10-K 1 iex-20151231x10k.htm 10-K 10-K

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Fiscal Year Ended December 31, 2015
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period From                      to                     
Commission file number 1-10235
IDEX CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
 
36-3555336
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
1925 West Field Court, Lake Forest, Illinois
 
60045
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number:
(847) 498-7070
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share
 
New York Stock Exchange
and Chicago Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ    No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  þ
 
Accelerated filer  ¨        
 
Non-accelerated filer  ¨       
 
Smaller reporting company  ¨
 
 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  þ
The aggregate market value, as of the last business day of the registrant’s most recently completed second fiscal quarter, of the common stock (based on the June 30, 2015 closing price of $78.58) held by non-affiliates of IDEX Corporation was $6,085,231,271.
The number of shares outstanding of IDEX Corporation’s common stock, par value $.01 per share, as of February 16, 2016 was 75,929,397.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement with respect to the IDEX Corporation 2016 annual meeting of stockholders (the “2016 Proxy Statement”) are incorporated by reference into Part III of this Form 10-K.
 



Table of Contents
 
PART I.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
PART II.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
PART III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
PART IV.
Item 15.




PART I

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

Item 1.
Business.
IDEX Corporation (“IDEX,” the “Company,” “us,” “our,” or “we”) is a Delaware corporation incorporated on September 24, 1987. The Company is an applied solutions business that sells an extensive array of pumps, flow meters and other fluidics systems and components and engineered products to customers in a variety of markets around the world. All of the Company’s business activities are carried out through wholly-owned subsidiaries.
The Company has three reportable business segments: Fluid & Metering Technologies (“FMT”), Health & Science Technologies (“HST”) and Fire & Safety/Diversified Products (“FSDP”). Within our three reportable segments, the Company maintains fifteen platforms, where we focus on organic growth and strategic acquisitions. Each of our fifteen platforms is also a reporting unit, where we annually test for goodwill impairment.
During the third quarter of 2015, the Company announced the appointment of Eric Ashleman as Chief Operating Officer. While there were no changes to the reportable segments or movement of businesses between the reportable segments, the Company no longer delineates between “platforms” and “groups” and made the following changes to how certain businesses are managed internally:
Created the Valves platform as a result of the Alfa Valvole acquisition in June 2015.
Eliminated the Diaphragm and Dosing Pump Technology (“DDPT”) platform.
Created the Industrial platform from the businesses previously reported within Chemical, Food & Process (Richter, Viking, and Aegis) plus the Warren Rupp and Trebor businesses from DDPT.
Created the Water platform from the businesses previously reported within Water Services & Technology (ADS, IETG, and iPEK) plus the Pulsafeeder and Knight businesses from DDPT.

The Fluid & Metering Technologies segment contains the Energy (comprised of Corken, Faure Herman, Liquid Controls, SAMPI and Toptech), Valves (comprised of Alfa Valvole), Water (comprised of Pulsafeeder, Knight, ADS, IETG, and iPEK), Industrial (comprised of Richter, Viking, Aegis, Warren Rupp, and Trebor), and Agriculture (comprised of Banjo) platforms. The Health & Science Technologies segment contains the Scientific Fluidics (comprised of Eastern Plastics, Rheodyne, Sapphire Engineering, Upchurch Scientific, ERC, and CiDRA Precision Services), IDEX Optics & Photonics (comprised of CVI Melles Griot, Semrock, and AT Films), Sealing Solutions (comprised of Precision Polymer Engineering, FTL Seals Technology, and Novotema), Gast, Micropump, and Material Processing Technologies (comprised of Quadro, Fitzpatrick, Microfluidics, and Matcon) platforms. The Fire & Safety/Diversified Products segment is comprised of the Fire Suppression (comprised of Class 1, Hale and Godiva), Rescue (comprised of Dinglee, Hurst Jaws of Life, Lukas, and Vetter), Band-It, and Dispensing platforms. 
IDEX believes that each of its reporting units is a leader in its product and service areas. The Company also believes that its strong financial performance has been attributable to its ability to design and engineer specialized quality products, coupled with its ability to identify and successfully consummate and integrate strategic acquisitions.

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FLUID & METERING TECHNOLOGIES SEGMENT
The Fluid & Metering Technologies segment designs, produces and distributes positive displacement pumps, flow meters, injectors, and other fluid-handling pump modules and systems and provides flow monitoring and other services for the food, chemical, general industrial, water & wastewater, agriculture and energy industries. Fluid & Metering Technologies application-specific pump and metering solutions serve a diverse range of end markets, including industrial infrastructure (fossil fuels, refined & alternative fuels, and water & wastewater), chemical processing, agriculture, food & beverage, pulp and paper, transportation, plastics and resins, electronics and electrical, construction & mining, pharmaceutical and bio-pharmaceutical, machinery and numerous other specialty niche markets. Fluid & Metering Technologies accounted for 43%, 42% and 43% of IDEX’s sales in 2015, 2014 and 2013, respectively, with approximately 44% of its 2015 sales to customers outside the U.S. The segment accounted for 43%, 43% and 47% of IDEX’s operating income in 2015, 2014 and 2013, respectively.
Energy.    Energy consists of the Company’s Corken, Faure Herman, Liquid Controls, SAMPI and Toptech businesses. Energy is a leading supplier of flow meters, electronic registration and control products, rotary vane and turbine pumps, reciprocating piston compressors, and terminal automation control systems. Headquartered in Lake Bluff, Illinois (Liquid Controls products), Energy has additional facilities in Longwood, Florida and Zwijndrecht, Belgium (Toptech products); Oklahoma City, Oklahoma (Corken products); La Ferté Bernard, France (Faure Herman products); and Altopascio, Italy (SAMPI products). Applications for Liquid Controls and SAMPI positive displacement flow meters, electronic, registration and control products include mobile and stationary metering installations for wholesale and retail distribution of petroleum and liquefied petroleum gas, aviation refueling, and industrial metering and dispensing of liquids and gases. Corken products consist of positive-displacement rotary vane pumps, single and multistage regenerative turbine pumps, and small horsepower reciprocating piston compressors. Toptech supplies terminal automation hardware and software to control and manage inventories, as well as transactional data and invoicing, to customers in the oil, gas and refined-fuels markets. Faure Herman is a leading supplier of ultrasonic and helical turbine flow meters used in the custody transfer and control of high value fluids and gases. Approximately 44% of Energy’s 2015 sales were to customers outside the U.S.
Valves. Valves consists of the Company’s Alfa Valvole (“Alfa”) business. Alfa is a leader in the design, manufacture and sale of specialty valve products for use in the chemical, petro-chemical, energy and sanitary markets. Located in Casorezzo, Italy, Alfa’s products are used in various industrial fields for fluid control, in both gas and liquid form, in all sectors of plant engineering, cosmetics, detergents, food industry, electric energy, pharmaceutical, chemical plants, petrochemical plants, oil, heating/air conditioning and in all markets worldwide and also on ships, ferries and marine oil platforms. 100% of Alfa’s 2015 sales were to customers outside the U.S.
Water.    Water consists of the Company’s ADS, IETG, iPEK, Knight and Pulsafeeder businesses. Water is a leading provider of metering technology, flow monitoring products and underground surveillance services for wastewater markets, alloy and non-metallic gear pumps, peristaltic pumps, transfer pumps, as well as dispensing equipment for industrial laundries, commercial dishwashing and chemical metering. ADS’s products and services provide comprehensive integrated solutions that enable industry, municipalities and government agencies to analyze and measure the capacity, quality and integrity of wastewater collection systems, including the maintenance and construction of such systems. IETG’s products and services enable water companies to effectively manage their water distribution and sewerage networks, while its surveillance service specializes in underground asset detection and mapping for utilities and other private companies. iPEK supplies remote controlled systems used for infrastructure inspection. Knight is a leading manufacturer of pumps and dispensing equipment for industrial laundries, commercial dishwashing and chemical metering. Pulsafeeder products (which also include OBL products) are used to introduce precise amounts of fluids into processes to manage water quality and chemical composition, as well as peristaltic pumps. Its markets include water & wastewater treatment, oil & gas, power generation, pulp & paper, chemical and hydrocarbon processing, and swimming pools. Water maintains operations in Huntsville, Alabama and various other locations in the United States and Australia (ADS products and services); Leeds, England (IETG products and services); Hirschegg, Austria, and Sulzberg, Germany (iPEK products); Rochester, New York, Punta Gorda, Florida and Milan, Italy (Pulsafeeder products); Lake Forest, California, Mississauga, Ontario, Canada, and Lewes, England, (Knight products); and a maquiladora in Ciudad Juarez, Chihuahua, Mexico (Knight products). Approximately 40% of Water’s 2015 sales were to customers outside the U.S.
Industrial. Industrial consists of the Company’s Richter, Viking, Aegis, Warren Rupp, and Trebor businesses. Industrial is a producer of fluoroplastic lined corrosion-resistant magnetic drive and mechanical seal pumps, shut-off, control and safety valves for corrosive, hazardous, contaminated, pure and high-purity fluids, as well as rotary internal gear, external gear, vane and rotary lobe pumps, custom-engineered OEM pumps, strainers, gear reducers and engineered pump systems. Richter’s products offer superior solutions for demanding and complex pump applications in the process industry. Viking’s products consist of external gear pumps, strainers and reducers, and related controls used for transferring and metering thin and viscous liquids sold under the Viking and Wright Flow brands. Viking products primarily serve the chemical, petroleum, pulp & paper, plastics, paints, inks, tanker trucks, compressor, construction, food & beverage, personal care, pharmaceutical and biotech

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markets. Aegis is a leader in the design, manufacture and sale of specialty chemical processing valves for use in the chemical, petro-chemical, chlor-alkali, pharmaceutical, semiconductor and pulp & paper industries. Warren Rupp products (which also include Pumper Parts and Versa-Matic products) are used for abrasive and semisolid materials as well as for applications where product degradation is a concern or where electricity is not available or should not be used. Warren Rupp products, which include air-operated diaphragm pumps, primarily serve the chemical, paint, food processing, electronics, construction, utilities, oil & gas, mining and industrial maintenance markets. Trebor is a leader in high-purity fluid handling products, including air-operated diaphragm pumps and deionized water-heating systems. Trebor products are used in manufacturing of semiconductors, disk drives and flat panel displays. Industrial maintains operations in Kempen, Germany and Suzhou, China (Richter products); Cedar Falls, Iowa (Viking, Wright Flow, and Richter products); Eastbourne, England (Wright Flow products); and Shannon, Ireland (Viking and Blagdon products); Geismar, Louisiana (Aegis products); Mansfield, Ohio (Warren Rupp products); Salt Lake City, Utah (Trebor products). Industrial primarily uses independent distributors to market and sell its products. Approximately 51% of Industrial’s 2015 sales were to customers outside the U.S.
Agriculture.   Agriculture consists of the Company’s Banjo business. Banjo is a provider of special purpose, severe-duty pumps, valves, fittings and systems used in liquid handling. Banjo is based in Crawfordsville, Indiana with a facility in Didam, The Netherlands, and its products are used in agriculture and industrial applications. Approximately 15% of Banjo’s 2015 sales were to customers outside the U.S.
HEALTH & SCIENCE TECHNOLOGIES SEGMENT
The Health & Science Technologies segment designs, produces and distributes a wide range of precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems used in beverage, food processing, pharmaceutical and cosmetics, pneumatic components and sealing solutions, including very high precision, low-flow rate pumping solutions required in analytical instrumentation, clinical diagnostics and drug discovery, high performance molded and extruded, biocompatible medical devices and implantables, air compressors used in medical, dental and industrial applications, optical components and coatings for applications in the fields of scientific research, defense, biotechnology, aerospace, telecommunications and electronics manufacturing, laboratory and commercial equipment used in the production of micro and nano scale materials, precision photonic solutions used in life sciences, research and defense markets, and precision gear and peristaltic pump technologies that meet exacting original equipment manufacturer specifications. Health & Science Technologies accounted for 36%, 35% and 35% of IDEX’s sales in 2015, 2014 and 2013, respectively, with approximately 55% of its 2015 sales to customers outside the U.S. The segment accounted for 33%, 31% and 30% of IDEX’s operating income in 2015, 2014 and 2013, respectively.
Scientific Fluidics.    Scientific Fluidics consists of the Company’s Eastern Plastics, Rheodyne, Sapphire Engineering, Upchurch Scientific, ERC, and CiDRA Precision Services (“CPS”) businesses. Scientific Fluidics has facilities in Rohnert Park, California (Rheodyne products); Bristol, Connecticut (Eastern Plastics products); Middleboro, Massachusetts (Sapphire Engineering products); Oak Harbor, Washington (Upchurch Scientific products); Kawaguchi, Japan (ERC products); and Wallingford, Connecticut (CPS products). Eastern Plastics products, which consist of high-precision integrated fluidics and associated engineered manifolds, are used in a broad set of end markets including medical diagnostics, analytical instrumentation, and laboratory automation. Rheodyne products consist of injectors, valves, fittings and accessories for the analytical instrumentation market. These products are used by manufacturers of high pressure liquid chromatography (“HPLC”) equipment servicing the pharmaceutical, biotech, life science, food & beverage, and chemical markets. Sapphire Engineering and Upchurch Scientific products consist of fluidic components and systems for the analytical, biotech and diagnostic instrumentation markets, such as fittings, precision-dispensing pumps and valves, tubing and integrated tubing assemblies, filter sensors and other micro-fluidic and nano-fluidic components, as well as advanced column hardware and accessories for the high performance liquid chromatography market. The products produced by Sapphire Engineering and Upchurch Scientific primarily serve the pharmaceutical, drug discovery, chemical, biochemical processing, genomics/proteomics research, environmental labs, food/agriculture, medical lab, personal care, and plastics/polymer/rubber production markets. ERC manufactures gas liquid separations and detection solutions for the life science, analytical instrumentation and clinical chemistry markets. ERC’s products consist of in-line membrane vacuum degassing solutions, refractive index detectors and ozone generation systems. CPS products consist of microfluidic components serving the life science, health and industrial market. Approximately 55% of Scientific Fluidics’ 2015 sales were to customers outside the U.S.
IDEX Optics and Photonics (“IOP”).    IOP consists of the Company’s CVI Melles Griot (“CVI MG”), Semrock, and AT Films (including Precision Photonics products) businesses. CVI MG is a global leader in the design and manufacture of precision photonic solutions used in the life sciences, research, semiconductor, security and defense markets. CVI MG’s innovative products are focused on the generation, control and productive use of light for a variety of key science and industrial applications. Products consist of specialty lasers and light sources, electro-optical components, specialty shutters, opto-mechanical assemblies and components. In addition, CVI MG produces critical components for life science research, electronics manufacturing, military and other industrial applications including lenses, mirrors, filters and polarizers. These

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components are utilized in a number of important applications such as spectroscopy, cytometry (cell counting), guidance systems for target designation, remote sensing, menology and optical lithography. CVI MG has manufacturing sites located in Albuquerque, New Mexico; Carlsbad, California; Rochester, New York; Leicester, England; Kyongki-Do, Korea; Tamagawa, Japan; and Didam, The Netherlands. Semrock is a provider of optical filters for biotech and analytical instrumentation in the life sciences markets. Semrock’s optical filters are produced using state-of-the-art manufacturing processes which enable it to offer its customers significant improvements in instrument performance and reliability. Semrock is located in Rochester, New York. AT Films specializes in optical components and coatings for applications in the fields of scientific research, defense, aerospace, telecommunications and electronics manufacturing. AT Films’ core competence is the design and manufacture of filters, splitters, reflectors and mirrors with the precise physical properties required to support their customers’ most challenging and cutting-edge optical applications. The Precision Photonics portion of its business specializes in optical components and coatings for applications in the fields of scientific research, aerospace, telecommunications and electronics manufacturing. AT Films is headquartered in Boulder, Colorado. Approximately 54% of IOP’s 2015 sales were to customers outside the U.S.
Sealing Solutions.    Sealing Solutions consists of the Company’s Precision Polymer Engineering (“PPE”), FTL Seals Technology (“FTL”), and Novotema businesses. PPE is a provider of proprietary high performance seals and advanced sealing solutions for a diverse range of global industries and applications, including hazardous duty, analytical instrumentation, semiconductor, process technologies, oil & gas, pharmaceutical, electronics, and food applications. PPE is headquartered in Blackburn, England with an additional manufacturing facility in Brenham, Texas. FTL, located in Leeds, England, specializes in the design and application of high integrity rotary seals, specialty bearings, and other custom products for the mining, power generation, and marine markets. Novotema, located in Villongo, Italy, is a leader in the design, manufacture and sale of specialty sealing solutions for use in the building products, gas control, transportation, industrial and water markets. Approximately 78% of Sealing Solutions’ 2015 sales were to customers outside the U.S.
Gast.    Gast consists of the Company’s Gast and Jun-Air businesses. The Gast business is a leading manufacturer of air-moving products, including air motors, low-range and medium-range vacuum pumps, vacuum generators, regenerative blowers and fractional horsepower compressors. Gast products are used in a variety of long-life applications requiring a quiet, clean source of moderate vacuum or pressure. Gast products primarily serve the medical equipment, environmental equipment, computers and electronics, printing machinery, paint mixing machinery, packaging machinery, graphic arts, and industrial manufacturing markets. The Jun-Air business is a provider of low-decibel, ultra-quiet vacuum compressors suitable for medical, dental and laboratory applications. Based in Benton Harbor, Michigan, Gast also has a logistics and commercial center in Redditch, England. Approximately 26% of Gast’s 2015 sales were to customers outside the U.S.
Micropump.    Micropump, headquartered in Vancouver, Washington, is a leader in small, precision-engineered, magnetically and electromagnetically driven rotary gear, piston and centrifugal pumps. Micropump products are used in low-flow abrasive and corrosive applications. Micropump products primarily serve the continuous ink-jet printing, medical equipment, chemical processing, pharmaceutical, refining, laboratory, electronics, textiles, peristaltic metering pumps, analytical process controllers and sample preparation systems markets. Approximately 72% of Micropump’s 2015 sales were to customers outside the U.S.
Material Processing Technologies (“MPT”).    MPT consists of the Company’s Quadro, Fitzpatrick, Microfluidics and Matcon businesses. Quadro is a leading provider of particle control solutions for the pharmaceutical and bio-pharmaceutical markets. Based in Waterloo, Canada, Quadro’s core capabilities include fine milling, emulsification and special handling of liquid and solid particulates for laboratory, pilot phase and production scale processing. Fitzpatrick is a global leader in the design and manufacture of process technologies for the pharmaceutical, food and personal care markets. Fitzpatrick designs and manufactures customized size reduction, roll compaction and drying systems to support their customers’ product development and manufacturing processes. Fitzpatrick is headquartered in Elmhurst, Illinois. Microfluidics is a global leader in the design and manufacture of laboratory and commercial equipment used in the production of micro and nano scale materials for the pharmaceutical and chemical markets. Microfluidics is the exclusive producer of the Microfluidizer family of high shear fluid processors for uniform particle size reduction, robust cell disruption and nanoparticle creation. Microfluidics is based in Waterloo, Canada and has offices in Newton, Massachusetts. Matcon is a global leader in material processing solutions for high value powders used in the manufacture of pharmaceuticals, food, plastics, and fine chemicals. Matcon’s innovative products consist of the original cone valve powder discharge system and filling, mixing and packaging systems, all of which support its customers’ automation and process requirements. These products are critical to its customers’ need to maintain clean, reliable and repeatable formulations of prepackaged foods and pharmaceuticals while helping them achieve lean and agile manufacturing. Matcon is located in Evesham, England. Approximately 59% of MPT’s 2015 sales were to customers outside the U.S.

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FIRE & SAFETY/DIVERSIFIED PRODUCTS SEGMENT
The Fire & Safety/Diversified Products segment produces firefighting pumps and controls, rescue tools, lifting bags and other components and systems for the fire and rescue industry, engineered stainless steel banding and clamping devices used in a variety of industrial and commercial applications, and precision equipment for dispensing, metering and mixing colorants and paints used in a variety of retail and commercial businesses around the world. The Fire & Safety/Diversified Products segment accounted for 21%, 23% and 22% of IDEX’s sales in 2015, 2014 and 2013, respectively, with approximately 52% of its 2015 sales to customers outside the U.S. The segment accounted for 24%, 26% and 23% of IDEX’s operating income in 2015, 2014 and 2013, respectively.
Fire Suppression.    Fire Suppression consists of the Company’s Class 1, Hale and Godiva businesses, which produce truck-mounted and portable fire pumps, stainless steel valves, foam and compressed air foam systems, pump modules and pump kits, electronic controls and information systems, conventional and networked electrical systems, and mechanical components for the fire, rescue and specialty vehicle markets. Fire Suppression’s customers are primarily OEMs. Fire Suppression is headquartered in Ocala, Florida (Class 1 and Hale products), with additional facilities located in Warwick, England (Godiva products). Approximately 38% of Fire Suppression’s 2015 sales were to customers outside the U.S.
Rescue.    Rescue consists of the Company’s Dinglee, Hurst Jaws of Life, Lukas and Vetter businesses, which produce hydraulic, battery, gas and electric-operated rescue equipment, hydraulic re-railing equipment, hydraulic tools for industrial applications, recycling cutters, pneumatic lifting and sealing bags for vehicle and aircraft rescue, environmental protection and disaster control, and shoring equipment for vehicular or structural collapse. Rescue’s customers are primarily public and private fire and rescue organizations. Rescue has facilities in Shelby, North Carolina (Hurst Jaws of Life products); Tianjin, China (Dinglee products); Erlangen, Germany (Lukas products); and Zulpich, Germany (Vetter products). Approximately 71% of Rescue’s 2015 sales were to customers outside the U.S.
Band-It.    Band-It is a leading producer of high-quality stainless steel banding, buckles and clamping systems. The BAND-IT brand is highly recognized worldwide. Band-It products are used for securing exhaust system heat and sound shields, industrial hose fittings, traffic signs and signals, electrical cable shielding, identification and bundling, and in numerous other industrial and commercial applications. Band-It products primarily serve the automotive, transportation equipment, oil & gas, general industrial maintenance, electronics, electrical, communications, aerospace, utility, municipal and subsea marine markets. Band-It is based in Denver, Colorado, with additional operations in Staveley, England. Approximately 36% of Band-It’s 2015 sales were to customers outside the U.S.
Dispensing.    Dispensing produces precision equipment for dispensing, metering and mixing colorants and paints used in a variety of retail and commercial businesses around the world. Dispensing is a global supplier of precision-designed tinting, mixing, dispensing and measuring equipment for auto refinishing and architectural paints. Dispensing products are used in retail and commercial stores, hardware stores, home centers, department stores, automotive body shops as well as point-of-purchase dispensers. Dispensing is headquartered in Sassenheim, The Netherlands with additional facilities in Wheeling, Illinois; Unanderra, Australia; and Milan, Italy, as well as IDEX shared manufacturing facilities in India and China. Approximately 61% of Dispensing’s 2015 sales were to customers outside the U.S.
INFORMATION APPLICABLE TO THE COMPANY’S BUSINESS IN GENERAL AND ITS SEGMENTS
Competitors
The Company’s businesses participate in highly competitive markets. IDEX believes that the principal points of competition are product quality, price, design and engineering capabilities, product development, conformity to customer specifications, quality of post-sale support, timeliness of delivery, and effectiveness of our distribution channels.
Principal competitors of the Fluid & Metering Technologies segment are the Pump Solutions Group (Maag, Blackmer and Wilden products) of Dover Corporation (with respect to pumps and small horsepower compressors used in liquified petroleum gas distribution facilities, rotary gear pumps, and air-operated double-diaphragm pumps); Milton Roy LLC (with respect to metering pumps and controls); and Tuthill Corporation (with respect to rotary gear pumps).
Principal competitors of the Health & Science Technologies segment are the Thomas division of Gardner Denver, Inc. (with respect to vacuum pumps and compressors); Thermo Scientific Dionex products (with respect to analytical instrumentation); Parker Hannifin (with respect to sealing devices); Valco Instruments Co., Inc. (with respect to fluid injectors and valves); and Gooch & Housego PLC (with respect to electro-optic and precision photonics solutions used in the life sciences market).
The principal competitors of the Fire & Safety/Diversified Products segment are Waterous Company, a unit of American Cast Iron Pipe Company (with respect to truck-mounted firefighting pumps); Holmatro, Inc. (with respect to rescue tools); CPS

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Color Group Oy (with respect to dispensing and mixing equipment for the paint industry); and Panduit Corporation (with respect to stainless steel bands, buckles and clamping systems).
Customers
The principal customers for our products are discussed immediately above by product category in each segment. None of our customers in 2015 accounted for more than two percent of net sales.
Employees
At December 31, 2015, the Company had 6,801 employees. Approximately 7% of employees were represented by labor unions, with various contracts expiring through June 2020. Management believes that the Company has a positive relationship with its employees. The Company historically has been able to renegotiate its collective bargaining agreements satisfactorily, with its last work stoppage in March 1993.
Suppliers
The Company manufactures many of the parts and components used in its products. Substantially all materials, parts and components purchased by the Company are available from multiple sources.
Inventory and Backlog
The Company regularly and systematically adjusts production schedules and quantities based on the flow of incoming orders. Backlogs typically are limited to one to one and a half months of production. While total inventory levels also may be affected by changes in orders, the Company generally tries to maintain relatively stable inventory levels based on its assessment of the requirements of the various industries served.
Raw Materials
The Company uses a wide variety of raw materials which are generally available from a number of sources. As a result, shortages from any single supplier have not had, and are not likely to have a material impact on operations.
Shared Services
The Company has production facilities in Suzhou, China and Vadodara, India that support multiple business units. IDEX also has personnel in China, India, Dubai, Latin America and Singapore that provide sales and marketing, product design and engineering, and sourcing support to its business units, as well as personnel in various locations in South America, the Middle East and Japan to support sales and marketing efforts of IDEX businesses in those regions.
Segment Information
For segment financial information for the years 2015, 2014 and 2013, including financial information about foreign and domestic sales and operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 11 of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”

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Executive Officers of the Registrant
Set forth below are the names of the executive officers of the Company, their ages, years of service, the positions held by them, and their business experience during the past five years.
 
Name
 
Age
 
Years  of
Service
 
Position
Andrew K. Silvernail
 
45
 
7
 
Chairman of the Board and Chief Executive Officer
Heath A. Mitts
 
45
 
10
 
Senior Vice President and Chief Financial Officer
Eric D. Ashleman
 
48
 
7
 
Senior Vice President and Chief Operating Officer
Denise R. Cade
 
53
 
<1
 
Senior Vice President, General Counsel and Corporate Secretary
Daniel J. Salliotte
 
49
 
11
 
Senior Vice President-Corporate Strategy, Mergers and Acquisitions and Treasury
Michael J. Yates
 
50
 
10
 
Vice President and Chief Accounting Officer
Jeffrey D. Bucklew
 
45
 
4
 
Senior Vice President-Chief Human Resources Officer
Mr. Silvernail has served as Chief Executive Officer since August 2011 and as Chairman of the Board since January 2012. Prior to that, Mr. Silvernail was Vice President-Group Executive Health & Science Technologies, Global Dispensing and Fire & Safety/Diversified Products from January 2011 to August 2011. From February 2010 to December 2010, Mr. Silvernail was Vice President-Group Executive Health & Sciences Technologies and Global Dispensing. Mr. Silvernail joined IDEX in January 2009 as Vice President-Group Executive Health & Science Technologies.
Mr. Mitts has served as Senior Vice President and Chief Financial Officer since March 2011. Mr. Mitts joined IDEX as Vice President-Corporate Finance in September 2005.
Mr. Ashleman has served as Senior Vice President and Chief Operating Officer since July 2015. Mr. Ashleman joined IDEX in 2008 as the President of Gast Manufacturing.
Ms. Cade has served as Senior Vice President, General Counsel and Corporate Secretary since joining IDEX in October 2015. Prior to joining IDEX, Ms. Cade was Senior Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer for SunCoke Energy, Inc. from March 2011 to October 2015 and held various roles at PPG Industries before joining SunCoke.
Mr. Salliotte has served as Senior Vice President-Mergers, Acquisitions and Treasury since February 2011. Mr. Salliotte joined IDEX in October 2004 as Vice President-Strategy and Business Development.
Mr. Yates has served as Vice President and Chief Accounting Officer since February 2010. Mr. Yates joined IDEX as Vice President-Controller in October 2005.
Mr. Bucklew has served as the Senior Vice President-Chief Human Resources Officer since joining IDEX in March 2012. Prior to joining IDEX, Mr. Bucklew served as the Vice President of Human Resources for Accretive Health from March 2009 to March 2012.
The Company’s executive officers are elected at a meeting of the Board of Directors immediately following the annual meeting of stockholders, and they serve until the meeting of the Board immediately following the next annual meeting of stockholders, or until their successors are duly elected and qualified or until their death, resignation or removal.
Public Filings
Copies of the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are made available free of charge at www.idexcorp.com as soon as reasonably practicable after being filed electronically with the United States Securities and Exchange Commission (the “SEC”). Our reports are also available free of charge on the SEC’s website, www.sec.gov. Information on the Company’s website is not incorporated into this Form 10-K.

7


Item 1A.    Risk Factors.
For an enterprise as diverse and complex as the Company, a wide range of factors present risks to the Company and could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of our operations and the financial results of our operations elsewhere in this report, the most significant of these factors are as follows:
Changes in U.S. or International Economic Conditions Could Adversely Affect the Sales and Profitability of Our Businesses.
In 2015, 50% of the Company’s sales were derived from domestic operations while 50% were derived from international operations. The Company’s largest end markets include life sciences and medical technologies, fire and rescue, oil & gas, paint and coatings, chemical processing, agriculture, water & wastewater treatment and optical filters and components. A slowdown in the U.S. or global economy and, in particular, any of these specific end markets could reduce the Company’s sales and profitability.
Conditions in Foreign Countries in Which We Operate Could Adversely Affect Our Business.
In 2015, approximately 50% of our total sales were to customers outside the U.S. We expect our international operations and export sales to continue to be significant for the foreseeable future. Our sales from international operations and our sales from export are both subject in varying degrees to risks inherent in doing business outside the U.S. These risks include the following:
possibility of unfavorable circumstances arising from host country laws or regulations;
risks of economic instability;
currency exchange rate fluctuations and restrictions on currency repatriation;
potential negative consequences from changes to taxation policies;
disruption of operations from labor and political disturbances;
changes in tariff and trade barriers and import or export licensing requirements; and,
political instability, terrorism, insurrection or war.
Any of these events could have an adverse impact on our business and operations.
Our Inability to Continue to Develop New Products Could Limit Our Sales Growth.
The Company’s sales were down 6% in 2015. Approximately 8% of our 2015 sales were derived from new products developed over the past three years. Our ability to continue to grow organically is tied in large part to our ability to continue to develop new products.
Our Growth Strategy Includes Acquisitions and We May Not be Able to Make Acquisitions of Suitable Candidates or Integrate Acquisitions Successfully.
Our historical growth has included, and our future growth is likely to continue to include, acquisitions. We intend to continue to seek acquisition opportunities both to expand into new markets and to enhance our position in existing markets throughout the world. We may not be able to successfully identify suitable candidates, negotiate appropriate acquisition terms, obtain financing needed to consummate those acquisitions, complete proposed acquisitions or successfully integrate acquired businesses into our existing operations. In addition, any acquisition, once successfully integrated, may not perform as planned, be accretive to earnings, or otherwise prove beneficial to us.
Acquisitions involve numerous risks, including the assumption of undisclosed or unindemnified liabilities, difficulties in the assimilation of the operations, technologies, services and products of the acquired companies and the diversion of management’s attention from other business concerns. In addition, prior acquisitions have resulted, and future acquisitions could result, in the incurrence of substantial additional indebtedness and other expenses.
The Markets We Serve are Highly Competitive and this Competition Could Reduce our Sales and Operating Margins.
Most of our products are sold in competitive markets. Maintaining and improving our competitive position will require continued investment by us in manufacturing, engineering, quality standards, marketing, customer service and support, and our distribution networks. We may not be successful in maintaining our competitive position. Our competitors may develop products that are superior to our products, or may develop methods of more efficiently and effectively providing products and

8


services or may adapt more quickly than us to new technologies or evolving customer requirements. Pricing pressures may require us to adjust the prices of our products to stay competitive. We may not be able to compete successfully with our existing competitors or with new competitors. Failure to continue competing successfully could reduce our sales, operating margins and overall financial performance.
We are Dependent on the Availability of Raw Materials, Parts and Components Used in Our Products.
While we manufacture certain parts and components used in our products, we require substantial amounts of raw materials and purchase some parts and components from suppliers. The availability and prices for raw materials, parts and components may be subject to curtailment or change due to, among other things, suppliers’ allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and prevailing price levels. Any change in the supply of, or price for, these raw materials or parts and components could materially affect our business, financial condition, results of operations and cash flow.
Significant Movements in Foreign Currency Exchange Rates May Harm Our Financial Results.
We are exposed to fluctuations in foreign currency exchange rates, particularly with respect to the Euro, Canadian Dollar, British Pound, Indian Rupee and Chinese Renminbi. Any significant change in the value of the currencies of the countries in which we do business against the U.S. Dollar could affect our ability to sell products competitively and control our cost structure, which could have a material adverse effect on our results of operations. For additional detail related to this risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosure About Market Risk.”
An Unfavorable Outcome of Any of Our Pending Contingencies or Litigation Could Adversely Affect Us.
We currently are involved in legal and regulatory proceedings. Where it is reasonably possible to do so, we accrue estimates of the probable costs for the resolution of these matters. These estimates are developed in consultation with outside counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future operating results for any particular quarter or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to these proceedings. For additional detail related to this risk, see Item 3, “Legal Proceedings.”
Our Intangible Assets, Including Goodwill, are a Significant Portion of Our Total Assets and a Write-off of Our Intangible Assets Would Adversely Impact Our Operating Results and Significantly Reduce Our Net Worth.
Our total assets reflect substantial intangible assets, primarily goodwill and identifiable intangible assets. At December 31, 2015, goodwill and intangible assets totaled $1,396.5 million and $287.8 million, respectively. These assets result from our acquisitions, representing the excess of cost over the fair value of the tangible net assets we have acquired. Annually, or when certain events occur that require a more current valuation, we assess whether there has been an impairment in the value of our goodwill and identifiable intangible assets. If future operating performance at one or more of our reporting units were to fall significantly below forecast levels, we could be required to reflect, under current applicable accounting rules, a non-cash charge to operating income for an impairment. Any determination requiring the write-off of a significant portion of our goodwill or identifiable intangible assets would adversely impact our results of operations and net worth. See Note 4 in Part II, Item 8, “Financial Statements and Supplementary Data” for further discussion on goodwill and intangible assets.
A Significant or Sustained Decline in Commodity Prices, Including Oil, Could Negatively Impact the Levels of Expenditures by Certain of Our Customers.
Demand for our products depends, in part, on the level of new and planned expenditures by certain of our customers. The level of expenditures by our customers is dependent on, among other factors, general economic conditions, availability of credit, economic conditions within their respective industries and expectations of future market behavior. Volatility in commodity prices, including oil, can negatively affect the level of these activities and can result in postponement of capital spending decisions or the delay or cancellation of existing orders. The ability of our customers to finance capital investment and maintenance may also be affected by the conditions in their industries. Reduced demand for our products could result in the delay or cancellation of existing orders or lead to excess manufacturing capacity, which unfavorably impacts our absorption of fixed manufacturing costs. This reduced demand could have a material adverse effect on our business, financial condition and results of operations.

9


Our Success Depends on Our Executive Management and Other Key Personnel.
Our future success depends to a significant degree on the skills, experience and efforts of our executive management and other key personnel and their ability to provide the Company with uninterrupted leadership and direction. The loss of the services of any of our executive officers or a failure to provide adequate succession plans for key personnel could have an adverse impact. The availability of highly qualified talent is limited, and the competition for talent is robust. However, we provide long-term equity incentives and certain other benefits for our executive officers which provide incentives for them to make a long-term commitment to our Company. Our future success will also depend on our ability to have adequate succession plans in place and to attract, retain and develop qualified personnel. A failure to efficiently replace executive management members and other key personnel and to attract, retain and develop new qualified personnel could have an adverse effect on our operations and implementation of our strategic plan.
Our Business Operations May Be Adversely Affected by Information Systems Interruptions or Intrusion.
We depend on various information technologies throughout our Company to administer, store and support multiple business activities. If these systems are damaged, cease to function properly, or are subject to cyber-security attacks, such as those involving unauthorized access, malicious software and/or other intrusions, we could experience production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems or networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation. While we attempt to mitigate these risks by employing a number of measures, including employee training, technical security controls, and maintenance of backup and protective systems, our systems, networks, products and services remain potentially vulnerable to known or unknown threats, any of which could have a material adverse effect on our business, financial condition or results of operations.

Failure To Comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act or Other Applicable Anti-bribery Laws Could Have an Adverse Effect on Our Business.
The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Recent years have seen a substantial increase in anti-bribery law enforcement activity with more frequent and aggressive investigations and enforcement proceedings by both the Department of Justice and the SEC, increased enforcement activity by non-U.S. regulators and increases in criminal and civil proceedings brought against companies and individuals. Our policies mandate compliance with all anti-bribery laws. However, we operate in certain countries that are recognized as having governmental and commercial corruption. Our internal control policies and procedures may not always protect us from reckless or criminal acts committed by our employees or third-party intermediaries. Violations of these anti-bribery laws may result in criminal or civil sanctions, which could have a material adverse effect on our business, financial condition and results of operations.
 
Item 1B.    Unresolved Staff Comments.
None.

Item 2.        Properties.
The Company’s principal plants and offices have an aggregate floor space area of approximately 4.5 million square feet, of which 2.9 million square feet (63%) is located in the U.S. and approximately 1.7 million square feet (37%) is located outside the U.S., primarily in the U.K. (8%), Germany (7%), Italy (6%), China (4%), India (3%) and The Netherlands (2%). Management considers these facilities suitable and adequate for the Company’s operations. Management believes the Company can meet demand increases over the near term with its existing facilities, especially given its operational improvement initiatives that usually increase capacity. The Company’s executive office occupies 36,588 square feet of leased space in Lake Forest, Illinois and 4,420 square feet of leased space in Chicago, Illinois.
Approximately 3.0 million square feet (67%) of the principal plant and office floor area is owned by the Company, and the balance is held under lease. Approximately 1.9 million square feet (41%) of the principal plant and office floor area is held by business units in the Fluid & Metering Technologies segment; 1.4 million square feet (31%) is held by business units in the Health & Science Technologies segment; and 1.0 million square feet (21%) is held by business units in the Fire & Safety/Diversified Products segment.
 

10


Item 3.        Legal Proceedings.
The Company and four of its subsidiaries are presently named as defendants in a number of lawsuits claiming various asbestos-related personal injuries and seeking money damages, allegedly as a result of exposure to products manufactured with components that contained asbestos. These components were acquired from third party suppliers, and were not manufactured by the Company or any of the defendant subsidiaries. To date, the majority of the Company’s settlements and legal costs, except for costs of coordination, administration, insurance investigation and a portion of defense costs, have been covered in full by insurance subject to applicable deductibles. However, the Company cannot predict whether and to what extent insurance will be available to continue to cover its settlements and legal costs, or how insurers may respond to claims that are tendered to them. Claims have been filed in jurisdictions throughout the United States. Most of the claims resolved to date have been dismissed without payment. The balance have been settled for various insignificant amounts. Only one case has been tried, resulting in a verdict for the affected business unit. No provision has been made in the financial statements of the Company for these asbestos-related claims, other than for insurance deductibles in the ordinary course, and the Company does not currently believe these claims will have a material adverse effect on it.
The Company is also party to various other legal proceedings arising in the ordinary course of business, none of which is expected to have a material adverse effect on it.
 
Item 4.        Mine Safety Disclosures.
Not applicable. 

11


PART II

Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The principal market for the Company’s common stock is the New York Stock Exchange, but the common stock is also listed on the Chicago Stock Exchange. As of February 16, 2016, there were approximately 6,760 stockholders of record of our common stock and there were 75,929,397 shares outstanding.
The high and low sales prices of the common stock per share and the dividends paid per share during the last two years are as follows:
 
 
2015
 
2014
 
High
 
Low
 
Dividends
 
High
 
Low
 
Dividends
First Quarter
$
78.85

 
$
69.44

 
$
0.28

 
$
79.27

 
$
68.58

 
$
0.23

Second Quarter
80.31

 
73.80

 
0.32

 
80.85

 
69.17

 
0.28

Third Quarter
79.61

 
66.88

 
0.32

 
81.82

 
72.27

 
0.28

Fourth Quarter
79.59

 
69.40

 
0.32

 
78.97

 
65.91

 
0.28

Our payment of dividends in the future will be determined by our Board of Directors and will depend on business conditions, our earnings and other factors.
For information pertaining to securities authorized for issuance under equity compensation plans and the related weighted average exercise price, see Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
The Company’s purchases of common stock during the quarter ended December 31, 2015 are as follows:
 
Period
Total Number of
Shares Purchased
 
Average Price
Paid per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs(1)
 
Maximum Dollar
Value that May Yet
be Purchased Under
the  Plans
or Programs(1)
October 1, 2015 to October 31, 2015
189,470

 
$
74.60

 
189,470

 
$
351,872,224

November 1, 2015 to November 30, 2015

 

 

 
351,872,224

December 1, 2015 to December 31, 2015
219,803

 
76.94

 
219,803

 
634,960,648

Total
409,273

 
$
75.86

 
409,273

 
$
634,960,648

 
(1)
On December 1, 2015, the Company’s Board of Directors approved an increase of $300.0 million in the authorized level for repurchases of common stock. This followed the prior Board of Directors approved repurchase authorization of $400.00 million, announced by the Company on November 6, 2014. These authorizations have no expiration date.

12


Performance Graph. The following table compares total stockholder returns over the last five years to the Standard & Poor’s (the “S&P”) 500 Index, the S&P Midcap Industrials Sector Index and the Russell 2000 Index assuming the value of the investment in our common stock and each index was $100 on December 31, 2010. Total return values for our common stock, the S&P 500 Index, S&P Midcap Industrials Sector Index and the Russell 2000 Index were calculated on cumulative total return values assuming reinvestment of dividends. The stockholder return shown on the graph below is not necessarily indicative of future performance.
 
 

 
12/10
12/11
12/12
12/13
12/14
12/15
IDEX Corporation
$
100.00

$
94.76

$
118.94

$
188.78

$
198.98

$
195.83

S&P 500 Index
$
100.00

$
100.00

$
113.40

$
146.97

$
163.71

$
162.47

S&P Midcap 400 Industrials Sector Index
$
100.00

$
98.18

$
117.97

$
168.05

$
171.14

$
161.34

Russell 2000 Index
$
100.00

$
94.55

$
114.43

$
148.48

$
153.73

$
144.95


13


Item 6.    Selected Financial Data.(1) 
 
(Dollars in thousands, except per share data)
2015
 
2014
 
2013
 
2012
 
2011
RESULTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
Net sales
$
2,020,668

 
$
2,147,767

 
$
2,024,130

 
$
1,954,258

 
$
1,838,451

Gross profit
904,315

 
949,315

 
873,364

 
803,700

 
738,673

Selling, general and administrative expenses
479,408

 
504,419

 
477,851

 
444,490

 
421,703

Gain on sale of business
(18,070
)
 

 

 

 

Restructuring expenses
11,239

 
13,672

 

 
32,473

 
12,314

Asset impairments

 

 

 
198,519

 

Operating income
431,738

 
431,224

 
395,513

 
128,218

 
304,656

Other (income) expense — net
(2,243
)
 
(3,111
)
 
178

 
(236
)
 
1,443

Interest expense
41,636

 
41,895

 
42,206

 
42,250

 
29,332

Provision for income taxes
109,538

 
113,054

 
97,914

 
48,574

 
80,024

Net income
282,807

 
279,386

 
255,215

 
37,630

 
193,857

Earnings per share (2)
 
 
 
 
 
 
 
 
 
— basic
$
3.65

 
$
3.48

 
$
3.11

 
$
0.45

 
$
2.34

— diluted
$
3.62

 
$
3.45

 
$
3.09

 
$
0.45

 
$
2.32

Weighted average shares outstanding
 
 
 
 
 
 
 
 
 
— basic
77,126

 
79,715

 
81,517

 
82,689

 
82,145

— diluted
77,972

 
80,728

 
82,489

 
83,641

 
83,543

Year-end shares outstanding
76,535

 
78,766

 
81,196

 
82,727

 
83,234

Cash dividends per share
$
1.28

 
$
1.12

 
$
0.89

 
$
0.80

 
$
0.68

FINANCIAL POSITION
 
 
 
 
 
 
 
 
 
Current assets
$
862,684

 
$
1,075,791

 
$
990,953

 
$
881,865

 
$
789,161

Current liabilities
309,597

 
411,968

 
304,609

 
291,427

 
258,278

Current ratio
2.8

 
2.6

 
3.3

 
3.0

 
3.1

Operating working capital (3)
370,213

 
366,209

 
350,881

 
373,704

 
396,126

Total assets (4)
$
2,805,443

 
$
2,903,463

 
$
2,881,118

 
$
2,777,821

 
$
2,827,535

Total borrowings (4)
840,794

 
859,345

 
767,417

 
779,007

 
800,238

Shareholders’ equity
1,443,291

 
1,486,451

 
1,572,989

 
1,464,998

 
1,513,135

PERFORMANCE MEASURES AND OTHER DATA
 
 
 
 
 
 
 
 
 
Percent of net sales:
 
 
 
 
 
 
 
 
 
Gross profit
44.8
%
 
44.2
%
 
43.1
%
 
41.1
%
 
40.2
%
Selling, general and administrative expenses
23.7
%
 
23.5
%
 
23.6
%
 
22.7
%
 
22.9
%
Operating income
21.4
%
 
20.1
%
 
19.5
%
 
6.6
%
 
16.6
%
Income before income taxes
19.4
%
 
18.3
%
 
17.4
%
 
4.4
%
 
14.9
%
Net income
14.0
%
 
13.0
%
 
12.6
%
 
1.9
%
 
10.5
%
Capital expenditures
$
43,776

 
$
47,997

 
$
31,536

 
$
35,520

 
$
34,548

Depreciation and amortization
78,120

 
76,907

 
79,334

 
78,312

 
72,386

Return on average assets (5)
9.9
%
 
9.7
%
 
9.0
%
 
1.3
%
 
13.7
%
Borrowings as a percent of capitalization (5)
36.8
%
 
36.6
%
 
32.8
%
 
34.7
%
 
34.6
%
Return on average shareholders’ equity (5)
19.3
%
 
18.3
%
 
16.8
%
 
2.5
%
 
13.4
%
Employees at year end
6,801

 
6,712

 
6,787

 
6,717

 
6,814

Record holders at year end
6,760

 
6,500

 
6,500

 
6,700

 
7,000

NON-GAAP MEASURES (6)
 
 
 
 
 
 
 
 
 
EBITDA
$
512,101

 
$
511,242

 
$
474,669

 
$
206,766

 
$
375,599

EBITDA margin
25.3
%
 
23.8
%
 
23.5
%
 
10.6
%
 
20.4
%
Adjusted EBITDA
$
505,270

 
$
524,914

 
$
474,669

 
$
437,758

 
$
387,913

Adjusted EBITDA margin 
25.0
%
 
24.4
%
 
23.5
%
 
22.4
%
 
21.1
%
Adjusted operating income
$
424,907

 
$
444,896

 
$
395,513

 
$
359,210

 
$
332,772

Adjusted operating margin
21.0
%
 
20.7
%
 
19.5
%
 
18.4
%
 
18.1
%
Adjusted net income 
$
277,229

 
$
288,823

 
$
255,215

 
$
224,067

 
$
213,758

Adjusted earnings per share 
$
3.55

 
$
3.57

 
$
3.09

 
$
2.68

 
$
2.56

 
(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 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 and Note 5 in the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data” for additional information related to the impact on the financials.
(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 U.S. GAAP. We have reconciled Adjusted operating income to Operating income; Adjusted net income to Net income; Adjusted EPS to EPS; consolidated EBITDA to net income; and segment EBITDA to segment operating income.
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 on the sale of business and restructuring expenses. 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 at recently acquired businesses, management uses EBITDA as an internal operating metric to provide management with another representation of performance of businesses 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 on the sale of business and restructuring expenses to arrive at Adjusted EBITDA. Management believes that Adjusted EBITDA is useful as a performance indicator on 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, and the financial results prepared in accordance with U.S. GAAP and the reconciliations from these results should be carefully evaluated.

Reconciliations of Consolidated EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Years Ended December 31,
 
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
(In thousands)
Net income
 
$
282,807

 
$
279,386

 
$
255,215

 
$
37,630

 
$
193,857

+ Provision for income taxes
 
109,538

 
113,054

 
97,914

 
48,574

 
80,024

+ Interest expense
 
41,636

 
41,895

 
42,206

 
42,250

 
29,332

+ Depreciation and amortization
 
78,120

 
76,907

 
79,334

 
78,312

 
72,386

EBITDA
 
512,101

 
511,242

 
474,669

 
206,766

 
375,599

+ Restructuring expenses
 
11,239

 
13,672

 

 
32,473

 
12,314

+ Gain on sale of business
 
(18,070
)
 

 

 

 

+ Asset impairments
 

 

 

 
198,519

 

Adjusted EBITDA
 
$
505,270

 
$
524,914

 
$
474,669

 
$
437,758

 
$
387,913

 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
2,020,668

 
$
2,147,767

 
$
2,024,130

 
$
1,954,258

 
$
1,838,451

EBITDA margin
 
25.3
%
 
23.8
%
 
23.5
%
 
10.6
%
 
20.4
%
Adjusted EBITDA margin
 
25.0
%
 
24.4
%
 
23.5
%
 
22.4
%
 
21.1
%


Reconciliations of Segment EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Years Ended December 31,
 
 
2015
 
2014
 
2013
 
 
FMT
 
HST
 
FSDP
 
FMT
 
HST
 
FSDP
 
FMT
 
HST
 
FSDP
 
 
(In thousands)
Operating income
 
$
204,506

 
$
157,948

 
$
115,745

 
$
216,886

 
$
152,999

 
$
130,494

 
$
211,256

 
$
136,707

 
$
102,730

- Other (income) expense
 
(840
)
 
(178
)
 
(1,453
)
 
(560
)
 
(542
)
 
(990
)
 
1,789

 
(508
)
 
(342
)
+ Depreciation and amortization
 
27,662

 
42,827

 
6,051

 
26,453

 
42,478

 
6,583

 
27,633

 
43,496

 
6,852

EBITDA
 
233,008

 
200,953

 
123,249

 
243,899

 
196,019

 
138,067

 
237,100

 
180,711

 
109,924

+ Restructuring expenses
 
7,090

 
3,408

 
576

 
6,413

 
4,912

 
1,034

 

 

 

Adjusted EBITDA
 
$
240,098

 
$
204,361

 
$
123,825

 
$
250,312

 
$
200,931

 
$
139,101

 
$
237,100

 
$
180,711

 
$
109,924

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
860,792

 
$
738,996

 
$
423,915

 
$
899,588

 
$
752,021

 
$
502,749

 
$
871,814

 
$
714,650

 
$
445,049

EBITDA margin
 
27.1
%
 
27.2
%
 
29.1
%
 
27.1
%
 
26.1
%
 
27.5
%
 
27.2
%
 
25.3
%
 
24.7
%
Adjusted EBITDA margin
 
27.9
%
 
27.7
%
 
29.2
%
 
27.8
%
 
26.7
%
 
27.7
%
 
27.2
%
 
25.3
%
 
24.7
%


Reconciliations of Consolidated Reported-to-Adjusted Operating Income and Margin
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Years Ended December 31,
 
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
(In thousands)
Operating income
 
$
431,738

 
$
431,224

 
$
395,513

 
$
128,218

 
$
304,656

 + Restructuring expenses
 
11,239

 
13,672

 

 
32,473

 
12,314

 + Gain on sale of business
 
(18,070
)
 

 

 

 

 + Asset impairments
 

 

 

 
198,519

 

 + CVI fair value inventory charge
 

 

 

 

 
15,802

Adjusted operating income
 
$
424,907

 
$
444,896

 
$
395,513

 
$
359,210

 
$
332,772

 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
2,020,668

 
$
2,147,767

 
$
2,024,130

 
$
1,954,258

 
$
1,838,451

 
 
 
 
 
 
 
 
 
 
 
Operating margin
 
21.4
%
 
20.1
%
 
19.5
%
 
6.6
%
 
16.6
%
Adjusted operating margin
 
21.0
%
 
20.7
%
 
19.5
%
 
18.4
%
 
18.1
%


Reconciliations of Segment Reported-to-Adjusted Operating Income and Margin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Years Ended December 31,
 
 
2015
 
2014
 
2013
 
 
FMT
 
HST
 
FSDP
 
FMT
 
HST
 
FSDP
 
FMT
 
HST
 
FSDP
 
 
(In thousands)
Operating income
 
$
204,506

 
$
157,948

 
$
115,745

 
$
216,886

 
$
152,999

 
$
130,494

 
$
211,256

 
$
136,707

 
$
102,730

 + Restructuring expenses
 
7,090

 
3,408

 
576

 
6,413

 
4,912

 
1,034

 

 

 

Adjusted operating income
 
$
211,596

 
$
161,356

 
$
116,321

 
$
223,299

 
$
157,911

 
$
131,528

 
$
211,256

 
$
136,707

 
$
102,730

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
860,792

 
$
738,996

 
$
423,915

 
$
899,588

 
$
752,021

 
$
502,749

 
$
871,814

 
$
714,650

 
$
445,049

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
 
23.8
%
 
21.4
%
 
27.3
%
 
24.1
%
 
20.3
%
 
26.0
%
 
24.2
%
 
19.1
%
 
23.1
%
Adjusted operating margin
 
24.6
%
 
21.8
%
 
27.4
%
 
24.8
%
 
21.0
%
 
26.2
%
 
24.2
%
 
19.1
%
 
23.1
%


Reconciliations of Reported-to-Adjusted Net Income and EPS
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Years Ended December 31,
 
 
2015
 
2014
 
2013
 
2012
 
2011
 
 
(In thousands)
Net income
 
$
282,807

 
$
279,386

 
$
255,215

 
$
37,630

 
$
193,857

 + Restructuring expenses, net of tax
 
7,653

 
9,437

 

 
22,926

 
8,716

 + Gain on sale of business, net of tax
 
(13,231
)
 

 

 

 

 + Asset impairments, net of tax
 

 

 

 
163,511

 

 + CVI fair value inventory charge, net of tax
 

 

 

 

 
11,185

Adjusted net income
 
$
277,229

 
$
288,823

 
$
255,215

 
$
224,067

 
$
213,758

 
 
 
 
 
 
 
 
 
 
 
EPS
 
$
3.62

 
$
3.45

 
$
3.09

 
$
0.45

 
$
2.32

 + Restructuring expenses, net of tax
 
0.10

 
0.12

 

 
0.27

 
0.10

 + Gain on sale of business, net of tax
 
(0.17
)
 

 

 

 

 + Asset impairments, net of tax
 

 

 

 
1.96

 

 + CVI fair value inventory charge
 

 

 

 

 
0.14

Adjusted EPS
 
$
3.55

 
$
3.57

 
$
3.09

 
$
2.68

 
$
2.56

 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares
 
77,972

 
80,728

 
82,489

 
83,641

 
83,543




14


Item 7.        Management’s Discussion and Analysis of Financial Condition and Results of Operations.
2015 Overview and Outlook
IDEX is an applied solutions company specializing in fluid and metering technologies, health and science technologies, and fire, safety and other diversified products built to customer specifications. IDEX’s products are sold in niche markets to a wide range of industries throughout the world. Accordingly, our businesses are affected by levels of industrial activity and economic conditions in the U.S. and in other countries where we do business and by the relationship of the U.S. dollar to other currencies. Levels of capacity utilization and capital spending in the industries that use our products and overall industrial activity are important factors that influence the demand for our products.
The Company has three reportable business segments: Fluid & Metering Technologies, Health & Science Technologies and Fire & Safety/Diversified Products. Within our three reportable segments, the Company maintains fifteen platforms, where we focus on organic growth and strategic acquisitions. Each of our fifteen platforms is also a reporting unit, where we annually test for goodwill impairment.
The Fluid & Metering Technologies segment contains the Energy (comprised of Corken, Faure Herman, Liquid Controls, SAMPI and Toptech), Valves (comprised of Alfa Valvole), Water (comprised of Pulsafeeder, Knight, ADS, IETG, and iPEK), Industrial (comprised of Richter, Viking, Aegis, Warren Rupp, and Trebor), and Agriculture (comprised of Banjo) platforms. The Health & Science Technologies segment contains the Scientific Fluidics (comprised of Eastern Plastics, Rheodyne, Sapphire Engineering, Upchurch Scientific, ERC, and CiDRA Precision Services), IDEX Optics & Photonics (comprised of CVI Melles Griot, Semrock, and AT Films), Sealing Solutions (comprised of PPE, FTL, and Novotema), Gast, Micropump, and Material Processing Technologies (comprised of Quadro, Fitzpatrick, Microfluidics, and Matcon) platforms. The Fire & Safety/Diversified Products segment is comprised of the Fire Suppression (comprised of Class 1, Hale, and Godiva), Rescue (comprised of Dinglee, Hurst Jaws of Life, Lukas, and Vetter), Band-It, and Dispensing platforms. 
The Fluid & Metering Technologies segment designs, produces and distributes positive displacement pumps, flow meters, valves, injectors, and other fluid-handling pump modules and systems and provides flow monitoring and other services for the food, chemical, general industrial, water & wastewater, agriculture and energy industries. The Health & Science Technologies segment designs, produces and distributes a wide range of precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems used in beverage, food processing, pharmaceutical and cosmetics, pneumatic components and sealing solutions, including very high precision, low-flow rate pumping solutions required in analytical instrumentation, clinical diagnostics and drug discovery, high performance molded and extruded, biocompatible medical devices and implantables, air compressors used in medical, dental and industrial applications, optical components and coatings for applications in the fields of scientific research, defense, biotechnology, life sciences, aerospace, telecommunications and electronics manufacturing, laboratory and commercial equipment used in the production of micro and nano scale materials, precision photonic solutions used in life sciences, research and defense markets, and precision gear and peristaltic pump technologies that meet exacting original equipment manufacturer specifications. The Fire & Safety/Diversified Products segment produces firefighting pumps and controls, rescue tools, lifting bags and other components and systems for the fire and rescue industry, and engineered stainless steel banding and clamping devices used in a variety of industrial and commercial applications, precision equipment for dispensing, metering and mixing colorants and paints used in a variety of retail and commercial businesses around the world.
Our 2015 financial results are as follows:
Sales of $2.0 billion decreased (6)%; reflecting a 4% decrease in organic sales (excluding acquisitions and foreign currency translation),  a 4% decrease due to foreign currency, and a 2% increase due to acquisitions.
Operating income of $431.7 million remained flat and operating margin of 21.4% was up 130 basis points from the prior year.
Net income increased 1% to $282.8 million.
Diluted EPS of $3.62 increased $0.17 or 5% compared to 2014.
Our 2015 financial results, adjusted for $11.2 million of restructuring costs and an $18.1 million gain on the sale of a business, are as follows (these non-GAAP measures have been reconciled to U.S. GAAP measures in Item 6, “Selected Financial Data”):
Adjusted operating income of $424.9 million decreased 4% and adjusted operating margin of 21.0% was up 30 basis points from the prior year adjusted operating income of $444.9 million and adjusted operating margin of 20.7%.
Adjusted net income of $277.2 million is 4% lower than the prior year of $288.8 million.
Adjusted EPS of $3.55 was 1% lower than the prior year adjusted EPS of $3.57.

15


Overall, we believe the current contraction of global economies will continue to pressure our end markets, creating an unstable growth environment for 2016. Based on the Company’s current outlook, we anticipate organic growth to be flat in 2016 with full year EPS of $3.60 to $3.70.

Results of Operations
The following is a discussion and analysis of our results of operations for each of the three years in the period ended December 31, 2015. For purposes of this Item, reference is made to the Consolidated Statements of Operations in Part II, Item 8, “Financial Statements and Supplementary Data.” Segment operating income excludes unallocated corporate operating expenses. Management’s primary measurements of segment performance are sales, operating income, and operating margin.
In the following discussion, and throughout this report, references to organic sales, a non-GAAP measure, refers to sales from continuing operations calculated according to generally accepted accounting principles in the United States but excludes (1) the impact of foreign currency translation and (2) sales from acquired businesses during the first twelve months of ownership. The portion of sales attributable to foreign currency translation is calculated as the difference between (a) the period-to-period change in organic sales and (b) the period-to-period change in organic sales after applying prior period foreign exchange rates to the current year period. Management believes that reporting organic sales provides useful information to investors by helping identify underlying growth trends in our business and facilitating easier comparisons of our revenue performance with prior and future periods and to our peers. The Company excludes the effect of foreign currency translation from organic sales because foreign currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. The Company excludes the effect of acquisitions because the nature, size, and number of acquisitions can vary dramatically from period to period and between the Company and its peers and can also obscure underlying business trends and make comparisons of long-term performance difficult.
Performance in 2015 Compared with 2014
 
(In thousands)
2015
 
2014
 
Change
 
Net sales
$
2,020,668

 
$
2,147,767

 
(6
)%
 
Operating income
431,738

 
431,224

 
 %
 
Operating margin
21.4
%
 
20.1
%
 
130

bps
Sales in 2015 were $2.0 billion, a (6)% decrease from the comparable period last year. This decrease reflects a 4% decrease in organic sales, a 4% decrease from foreign currency translation and a 2% increase from acquisitions (CiDRA Precision Services — July 2015; Alfa Valvole — June 2015; Novotema — May 2015 and Aegis — April 2014). Sales to customers outside the U.S. represented approximately 50% of total sales in both 2015 and 2014.
In 2015, Fluid & Metering Technologies contributed 43% of sales and 43% of operating income; Health & Science Technologies contributed 36% of sales and 33% of operating income; and Fire & Safety/Diversified Products contributed 21% of sales and 24% of operating income.
Gross profit of $904.3 million in 2015 decreased $45.0 million, or 5%, from 2014, while gross margins increased 60 basis points to 44.8% in 2015 from 44.2% in 2014. The margin increase is mainly attributable to benefits from productivity initiatives, partially offset by decreased sales volume.
SG&A expenses decreased to $479.4 million in 2015 from $504.4 million in 2014. The $25.0 million decrease is mainly attributable to a reduction in volume-related expenses of $35.1 million, partially offset by approximately $10.1 million of incremental costs from new acquisitions. As a percentage of sales, SG&A expenses were 23.7% for 2015 and 23.5% for 2014.
During 2015, the Company recorded pre-tax restructuring expenses totaling $11.2 million compared to $13.7 million recorded in 2014. The restructuring expenses for both years were mainly attributable to employee severance related to head count reductions across all three segments and corporate.
Operating income of $431.7 million in 2015 increased slightly from the $431.2 million recorded in 2014, primarily reflecting improved productivity offset by decreased volumes. Operating margin of 21.4% in 2015 was up 130 basis points from 20.1% in 2014 primarily due to the gain on the sale of the Ismatec product line and productivity improvements.
Other (income) expense decreased $0.9 million from other income of $3.1 million in 2014 to $2.2 million of income in 2015 mainly due to mark-to-market gains in available for sale securities in 2014 compared to losses in 2015.

16


Interest expense decreased slightly to $41.6 million in 2015 from $41.9 million in 2014. The decrease was primarily due to the maturation of the 2.58% Senior Euro Notes, partially offset by a higher balance on the Revolving Facility.
The provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes decreased to $109.5 million in 2015 compared to $113.1 million in 2014. The effective tax rate decreased to 27.9% in 2015 compared to 28.8% in 2014, due to the revaluation of the Italian deferred tax liability related to the reduction in the Italian statutory tax rate, the disposition of the Ismatec product line and the mix of global pre-tax income among jurisdictions.
Net income for the year of $282.8 million increased from the $279.4 million earned in 2014. Diluted earnings per share in 2015 of $3.62 increased $0.17 from $3.45 in 2014 as a result of the gain on the sale of the Ismatec product line and lower share count resulting from share repurchases, partially offset by lower sales volume.
Fluid & Metering Technologies Segment
 
(In thousands)
2015
 
2014
 
Change
 
Net sales
$
860,792

 
$
899,588

 
(4
)%
 
Operating income
204,506

 
216,886

 
(6
)%
 
Operating margin
23.8
%
 
24.1
%
 
(30
)
bps
Sales of $860.8 million decreased $38.8 million, or 4%, in 2015 compared with 2014. This decrease reflected a 2% decline in organic growth, a 2% increase from acquisitions (Alfa Valvole — June 2015 and Aegis — April 2014) and 4% of unfavorable foreign currency translation. In 2015, sales decreased approximately 3% domestically and 5% internationally. Sales to customers outside the U.S. were approximately 44% of total segment sales in 2015, compared with 45% in 2014.
Sales within our Energy platform decreased compared to 2014 primarily due to the fall in oil prices and the related delay in large capital projects in Europe and the Middle East. Sales within our Industrial platform similarly decreased compared to 2014 due to the fall in oil & gas prices, but also due to the weakening of the North American industrial distribution market. This decrease was partially offset by an increase in European chemical project activity. Sales within our Agriculture platform decreased as OEM and after-market distribution sales fell significantly due to depressed commodity prices and lower farm incomes. The slight sales decrease in the Water platform was driven by weakness in North American industrial markets, offset by growth in the global municipal markets and share gains from new products. Sales in the Valves platform, which was created in the third quarter of 2015, increased as a result of the Alfa acquisition.
Operating income and operating margin of $204.5 million and 23.8%; respectively, were lower than the $216.9 million and 24.1%; respectively, recorded in 2014, primarily due to the lower sales volume.
Health & Science Technologies Segment
 
(In thousands)
2015
 
2014
 
Change
 
Net sales
$
738,996

 
$
752,021

 
(2
)%
 
Operating income
157,948

 
152,999

 
3
 %
 
Operating margin
21.4
%
 
20.3
%
 
110

bps
Sales of $739.0 million decreased $13.0 million, or 2%, in 2015 compared with 2014. This decrease reflected a 1% decline in organic sales, a 2% increase from acquisitions (CiDRA Precision Services — July 2015 and Novotema — May 2015) and 3% unfavorable foreign currency translation. In 2015, sales decreased 3% domestically and 1% internationally. Sales to customers outside the U.S. were approximately 55% of total segment sales in 2015 compared with 54% in 2014.
Sales within our Scientific Fluidics platform increased as demand from the core biotech, in-vitro diagnostic and analytical instrumentation markets grew and remained consistently strong through the year. Sales within our Material Processing Technologies platform decreased compared to 2014 due to softer orders in the first half of the year, as general spending on large capital projects declined. Sales within our Sealing Solutions platform increased compared to 2014 due to the acquisition of Novotema and strong growth in the semiconductor markets, partially offset by declines in the oil & gas market. Sales within the IDEX Optics and Photonics platform decreased compared to 2014, primarily from slow demand in the industrial and laser optical end markets. Sales in our Gast platform decreased compared to 2014 due to softness in North American industrial

17


distribution markets. Sales in our Micropump platform decreased compared to 2014 due to softness in Asian printing markets, and declines in the North American industrial distribution market.
Operating income and operating margin of $157.9 million and 21.4%, respectively, in 2015 were up from $153.0 million and 20.3%, respectively, recorded in 2014, primarily due to productivity initiatives, partially offset by lower volume.
Fire & Safety/Diversified Products Segment
 
(In thousands)
2015
 
2014
 
Change
 
Net sales
$
423,915

 
$
502,749

 
(16
)%
 
Operating income
115,745

 
130,494

 
(11
)%
 
Operating margin
27.3
%
 
26.0
%
 
130

bps
Sales of $423.9 million decreased $78.8 million, or 16%, in 2015 compared with 2014. This decrease reflected a 10% decline in organic growth and 6% unfavorable foreign currency translation. In 2015, sales decreased 12% domestically and 19% internationally. Sales to customers outside the U.S. were approximately 52% of total segment sales in 2015, compared with 54% in 2014.
Sales within our Dispensing platform decreased due to the benefit of large projects in the first half of the prior year and softness in Asian markets. The sales decrease in our Band-It platform was driven by the decline of upstream oil & gas sales, due to depressed prices, slightly offset by continued strength in the North American transportation markets. Sales within our Fire Suppression platform decreased due to prior year trailer sales for North American power production facilities, and lack of project orders in China and North America. Sales within our Rescue platform decreased, due to continued decision delays on municipal projects in Europe and Asia.
Operating income of $115.7 million was lower than the $130.5 million recorded in 2014, while operating margin of 27.3% was higher than the 26.0% recorded in 2014, primarily due to favorable mix within the Dispensing platform along with productivity improvements across the entire segment, partially offset by lower volume.
Performance in 2014 Compared with 2013
 
(In thousands)
2014
 
2013
 
Change
 
Net sales
$
2,147,767

 
$
2,024,130

 
6
%
 
Operating income
431,224

 
395,513

 
9
%
 
Operating margin
20.1
%
 
19.5
%
 
60

bps
Sales in 2014 were $2.1 billion, a 6% increase from the comparable period the previous year. This increase reflects a 5% increase in organic sales and 1% from acquisitions (Aegis — April 2014 and FTL — March 2013). Organic sales to customers outside the U.S. represented approximately 50% of total sales in 2014 compared with 51% in 2013.
In 2014, Fluid & Metering Technologies contributed 42% of sales and 43% of operating income; Health & Science Technologies contributed 35% of sales and 31% of operating income; and Fire & Safety/Diversified Products contributed 23% of sales and 26% of operating income.
Gross profit of $949.3 million in 2014 increased $76.0 million, or 9%, from 2013, while gross margins were 44.2% in 2014 and 43.1% in 2013. The increases are mainly attributable to increased sales volume, favorable net material costs as well as benefits from productivity initiatives.
SG&A expenses increased to $504.4 million in 2014 from $477.9 million in 2013. The $26.6 million increase reflects approximately $4.0 million of incremental costs from new acquisitions and $22.6 million of volume-related expenses. As a percentage of sales, SG&A expenses were 23.5% for 2014 and 23.6% for 2013.
During 2014, the Company recorded pre-tax restructuring expenses totaling $13.7 million. No restructuring expenses were recorded in 2013. The 2014 restructuring expenses were mainly attributable to employee severance related to head count reductions across all three segments and corporate.
Operating income of $431.2 million in 2014 increased from the $395.5 million recorded in 2013, primarily reflecting an increase in volume, improved productivity partially offset by the $13.7 million of restructuring-related charges recorded in

18


2014. Operating margin of 20.1% in 2014 was up from 19.5% in 2013 primarily due to volume leverage and productivity partially offset by the restructuring-related charges in 2014.
Other (income) expense increased $3.3 million from other expense of $0.2 million in 2013 to $3.1 million of income in 2014 mainly due to a favorable impact from foreign currency transactions and an increase in interest income.
Interest expense decreased slightly to $41.9 million in 2014 from $42.2 million in 2013. The decrease was principally due to lower interest rates.
The provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes increased to $113.1 million in 2014 compared to $97.9 million in 2013. The effective tax rate increased to 28.8% in 2014 compared to 27.7% in 2013, due to a mix of global pre-tax income among jurisdictions and the 2012 U.S. R&D credit in 2013, which was retroactively reinstated to January 1, 2012 as a result of the the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013.
Net income for the year of $279.4 million increased from the $255.2 million earned in 2013. Diluted earnings per share in 2014 of $3.45 increased $0.36 from $3.09 in 2013 due to higher net income and lower share count resulting from share repurchases.
Fluid & Metering Technologies Segment
 
(In thousands)
2014
 
2013
 
Change
 
Net sales
$
899,588

 
$
871,814

 
3
 %
 
Operating income
216,886

 
211,256

 
3
 %
 
Operating margin
24.1
%
 
24.2
%
 
(10
)
bps
Sales of $899.6 million increased $27.8 million, or 3%, in 2014 compared with 2013. This increase reflected 2% organic growth and 1% acquisition. The increase in organic sales was attributable to growth across all our platforms and groups within the segment. In 2014, organic sales increased approximately 4% domestically and 1% internationally. Organic sales to customers outside the U.S. were approximately 45% of total segment sales in 2014, compared with 46% in 2013.
Sales within our Energy platform increased modestly compared to 2013, due to the strength of the LPG and refined fuel markets. Sales have grown in the North American and Asian markets, while Europe and the Middle East sales have declined, due to the fall in oil prices and large project delays. Sales within our Industrial platform increased compared to 2013 on continued strength of the North American industrial distribution and chemical markets. This increase was partially offset by a decline in Industrial chemical sales in Europe due to a lack of project activity. Sales within our Agriculture platform increased slightly driven by strong aftermarket demand in North America, which was offset by weak OEM demand due to falling farm income. The sales increase in our Water platform was driven by share gains from new products and increased global project activity.
Operating income of $216.9 million was higher than the $211.3 million recorded in 2013, while operating margin of 24.1% was lower than the 24.2% recorded in 2013, primarily due to $6.4 million of restructuring charges recorded in 2014, partially offset by volume leverage and productivity initiatives.
Health & Science Technologies Segment
 
(In thousands)
2014
 
2013
 
Change
 
Net sales
$
752,021

 
$
714,650

 
5
%
 
Operating income (loss)
152,999

 
136,707

 
12
%
 
Operating margin
20.3
%
 
19.1
%
 
120

bps
Sales of $752.0 million increased $37.4 million, or 5%, in 2014 compared with 2013. This increase reflected 4% growth in organic sales and 1% favorable foreign currency translation. In 2014, organic sales increased 7% domestically and 1% internationally. Organic sales to customers outside the U.S. were approximately 54% of total segment sales in 2014 compared with 53% in 2013.

19


Sales within our MPT platform increased compared to 2013 due to large projects in the Asian food and pharmaceutical markets. Sales within our Scientific Fluidics platform increased after pausing in the middle part of 2014 as customers right-sized their inventory. In the latter part of 2014 we saw increased demand from the core biotech, in-vitro diagnostic and analytical instrumentation markets. Sales within our Sealing Solutions platform increased compared to 2013 due to strong growth in the semiconductor and marine diesel markets, partially offset by softness in oil & gas towards year end due to declining oil prices. Sales within our IOP platform were flat when compared to 2013, primarily from continued slow demand in the industrial and life sciences markets. Sales in our Gast platform increased compared to 2013 due to strong growth in the North American distribution markets. Sales in our Micropump platform increased compared to 2013 due to the success of new product introductions.
Operating income and operating margin of $153.0 million and 20.3%, respectively, in 2014 were up from $136.7 million and 19.1%, respectively, recorded in 2013, primarily due to volume leverage and productivity initiatives, partially offset by $4.9 million of restructuring charges recorded in 2014.
Fire & Safety/Diversified Products Segment
 
(In thousands)
2014
 
2013
 
Change
 
Net sales
$
502,749

 
$
445,049

 
13
%
 
Operating income
130,494

 
102,730

 
27
%
 
Operating margin
26.0
%
 
23.1
%
 
290

bps
Sales of $502.7 million increased $57.7 million, or 13%, in 2014 compared with 2013. This increase was driven entirely by organic growth. In 2014, organic sales increased 17% domestically and 9% internationally. Organic sales to customers outside the U.S. were approximately 54% of total segment sales in 2014, compared with 56% in 2013.
Sales within our Dispensing platform increased due to the fulfillment of a large order in the first quarter of 2014 and the strength of Asian and Western European markets. The sales increase within our Band-It platform was driven by continued strength in the transportation, cable management and industrial industries, offset by declines in oil & gas application markets to close out the year. Sales within our Fire Suppression platform increased as a result of orders for fire suppression trailers at power production facilities and stable project orders in China and North America. Sales within our Rescue platform decreased slightly, due to delayed decision making for municipal projects in Europe and Asia.
Operating income and operating margin of $130.5 million and 26.0%, respectively, were higher than the $102.7 million and 23.1% recorded in 2013, primarily due to volume leverage, partially offset by $1.0 million of restructuring charges recorded in 2014.

Liquidity and Capital Resources
Operating Activities
Cash flows from operating activities decreased $7.6 million, or 2.1%, to $360.3 million in 2015, primarily due to lower earnings (excluding the gain on sale of business), partially offset by improved working capital performance. At December 31, 2015, working capital was $553.1 million and the Company’s current ratio was 2.79 to 1. At December 31, 2015, the Company’s cash and cash equivalents totaled $328.0 million, of which $298.8 million was held outside of the United States.
Investing Activities
Cash flow used in investing activities increased $138.2 million to $210.5 million in 2015, primarily as a result of cash paid for acquisitions, partially offset by proceeds from the sale of a business.
Cash flows from operations were more than adequate to fund capital expenditures of $43.8 million and $48.0 million in 2015 and 2014, respectively. Capital expenditures were generally for machinery and equipment that improved productivity, although a portion was for business system technology, replacement of equipment, and construction of new facilities. Management believes that the Company has ample capacity in its plants and equipment to meet demand increases for future growth in the intermediate term.
The Company acquired Novotema in May 2015 for cash consideration of $61.1 million (€56 million); Alfa in June 2015 for cash consideration of $112.6 million (€99.8 million); and CPS in July 2015 for cash consideration of $19.5 million and non-cash contingent consideration valued at $4.7 million. The entire purchase price for all of the 2015 acquisitions were funded with cash on hand. The Company acquired Aegis in April 2014 for cash consideration of $25.4 million and the entire purchase price was funded with borrowings under the Company’s bank credit facility.

20


Financing Activities
Cash flow used in financing activities increased $111.5 million, or 60.6% to $295.5 million in 2015, primarily as a result of the Company paying off the $88.4 million balance on the 2.58% Senior Euro Notes and increased payments, net of borrowings, of $23 million on the Company’s revolving credit facility.
The Company maintains a revolving credit facility (the “Revolving Facility”), which is a $700.0 million unsecured, multi-currency bank credit facility expiring on June 23, 2020. At December 31, 2015, $195.0 million was outstanding under the Revolving Facility, with $7.2 million of outstanding letters of credit resulting in net available borrowing capacity under the Revolving Facility at December 31, 2015, was approximately $497.8 million. Borrowings under the Revolving Facility bear interest, at either an alternate base rate or an adjusted LIBOR rate plus, in each case, an applicable margin. This applicable margin is based on the Company’s senior, unsecured, long-term debt rating and can range from .005% to 1.50%. Based on the Company’s credit rating at December 31, 2015, the applicable margin was 1.10% resulting in an interest rate of 1.51% at December 31, 2015. Interest is payable (a) in the case of base rate loans, quarterly, and (b) in the case of LIBOR rate loans, on the maturity date of the borrowing, or quarterly from the effective date for borrowings exceeding three months. The Company may request increases in the lending commitments under the Credit Agreement, but the aggregate lending commitments pursuant to such increases may not exceed $350.0 million. An annual Revolving Facility fee, also based on the Company’s credit rating, is currently 15 basis points and is payable quarterly.
As of December 31, 2014 the Company included the outstanding balance of the 2.58% Senior Euro Notes, $98.5 million, within Current liabilities on the Consolidated Balance Sheet as the maturity date was within twelve months. On June 9, 2015, the Company paid the balance of the 2.58% Senior Euro Notes, upon its maturity, using cash on hand.
On December 6, 2010, the Company completed a public offering of $300.0 million 4.5% senior notes due December 15, 2020 (“4.5% Senior Notes”). The net proceeds from the offering of approximately $295.7 million, after deducting a $1.6 million issuance discount, a $1.9 million underwriting commission and $0.8 million offering expenses, were used to repay $250.0 million of outstanding bank indebtedness, with the balance used for general corporate purposes. The 4.5% Senior Notes bear interest at a rate of 4.5% per annum, which is payable semi-annually in arrears on each June 15 and December 15. The Company may redeem all or a portion of the 4.5% Senior Notes at any time prior to maturity at the redemption prices set forth in the Note Indenture governing the 4.5% Senior Notes. The Company may issue additional debt from time to time pursuant to the Indenture. The Indenture and 4.5% Senior Notes contain covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of the 4.5% Senior Notes also require the Company to make an offer to repurchase the 4.5% Senior Notes upon a change of control triggering event (as defined in the Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest, if any.
On December 9, 2011, the Company completed a public offering of $350.0 million 4.2% senior notes due December 15, 2021 (“4.2% Senior Notes”). The net proceeds from the offering of approximately $346.2 million, after deducting a $0.9 million issuance discount, a $2.3 million underwriting commission and $0.6 million offering expenses, were used to repay $306.0 million of outstanding bank indebtedness, with the balance used for general corporate purposes. The 4.2% Senior Notes bear interest at a rate of 4.2% per annum, which is payable semi-annually in arrears on each June 15 and December 15. The Company may redeem all or part of the 4.2% Senior Notes at any time prior to maturity at the redemption prices set forth in the Note Indenture governing the 4.2% Senior Notes. The Company may issue additional debt from time to time pursuant to the Indenture. The Indenture and 4.2% Senior Notes contain covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of the 4.2% Senior Notes also require the Company to make an offer to repurchase the 4.2% Senior Notes upon a change of control triggering event (as defined in the Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest, if any.
There are two key financial covenants that the Company is required to maintain in connection with the Revolving Facility, which requires a minimum interest coverage ratio of 3.0 to 1 and a maximum leverage ratio of 3.50 to 1. At December 31, 2015, the Company was in compliance with both of these financial covenants, as the Company’s interest coverage ratio was 12.73 to 1 and the leverage ratio was 1.63 to 1. There are no financial covenants relating to the 4.5% Senior Notes or 4.2% Senior Notes; however, both are subject to cross-default provisions.

On December 1, 2015 the Company’s Board of Directors approved an increase of $300.0 million in the authorized level for repurchases of common stock. Repurchases under the program will be funded with future cash flow generation or borrowings available under the Revolving Facility. During 2015, the Company purchased a total of 2.8 million shares at a cost of $210.5 million, of which $2.3 million was settled in January 2016, compared to 3.0 million shares purchased at a cost of $222.5 million in 2014. As of December 31, 2015, there was $635 million of repurchase authorization remaining.

21


The Company believes current cash, cash from operations and cash available under the Revolving Facility will be sufficient to meet its operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and postretirement funding requirements, authorized share repurchases and annual dividend payments to holders of the Company’s common stock for the next twelve months. Additionally, in the event that suitable businesses are available for acquisition on acceptable terms, the Company may obtain all or a portion of the financing for these acquisitions through the incurrence of additional borrowings. As of December 31, 2015, $195.0 million was outstanding under the Revolving Facility, with $7.2 million of outstanding letters of credit, resulting in net available borrowing capacity under the Revolving Facility at December 31, 2015 of approximately $497.8 million.

Contractual Obligations
Our contractual obligations include pension and postretirement medical benefit plans, rental payments under operating leases, payments under capital leases, and other long-term obligations arising in the ordinary course of business. There are no identifiable events or uncertainties, including the lowering of our credit rating, which would accelerate payment or maturity of any of these commitments or obligations.
The following table summarizes our significant contractual obligations and commercial commitments at December 31, 2015, and the future periods in which such obligations are expected to be settled in cash. In addition, the table reflects the timing of principal and interest payments on outstanding borrowings. Additional detail regarding these obligations is provided in the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”
 
Payments Due by Period
Total
 
Less
Than
1 Year
 
1-3
Years
 
3-5
Years
 
More
Than
5 Years
 
(In thousands)
Borrowings (1)
$
1,018,228

 
$
32,782

 
$
64,504

 
$
556,855

 
$
364,087

Operating lease obligations
54,406

 
16,253

 
21,679

 
9,574

 
6,900

Capital lease obligations (2)
1,960

 
601

 
1,350

 
9

 

Purchase obligations (3)
99,299

 
96,878

 
1,570

 
851

 

Pension and post-retirement obligations
108,276

 
14,170

 
20,636

 
20,876

 
52,594

Total contractual obligations (4)
$
1,282,169

 
$
160,684

 
$
109,739

 
$
588,165

 
$
423,581

 
(1)
Includes interest payments based on contractual terms and current interest rates for variable debt.
(2)
Consists primarily of tangible personal property leases.
(3)
Consists primarily of inventory commitments.
(4)
Comprises liabilities recorded on the balance sheet of $918.2 million, and obligations not recorded on the balance sheet of $364.0 million.

Critical Accounting Policies
We believe that the application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”
Revenue recognition — The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectibility of the sales price is reasonably assured. For product sales, delivery does not occur until the products have been shipped and risk of loss has been transferred to the customer. Revenue from services is recognized when the services are provided or ratably over the contract term. Some arrangements with customers may include multiple deliverables, including the combination of products and services. In such cases, the Company has identified these as separate elements in accordance with Accounting Standards Codification (“ASC”) 605-25, Revenue Recognition-Multiple-Element Arrangements-Recognition, and recognizes revenue consistent with the policy for each separate element based on the relative selling price method. Revenues from some long-term contracts are recognized on the percentage-of-completion method. Percentage-of-completion is measured principally by the percentage of costs incurred to date for each contract to the estimated total costs for such contract at completion. Provisions for estimated losses on uncompleted long-term contracts are made in the period in which such losses are determined. Due to uncertainties inherent in the estimation process, it is reasonably possible that completion costs, including those arising from contract penalty provisions and final contract settlements, will be revised in the near-term. Such revisions to costs and income are recognized in the period in which the revisions are determined.
The Company records allowances for discounts, product returns and customer incentives at the time of sale as a reduction of revenue as such allowances can be reliably estimated based on historical experience and known trends. The Company also offers product warranties and accrues its estimated exposure for warranty claims at the time of sale based upon the length of the warranty period, warranty costs incurred and any other related information known to the Company.
Goodwill, long-lived and intangible assets — The Company evaluates the recoverability of certain noncurrent assets utilizing various estimation processes. An impairment of a long-lived asset exists when the asset’s carrying amount exceeds its fair value, and is recorded when the carrying amount is not recoverable through future operations. An indefinite lived intangible asset or goodwill impairment exists when the carrying amount of intangible assets and goodwill exceeds its fair value. Assessments of possible impairments of goodwill, long-lived or intangible assets are made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. Additionally, testing for possible impairment of recorded goodwill and indefinite-lived intangible asset balances is performed annually. The amount and timing of impairment charges for these assets require the estimation of future cash flows and the fair value of the related assets.
The Company’s business acquisitions result in recording goodwill and other intangible assets, which affect the amount of amortization expense and possible impairment expense that the Company will incur in future periods. The Company follows the guidance prescribed in ASC 350, Goodwill and Other Intangible Assets, to test goodwill and intangible assets for impairment. Annually, on October 31, or more frequently if triggering events occur, the Company compares the fair value of their reporting units to the carrying value of each reporting unit to determine if a goodwill impairment exists.
The Company determines the fair value of each reporting unit utilizing an income approach (discounted cash flows) weighted 50% and a market approach consisting of a comparable public company multiples methodology weighted 50%. To determine the reasonableness of the calculated fair values, the Company reviews the assumptions to ensure that neither the income approach nor the market approach yielded significantly different valuations.
The key assumptions are updated every year for each reporting unit for the income and market methodology used to determine fair value. Various assumptions are utilized including forecasted operating results, annual operating plans, strategic plans, economic projections, anticipated future cash flows, the weighted average cost of capital, market data and market multiples. The assumptions that have the most significant effect on the fair value calculation are the weighted average cost of capital, the market multiples, forecasted EBITDA, and terminal growth rates. The 2015 and 2014 ranges for these three assumptions utilized by the Company are as follows:
 
Assumptions
  
2015
Range
  
2014
Range
Weighted average cost of capital
  
9.5% to 13.0%
  
10.0% to 14.0%
Market multiples
  
7.5x to 14.0x
  
7.5x to 12.5x
Terminal growth rates
  
3.0% to 3.5%
  
3.0% to 3.5%
In assessing the fair value of the reporting units, the Company considered both the market approach and income approach. Under the market approach, the fair value of the reporting unit is determined by the respective trailing twelve month EBITDA and forward looking 2016 EBITDA (50% each), based on multiples of comparable public companies. The market approach is dependent on a number of significant management assumptions including forecasted EBITDA and selected market multiples. Under the income approach, the fair value of the reporting unit is determined based on the present value of estimated future cash flows. The income approach is dependent on a number of significant management assumptions including estimates of operating results, capital expenditures, net working capital requirements, long term growth rate and discount rates. Weighting was equally attributed to both the market and income approaches (50% each) in arriving at the fair value of the reporting units.
In 2015 and 2014, there were no triggering events or changes in circumstances that would have required a review other than as of our annual test date. Based on the results of our measurement as of October 31, 2015, all reporting units had a fair value that was greater than 70% in excess of carrying value, except for our IOP and Valves reporting unit. Our IOP reporting unit had a fair value that was approximately 20% in excess of carrying value and our Valves reporting unit had a fair value near its carrying value as a result of the formation of this reporting unit in conjunction with our Alfa acquisition in June 2015.

22


The unamortized Banjo trade name was determined to be an indefinite lived intangible asset which is tested for impairment on an annual basis in accordance with ASC 350 or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company uses the relief-from-royalty method, a form of the income approach. The relief-from-royalty method is dependent on a number of significant management assumptions, including estimates of revenues, royalty rates and discount rates.
In 2015 and 2014, there were no triggering events or changes in circumstances that would have required a review other than as of our annual test date. Based on the results of our measurement as of October 31, 2015, the fair value of the Banjo trade name was greater than 20% in excess of carrying value.
A long-lived asset impairment exists when the carrying amount of the asset exceeds its fair value. Assessments of possible impairments of long-lived assets are made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. The amount and timing of impairment charges for these assets require the estimation of future cash flows and the fair value of the related assets. In 2015 and 2014, the Company concluded that certain long lived assets had a fair value that was less than the carrying value of the assets, resulting in $0.8 million and $2.5 million, respectively, of impairment charges.
Defined benefit retirement plans — The plan obligations and related assets of the defined benefit retirement plans are presented in Note 15 of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.” Level 1 assets are valued using unadjusted quoted prices for identical assets in active markets. Level 2 assets are valued using quoted prices or other observable inputs for similar assets. Level 3 assets are valued using unobservable inputs, but reflect the assumptions market participants would use in pricing the assets. Plan obligations and the annual pension expense are determined by consulting with actuaries using a number of assumptions provided by the Company. Key assumptions in the determination of the annual pension expense include the discount rate, the rate of salary increases, and the estimated future return on plan assets. To the extent actual amounts differ from these assumptions and estimated amounts, results could be adversely affected.
The Society of Actuaries recently released revised mortality tables, which update life expectancy assumptions. In consideration of these tables, we modified the mortality assumptions used in determining our pension and post-retirement benefit obligations as of December 31, 2015, which will have a related impact on our annual benefit expense in future years. The new mortality tables may result in additional funding requirements dependent upon the funded status of our plans. These expectations presume all other assumptions remain constant and there are no changes to applicable funding regulations.
Changes in the discount rate assumptions will impact the (gain) loss amortization and interest cost components of the projected benefit obligation (“PBO”), which in turn, may impact the Company’s funding decisions if the PBO exceeds plan assets. Each 100 basis point increase in the discount rate will cause a corresponding decrease in the PBO of approximately $22 million based upon the December 31, 2015 data. Each 100 basis point decrease in the discount rate will cause a corresponding increase in the PBO of approximately $26 million based upon the December 31, 2015 data.

New Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 which introduces a new five-step revenue recognition model. Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal years beginning after December 15, 2017, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption. The Company is currently evaluating the impact of the new guidance on our consolidated financial statements and have not yet determined the method by which we will adopt the standard in 2018.

 
Item 7A.     Quantitative and Qualitative Disclosures About Market Risk.
The Company is subject to market risk associated with changes in foreign currency exchange rates and interest rates. The Company may, from time to time, enter into foreign currency forward contracts and interest rate swaps on its debt when it believes there is a financial advantage in doing so. A treasury risk management policy, adopted by the Board of Directors, describes the procedures and controls over derivative financial and commodity instruments, including foreign currency forward

23


contracts and interest rate swaps. Under the policy, the Company does not use financial or commodity derivative instruments for trading purposes, and the use of these instruments is subject to strict approvals by senior officers. Typically, the use of derivative instruments is limited to foreign currency forward contracts and interest rate swaps on the Company’s outstanding long-term debt.
Foreign Currency Exchange Rates
The Company’s foreign currency exchange rate risk is limited principally to the Euro, British Pound, Canadian Dollar, Indian Rupee and Chinese Renminbi. The Company manages its foreign exchange risk principally through invoicing customers in the same currency as the source of products. The foreign currency transaction (gains) losses for the period ending December 31, 2015, 2014 and 2013 were $(0.1) million, $0.9 million, and $2.2 million, respectively, and are reported within Other (income) expense-net on the Consolidated Statements of Operations.
Interest Rate Fluctuations
The Company’s interest rate exposure is primarily related to its $847.4 million of total debt outstanding at December 31, 2015. Approximately 23% of the debt is priced at interest rates that float with the market. A 50 basis point movement in the interest rate on the floating rate debt would result in an approximate $1.0 million annualized increase or decrease in interest expense and cash flows. The remaining debt is fixed rate debt.

24


Item 8.         Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of IDEX Corporation
We have audited the internal control over financial reporting of IDEX Corporation and subsidiaries (the “Company”) as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Novotema SpA (Novotema), which was acquired on May 29, 2015, Alfa Valvole S.r.l. (Alfa) which was acquired on June 10, 2015, and CiDRA Precision Services (CiDRA), which was acquired on July 1, 2015. These exclusions constitute 14.1% and 8.5% of net and total assets, respectively, 1.8% of net sales, and 1.0% of net income of the consolidated financial statement amounts as of and for the year ended December 31, 2015. Accordingly, our audit did not include the internal control over financial reporting at Novotema, Alfa, or CiDRA. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”). A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2015, of the Company and our report dated February 19, 2016, expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding the Company’s adoption of Accounting Standards Update 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.”
 
 
Deloitte & Touche LLP
Chicago, Illinois
 
February 19, 2016
 

25


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of IDEX Corporation
We have audited the accompanying consolidated balance sheets of IDEX Corporation and subsidiaries (the "Company") as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
  In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of IDEX Corporation and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for deferred income taxes in 2015 due to the adoption of Accounting Standards Update 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.”
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 19, 2016, expressed an unqualified opinion on the Company's internal control over financial reporting.

 
 
Deloitte & Touche LLP
Chicago, Illinois
 
February 19, 2016
 



26


MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America, and as defined in Exchange Act Rule 13a-15(f).
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.
Management has used the framework set forth in the report entitled “Internal Control — Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission to assess the effectiveness of the Company’s internal control over financial reporting. Based on that assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2015.
The Company completed the acquisitions of Novotema SpA in May 2015, Alfa Valvole S.r.l. in June 2015 and CiDRA Precision Services in July 2015. Due to the timing of the acquisitions, management has excluded these acquisitions from our evaluation of effectiveness of internal controls over financial reporting. This exclusion represented 1.8% of net sales and 1.0% of net income as well as 14.1% of net assets and 8.5% of total assets for the year ended December 31, 2015. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears herein.



27


IDEX CORPORATION
CONSOLIDATED BALANCE SHEETS
 
 
As of December 31,
 
2015
 
2014
 
(In thousands except share and
per share amounts)
ASSETS
Current assets
 
 
 
Cash and cash equivalents
$
328,018

 
$
509,137

Receivables — net
260,000

 
256,040

Inventories
239,124

 
237,631

Other current assets
35,542

 
72,983

Total current assets
862,684

 
1,075,791

Property, plant and equipment — net
240,945

 
219,543

Goodwill
1,396,529

 
1,321,277

Intangible assets — net
287,837

 
271,164

Other noncurrent assets
17,448

 
15,688

Total assets
$
2,805,443

 
$
2,903,463

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
 
 
 
Trade accounts payable
$
128,911

 
$
127,462

Accrued expenses
153,672

 
163,409

Short-term borrowings
1,087

 
98,946

Dividends payable
25,927

 
22,151

Total current liabilities
309,597

 
411,968

Long-term borrowings
839,707

 
760,399

Deferred income taxes
110,483

 
130,368

Other noncurrent liabilities
102,365

 
114,277

Total liabilities
1,362,152

 
1,417,012

Commitments and contingencies (Note 8)

 

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

 

Common stock:
 
 
 
Authorized: 150,000,000 shares, $.01 per share par value; Issued: 90,151,131 shares at December 31, 2015 and 89,761,305 shares at December 31, 2014
902

 
898

Additional paid-in capital
679,623

 
647,553

Retained earnings
1,666,680

 
1,483,821

Treasury stock at cost: 13,616,592 shares at December 31, 2015 and 10,995,361 shares at December 31, 2014
(757,416
)
 
(553,543
)
Accumulated other comprehensive loss
(146,498
)
 
(92,278
)
Total shareholders’ equity
1,443,291

 
1,486,451

Total liabilities and shareholders’ equity
$
2,805,443

 
$
2,903,463

 
 
 
 
See Notes to Consolidated Financial Statements.

28


IDEX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
For the Years Ended December 31,
 
2015
 
2014
 
2013
 
(In thousands except per share amounts)
Net sales
$
2,020,668

 
$
2,147,767

 
$
2,024,130

Cost of sales
1,116,353

 
1,198,452

 
1,150,766

Gross profit
904,315

 
949,315

 
873,364

Selling, general and administrative expenses
479,408

 
504,419

 
477,851

Gain on sale of business
(18,070
)
 

 

Restructuring expenses
11,239

 
13,672

 

Operating income
431,738

 
431,224

 
395,513

Other (income) expense — net
(2,243
)
 
(3,111
)
 
178

Interest expense
41,636

 
41,895

 
42,206

Income before income taxes
392,345

 
392,440