Item 6. Selected Financial Data.(1)

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Item 6. Selected Financial Data.(1)



(Dollars in thousands, except per share data)	2017			2016			2015			2014			2013
RESULTS OF OPERATIONS
Net sales	$	2,287,312		$	2,113,043		$	2,020,668		$	2,147,767		$	2,024,130
Gross profit	1,026,678			930,767			904,315			949,315			873,364
Selling, general and administrative expenses	524,940			492,398			474,156			500,719			468,806
Loss (gain) on sale of businesses - net	(9,273		)	22,298			(18,070		)	—			—
Restructuring expenses	8,455			3,674			11,239			13,672			—
Operating income	502,556			412,397			436,990			434,924			404,558
Other (income) expense - net	2,394			(1,731		)	3,009			589			9,223
Interest expense	44,889			45,616			41,636			41,895			42,206
Provision for income taxes	118,016			97,403			109,538			113,054			97,914
Net income	337,257			271,109			282,807			279,386			255,215
Earnings per share: (2)
— basic	$	4.41		$	3.57		$	3.65		$	3.48		$	3.11
— diluted	$	4.36		$	3.53		$	3.62		$	3.45		$	3.09
Weighted average shares outstanding:
— basic	76,232			75,803			77,126			79,715			81,517
— diluted	77,333			76,758			77,972			80,728			82,489
Year-end shares outstanding	76,694			76,441			76,535			78,766			81,196
Cash dividends per share	$	1.48		$	1.36		$	1.28		$	1.12		$	0.89
FINANCIAL POSITION
Current assets	$	1,004,043		$	822,721		$	862,684		$	1,075,791		$	990,953
Current liabilities	360,975			309,158			309,597			411,968			304,609
Current ratio	2.8			2.7			2.8			2.6			3.3
Operating working capital (3)	406,823			396,739			370,213			366,209			350,881
Total assets (4)	$	3,399,628		$	3,154,944		$	2,805,443		$	2,903,463		$	2,881,118
Total borrowings (4)	859,046			1,015,281			840,794			859,345			767,417
Shareholders’ equity	1,886,542			1,543,894			1,443,291			1,486,451			1,572,989
PERFORMANCE MEASURES AND OTHER DATA
Percent of net sales:
Gross profit	44.9		%	44.0		%	44.8		%	44.2		%	43.1		%
Selling, general and administrative expenses	23.0		%	23.3		%	23.5		%	23.3		%	23.2		%
Operating income	22.0		%	19.5		%	21.6		%	20.3		%	20.0		%
Income before income taxes	19.9		%	17.4		%	19.4		%	18.3		%	17.4		%
Net income	14.7		%	12.8		%	14.0		%	13.0		%	12.6		%
Capital expenditures	$	43,858		$	38,242		$	43,776		$	47,997		$	31,536
Depreciation and amortization	84,216			86,892			78,120			76,907			79,334
Return on average assets (5)	10.3		%	9.1		%	9.9		%	9.7		%	9.0		%
Borrowings as a percent of capitalization (5)	31.3		%	39.7		%	36.8		%	36.6		%	32.8		%
Return on average shareholders’ equity (5)	19.7		%	18.2		%	19.3		%	18.3		%	16.8		%
Employees at year end	7,167			7,158			6,801			6,712			6,787
NON-GAAP MEASURES (6)
EBITDA	$	584,378		$	501,020		$	512,101		$	511,242		$	474,669
EBITDA margin	25.5		%	23.7		%	25.3		%	23.8		%	23.5		%
Adjusted EBITDA	$	583,560		$	530,546		$	505,270		$	524,914		$	474,669
Adjusted EBITDA margin	25.5		%	25.1		%	25.0		%	24.4		%	23.5		%
Adjusted operating income	$	501,738		$	438,369		$	430,159		$	448,596		$	404,558
Adjusted operating margin	21.9		%	20.7		%	21.3		%	20.9		%	20.0		%
Adjusted net income	$	333,667		$	288,373		$	277,229		$	288,823		$	255,215
Adjusted earnings per share	$	4.31		$	3.75		$	3.55		$	3.57		$	3.09


(1)	For additional detail, see Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”


(2)	Calculated by applying the two-class method of allocating earnings to common stock and participating securities as required by Accounting Standards Codification (“ASC”) 260, Earnings Per Share.


(3)	Operating working capital is defined as inventory plus accounts receivable minus accounts payable.


(4)	In the fourth quarter of fiscal year 2015, the Company adopted Accounting Standards Update 2015-03 regarding simplifying the presentation of debt issuance costs. The update was applied retrospectively to all periods presented in accordance with the provisions of the update. Refer to Note 1 for additional information related to ASU 2015-03 in the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”

(4)

In the fourth quarter of fiscal year 2015, the Company adopted Accounting Standards Update 2015-03 regarding simplifying the presentation of debt issuance costs. The update was applied retrospectively to all periods presented in accordance with the provisions of the update. Refer to Note 1 for additional information related to ASU 2015-03 in the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”


(5)	Return on average assets is calculated as: Net income / (Current year Total assets + Prior year Total assets) / 2; Borrowings as a percent of capitalization is calculated as: (Long-term borrowings + Short-term borrowings) / (Long-term borrowings + Short-term borrowings + Total shareholders’ equity); Return on average shareholders’ equity is calculated as Net Income / (Current year Total shareholders’ equity + Prior year Total shareholders’ equity) / 2

(5)

Return on average assets is calculated as: Net income / (Current year Total assets + Prior year Total assets) / 2; Borrowings as a percent of capitalization is calculated as: (Long-term borrowings + Short-term borrowings) / (Long-term borrowings + Short-term borrowings + Total shareholders’ equity); Return on average shareholders’ equity is calculated as Net Income / (Current year Total shareholders’ equity + Prior year Total shareholders’ equity) / 2


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

(6)

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

Management uses Adjusted operating income, Adjusted net income, and Adjusted EPS as metrics by which to measure performance of the Company since they exclude items that are not reflective of ongoing operations, such as gains/losses on the sale of businesses, restructuring expenses, and pension settlements. Management also supplements its U.S. GAAP financial statements with adjusted information to provide investors with greater insight, transparency, and a more comprehensive understanding of the information used by management in its financial and operational decision making.

EBITDA means earnings before interest, income taxes, depreciation and amortization. Given the acquisitive nature of the Company which results in a higher level of amortization expense from recently acquired businesses, management uses EBITDA as an internal operating metric to provide another representation of the businesses’ performance across our three segments and for enterprise valuation purposes. EBITDA is also used to calculate certain financial covenants, as discussed in Note 5 of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.” In addition, EBITDA has been adjusted for items that are not reflective of ongoing operations, such as gains/losses on the sale of businesses, restructuring expenses, and pension settlements to arrive at Adjusted EBITDA. Management believes that Adjusted EBITDA is useful as a performance indicator of ongoing operations. We believe that Adjusted EBITDA is also useful to some investors as an indicator of the strength and performance of the Company and its segments’ ongoing business operations and a way to evaluate and compare operating performance and value companies within our industry. The definition of Adjusted EBITDA used here may differ from that used by other companies.

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



1. Reconciliations of Consolidated EBITDA

	For the Years Ended December 31,
	2017			2016			2015			2014			2013
	(In thousands)
Net income	$	337,257		$	271,109		$	282,807		$	279,386		$	255,215
+ Provision for income taxes	118,016			97,403			109,538			113,054			97,914
+ Interest expense	44,889			45,616			41,636			41,895			42,206
+ Depreciation and amortization	84,216			86,892			78,120			76,907			79,334
EBITDA	584,378			501,020			512,101			511,242			474,669
+ Restructuring expenses	8,455			3,674			11,239			13,672			—
+ Loss (gain) on sale of businesses - net	(9,273		)	22,298			(18,070		)	—			—
+ Pension settlement	—			3,554			—			—			—
Adjusted EBITDA	$	583,560		$	530,546		$	505,270		$	524,914		$	474,669

Net sales	$	2,287,312		$	2,113,043		$	2,020,668		$	2,147,767		$	2,024,130
EBITDA margin	25.5		%	23.7		%	25.3		%	23.8		%	23.5		%
Adjusted EBITDA margin	25.5		%	25.1		%	25.0		%	24.4		%	23.5		%



2. Reconciliations of Segment EBITDA

	For the Years Ended December 31,
	2017									2016									2015
	FMT			HST			FSDP			FMT			HST			FSDP			FMT			HST			FSDP
	(In thousands)
EBITDA	$	263,610		$	225,649		$	159,610		$	242,892		$	200,980		$	135,400		$	233,008		$	200,953		$	123,249
+ Restructuring expenses	3,374			4,696			255			932			1,117			1,425			7,090			3,408			576
+ Pension settlement	—			—			—			2,032			—			540			—			—			—
Adjusted EBITDA	$	266,984		$	230,345		$	159,865		$	245,856		$	202,097		$	137,365		$	240,098		$	204,361		$	123,825

Net sales	$	880,957		$	820,131		$	587,533		$	849,101		$	744,809		$	520,009		$	860,792		$	738,996		$	423,915
EBITDA margin	29.9		%	27.5		%	27.2		%	28.6		%	27.0		%	26.0		%	27.1		%	27.2		%	29.1		%
Adjusted EBITDA margin	30.3		%	28.1		%	27.2		%	29.0		%	27.1		%	26.4		%	27.9		%	27.7		%	29.2		%



3. Reconciliations of Consolidated Reported-to-Adjusted Operating Income and Margin

	For the Years Ended December 31,
	2017			2016			2015			2014			2013
	(In thousands)
Operating income	$	502,556		$	412,397		$	436,990		$	434,924		$	404,558
+ Restructuring expenses	8,455			3,674			11,239			13,672			—
+ Loss (gain) on sale of businesses - net	(9,273		)	22,298			(18,070		)	—			—
Adjusted operating income	$	501,738		$	438,369		$	430,159		$	448,596		$	404,558

Net sales	$	2,287,312		$	2,113,043		$	2,020,668		$	2,147,767		$	2,024,130

Operating margin	22.0		%	19.5		%	21.6		%	20.3		%	20.0		%
Adjusted operating margin	21.9		%	20.7		%	21.3		%	20.9		%	20.0		%



4. Reconciliations of Segment Reported-to-Adjusted Operating Income and Margin

	For the Years Ended December 31,
	2017									2016									2015
	FMT			HST			FSDP			FMT			HST			FSDP			FMT			HST			FSDP
	(In thousands)
Operating income	$	241,030		$	179,567		$	147,028		$	217,500		$	153,691		$	123,605		$	206,419		$	158,364		$	117,346
+ Restructuring expenses	3,374			4,696			255			932			1,117			1,425			7,090			3,408			576
Adjusted operating income	$	244,404		$	184,263		$	147,283		$	218,432		$	154,808		$	125,030		$	213,509		$	161,772		$	117,922

Net sales	$	880,957		$	820,131		$	587,533		$	849,101		$	744,809		$	520,009		$	860,792		$	738,996		$	423,915

Operating margin	27.4		%	21.9		%	25.0		%	25.6		%	20.6		%	23.8		%	24.0		%	21.4		%	27.7		%
Adjusted operating margin	27.7		%	22.5		%	25.1		%	25.7		%	20.8		%	24.0		%	24.8		%	21.9		%	27.8		%



5. Reconciliations of Reported-to-Adjusted Net Income and EPS

	For the Years Ended December 31,
	2017			2016			2015			2014			2013
	(In thousands)
Net income	$	337,257		$	271,109		$	282,807		$	279,386		$	255,215
+ Restructuring expenses	8,455			3,674			11,239			13,672			—
+ Tax impact on restructuring expenses	(2,772		)	(1,299		)	(3,586		)	(4,235		)	—
+ Loss (gain) on sale of businesses	(9,273		)	22,298			(18,070		)	—			—
+ Tax impact on loss (gain) on sale of businesses	—			(9,706		)	4,839			—			—
+ Pension settlement	—			3,554			—			—			—
+ Tax impact on pension settlement	—			(1,257		)	—			—			—
Adjusted net income	$	333,667		$	288,373		$	277,229		$	288,823		$	255,215

EPS	$	4.36		$	3.53		$	3.62		$	3.45		$	3.09
+ Restructuring expenses	0.11			0.05			0.14			0.17			—
+ Tax impact on restructuring expenses	(0.04		)	(0.02		)	(0.04		)	(0.05		)	—
+ Loss (gain) on sale of businesses	(0.12		)	0.29			(0.23		)	—			—
+ Tax impact on loss (gain) on sale of businesses	—			(0.13		)	0.06			—			—
+ Pension settlement	—			0.05			—			—			—
+ Tax impact on pension settlement	—			(0.02		)	—			—			—
Adjusted EPS	$	4.31		$	3.75		$	3.55		$	3.57		$	3.09

Diluted weighted average shares	77,333			76,758			77,972			80,728			82,489



6. Reconciliations of EBITDA to Net Income (dollars in thousands)

	For the Year Ended December 31, 2017
	FMT			HST			FSDP			Corporate			IDEX
Operating income (loss)	$	241,030		$	179,567		$	147,028		$	(65,069	)	$	502,556
- Other (income) expense - net	1,007			(795		)	1,959			223			2,394
+ Depreciation and amortization	23,587			45,287			14,541			801			84,216
EBITDA	263,610			225,649			159,610			(64,491		)	584,378
- Interest expense													44,889
- Provision for income taxes													118,016
- Depreciation and amortization													84,216
Net income													$	337,257

Net sales (eliminations)	$	880,957		$	820,131		$	587,533		$	(1,309	)	$	2,287,312

Operating margin	27.4		%	21.9		%	25.0		%	n/m			22.0		%
EBITDA margin	29.9		%	27.5		%	27.2		%	n/m			25.5		%




	For the Year Ended December 31, 2016
	FMT			HST			FSDP			Corporate			IDEX
Operating income (loss)	$	217,500		$	153,691		$	123,605		$	(82,399	)	$	412,397
- Other (income) expense - net	3,066			(1,991		)	161			(2,967		)	(1,731		)
+ Depreciation and amortization	28,458			45,298			11,956			1,180			86,892
EBITDA	242,892			200,980			135,400			(78,252		)	501,020
- Interest expense													45,616
- Provision for income taxes													97,403
- Depreciation and amortization													86,892
Net income													$	271,109

Net sales (eliminations)	$	849,101		$	744,809		$	520,009		$	(876	)	$	2,113,043

Operating margin	25.6		%	20.6		%	23.8		%	n/m			19.5		%
EBITDA margin	28.6		%	27.0		%	26.0		%	n/m			23.7		%




	For the Year Ended December 31, 2015
	FMT			HST			FSDP			Corporate			IDEX
Operating income (loss)	$	206,419		$	158,364		$	117,346		$	(45,139	)	$	436,990
- Other (income) expense - net	1,073			238			148			1,550			3,009
+ Depreciation and amortization	27,662			42,827			6,051			1,580			78,120
EBITDA	233,008			200,953			123,249			(45,109		)	512,101
- Interest expense													41,636
- Provision for income taxes													109,538
- Depreciation and amortization													78,120
Net income													$	282,807

Net sales (eliminations)	$	860,792		$	738,996		$	423,915		$	(3,035	)	$	2,020,668

Operating margin	24.0		%	21.4		%	27.7		%	n/m			21.6		%
EBITDA margin	27.1		%	27.2		%	29.1		%	n/m			25.3		%



7. Reconciliation of the Change in Net Sales to Net Organic Sales

	For the Year Ended December 31,
	2017								2016								2015
	FMT		HST		FSDP		IDEX		FMT		HST		FSDP		IDEX		FMT		HST		FSDP		IDEX
Change in net sales	4	%	10	%	13	%	8	%	(1	)%	1	%	23	%	5	%	(4	)%	(2	)%	(16	)%	(6	)%
- Net impact from acquisitions/divestitures	(2	)%	3	%	9	%	2	%	1	%	3	%	27	%	7	%	2	%	2	%	—	%	2	%
- Impact from FX	—	%	(1	)%	—	%	—	%	(1	)%	(1	)%	(1	)%	(1	)%	(4	)%	(3	)%	(6	)%	(4	)%
Change in organic net sales	6	%	8	%	4	%	6	%	(1	)%	(1	)%	(3	)%	(1	)%	(2	)%	(1	)%	(10	)%	(4	)%

Refer to Management’s Discussion and Analysis for definition and further discussion on organic sales.

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