IEX
#Yes, so again, I want to be really, really careful.
We don't comment on any specific customer.
So, what ---+ we are ---+ where we sit in the food chain, what we experience in our numbers tends to be ---+ was already played out for us by the time it has played out in the markets for our customers generally.
Just because of how that works in the supply chain and timing, et cetera.
And so we don't see a major change in the fourth quarter based on anything you see out there the marketplace.
And also I think it's really important to note that this is ---+ we're talking about no customer being more than 2% of sales.
So we don't have a single customer that is material to the IDEX results as we think about that in the portfolio.
So with that said, as I think about the broader life sciences market, I think there's always bumps in there.
Every six or so quarters, you'll see a bump in these marketplaces based on when products are shipping, et cetera, product life cycles, supply chain.
But the story is a good news story.
We have seen strength in those markets, we expect to see strength in those markets going forward and for those to be above the IDEX average in terms of growth.
I think it's a combination of sustained improvement in a commodities world ---+ and this sounds like such a weak answer, but confidence.
There is a general lack of confidence in spending money and putting yourself out forward and putting a lot of capital forward.
And so I think that confidence is a combination of two years of a pretty soft market, a very uncertain political environment that people just aren't comfortable with how things are going to want to play out.
And I think that really needs to happen.
A little bit of improvement in the overall economic growth rate would go a long way.
Certainly people are seeing this is starting to play through in wage inflation.
And see what's going to happen in the global marketplace.
So you are seeing some elements of it spark there, but in general, you are not seeing that catalyst that is going to push that forward.
And as we think about our 2017 planning, we don't see a catalyst.
We don't see that happening.
We are well-positioned to deal with it if it does.
We have always said time and again that we are very able to react on the upside, and we never want to get caught on the downside.
And so for our ability to mobilize and execute a faster environment, we feel really comfortable around that in terms of supply chain and our ability to produce.
And at the same time, we think that this environment is going to continue here into 2017.
You know, Walt, I feel really comfortable that we can continue to drive productivity.
I'll tell you, what has accelerated our gains this year has been around the focus we've had on about a quarter of our portfolio that are fixed businesses.
We told you earlier in the year that that makes up about 25% of our business.
Into this year, we are almost 300 basis points better in profitability around those businesses.
And so that has just been a very, very good news story.
And let's keep in mind, too, that we are delivering this kind of margin profile with some of our bellwether, most profitable companies struggling that have really been hit most by this commodity and overall industrial distribution.
So if you think about Viking, Warren Rupp, BAND-IT, Banjo and even rescue tools ---+ so rescue tools has ---+ it's a different struggle for rescue tools because of the weakness in emerging markets around sovereign budget.
But if you look at those five businesses, those are big profit contributors to this Company.
And they have been hit squarely with the headwind.
And what we have been able to do is be able to really deliver the quality of earnings in those businesses, continued ---+ very, very high quality of earnings in those businesses and cash flow and, at the same time still drive overall margin potential with what we're doing in the rest of the business.
So, when I think about our execution and our positioning for any kind of improvement, we are in a good spot.
You know, Walt, with modest growth, a couple of points.
We can get 50 plus ---+
50 to 80 basis points of margin improvement, Walt, is what we have kind of said.
Yes, with a couple of points growth.
And that breakeven point ---+ when I say breakeven point, I mean the point at which we can still expand margins has gone down substantially.
And our ability to drive productivity.
And so if we continue to see a soft environment, we will still get better margins going forward.
Thank you.
The vast majority of our businesses are ---+ we are looking at book and ship.
I'm not sure I can give you a specific number.
But big capital projects, they have never been a big piece of our business.
But they can swing ---+ they can certainly swing in terms of volatility in any one quarter, and some of that we're seeing right now.
But historically we go into a quarter with half the quarter booked.
And you've got to deliver a book and ship in the quarter of about half the business.
And so that is what that kind of looks like.
Now for us, no material difference.
The difference is I think the larger CapEx really are the things that we have had in the past and were a buffer.
Those have certainly been pushed or canceled.
It can.
If you look at where we stand today and our expectations for fourth-quarter organic, that is the big pivot.
But at the same time, we are finding ways to cover it.
We are finding ways to still grow income and do a great job around cash.
I think ---+ let me talk about SFC first.
That's a very high-margin business, and that is really around a growth story.
So that's our focus with SFC.
And by the way, with AWG and Akron, growth is a critical component to the overall story.
But recognizing that when we bought the businesses, we saw more opportunity to get the margin profile ---+ margin profiles in line with our core IDEX business ---+ and that's about 500 basis points in total.
And Akron has been part of the portfolio a little bit longer.
Back earlier in the year, we bought the business.
We have had great results so far with it, and AWG is a terrific fit.
You put that together with our other safety and rescue assets, there's a lot of opportunity to grow the business and to improve margin profile.
I think what we have said in the past, and I wouldn't change it, is there is no reason you wouldn't see a couple hundred basis points out of the gate for those businesses and then the balance over three years.
So I think it takes three years to get 500 basis points, but there's no reason you wouldn't see a couple hundred basis points in that first year.
Yes, <UNK>, the bulk of it is from the acquisitions, but there are a few other areas that we are taking the opportunity to do some consolidation and get some leverage.
And so we will see some improvement in some other businesses also.
Yes, let me talk about the rationale behind it.
When we think about these things, it's not necessarily just a growth profile that we're looking at.
It is really around how are they going to be advantaged or disadvantaged long-term with us as the owners.
And so with the things that we have sold, we have sold them principally to people who have one of two things: either a different expectation of long-term performance than we have, but, more importantly, the ability to better position that business with an asset that they own.
And so ---+ and we have elected to not make the investment to get that competitive scale.
So what you are seeing us do are sell relatively small things or very small things that don't have a unique advantage today that really need some kind of relative competitive scale.
And we are selling those things that we don't ---+ we have decided that it's not worth the organic or inorganic investment to us, that the opportunities are elsewhere, and that's really how we have been making those decisions.
And also keep in mind things that are small and don't have the kind of advantage that we look for in business, they take a lot of management time.
They are disproportionate in what they require from a management time, and we would rather put those resources elsewhere.
In terms of ---+ have we said what our ---+ the businesses ---+ their business.
No.
We have not published that yet, so we won't do so.
But we're talking something that is small.
You'll see it as things roll out here in the next few weeks.
Yes, you are really talking about Viking and Warren Rupp for the most part.
When you say CFP, that is the bulk of it.
Right.
Richter, whatnot.
Really the same factors we're talking about generally.
Those are the big pieces of us ---+ of our FMT business is based in the general industrial world.
And they have had a tough go in 2017.
They have been hit disproportionately to the pressures that we are seeing in energy and the general industrial markets.
But, again, all of those businesses have seen sequential stability in their day rate business with some incremental negative on the CapEx side.
That's why we want to be very careful in saying I'm not going to call this an inflection point.
I think that would be a mistake.
We saw some improvement in the quarter.
It's been a tough story overall.
And ---+ but we did see some sequential improvement in the quarter and some year-over-year improvement in the quarter.
But I think ---+ let's be hesitant on that one.
It was good to see, but we've got to have a lot more data points before I make any commentary that I think it's ---+ we have seen a sustainable inflection.
<UNK>, it was probably depleted inventories just in channel and a pent-up demand for the replacement parts.
It's been down for almost seven quarters.
Yes, I think it's more replacement parts than it is equipment pick-up.
There's still a lot of equipment in the channel.
There is a lot of equipment in the field, there's a lot of equipment in the channel, so it's really a replacement part story versus a meaningful uptick in equipment.
Yes, I wouldn't say there's any major change.
We did note that the back-half comp started to get easier.
So, hey, we are glad to see it.
It's good to see, but is no major inflection different from what we've talked about so far.
I'm not sure I understand the question, <UNK>.
You're saying because ---+
No, I don't think so.
I think you've got ---+ when you are talking about sequencing, you have got major product cycles that are critically important.
And you have got this movement from, I will call it, the lab space into more of a commercial application.
And so that is a move that everyone has expected to happen.
And with that, you see a movement from very, very high-priced equipment down to more readily available lower-priced equipment that is more deployable into the field.
I think ---+ when you step back and think about the potential for this industry and you look at the number of sequences that are sold per year compared to the number of mass spec or analytical instruments in ultra-high-pressure liquid chromatography, it's tiny.
I mean, it is absolutely tiny.
And when you look at the applications and where those can go and land, and the number of potential units that can be sold into commercial applications ---+ and when I say commercial, I mean non-laboratory research ---+ the number is huge.
It is multiples of what is sold today.
And so it's not going to be smooth; it's not going to be perfect.
But if I think five years from now or 10 years from now compared to where we are today and the unit volume that you would expect, it's going to be much, much, much higher.
That is the bet we're making.
No, I wouldn't read into that at all.
Across our business, we are pretty asset-light.
You're talking about 1.5%, 2% CapEx intensity for the businesses.
We're not necessarily buying things that are lower than that or selling things that are higher than that.
It is really around market positioning.
Market positioning and what I would call relative competitive scale.
So, what ---+ if you look at what really works for us, it is when we are in a niche that is big enough to be attractive but small enough to not get the gorillas of the world if you wanted to compete for it.
And then we have the attractive relative market share position.
So we are a classic number one or number two.
And that ---+ the profit pools in that scenario and the attractiveness is very, very high.
When you are a distant three, four, five and you don't have a pathway, or if the niche is too small, that's where it's just not very attractive for us.
Well, thank you very much, and thank you, everybody, for joining us on the call today.
I think as I open this up, my hope is that people will really focus in on what we've done to drive operating results and what we have the ability to do given this continued weak macro environment.
And, again, I think our overall execution has been extremely strong.
The underlying operating earnings of this Company and our potential to drive earnings growth over time, I think, is substantial.
We have done a nice job with disciplined capital deployment, and we've got a great balance sheet to continue to do that.
So, look, we're going to have to continue to work through this murky macro environment that's going to be with us for a while, but we are exceptionally well-positioned to drive total shareholder return as we go forward.
So, again, thank you for your questions today, and thank you for your support of IDEX.
And we will talk to you here in about 90 days.
Take care.
