue to be solid, and we're seeing really nice business wins in new product for the combination of Fluidics and Optic.

Sealing had a great quarter. Our acquisition of SFC has turned out quite nicely, along with some very nice business wins in the Semicon market by our Sealing team. We made a substantial investment a few years ago in new capacity in the United States really to allow us to attack the Semicon and the energy markets, and that is paying off well. Just as kind of an interesting note, in terms of volume in our Brenham, Texas facility, it's up 10x what it was this time last year. Now albeit, that was a start-up volume, but they've just done a terrific job of getting up to speed in servicing some very demanding and important customers.

On the industrial side, much like FMT, a nice pick up on the industrial distribution in North America, in particular. And then on our materials process business, pharma and the nutrition markets have been decent, and our consolidation of a number of those sites into one significant site into North America is going quite well.

All right, I'm on our last segment. I'm on Slide 7, then we'll talk about Diversified. Organic orders were down 11% in the quarter and sales were up 1%. Just -- I think this is an important note because I'm sure we'll get some questions on this too. Really, the order decrease was relative to a very strong order book last year in our Dispensing business that we're going to comp again, and the order that we expected to fall has got pushed into the second quarter. So you'll see some lumpiness in here, both that you'll see in the order book here. And then as we look at the second quarter, you'll see some lumpiness on the sales side. So nothing from an underlying basis to be concerned about. Really, this is the lumpiest segment that we have and that shows up from time to time.

We did see a margin decrease about 70 points, all due to the impact of acquisitions. So very much in line with what we expected.

Dispensing obviously had a great year in 2016. Orders and sales are going to be down in dispensing or down in dispensing. And as I mentioned, you see a larger order got pushed into the second quarter. Generally, the markets remain stable and we've just done a great competitive position in that business.

Fire & Safety had a really nice quarter. The overall project funnel is strong. OEM activity is strong. The combination of our legacy Fire business with Akron and AWG, that strategy is playing out. And Akron, in particular, has had just a really strong results year since we bought the business just about a year ago.

Band-It. Band-It had a nice showing here. The energy business was up. Transportation was solid. Obviously, the upstream improvement that helped us in Band-It and the North American industrial market has seen improvements also like in other parts of our business.

Okay, let's conclude here with the second quarter and full year guidance. I'm on Slide 8. So for the second quarter, we're estimating EPS to be in the range of $1.04 to $1.06. Revenue to be up 2% to 3% year-over-year. Margins, and again some of that has to do with the timing of some larger things that are being pushed quarter-to-quarter. Operating margins will be about 21.5%. And the Q2 tax rate, we expect ICP to be very favorable at about 26.5%.

In terms of full year based on our performance here in the first quarter and raising our outlook here a little bit for the second quarter, we're expecting $4 to $4.10 for the year in earnings. We're also increasing our overall growth rate expectations to 3% to 4% and margins to be at about 21.5%. We should have about 1 point of impact from FX for the year. Corporate costs will be around $66 million, and no changes in expectation of conversion of free cash flow, still should be about 120%. As always, our guidance doesn't include any impact of acquisitions or restructuring as we think about the balance of the year.

So with that, Brenda, operator, I'm going to stop here and turn it over for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from the line of Scott Graham with BMO.

--------------------------------------------------------------------------------

Katja Jancic, BMO Capital Markets Equity Research - Associate [2]

--------------------------------------------------------------------------------

This is Katja for Scott Graham. Could you discuss a little bit about what pricing for the company in first quarter was?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [3]

--------------------------------------------------------------------------------

Very consistent, Katja, with what we've seen here in the past, which is about a point. So not a big deviation from what we've seen. And so it's pretty consistent with what we've seen over time.

--------------------------------------------------------------------------------

Katja Jancic, BMO Capital Markets Equity Research - Associate [4]

--------------------------------------------------------------------------------

And what about the inflation offset?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [5]

--------------------------------------------------------------------------------

Actually, we haven't seen a lot of inflation yet. We -- I will note that obviously around some of commodities have started to inch up. We do expect that, that will start to be a bigger issue as we go through the year. Obviously, we planned for it and we're mindful of the fact that with the improvement in outlook, you're likely to see some improvements of -- or some increases in commodity prices. But generally, nothing has been a major offset yet. Bill, anything you'd add on that?

--------------------------------------------------------------------------------

William K. Grogan, IDEX Corporation - CFO and SVP [6]

--------------------------------------------------------------------------------

I mean, as we continue to monitor [ in bottom ] inflation, we look for opportunities to pass along [ there, Katja ].

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [7]

--------------------------------------------------------------------------------

Yes, we're really -- this is pretty high on our list, Katja, about making sure we don't get behind in inflation curve if that starts to pick up. Our expectation is going to, right? And so that's something that's very high in our priority list as we look at that balance of 2017.

--------------------------------------------------------------------------------

Katja Jancic, BMO Capital Markets Equity Research - Associate [8]

--------------------------------------------------------------------------------

Just one more question, sorry about that. Can you discuss -- it looks like corporate expenses look lower for the rest of the year. Can you discuss why?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [9]

--------------------------------------------------------------------------------

No, it's pretty consistent, not meaningfully different from what we've talked about in the past. It's got $16.5 million a quarter plus or minus.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

Our next question comes from the line of Nathan Jones with Stifel.

--------------------------------------------------------------------------------

Adam Michael Farley, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [11]

--------------------------------------------------------------------------------

This is Adam Farley on for Nathan. First question is on North American industrial. We called out in the press release that there was awesome improvement in larger capital projects. What markets are driving these improvements, specifically related to the larger capital projects?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [12]

--------------------------------------------------------------------------------

It's actually pretty broad-based. Energy is the place that we've seen more of it, meaning upstream energy. We haven't started seeing it in the midstream yet, so to speak. But I think it's -- you're not seeing one place where your massive investment and not see it in others. You're starting to see it. Now to be clear, right, it's not huge capital investments. It's things that are just -- there are larger projects that are starting to move through the pipeline.

--------------------------------------------------------------------------------

Adam Michael Farley, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [13]

--------------------------------------------------------------------------------

Okay, that's helpful. Turning to gross margins. What are the sources of gross margin improvement? Is it COGS reduction, value pricing, maybe new product releases or all of the above?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [14]

--------------------------------------------------------------------------------

It's actually -- it is all of the above. Pricing is about what we expected it to be, plus or minus. I mentioned to -- when Katja asked the question, a point. The math is actually a little bit less than a point in the first quarter, but that's about what we expected. You're getting some -- obviously, with our business, specifically FMT, you get a lot of volume leverage. These are very high contribution margin businesses to see any improvement there. And then just on an ongoing basis, the work that we've done around segmenting our portfolio and specifically our fixed businesses, we're getting more overall leverage in those businesses than we have in the past.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

Our next question comes from the line of Mike Halloran with Robert W. Baird.

--------------------------------------------------------------------------------

Michael Patrick Halloran, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [16]

--------------------------------------------------------------------------------

So first on sustainability here. Obviously, the confidence level seems a lot higher, Andy, based on what you've seen over the last couple of quarters. I think 3 quarters in a row now, organic order -- or positive organic orders. Maybe dig a layer deeper and just talk about how much you think is inventory replenishment, how much is going right to end-market demand. The project activity that you just commented on being broad-based seems favorable from a sustainability perspective, but maybe anything underneath there and then also just how things trended through the quarter through April. It sounds like March was good, but some cadence on that too.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [17]

--------------------------------------------------------------------------------

So Mike, let me -- I'll start there. So March was really good, yes, to be clear, right? So I think as we -- when we got here the last time, our last call, we had mentioned that January had started well. January was a strong month for us. To be honest with you, February was kind of muted. And so part of my cautionary tone in my earlier prepared comment is, when you look at our order book over the last 3 quarters, it's not look like through any quarter we've had kind of sustained strength, right? You still see spottiness, and so I'm mindful of that. But March was really strong, both in terms of orders and our ability to execute, frankly. In terms of overall kind of peeling back the onion, so to speak, the improvements that we saw were pretty broad-based, and so it's not a singular market. And so obviously, our life sciences businesses has been solid here for a long time, and what we really saw -- what we've seen here in the last 2 quarters, specifically this quarter, is improvement in the core industrial business. So general industrial is kind of the big difference between now and 6 months ago. And we're seeing that across different businesses. In terms of the inventory, do I think that some of it is inventory? I think there's probably a little bit. But as I've mentioned in the past, the stocking and destocking, it doesn't impact us as much as it does, I think, some other businesses. A lot of that has to do with -- we're doing a lot of value-added stuff, so we don't have a ton of general products, right, of off-the-shelf stuff. So we don't see that quite as much as maybe some others do. So I think it is more demand. That being said, what you do see in times like this is people where you do have [ combines ], customer [ combine ]. You see them changing those levels, right? So they're going to take on more stock because they've got to meet more volatility and demand. So there's a little bit of that. But I would say, generally, it's an improvement in end-market demand.

--------------------------------------------------------------------------------

Michael Patrick Halloran, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [18]

--------------------------------------------------------------------------------

That makes a lot of sense. And then on the margin side, historically, we've always talked about how organic -- as organic revenue accelerates, so too does that drop-through for you guys with a nice drop-through in the quarter. When you look at the rest of the year, 1Q margins on an op basis are a little bit ahead of what the median for '17 looks like. So maybe talk about how the margins you expect for the year. Was there something in the first quarter, besides maybe really good mix, something else that drove something that's not repeatable as we go moving forward? Or is there this level of conservatism being baked in? Some thoughts there would be great.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [19]

--------------------------------------------------------------------------------

Mike, we're only about 30 bps off of what we're talking about for the year. So it's not a big number, right, number one. And that can flex a lot. If you look at the FMT margins, the FMT margins were very positively impacted by mix in this quarter, and so up 300 basis points. We do think that we've definitely taken a step function -- or a, not step function, but another step in where our sustainable margins are. We do think we have reached a new level there. But we did have pretty favorable mix in FMT. And HST actually, we had kind of negative mix. Our Sealing business had a really strong quarter, and that's on the lower end, still quite good, but it's on the lower end of margin mix. And so when I look at the year, that plus/minus 21.5%, that feels pretty good. The 21.8%, that's within striking distance of that 21.5%, not a big difference.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

Our next question comes from the line of Charley Brady with SunTrust.

--------------------------------------------------------------------------------

Peng Yao Wu, SunTrust Robinson Humphrey, Inc., Research Division - Associate [21]

--------------------------------------------------------------------------------

This is actually Patrick Wu standing up with Charley. I just wanted to touch a little bit on growth investment. I think the last quarter, what you guys outlined '17 sort of expectations I think growth in investments are around 11% sort of a headwind. On the bottom line, I guess, both for '17. How much of that has been realized in the first quarter? And I guess, how should we think about how that is progressing? Is management thinking this could potentially change now with higher growth -- organic growth expected, I think, with that?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [22]

--------------------------------------------------------------------------------

So we're right on track. The spending that we had planned in the first quarter to get to ramp that has happened, so nothing surprising there. And so I don't see us -- from those planned investments, they're going to happen very much like we've outlined. With a little bit better environment, obviously we'll push even harder around investments. And so if what we've seen here in the first quarter sustained, I would expect that some of the investments will increase over the year, not big numbers, Patrick, but I would expect us to make some further investments.

--------------------------------------------------------------------------------

Peng Yao Wu, SunTrust Robinson Humphrey, Inc., Research Division - Associate [23]

--------------------------------------------------------------------------------

But I guess, that number, that $0.11 number would probably would change even if you're thinking...

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [24]

--------------------------------------------------------------------------------

No, no. Yes, it's -- in terms of how it impacts our margin structure, no, no.

--------------------------------------------------------------------------------

Peng Yao Wu, SunTrust Robinson Humphrey, Inc., Research Division - Associate [25]

--------------------------------------------------------------------------------

And can you maybe just talk a little bit more about I guess sort of on that front some of the new product rollouts that you guys have? Maybe you've already done [ it ] in the first quarter and sort of throughout the rest of the quarters here?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [26]

--------------------------------------------------------------------------------

Yes, so it's pretty broad-based, right? So if you look at our new products, we have a whole host of products that are launching in conjunction with our customers in Scientific Fluidics, and those are things that are -- that take years to develop, right? And so we expected those to really kick in, in '17. We've seen that happen. In our Water business, we have 2 significant new product launches around one on the meter side and one on the sewer pipeline side. We have a new product investment in [ black skid ] coming from our Viking business. And in Dispensing, we've got the next generation. As you know, the X-Smart has been excellent. It's been a great product for us. And we're launching kind of the next phase of that, which is into the next level-up market segment that we've been playing here for some time. So those are all kind of moving ahead, and these are things that have been in the pipeline for a long time for us.

--------------------------------------------------------------------------------

Peng Yao Wu, SunTrust Robinson Humphrey, Inc., Research Division - Associate [27]

--------------------------------------------------------------------------------

Okay, great. That's good color, I guess. Just one more. I think you talked a little bit about sort of order rate, February being a little muted and March being probably a little bit better than you expected. How -- what is sort of the exit rate, I guess, for the orders coming out of March? And what have you seen so far for the first, let's say, 20 days of April?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [28]

--------------------------------------------------------------------------------

Yes, it's fine. The orders have been kind of in line with our expectation in April, so nothing -- no big deviation. March was definitely stronger than we had expected, but February was softer, right? And so month-to-month orders, we obviously pay attention to it. I think the thing that matters more to me now is the fact that you still see the volatility. And so we have -- obviously, the tone here in both our release and our prepared remarks and whatnot, obviously, the tone is more positive. So that's one of the reason that I remain a little bit cautious, is that volatility is still there. Certainly, we're in a better position than we were 90 days ago in terms of our confidence level, but there's still volatility.

--------------------------------------------------------------------------------

Peng Yao Wu, SunTrust Robinson Humphrey, Inc., Research Division - Associate [29]

--------------------------------------------------------------------------------

And that order that you mentioned, FSD, that's being pushed into second quarter. Is that -- I mean, I know you said it's timing related, but what is the reason? Are the customers saying to hold back on that?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [30]

--------------------------------------------------------------------------------

Yes, customer chooses, right? They did. It's a matter of their readiness. So it's nothing I'm concerned about. It's just we don't have a lot of things that are on the larger side. And when things move by a few weeks, it has an impact.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

Our next question comes from the line of Allison Poliniak with Wells Fargo.

--------------------------------------------------------------------------------

Allison Poliniak-Cusic, Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst [32]

--------------------------------------------------------------------------------

Can I just go back to the margin assumption question about somebody you have had? You talked about mix in FMT being more favorable in Q1. How should we think of that for the rest of the year? And was there specific vertical with that mix that was driving that?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [33]

--------------------------------------------------------------------------------

I think -- I don't know that it's going to be as good as that for the year in some of its mix versus expectation, but ag was better than we thought it was going to be, Allison. And as you know, that's very favorable for us. And so that was kind of one that was better than expectation. And then when you peel back the businesses, as you know, we've got a few brands that just have much higher contribution margin. I'm thinking of the Viking some more and [ robs ] as an example, right, and they had a better quarter. In terms of their -- for the balance of the year, again, I think, in total, we're in striking distance of kind of overall what we expected.

--------------------------------------------------------------------------------

Allison Poliniak-Cusic, Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst [34]

--------------------------------------------------------------------------------

Okay, that's great. And then just your comments around obviously the risk out there and you bring to -- bring forward the question about the sustainability of your early stages of recovery. Obviously, order is great. You seem comfortable with the near-term outlook. But as you talk to your customers, is there a specific market that you're more concerned about, the sustainability? I understand your concern, but I guess what are you seeing, I guess, from your customers that is -- could be driving some of that?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [35]

--------------------------------------------------------------------------------

Yes. No, I don't have a specific -- I'm not going to put my finger on anything specific. It's just -- it's much more -- I think your term early-stage is the good way to put that in the industrial side, and there's -- we're literally 6 months out of a horrible industrial recession. And so I'm cautious about that and I'm cautious about the fertility of it. With a lot of things that are still pretty unpredictable out there and with a lot of positivity priced in, and I don't mean just in the stock market but priced into confidence, right. And even in the last couple of weeks, we've seen some of that -- the negative the side of that. And so I'm just -- I feel better about what we're seeing, no doubt about it, but I think we are very prudent to managing -- to continue to manage our business for expected volatility.

--------------------------------------------------------------------------------

Allison Poliniak-Cusic, Wells Fargo Securities, LLC, Research Division - Senior Equity Analyst [36]

--------------------------------------------------------------------------------

That's great. And then just on FMT and Water, you highlighted a lot of the new products, strong order growth there. I don't know, is there a way to parse out that you're driving maybe above-market order growth because of some of these new products? I don't know how easy...

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [37]

--------------------------------------------------------------------------------

I think so. I think -- so if you kind of take the -- let's just kind of take 5% growth and let's -- actually, let's not take 5%. Let's take 3% to 4% for the year, right, and you say how much of that do you believe is just underlying market and how much of that is us outperforming the market. I think a combination of customer focus, meaning really around our segmentation work on new products. I think that's going to get us 1 point or 2 points above the underlying market. And so it'll -- if you're 3% to 4%, I think we're going to get 1% to 2% of that or we're going to outperform on new products and customer focus. And the balance of that is going to be how the markets perform.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

Our next question comes from the line of Matthew Mishan with KeyBanc.

--------------------------------------------------------------------------------

Matthew Ian Mishan, KeyBanc Capital Markets Inc., Research Division - VP and Senior Equity Research Analyst [39]

--------------------------------------------------------------------------------

Starting off with HST, could you maybe parse out a little bit around the order growth? What really drove the inflection to the 8% increase? Was it an increase in Sealing, life sciences or like MPT?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [40]

--------------------------------------------------------------------------------

So the industrial side was decent. The most strength came out of Sealing, followed by Scientific Fluidics and Optics. So those 2 were really the stronger pieces. Sealing was, by far, the strongest grower in the quarter and has a little bit of that negative mix I talked about, still quite good, don't get me wrong. But just from an overall mix perspective, it's negative to the segment.

--------------------------------------------------------------------------------

Matthew Ian Mishan, KeyBanc Capital Markets Inc., Research Division - VP and Senior Equity Research Analyst [41]

--------------------------------------------------------------------------------

And then you've been talking about like a very strong product cycle in Fluidics and Optics in 2017 and 2018. Can we maybe talk about some of the advancements that are driving that for your customers?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [42]

--------------------------------------------------------------------------------

Well, it's -- the story is very, very similar, right, which is -- it's really around our ability to bring an improved Fluidics system into the whole host of customers, whether it's IVD, bio, analytical instrumentation. You see those things the same, but we are kind of taking more real estate, and that is driven by really performance. And that's a combination of our ability to move smaller things at higher pressures, higher quality and then the integration of Optics and Fluidics. So those are really the things that come together. And obviously, that was a piece of our thesis to many years ago in bringing those businesses together, and we're seeing that play itself through.

--------------------------------------------------------------------------------

Matthew Ian Mishan, KeyBanc Capital Markets Inc., Research Division - VP and Senior Equity Research Analyst [43]

--------------------------------------------------------------------------------

Okay, great. And then if I could squeeze one last one in. There was a large MPT order in 4Q, did that ship in the first quarter? And how much of the growth would be attributed to that?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [44]

--------------------------------------------------------------------------------

Mostly second quarter. Most of the things are in the second quarter, right, Bill?

--------------------------------------------------------------------------------

William K. Grogan, IDEX Corporation - CFO and SVP [45]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [46]

--------------------------------------------------------------------------------

So it's mostly the second quarter.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

Our next questions come from the line of Matt Summerville with Alembic Global Advisors.

--------------------------------------------------------------------------------

Matt J. Summerville, Alembic Global Advisors - MD and Senior Analyst [48]

--------------------------------------------------------------------------------

Just a couple of questions. Maybe just dig a little bit deeper into what you're seeing in the Fire business, if you could parse compression versus safety and maybe provide a little bit of geographic color around that. I know in the last year, you were -- there were some regions that were a bit more challenged than others. And then also, can you speak to kind of provide an update on the fire acquisitions you made during 2016? I know you kind of anniversaried Akron Brass at this point. So how are you performing in terms of driving margin improvement, integration, et cetera?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [49]

--------------------------------------------------------------------------------

Well, Matt, maybe let me start there. So the Akron integration has gone really well, and certainly, we are a little bit better than our expectation and we had pretty aggressive expectations. And that's gone well. It's gone well on a number of levels done, but the product side, the channel side, obviously an improved cost structure. We are -- the thesis there, if you recall, was really bringing together close beyond to close the loop with high-value content on a fire truck, and then electronics will increasingly play a bigger role. That's not baked yet, but it will be an important piece of that. So that's certainly at or above our expectation. In terms of the overall growth, probably the biggest, I would say, net positive compared to our expectation is the Chinese business has improved. The tenders, which had been held off for quite some time, have been released, and we've won those. And by the way, we've won competitive share there. So that's probably the biggest thing in that overall Fire & Safety business.

--------------------------------------------------------------------------------

Matt J. Summerville, Alembic Global Advisors - MD and Senior Analyst [50]

--------------------------------------------------------------------------------

And then just one more follow-up on FMT. I know you kind of talked about the margin a little bit and maybe I'll use the term that you sort of backed off from a little bit and that being step function. If you go back 12 to 24 months ago, you're at 23% to 24% margin bandwidth. And now for the last 2 quarters, you've done above 27%. I guess when you think about the mix dynamics in the business, what do you feel going forward is the right sort of high low bandwidth on that business?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [51]

--------------------------------------------------------------------------------

Yes. So I think it's in that 26%, 27% around FMT. That's probably a pretty good number here, assuming kind of constant volume generally. I think we're at that range now. And you're right, the reason I corrected myself is I think step function is just too great a term. But we've definitely made some movement, and that's happened around a couple of things. Number one, as you know, we had -- those businesses that we define as fixed, probably the greatest proportion of those set by FMT and that team really led by [ Floriant ]. They've done a great job. Bottom line, they've done a terrific job. And by the way, they've done it while launching a new product, right. So we're very, very happy with that. But also, within some of our bigger brands, when you look at the Viking brand or the Warren Rupp brand or even, to a degree, if you look at Banjo, they had a huge headwind. They held their own with some pretty big headwind. And so we've made improvements in those businesses while they were facing peak-to-trough double-digit headwind, right, and they held their own. And so when you get some volume back and those things, it flows through to the bottom. So it's -- I'll give Eric Ashleman, who's our COO, an awful lot of credit here with really driving that focus in the FMT businesses and helping them get to the kind of margin structure we would expect.

--------------------------------------------------------------------------------

Operator [52]

--------------------------------------------------------------------------------

Our next questions come from the line of Brett Linzey with Vertical Research Partners.

--------------------------------------------------------------------------------

Brett Logan Linzey, Vertical Research Partners, LLC - VP [53]

--------------------------------------------------------------------------------

Just wanted to come back to the 2017 guide. So you're taking up the organic growth forecast, maintaining the point estimate on margins. I'm surprised you're not getting a little bit better leverage there. If we were to just adjust for investments in some of the M&A noise, what are the volume-based incrementals that you're assuming for the business for 2017?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [54]

--------------------------------------------------------------------------------

Well, I have to parse that through, right, in total. Separating out the new investments versus if you just didn't do new investments and what you get for leverage, that's a tough one, right, to parse out. I think that the overall flow-throughs that we're getting are very much in line with our expectation. I don't see anything -- any big deviation from what we have thought about or talked about over time.

--------------------------------------------------------------------------------

Brett Logan Linzey, Vertical Research Partners, LLC - VP [55]

--------------------------------------------------------------------------------

Okay. And then just back to some of the energy commentary. It sounds like it's still relatively muted overall. Could you just talk about what the order flow rates were in the quarter here into April? And was that, that total oil and gas business, up in the quarter on a sales basis?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [56]

--------------------------------------------------------------------------------

Well, you got to break that down a little bit. Because when we talk about energy, right, we've got our businesses that -- Liquid Controls, as an example, our [ fork in ] brand, and those are, by and large, that all they do is energy, right? And then you've got -- then you have pieces of Sealing, of Band-It, of Viking that -- Warren Rupp -- that all touch that. So let me kind of break -- let me break it down into what's kind of happening in the segment of the energy business. What I mean is upstream, very strong, right, whether -- it doesn't matter kind of what part of our business we're touching, but that's only 2%, 3% of our IDEX volume. So that's been up very, very nicely. The midstream side is the part that's much more muted, and that's really around LPG and that has to do with truck build. That's the part that's still soft. And given what we see as an outlook of truck build and we're pretty close to those customers, that's not going to get better here. We don't think in the balance of this year. So that's how I'd separate it out.

--------------------------------------------------------------------------------

Brett Logan Linzey, Vertical Research Partners, LLC - VP [57]

--------------------------------------------------------------------------------

Okay. No, that helps. And just one more back to FS and DP. Do you have any sense as to -- or could you maybe quantify what the delta impact was on orders, those large projects, last year, how large they were? And then could you...

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [58]

--------------------------------------------------------------------------------

You mean, comparison? You mean...

--------------------------------------------------------------------------------

Brett Logan Linzey, Vertical Research Partners, LLC - VP [59]

--------------------------------------------------------------------------------

Yes, the comparison. And then also, what was the size of these projects that got shifted from Q1 into Q2?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [60]

--------------------------------------------------------------------------------

So you're talking -- it's sub-$10 million in total, right? And I'm talking about what the comp and the push. So the tough comp to last year and the push to this year, that's the kind of a magnitude you're talking about in total.

--------------------------------------------------------------------------------

Brett Logan Linzey, Vertical Research Partners, LLC - VP [61]

--------------------------------------------------------------------------------

Okay. So underlying orders were still relatively...

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [62]

--------------------------------------------------------------------------------

They're good.

--------------------------------------------------------------------------------

Brett Logan Linzey, Vertical Research Partners, LLC - VP [63]

--------------------------------------------------------------------------------

Okay. Yes.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [64]

--------------------------------------------------------------------------------

Yes, today.

--------------------------------------------------------------------------------

William K. Grogan, IDEX Corporation - CFO and SVP [65]

--------------------------------------------------------------------------------

No, I'd say Fire & Rescue was strong for the quarter as well as Band-It. Dispensing was the outlier relative to just those couple projects that moved. So underlying order rates, if you excluded that, will be in line with the balance of the portfolio.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [66]

--------------------------------------------------------------------------------

But that's also when you look at the second quarter and you go, well, why is your organic going to be 2% to 3% after you're coming off a 5%? That's part of what you're going to comp against, right, is you're going to have -- that lumpiness is going to -- you've got kind of an orders lumpiness that hits you here, and you get sales lumpiness that hits you in the second quarter.

--------------------------------------------------------------------------------

William K. Grogan, IDEX Corporation - CFO and SVP [67]

--------------------------------------------------------------------------------

Exactly.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [68]

--------------------------------------------------------------------------------

It will be breakable in the order side from that in the second quarter, but we're going to be hit on the sales side comparatively. That's where we've (inaudible).

--------------------------------------------------------------------------------

Operator [69]

--------------------------------------------------------------------------------

Our next questions come from the line of Bhupender Bohra with Jefferies.

--------------------------------------------------------------------------------

Bhupender Singh Bohra, Jefferies LLC, Research Division - Equity Analyst [70]

--------------------------------------------------------------------------------

So just a question on -- when we look at the margins here, especially FMT, we have 300 bps improvement year-over-year, and historically, I think even this release, you guys talked about productivity. Can you give us some clarity like how much mix was, how much productivity actually benefited margins overall in that particular business? I think you pointed out that as one of the margin improvement.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [71]

--------------------------------------------------------------------------------

Yes. So it's -- [ indiscernible ]?

--------------------------------------------------------------------------------

William K. Grogan, IDEX Corporation - CFO and SVP [72]

--------------------------------------------------------------------------------

Go ahead.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [73]

--------------------------------------------------------------------------------

No, go ahead.

--------------------------------------------------------------------------------

William K. Grogan, IDEX Corporation - CFO and SVP [74]

--------------------------------------------------------------------------------

Maybe I'll take that one. I would say, right, we've seen ratable improvement within our FMT margins over the last 6 months, as Andy talked about some of the focused actions we've taken on some of the fixed businesses. So I think our underlying kind of target is probably close to that 27% rate, and then you're going to fluctuate off of that based upon the mix within the portfolio. So I think kind of fundamental improvements have gotten us close to that 27%, and the mix will vary slightly off of that.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [75]

--------------------------------------------------------------------------------

But in terms of splitting it between productivity and volume leverage, they kind of go hand-in-hand, right? So you're talking about a business that in general is north of 65% contribution margin and the key is, as the volume comes back, we don't have to add fixed cost at nearly the rate, right? So -- and that really kind to comes into productivity in and of itself, so they really go hand-in-hand, Bhupender.

--------------------------------------------------------------------------------

Bhupender Singh Bohra, Jefferies LLC, Research Division - Equity Analyst [76]

--------------------------------------------------------------------------------

Okay. So I mean if I had to -- a bucket, that 300 bps improvement year-over-year, you would say like 2/3 would be kind of top line volume leverage and mix and the 1/3 would be productivity kind of thing, would that be fair?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [77]

--------------------------------------------------------------------------------

Well...

--------------------------------------------------------------------------------

William K. Grogan, IDEX Corporation - CFO and SVP [78]

--------------------------------------------------------------------------------

No, you get price in there, too.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [79]

--------------------------------------------------------------------------------

Yes, yes, the price is there. We're probably -- honestly, we're probably getting in too fine a level of detail to share publicly. We don't really get into that level of detail. And so -- but I think generally, right, the big impact here in the quarter that's different from what you've seen in the last, call it, year, is that change in leverage.

--------------------------------------------------------------------------------

Bhupender Singh Bohra, Jefferies LLC, Research Division - Equity Analyst [80]

--------------------------------------------------------------------------------

Okay, got it. And as we go into the rest of 2017 as you have improved your organic guidance here, could you just talk about some of the end markets from all the 3 business perspective where you think -- what you think are going to be more -- a little bit more positive from your perspective? Do you think there will be some incremental improvement? Or -- and where you see headwind, if any, basically?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [81]

--------------------------------------------------------------------------------

I think that the biggest difference from where we talked about a couple of months ago here is really around North American industrial. That's the biggest inflection of anything that we had. And that shows up in FMT and in HST, right? It shows up -- you see kind of the strength. The other place that obviously was a big differentiator for us within HST was -- were the wins with Semicon. And Semicon's been good for us generally. The market's been decent. But the team has done an exceptional job of focusing in on a handful of core customers and on applications where we could really differentiate, and we backed that up with a major investment, right? So when we opened our new facility in Texas here a couple of years ago, it was all about our ability to win in the North American Semicon and North American energy market. Obviously, energy has been tough in the last few years, but that thesis and that strategy has played itself out. So that's -- they're winning in there -- they're winning well there. And then what's been a little bit lost in the shelf, although I did touch on it earlier, the team in Scientific Fluidics and Optics, they saw this refresh, this 2017, 2018 product cycle refresh years ago. And what they have done -- what that team has done to be inside our customers, to have concurrent engineering happening, we told you this about 1.5 years ago that this was going to happen, and it's happening. And so the growth that they're getting is really from years and years of executing their strategy of more high-value content by solving those customer's vertical problems in it. They've just done a terrific job, and it's playing out.

--------------------------------------------------------------------------------

Operator [82]

--------------------------------------------------------------------------------

(Operator Instructions) Our next question comes from the line of Deane Dray with RBC.

--------------------------------------------------------------------------------

Jeffrey Jacob Reive, RBC Capital Markets, LLC, Research Division - Associate [83]

--------------------------------------------------------------------------------

This is Jeffrey on for Deane Dray. My question is more about your M&A pipeline. I'm just curious how it's looking and which segments you're primarily focused on and if you have any other divestitures or portfolio premium actions in the pipeline.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [84]

--------------------------------------------------------------------------------

Well, Jeff, maybe we'll start there. So we don't ever really get into specifics about pruning. But as I said in the past, we've done the vast majority of things that we're going to do from that perspective, and I think it's played out well. And so generally, I don't expect to see us -- the divestiture gain in any major way here going forward. In terms of the M&A pipeline, it looks really similar to what it did back when we talk about the fourth quarter. It's robust in the sense of we've got a lot of target that we're working. I would say, the private equity side, that's been strong, which obviously gives you a little bit of caution because of the amount of stuff that's been sold. And then prices are elevating. As markets improved, people's expectations raise. And I think that being very, very disciplined here is smart for us. So thinking -- having a balance capital allocation strategy is very important in this kind of market. And then buying businesses like FSD, like Akron, like AWG that are in our sweet spot and working those things really consistently, that's how we're going to be successful. And so we're going to be very disciplined, and we're going to be consistent and over time, we're going to -- we'll put our balance sheet and our cash flows to work, but it's going to be in a very disciplined way.

--------------------------------------------------------------------------------

Jeffrey Jacob Reive, RBC Capital Markets, LLC, Research Division - Associate [85]

--------------------------------------------------------------------------------

Okay. And a final follow-on to that with -- I mean, I guess equity valuation elevated, as you said. Could we possibly see more acquisitions utilizing your own equity?

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [86]

--------------------------------------------------------------------------------

I mean, I guess maybe I'll answer that in a very big picture. I'm not wholly against it. We would use equity if it made sense. The number of situations, right, that possibly see us doing that are really, really small. And obviously, we've got the balance sheet and free cash flow that it would have to be a pretty special situation. And obviously, we get more leverage by using our balance sheet and so that would obviously be our first choice. But to say I would never use equity, that would be too strong. I'd use it in the right situation.

--------------------------------------------------------------------------------

Operator [87]

--------------------------------------------------------------------------------

At this time, we have no further questions. I would like turn to turn the floor back over to Mr. Andy Silvernail for closing comments.

--------------------------------------------------------------------------------

Andrew K. Silvernail, IDEX Corporation - Chairman, CEO and President [88]

--------------------------------------------------------------------------------

Well, thank you all again for joining us here in our first quarter conference call. Obviously, I'm really proud of how our teams have executed. They've done a terrific job when we had headwinds here for 2, 2.5 years. I'm really proud of what they've gotten done. And yes, we are seeing some improvement in outlook, and I'm glad that we've had the ability to raise our guidance and our expectations. I still remain cautious, and I think we're all -- it's all smart of us to not get over our skis. And our job is to execute for our shareholders. I appreciate the ownership. I appreciate the focus, and we look forward to talking to you here in 90 days. Take care.

--------------------------------------------------------------------------------

Operator [89]

--------------------------------------------------------------------------------

This concludes today's teleconference. Please disconnect your lines at this time, and thank you for your participation.