10-K 1 iex-20181231x10k.htm Document
 
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, 2018
¨
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, Suite 200, Lake Forest, Illinois
 
60045
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code:
(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
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) 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.    ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  þ
 
Accelerated filer  ¨        
 
Non-accelerated filer  ¨       
 
Smaller reporting company  ¨
Emerging growth company  ¨        
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the 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, 2018 closing price of $136.48) held by non-affiliates of IDEX Corporation was $10,446,083,118.
The number of shares outstanding of IDEX Corporation’s common stock, par value $.01 per share, as of February 15, 2019 was 75,792,814.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement with respect to the IDEX Corporation 2019 annual meeting of stockholders (the “2019 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.
Item 16.



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 “anticipates,” “estimates,” “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 the Company’s results, particularly in light of the low levels of order backlogs it typically maintains; the Company’s 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; developments with respect to trade policy and tariffs; 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, valves, 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 13 platforms, where we focus on organic growth and strategic acquisitions. Each of our 13 platforms is also a reporting unit that we annually test for goodwill impairment.


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The Fluid & Metering Technologies segment contains the Energy platform (comprised of Corken, Liquid Controls, SAMPI and Toptech), the Valves platform (comprised of Alfa Valvole, Richter and Aegis), the Water platform (comprised of Pulsafeeder, OBL, Knight, ADS, Trebor and iPEK), the Pumps platform (comprised of Viking and Warren Rupp) and the Agriculture platform (comprised of Banjo). The Health & Science Technologies segment contains the Scientific Fluidics & Optics platform (comprised of Eastern Plastics, Rheodyne, Sapphire Engineering, Upchurch Scientific, ERC, CiDRA Precision Services, thinXXS Microtechnology (“thinXXS”), CVI Melles Griot, Semrock, AT Films and Finger Lakes Instrumentation (“FLI”)), the Sealing Solutions platform (comprised of Precision Polymer Engineering, FTL Seals Technology, Novotema and SFC Koenig), the Gast platform, the Micropump platform and the Material Processing Technologies platform (comprised of Quadro, Fitzpatrick, Microfluidics and Matcon). The Fire & Safety/Diversified Products segment is comprised of the Fire & Safety platform (comprised of Class 1, Hale, Godiva, Akron Brass, Weldon, AWG Fittings, Dinglee, Hurst Jaws of Life, Lukas and Vetter), the Band-It platform and the Dispensing platform.

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.

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 and 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 and alternative fuels and water and wastewater), chemical processing, agriculture, food and beverage, pulp and paper, transportation, plastics and resins, electronics and electrical, construction and mining, pharmaceutical and bio-pharmaceutical, machinery and numerous other specialty niche markets.


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Fluid & Metering Technologies accounted for 38%, 38% and 40% of IDEX’s sales in 2018, 2017 and 2016, respectively, with approximately 43% of its 2018 sales to customers outside the U.S. The segment accounted for 42%, 42% and 44% of total segment operating income in 2018, 2017 and 2016, respectively.

Energy.    Energy consists of the Company’s Corken, 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. Applications for Liquid Controls and SAMPI consist of positive displacement flow meters and electronic registration and control products, including 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. Energy maintains facilities in Lake Bluff, Illinois (Liquid Controls products); Longwood, Florida and Zwijndrecht, Belgium (Toptech products); Oklahoma City, Oklahoma (Corken products); and Altopascio, Italy (SAMPI products). Approximately 42% of Energy’s 2018 sales were to customers outside the U.S.

Valves. Valves consists of the Company’s Alfa Valvole, Richter and Aegis businesses. Valves is a leader in the design, manufacture and sale of specialty valve products for use in the chemical, petro-chemical, energy and sanitary markets as well as a leading 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. Alfa Valvole’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 also on ships, ferries and marine oil platforms. Richter’s products offer superior solutions for demanding and complex pump and valve applications in the process industry. Aegis produces specialty chemical processing valves for use in the chemical, petro-chemical, chlor-alkali and pulp and paper industries. Valves maintains operations in Casorezzo, Italy (Alfa Valvole products); Cedar Falls, Iowa, Kempen, Germany and Suzhou, China (Richter products); and Geismar, Louisiana (Aegis products). Approximately 82% of Valves’ 2018 sales were to customers outside the U.S.

Water.    Water consists of the Company’s ADS, iPEK, Knight, Trebor, Pulsafeeder and OBL 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’ 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,

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including the maintenance and construction of such systems. 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. 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 the manufacturing of semiconductors, disk drives and flat panel displays. 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 and wastewater treatment, oil and gas, power generation, pulp and paper, chemical and hydrocarbon processing and swimming pools. Water maintains operations in Huntsville, Alabama and various other locations in the United States, Canada and Australia (ADS products and services); Hirschegg, Austria and Sulzberg, Germany (iPEK products); Rochester, New York, Punta Gorda, Florida, and Milan, Italy (Pulsafeeder products); West Jordan, Utah (Trebor products); Irvine, California, Mississauga, Ontario, Canada, and Lewes, England (Knight products); and a maquiladora in Ciudad Juarez, Chihuahua, Mexico (Knight products). Approximately 42% of Water’s 2018 sales were to customers outside the U.S.

Pumps. Pumps consists of the Company’s Viking and Warren Rupp businesses. Pumps is a leading manufacturer of rotary internal gear, external gear, vane and rotary lobe pumps, custom-engineered OEM pumps, strainers, gear reducers and engineered pump systems. 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 and paper, plastics, paints, inks, tanker trucks, compressor, construction, food and beverage, personal care, pharmaceutical and biotech markets. Warren Rupp products (which include 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 double diaphragm pumps, primarily serve the chemical, paint, food processing, electronics, construction, utilities, oil and gas, mining and industrial maintenance markets. Pumps maintains operations in Cedar Falls, Iowa (Viking and Wright Flow products); Eastbourne, England (Wright Flow products); Shannon, Ireland (Viking and Blagdon products); and Mansfield, Ohio (Warren Rupp products). Pumps primarily uses independent distributors to market and sell its products. Approximately 38% of Pumps’ 2018 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 distribution facilities in Didam, The Netherlands and Valinhos, Brazil. Its products are used in agriculture (approximately 72% of revenue) and industrial (approximately 28% of revenue) applications. Approximately 19% of Banjo’s 2018 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 sealing components, biocompatible medical devices and implantables, air compressors used in medical, dental and industrial applications, optical components and coatings for applications in the fields of scientific research, defense, biotechnology, aerospace, telecommunications and electronics manufacturing, laboratory and commercial equipment used in the production of micro and nano scale materials, precision photonic solutions used in life sciences, research and defense markets and precision gear and peristaltic pump technologies that meet exacting original equipment manufacturer specifications.

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Health & Science Technologies accounted for 36%, 36% and 35% of IDEX’s sales in 2018, 2017 and 2016, respectively, with approximately 56% of its 2018 sales to customers outside the U.S. The segment accounted for 32%, 32% and 31% of total segment operating income in 2018, 2017 and 2016, respectively.

Scientific Fluidics & Optics.    Scientific Fluidics & Optics consists of the Company’s Eastern Plastics, Rheodyne, Sapphire Engineering, Upchurch Scientific, ERC, CiDRA Precision Services, thinXXS, CVI Melles Griot, Semrock, AT Films (including Precision Photonics products) and FLI businesses. 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 and 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. CiDRA Precision Services’ products consist of microfluidic components serving the life science, health and industrial markets and thinXXS is a leader in the design, manufacture and sale of microfluidic components serving the point of care, veterinary and life science markets. CVI Melles Griot is a global leader in the design and manufacture of precision photonic solutions used in the life science, research, semiconductor, security and defense markets. CVI Melles Griot’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 Melles Griot produces critical components for life science research, electronics manufacturing, military and other industrial applications including lenses, mirrors, filters and polarizers. These 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. Semrock is a provider of optical filters for biotech and analytical instrumentation in the life science market. 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. 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

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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. FLI specializes in the design, development and production of low-noise cooled charge-coupled device (“CCD”) and high speed, high-sensitivity Scientific complementary metal-oxide semiconductor (“CMOS”) cameras for the astronomy and life sciences markets. Scientific Fluidics & Optics has facilities in Bristol, Connecticut (Eastern Plastics products); Rohnert Park, California (Rheodyne products); Middleboro, Massachusetts (Sapphire Engineering products); Oak Harbor, Washington (Upchurch Scientific products); Kawaguchi, Japan (ERC products); Wallingford, Connecticut (CiDRA Precision Services products); Zweibrücken, Germany (thinXXS products); Albuquerque, New Mexico, Rochester, New York, Leicester, England and Didam, The Netherlands (CVI Melles Griot products); Rochester, New York (Semrock products); Boulder, Colorado (AT Films products); and Lima, New York (FLI products). Approximately 51% of Scientific Fluidics & Optics’ 2018 sales were to customers outside the U.S.

Sealing Solutions.    Sealing Solutions consists of the Company’s Precision Polymer Engineering, FTL Seals Technology, Novotema and SFC Koenig businesses. Precision Polymer Engineering 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 and gas, pharmaceutical, electronics and food applications. Precision Polymer Engineering is headquartered in Blackburn, England with an additional manufacturing facility in Brenham, Texas. FTL Seals Technology, 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. SFC Koenig is a producer of highly engineered expanders and check valves for critical applications across the transportation, hydraulic, aviation and medical markets. SFC Koenig is based in Dietikon, Switzerland, with additional facilities in North Haven, Connecticut, Illerrieden, Germany, and Suzhou, China. Approximately 77% of Sealing Solutions’ 2018 sales were to customers outside the U.S.

Gast.    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. Based in Benton Harbor, Michigan, Gast also has a logistics and commercial center in Redditch, England. Approximately 27% of Gast’s 2018 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 71% of Micropump’s 2018 sales were to customers outside the U.S.

Material Processing Technologies.    Material Processing Technologies 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 Waterloo, Canada. 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 also 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 65% of Material Processing Technologies’ 2018 sales were to customers outside the U.S.


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FIRE & SAFETY/DIVERSIFIED PRODUCTS SEGMENT

The Fire & Safety/Diversified Products segment designs, produces and distributes firefighting pumps, valves, 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.

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The Fire & Safety/Diversified Products segment accounted for 26%, 26% and 25% of IDEX’s sales in 2018, 2017 and 2016, respectively, with approximately 53% of its 2018 sales to customers outside the U.S. The segment accounted for 26%, 26% and 25% of total segment operating income in 2018, 2017 and 2016, respectively.

Fire & Safety.    Fire & Safety consists of the Company’s Class 1, Hale, Godiva, Akron Brass, AWG Fittings, Dinglee, Hurst Jaws of Life, Lukas and Vetter businesses, which produce truck-mounted and portable fire pumps, stainless steel valves, monitors, apparatus valves, nozzles, foam and compressed air foam systems, pump modules and pump kits, electronic controls and information systems, conventional and networked electrical systems, mechanical components for the fire, rescue and specialty vehicle markets, 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. Fire & Safety’s customers are OEMs as well as public and private fire and rescue organizations. Fire & Safety maintains facilities in Ocala, Florida (Class 1 and Hale products); Warwick, England (Godiva products); Wooster and Columbus, Ohio (Akron Brass and Weldon products); Ballendorf, Germany (AWG Fittings products); Shelby, North Carolina (Hurst Jaws of Life products); Tianjin, China (Dinglee products); Erlangen, Germany (Lukas products); and Zulpich, Germany (Vetter products). Approximately 52% of Fire & Safety’s 2018 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 and 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 42% of Band-It’s 2018 sales were to customers outside the U.S.


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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 maintains facilities in Sassenheim, The Netherlands, Wheeling, Illinois, Unanderra, Australia and Milan, Italy as well as IDEX shared manufacturing facilities in India and China. Approximately 67% of Dispensing’s 2018 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, 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 Pumps 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); Corob S.p.A. (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 2018 accounted for more than two percent of net sales.

Employees

At December 31, 2018, the Company had 7,352 employees. Approximately 7% of employees were represented by labor unions, with various contracts expiring through October 2022. 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 occurring 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 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.

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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, Mexico, 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, Korea and Japan to support sales and marketing efforts of IDEX businesses in those regions.

Segment Information

For segment financial information for the years 2018, 2017 and 2016, 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 12 of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”

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
 
48
 
10
 
Chairman of the Board and Chief Executive Officer
William K. Grogan
 
40
 
7
 
Senior Vice President and Chief Financial Officer
Eric D. Ashleman
 
51
 
10
 
Senior Vice President and Chief Operating Officer
Denise R. Cade
 
56
 
3
 
Senior Vice President, General Counsel and Corporate Secretary
Daniel J. Salliotte
 
52
 
14
 
Senior Vice President-Corporate Development
Michael J. Yates
 
53
 
13
 
Vice President and Chief Accounting Officer
Jeffrey D. Bucklew
 
48
 
7
 
Senior Vice President-Chief Human Resources Officer
James MacLennan
 
55
 
7
 
Senior Vice President-Chief Information 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. Grogan has served as Senior Vice President and Chief Financial Officer since January 2017. Prior to that, Mr. Grogan served as Vice President of Finance, Operations from July 2015 through January 2017. From January 2012 through July 2015, Mr. Grogan was Vice President-Finance for the Company’s Health & Science Technologies and Fire & Safety/Diversified Products segments.

Mr. Ashleman has served as Senior Vice President and Chief Operating Officer since July 2015. Prior to that, Mr. Ashleman served as the Vice President-Group Executive of the Company’s Health & Science Technologies and Fire & Safety/Diversified Products segments from January 2014 through July 2015 and President-Group Executive of the Company’s Fire & Safety/Diversified Products segment from 2011 through January 2014. 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-Corporate Development since March 2018. Prior to that, Mr. Salliotte served as Senior Vice President-Corporate Strategy, 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, and served as interim Chief Financial Officer from September 2016 to December 2016. Mr. Yates joined IDEX as Vice President-Controller in October 2005.


9

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.

Mr. MacLennan has served as the Senior Vice President-Chief Information Officer since joining IDEX in March 2012. Prior to joining IDEX, Mr. MacLennan had a dual role as CIO for Pactiv LLC and Vice President of IT for Reynolds Services Inc.

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.


10

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 2018, 49% of the Company’s sales were derived from domestic operations while 51% were derived from international operations. The Company’s largest end markets include industrial, life sciences and medical technologies, fire and rescue, oil and gas, paint and coatings, chemical processing, agriculture, water and 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.

Change to Political and Economic Conditions in the U.S. and Foreign Countries in Which We Operate Could Adversely Affect Our Business.

In 2018, approximately 51% 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;
•
withdrawal from or renegotiation of international trade agreements and other restrictions on the trade between the United States and other countries;
•
effects of the United Kingdom’s decision to exit the European Union and related potential disruption to trade;
•
changes in tariff and trade barriers, including recently imposed tariffs with respect to certain products imported from China or exported to China, 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.

Our ability to continue to grow organically is tied in large part to our ability to continue to develop new products. A failure to continue to develop and deliver new, innovative and competitive products to the market could limit our sales growth and negatively impact our business, financial condition, results of operations and cash flow.

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 in, and future acquisitions could result in, the incurrence of substantial additional indebtedness and other expenses.


11

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 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, Swiss Franc, 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.”

Fluctuations in Interest Rates Could Adversely Affect Our Results of Operations and Financial Position.

Our profitability may be adversely affected during any periods of unexpected or rapid increases in interest rates. We maintain a revolving credit facility, which bears interest at either an alternate base rate or an adjusted LIBOR rate plus, in each case, an applicable margin based on the Company's senior, unsecured, long-term debt rating. A significant increase in LIBOR would significantly increase our cost of borrowings. We are also exposed to risks if the U.S. Federal Reserve raises its benchmark interest rate, which may reduce the availability and increase the cost of obtaining new debt and refinancing existing indebtedness. 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 are currently involved in pending and threatened legal, regulatory and other proceedings arising in the ordinary course of business. These proceedings may pertain to matters such as product liability or contract disputes, and may also involve governmental inquiries, inspections, audits or investigations relating to issues such as tax matters, intellectual property, environmental, health and safety issues, governmental regulations, employment and other matters. 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 and the availability of insurance coverage, 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, the continued availability of insurance coverage or the effectiveness of our strategies related to these proceedings. For additional detail related to this risk, see Item 3, “Legal Proceedings” and Note 9 in Part II, Item 8, “Financial Statements and Supplementary Data.”

Our Intangible Assets, Including Goodwill, are a Significant Portion of Our Total Assets and a Write-off of Our Intangible Assets or Goodwill 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, 2018, goodwill and intangible assets totaled $1,698.0 million and $383.3 million, respectively. These assets primarily result from our acquisitions, representing the excess of the purchase price 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 forecasted 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

12

goodwill or identifiable intangible assets would adversely impact our results of operations and net worth. See Note 5 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.

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.

Challenges with Respect to Labor Availability Could Negatively Impact our Ability to Operate or Grow our Business.
 
Our success depends in part on the ability of our businesses to proactively attract, motivate and retain a qualified and highly skilled workforce in an intensely competitive labor market. A failure to attract, motivate and retain highly skilled personnel could adversely affect our operating results or our ability to operate or grow our business.

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 (or the systems of our customers or third-party hosting services) 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, penalties, fines 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. Further, given the unpredictability, nature and scope of cyber-security attacks, it is possible that potential vulnerabilities could go undetected for an extended period.

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

13

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.

Changes in Applicable Tax Regulations and Resolutions of Tax Disputes Could Negatively Affect Our Financial Results.

The Company is subject to taxation in the U.S. and numerous foreign jurisdictions. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The changes included in the Tax Act were broad and complex. The Company finalized the impact of the reduction in the corporate rate and the deemed repatriation transition tax based upon the Company’s interpretations of the Tax Act. However, additional guidance issued by the Internal Revenue Service, the U.S. Department of Treasury or any other applicable taxing authority or actions taken by the Company may result in a different impact.

In addition, foreign jurisdictions may enact tax legislation that could significantly affect our ongoing operations. Aspects of U.S. tax reform could also lead foreign jurisdictions to respond by enacting additional tax legislation that is unfavorable to us.

Item 1B.    Unresolved Staff Comments.

None.

Item 2.        Properties.

The Company’s principal plants and offices have an aggregate floor space area of approximately 4.6 million square feet, of which 3.0 million square feet (65%) is located in the U.S. and approximately 1.6 million square feet (35%) is located outside the U.S., primarily in Germany (9%), U.K. (7%), Italy (6%), India (3%), China (2%), Canada (2%), Switzerland (2%) 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 16,268 square feet of leased space in Chicago, Illinois.

Approximately 3.1 million square feet (68%) of the principal plant and office floor area is owned by the Company and the balance is held under lease. Approximately 1.7 million square feet (38%) of the principal plant and office floor area is held by business units in the Fluid & Metering Technologies segment; 1.4 million square feet (29%) is held by business units in the Health & Science Technologies segment; and 1.3 million square feet (28%) is held by business units in the Fire & Safety/Diversified Products segment. The remaining 0.2 million square feet (5%) include the executive office as well as shared services locations.
 
Item 3.        Legal Proceedings.

The Company and its subsidiaries are party to legal proceedings as described in Note 9 in Part II, Item 8, “Commitments and Contingencies,” and such disclosure is incorporated by reference into this Item 3, “Legal Proceedings.” In addition, the Company and six of its subsidiaries are presently named as defendants in a number of lawsuits claiming various asbestos-related personal injuries, 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 these 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 and the United Kingdom. Most of the claims resolved to date have been dismissed without payment. The balance of the claims have been settled for various insignificant amounts. Only one case has been tried, resulting in a verdict for the Company’s business unit. No provision has been made in the financial statements of the Company, other than for insurance deductibles in the ordinary course, and the Company does not currently believe the asbestos-related claims will have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

Item 4.        Mine Safety Disclosures.

Not applicable.

14

PART II

Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The Company’s common stock trades on the New York Stock Exchange under the symbol “IEX”. As of February 15, 2019, there were approximately 5,151 stockholders of record of our common stock and there were 75,792,814 shares outstanding.
 
 
 
 
 
 
 
 
 
 
 
 
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, 2018 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, 2018 to October 31, 2018
172,705

 
$
132.14

 
172,705

 
$
476,454,817

November 1, 2018 to November 30, 2018
420,000

 
134.26

 
420,000

 
420,066,720

December 1, 2018 to December 31, 2018
324,666

 
132.62

 
324,666

 
377,010,479

Total
917,371

 
$
133.28

 
917,371

 
$
377,010,479

 
(1)
On December 1, 2015, the Company’s Board of Directors approved an increase of $300.0 million in the authorized level of repurchases of common stock. This followed the prior Board of Directors approved repurchase authorization of $400.0 million that was announced by the Company on November 6, 2014. These authorizations have no expiration date.

15

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, 2013. 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.
 
chart-579c70c61bc15e75be8.jpg

 
12/13
12/14
12/15
12/16
12/17
12/18
IDEX Corporation
$
100.00

$
105.40

$
103.74

$
121.95

$
178.70

$
170.97

S&P 500 Index
$
100.00

$
111.39

$
110.58

$
121.13

$
144.65

$
135.63

S&P Midcap 400 Industrials Sector Index
$
100.00

$
100.30

$
96.01

$
122.00

$
149.08

$
125.40

Russell 2000 Index
$
100.00

$
103.53

$
97.62

$
116.63

$
131.96

$
115.89


16

Item 6.        Selected Financial Data.(1) 
 
(Dollars in thousands, except per share data)
2018
 
2017
 
2016
 
2015
 
2014
RESULTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
Net sales
$
2,483,666

 
$
2,287,312

 
$
2,113,043

 
$
2,020,668

 
$
2,147,767

Gross profit
1,117,895

 
1,026,678

 
930,767

 
904,315

 
949,315

Selling, general and administrative expenses
536,724

 
524,940

 
492,398

 
474,156

 
500,719

Loss (gain) on sale of businesses - net
—

 
(9,273
)
 
22,298

 
(18,070
)
 
—

Restructuring expenses
12,083

 
8,455

 
3,674

 
11,239

 
13,672

Operating income
569,088

 
502,556

 
412,397

 
436,990

 
434,924

Other (income) expense - net
(3,985
)
 
2,394

 
(1,731
)
 
3,009

 
589

Interest expense
44,134

 
44,889

 
45,616

 
41,636

 
41,895

Provision for income taxes
118,366

 
118,016

 
97,403

 
109,538

 
113,054

Net income
410,573

 
337,257

 
271,109

 
282,807

 
279,386

Earnings per share: (2)
 
 
 
 
 
 
 
 
 
— basic
$
5.36

 
$
4.41

 
$
3.57

 
$
3.65

 
$
3.48

— diluted
$
5.29

 
$
4.36

 
$
3.53

 
$
3.62

 
$
3.45

Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
— basic
76,412

 
76,232

 
75,803

 
77,126

 
79,715

— diluted
77,563

 
77,333

 
76,758

 
77,972

 
80,728

Year-end shares outstanding
75,953

 
76,694

 
76,441

 
76,535

 
78,766

Cash dividends per share
$
1.72

 
$
1.48

 
$
1.36

 
$
1.28

 
$
1.12

FINANCIAL POSITION
 
 
 
 
 
 
 
 
 
Current assets
$
1,092,532

 
$
1,004,043

 
$
822,721

 
$
862,684

 
$
1,075,791

Current liabilities
364,661

 
360,975

 
309,158

 
309,597

 
411,968

Current ratio
3.0

 
2.8

 
2.7

 
2.8

 
2.6

Operating working capital (3)
451,552

 
406,823

 
396,739

 
370,213

 
366,209

Total assets
$
3,473,857

 
$
3,399,628

 
$
3,154,944

 
$
2,805,443

 
$
2,903,463

Total borrowings
848,818

 
859,046

 
1,015,281

 
840,794

 
859,345

Shareholders’ equity
1,994,640

 
1,886,542

 
1,543,894

 
1,443,291

 
1,486,451

PERFORMANCE MEASURES AND OTHER DATA
 
 
 
 
 
 
 
 
 
Percent of net sales:
 
 
 
 
 
 
 
 
 
Gross profit
45.0
%
 
44.9
%
 
44.0
%
 
44.8
%
 
44.2
%
Selling, general and administrative expenses
21.6
%
 
23.0
%
 
23.3
%
 
23.5
%
 
23.3
%
Operating income
22.9
%
 
22.0
%
 
19.5
%
 
21.6
%
 
20.3
%
Income before income taxes
21.3
%
 
19.9
%
 
17.4
%
 
19.4
%
 
18.3
%
Net income
16.5
%
 
14.7
%
 
12.8
%
 
14.0
%
 
13.0
%
Capital expenditures
$
56,089

 
$
43,858

 
$
38,242

 
$
43,776

 
$
47,997

Depreciation and amortization
77,544

 
84,216

 
86,892

 
78,120

 
76,907

Return on average assets (4)
11.9
%
 
10.3
%
 
9.1
%
 
9.9
%
 
9.7
%
Borrowings as a percent of capitalization (4)
29.9
%
 
31.3
%
 
39.7
%
 
36.8
%
 
36.6
%
Return on average shareholders’ equity (4)
21.2
%
 
19.7
%
 
18.2
%
 
19.3
%
 
18.3
%
Employees at year end
7,352

 
7,167

 
7,158

 
6,801

 
6,712

NON-GAAP MEASURES (5)
 
 
 
 
 
 
 
 
 
EBITDA
$
650,617

 
$
584,378

 
$
501,020

 
$
512,101

 
$
511,242

EBITDA margin
26.2
%
 
25.5
%
 
23.7
%
 
25.3
%
 
23.8
%
Adjusted EBITDA
$
662,700

 
$
583,560

 
$
530,546

 
$
505,270

 
$
524,914

Adjusted EBITDA margin 
26.7
%
 
25.5
%
 
25.1
%
 
25.0
%
 
24.4
%
Adjusted operating income
$
581,171

 
$
501,738

 
$
438,369

 
$
430,159

 
$
448,596

Adjusted operating margin
23.4
%
 
21.9
%
 
20.7
%
 
21.3
%
 
20.9
%
Adjusted net income 
$
419,624

 
$
333,667

 
$
288,373

 
$
277,229

 
$
288,823

Adjusted earnings per share 
$
5.41

 
$
4.31

 
$
3.75

 
$
3.55

 
$
3.57


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

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

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

(4)
Return on average assets is calculated as: Net income / (Current year Total assets + Prior year Total assets) / 2; Borrowings as a percent of capitalization is calculated as: (Long-term borrowings + Short-term borrowings) / (Long-term borrowings + Short-term borrowings + Total shareholders’ equity); Return on average shareholders’ equity is calculated as Net Income / (Current year Total shareholders’ equity + Prior year Total shareholders’ equity) / 2.

(5)
Set forth below are reconciliations of Adjusted operating income, Adjusted net income, Adjusted EPS, EBITDA and Adjusted EBITDA to the comparable measures of net income and operating income, as determined in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”). We have reconciled Adjusted operating income to Operating income; Adjusted net income to Net income; Adjusted EPS to EPS; consolidated EBITDA, segment EBITDA, adjusted EBITDA and adjusted segment EBITDA to net income. The reconciliation of segment EBITDA to net income was performed on a consolidated basis due to the fact that we do not allocate consolidated interest expense or the consolidated provision for income taxes to our segments.

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

EBITDA means earnings before interest, income taxes, depreciation and amortization. Given the acquisitive nature of the Company which results in a higher level of amortization expense from recently acquired businesses, management uses EBITDA as an internal operating metric to provide another representation of the businesses’ performance across our three segments and for enterprise valuation purposes. EBITDA is also used to calculate certain financial covenants, as discussed in Note 6 of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.” In addition, EBITDA has been adjusted for items that are not reflective of ongoing operations, such as gains/losses on the sale of businesses, restructuring expenses and pension settlements to arrive at Adjusted EBITDA. Management believes that Adjusted EBITDA is useful as a performance indicator of ongoing operations. We believe that Adjusted EBITDA is also useful to some investors as an indicator of the strength and performance of the Company and its segments’ ongoing business operations and a way to evaluate and compare operating performance and value companies within our industry. The definition of Adjusted EBITDA used here may differ from that used by other companies.

Also set forth below is a reconciliation of the change in organic net sales to the comparable measure of net sales as determined in accordance with U.S. GAAP, which represents the year-over-year consistency in net sales after excluding the impact from acquisitions/divestitures and foreign currency translation.

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

1. Reconciliations of Consolidated EBITDA
 
 
 
 
 
 
 
 
 
 
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
2015
 
2014
 
(In thousands)
Net income
$
410,573

 
$
337,257

 
$
271,109

 
$
282,807

 
$
279,386

+ Provision for income taxes
118,366

 
118,016

 
97,403

 
109,538

 
113,054

+ Interest expense
44,134

 
44,889

 
45,616

 
41,636

 
41,895

+ Depreciation and amortization
77,544

 
84,216

 
86,892

 
78,120

 
76,907

EBITDA
650,617

 
584,378

 
501,020

 
512,101

 
511,242

+ Restructuring expenses
12,083

 
8,455

 
3,674

 
11,239

 
13,672

+ Loss (gain) on sale of businesses - net
—

 
(9,273
)
 
22,298

 
(18,070
)
 
—

+ Pension settlement
—

 
—

 
3,554

 
—

 
—

Adjusted EBITDA
$
662,700

 
$
583,560

 
$
530,546

 
$
505,270

 
$
524,914

 
 
 
 
 
 
 
 
 
 
Net sales
$
2,483,666

 
$
2,287,312

 
$
2,113,043

 
$
2,020,668

 
$
2,147,767

EBITDA margin
26.2
%
 
25.5
%
 
23.7
%
 
25.3
%
 
23.8
%
Adjusted EBITDA margin
26.7
%
 
25.5
%
 
25.1
%
 
25.0
%
 
24.4
%


2. Reconciliations of Segment EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
FMT
 
HST
 
FSDP
 
FMT
 
HST
 
FSDP
 
FMT
 
HST
 
FSDP
 
(In thousands)
EBITDA
$
296,079

 
$
246,810

 
$
186,538

 
$
263,610

 
$
225,649

 
$
159,610

 
$
242,892

 
$
200,980

 
$
135,400

+ Restructuring expenses
2,458

 
5,904

 
2,184

 
3,374

 
4,696

 
255

 
932

 
1,117

 
1,425

 + Pension settlement
—

 
—

 
—

 
—

 
—

 
—

 
2,032

 
—

 
540

Adjusted EBITDA
$
298,537

 
$
252,714

 
$
188,722

 
$
266,984

 
$
230,345

 
$
159,865

 
$
245,856

 
$
202,097

 
$
137,365

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
951,552

 
$
896,419

 
$
637,028

 
$
880,957

 
$
820,131

 
$
587,533

 
$
849,101

 
$
744,809

 
$
520,009

EBITDA margin
31.1
%
 
27.5
%
 
29.3
%
 
29.9
%
 
27.5
%
 
27.2
%
 
28.6
%
 
27.0
%
 
26.0
%
Adjusted EBITDA margin
31.4
%
 
28.2
%
 
29.6
%
 
30.3
%
 
28.1
%
 
27.2
%
 
29.0
%
 
27.1
%
 
26.4
%


3. Reconciliations of Consolidated Reported-to-Adjusted Operating Income and Margin
 
 
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
2015
 
2014
 
(In thousands)
Operating income
$
569,088

 
$
502,556

 
$
412,397

 
$
436,990

 
$
434,924

 + Restructuring expenses
12,083

 
8,455

 
3,674

 
11,239

 
13,672

 + Loss (gain) on sale of businesses - net
—

 
(9,273
)
 
22,298

 
(18,070
)
 
—

Adjusted operating income
$
581,171

 
$
501,738

 
$
438,369

 
$
430,159

 
$
448,596

 
 
 
 
 
 
 
 
 
 
Net sales
$
2,483,666

 
$
2,287,312

 
$
2,113,043

 
$
2,020,668

 
$
2,147,767

 
 
 
 
 
 
 
 
 
 
Operating margin
22.9
%
 
22.0
%
 
19.5
%
 
21.6
%
 
20.3
%
Adjusted operating margin
23.4
%
 
21.9
%
 
20.7
%
 
21.3
%
 
20.9
%

4. Reconciliations of Segment Reported-to-Adjusted Operating Income and Margin
 
 
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
FMT
 
HST
 
FSDP
 
FMT
 
HST
 
FSDP
 
FMT
 
HST
 
FSDP
 
(In thousands)
Operating income
$
275,060

 
$
205,679

 
$
168,601

 
$
241,030

 
$
179,567

 
$
147,028

 
$
217,500

 
$
153,691

 
$
123,605

 + Restructuring expenses
2,458

 
5,904

 
2,184

 
3,374

 
4,696

 
255

 
932

 
1,117

 
1,425

Adjusted operating income
$
277,518

 
$
211,583

 
$
170,785

 
$
244,404

 
$
184,263

 
$
147,283

 
$
218,432

 
$
154,808

 
$
125,030

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
951,552

 
$
896,419

 
$
637,028

 
$
880,957

 
$
820,131

 
$
587,533

 
$
849,101

 
$
744,809

 
$
520,009

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
28.9
%
 
22.9
%
 
26.5
%
 
27.4
%
 
21.9
%
 
25.0
%
 
25.6
%
 
20.6
%
 
23.8
%
Adjusted operating margin
29.2
%
 
23.6
%
 
26.8
%
 
27.7
%
 
22.5
%
 
25.1
%
 
25.7
%
 
20.8
%
 
24.0
%


5. Reconciliations of Reported-to-Adjusted Net Income and EPS
 
 
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
2015
 
2014
 
(In thousands)
Net income
$
410,573

 
$
337,257

 
$
271,109

 
$
282,807

 
$
279,386

 + Restructuring expenses
12,083

 
8,455

 
3,674

 
11,239

 
13,672

 + Tax impact on restructuring expenses
(3,032
)
 
(2,772
)
 
(1,299
)
 
(3,586
)
 
(4,235
)
 + Loss (gain) on sale of businesses
—

 
(9,273
)
 
22,298

 
(18,070
)
 
—

 + Tax impact on loss (gain) on sale of businesses
—

 
—

 
(9,706
)
 
4,839

 
—

 + Pension settlement
—

 
—

 
3,554

 
—

 
—

 + Tax impact on pension settlement
—

 
—

 
(1,257
)
 
—

 
—

Adjusted net income
$
419,624

 
$
333,667

 
$
288,373

 
$
277,229

 
$
288,823

 
 
 
 
 
 
 
 
 
 
EPS
$
5.29

 
$
4.36

 
$
3.53

 
$
3.62

 
$
3.45

 + Restructuring expenses
0.16

 
0.11

 
0.05

 
0.14

 
0.17

 + Tax impact on restructuring expenses
(0.04
)
 
(0.04
)
 
(0.02
)
 
(0.04
)
 
(0.05
)
 + Loss (gain) on sale of businesses
—

 
(0.12
)
 
0.29

 
(0.23
)
 
—

 + Tax impact on loss (gain) on sale of businesses
—

 
—

 
(0.13
)
 
0.06

 
—

 + Pension settlement
—

 
—

 
0.05

 
—

 
—

 + Tax impact on pension settlement
—

 
—

 
(0.02
)
 
—

 
—

Adjusted EPS
$
5.41

 
$
4.31

 
$
3.75

 
$
3.55

 
$
3.57

 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares
77,563

 
77,333

 
76,758

 
77,972

 
80,728


6. Reconciliations of EBITDA to Net Income (dollars in thousands)
 
 
 
For the Year Ended December 31, 2018
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Operating income (loss)
$
275,060

 
$
205,679

 
$
168,601

 
$
(80,252
)
 
$
569,088

 - Other (income) expense - net
1,351

 
(1,192
)
 
(3,444
)
 
(700
)
 
(3,985
)
 + Depreciation and amortization
22,370

 
39,939

 
14,493

 
742

 
77,544

EBITDA
296,079

 
246,810

 
186,538

 
(78,810
)
 
650,617

 - Interest expense
 
 
 
 
 
 
 
 
44,134

 - Provision for income taxes
 
 
 
 
 
 
 
 
118,366

 - Depreciation and amortization
 
 
 
 
 
 
 
 
77,544

Net income
 
 
 
 
 
 
 
 
$
410,573

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
951,552

 
$
896,419

 
$
637,028

 
$
(1,333
)
 
$
2,483,666

 
 
 
 
 
 
 
 
 
 
Operating margin
28.9
%
 
22.9
%
 
26.5
%
 
n/m

 
22.9
%
EBITDA margin
31.1
%
 
27.5
%
 
29.3
%
 
n/m

 
26.2
%

 
For the Year Ended December 31, 2017
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Operating income (loss)
$
241,030

 
$
179,567

 
$
147,028

 
$
(65,069
)
 
$
502,556

 - Other (income) expense - net
1,007

 
(795
)
 
1,959

 
223

 
2,394

 + Depreciation and amortization
23,587

 
45,287

 
14,541

 
801

 
84,216

EBITDA
263,610

 
225,649

 
159,610

 
(64,491
)
 
584,378

 - Interest expense
 
 
 
 
 
 
 
 
44,889

 - Provision for income taxes
 
 
 
 
 
 
 
 
118,016

 - Depreciation and amortization
 
 
 
 
 
 
 
 
84,216

Net income
 
 
 
 
 
 
 
 
$
337,257

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
880,957

 
$
820,131

 
$
587,533

 
$
(1,309
)
 
$
2,287,312

 
 
 
 
 
 
 
 
 
 
Operating margin
27.4
%
 
21.9
%
 
25.0
%
 
n/m

 
22.0
%
EBITDA margin
29.9
%
 
27.5
%
 
27.2
%
 
n/m

 
25.5
%
 
For the Year Ended December 31, 2016
 
FMT
 
HST
 
FSDP
 
Corporate
 
IDEX
Operating income (loss)
$
217,500

 
$
153,691

 
$
123,605

 
$
(82,399
)
 
$
412,397

 - Other (income) expense - net
3,066

 
(1,991
)
 
161

 
(2,967
)
 
(1,731
)
 + Depreciation and amortization
28,458

 
45,298

 
11,956

 
1,180

 
86,892

EBITDA
242,892

 
200,980

 
135,400

 
(78,252
)
 
501,020

 - Interest expense
 
 
 
 
 
 
 
 
45,616

 - Provision for income taxes
 
 
 
 
 
 
 
 
97,403

 - Depreciation and amortization
 
 
 
 
 
 
 
 
86,892

Net income
 
 
 
 
 
 
 
 
$
271,109

 
 
 
 
 
 
 
 
 
 
Net sales (eliminations)
$
849,101

 
$
744,809

 
$
520,009

 
$
(876
)
 
$
2,113,043

 
 
 
 
 
 
 
 
 
 
Operating margin
25.6
%
 
20.6
%
 
23.8
%
 
n/m

 
19.5
%
EBITDA margin
28.6
%
 
27.0
%
 
26.0
%
 
n/m

 
23.7
%

7. Reconciliation of the Change in Net Sales to Net Organic Sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Year Ended December 31,
 
2018
 
2017
 
2016
 
FMT
 
HST
 
FSDP
 
IDEX
 
FMT
 
HST
 
FSDP
 
IDEX
 
FMT
 
HST
 
FSDP
 
IDEX
Change in net sales
8
 %
 
9
%
 
8
%
 
9
%
 
4
 %
 
10
 %
 
13
%
 
8
%
 
(1
)%
 
1
 %
 
23
 %
 
5
 %
 - Net impact from acquisitions/divestitures
(2
)%
 
2
%
 
—
%
 
—
%
 
(2
)%
 
3
 %
 
9
%
 
2
%
 
1
 %
 
3
 %
 
27
 %
 
7
 %
 - Impact from FX
1
 %
 
1
%
 
1
%
 
1
%
 
—
 %
 
(1
)%
 
—
%
 
—
%
 
(1
)%
 
(1
)%
 
(1
)%
 
(1
)%
Change in organic net sales
9
 %
 
6
%
 
7
%
 
8
%
 
6
 %
 
8
 %
 
4
%
 
6
%
 
(1
)%
 
(1
)%
 
(3
)%
 
(1
)%

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



17

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

2018 Overview and Outlook

IDEX is an applied solutions company specializing in the manufacture of fluid and metering technologies, health and science technologies and fire, safety and other diversified products built to customers’ specifications. IDEX’s products are sold in niche markets across a wide range of industries throughout the world. Accordingly, IDEX’s businesses are affected by levels of industrial activity and economic conditions in the U.S. and in other countries where it does business and by the relationship of the U.S. dollar to other currencies. Levels of capacity utilization and capital spending in certain industries and overall industrial activity are important factors that influence the demand for IDEX’s 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 13 platforms, where we focus on organic growth and strategic acquisitions. Each of our 13 platforms is also a reporting unit that we annually test goodwill for impairment.

The Fluid & Metering Technologies segment designs, produces and distributes positive displacement pumps, flow meters, injectors and other fluid-handling pump modules and systems and provides flow monitoring and other services for the food, chemical, general industrial, water and wastewater, agriculture and energy industries. The Fluid & Metering Technologies segment contains the Energy platform (comprised of Corken, Liquid Controls, SAMPI and Toptech), the Valves platform (comprised of Alfa Valvole, Richter and Aegis), the Water platform (comprised of Pulsafeeder, OBL, Knight, ADS, Trebor and iPEK), the Pumps platform (comprised of Viking and Warren Rupp) and the Agriculture platform (comprised of Banjo).

The Health & Science Technologies segment designs, produces and distributes a wide range of precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems used in beverage, food processing, pharmaceutical and cosmetics, pneumatic components and sealing solutions, including very high precision, low-flow rate pumping solutions required in analytical instrumentation, clinical diagnostics and drug discovery, high performance molded and extruded sealing components, biocompatible medical devices and implantables, air compressors used in medical, dental and industrial applications, optical components and coatings for applications in the fields of scientific research, defense, biotechnology, aerospace, telecommunications and electronics manufacturing, laboratory and commercial equipment used in the production of micro and nano scale materials, precision photonic solutions used in life sciences, research and defense markets and precision gear and peristaltic pump technologies that meet exacting original equipment manufacturer specifications. The Health & Science Technologies segment contains the Scientific Fluidics & Optics platform (comprised of Eastern Plastics, Rheodyne, Sapphire Engineering, Upchurch Scientific, ERC, CiDRA Precision Services, thinXXS, CVI Melles Griot, Semrock, AT Films and FLI), the Sealing Solutions platform (comprised of Precision Polymer Engineering, FTL Seals Technology, Novotema and SFC Koenig) the Gast platform, the Micropump platform and the Material Processing Technologies platform (comprised of Quadro, Fitzpatrick, Microfluidics and Matcon).

The Fire & Safety/Diversified Products segment designs, produces and develops firefighting pumps, valves and controls, rescue tools, lifting bags and other components and systems for the fire and rescue industry, engineered stainless steel banding and clamping devices used in a variety of industrial and commercial applications and precision equipment for dispensing, metering, and mixing colorants and paints used in a variety of retail and commercial businesses around the world. The Fire & Safety/Diversified Products segment is comprised of the Fire & Safety platform (comprised of Class 1, Hale, Akron Brass, AWG Fittings, Godiva, Dinglee, Hurst Jaws of Life, Lukas and Vetter), the Band-It platform and the Dispensing platform.

Our 2018 financial results were as follows:

•
Sales of $2.5 billion increased 9%, reflecting an 8% increase in organic sales and a 1% increase due to foreign currency translation.
•
Operating income of $569.1 million was up 13% and operating margin of 22.9% was up 90 basis points from the prior year.
•
Net income increased 22% to $410.6 million.
•
Diluted EPS of $5.29 increased $0.93, or 21%, compared to 2017.

Our 2018 financial results, adjusted for $12.1 million of restructuring expense, compared to our 2017 financial results, adjusted for $8.5 million of restructuring expense and a $9.3 million gain on sale of a business, were as follows (these non-GAAP measures have been reconciled to U.S. GAAP measures in Item 6, “Selected Financial Data”):

18

•
Adjusted operating income of $581.2 million was up 16% and adjusted operating margin of 23.4% was up 150 basis points from the prior year.
•
Adjusted net income increased 26% to $419.6 million.
•
Adjusted EPS of $5.41 was 26% higher than prior year adjusted EPS of $4.31.

Although trade tensions persist and the geopolitical environment remains uncertain, we are confident in our outlook given our market leading positions in our diversified portfolio and our track record of strong execution in volatile times. Consistent with our long-term strategic objective to grow faster than underlying market growth, we are projecting 4 to 5 percent organic revenue growth in 2019 and full year 2019 EPS is expected to be in the range of $5.60 to $5.80.

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, 2018. 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 or divested businesses during the first twelve months of ownership or divestiture. 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 and divestitures because they can obscure underlying business trends and make comparisons of long-term performance difficult due to the varying nature, size and number of transactions from period to period and between the Company and its peers.

Performance in 2018 Compared with 2017
(In thousands)
2018
 
2017
 
Change
 
Net sales
$
2,483,666

 
$
2,287,312

 
9
%
 
Operating income
569,088

 
502,556

 
13
%
 
Operating margin
22.9
%
 
22.0
%
 
90

bps

Sales in 2018 were $2.5 billion, a 9% increase from last year. This increase reflects an 8% increase in organic sales and a 1% favorable impact from foreign currency translation. Sales to customers outside the U.S. represented approximately 51% of total sales in 2018 compared with 49% in 2017.

In 2018, Fluid & Metering Technologies contributed 38% of sales and 42% of total segment operating income; Health & Science Technologies contributed 36% of sales and 32% of total segment operating income; and Fire & Safety/Diversified Products contributed 26% of sales and 26% of total segment operating income.

Gross profit of $1.1 billion in 2018 increased $91.2 million, or 9%, from 2017, while gross margin increased 10 basis points to 45.0% in 2018 from 44.9% in 2017. The increase in gross profit and margin is primarily a result of productivity initiatives and volume leverage, partially offset by higher engineering costs.

Selling, general and administrative (“SG&A”) expenses increased to $536.7 million in 2018 from $524.9 million in 2017. The $11.8 million increase is mainly attributable to a stamp duty tax in Switzerland associated with the restructuring of intercompany loans and higher stock compensation. As a percentage of sales, SG&A expenses were 21.6% for 2018 and 23.0% for 2017.

In 2017, the Company divested its Faure Herman business for a pre-tax gain of $9.3 million.

In 2018 and 2017, the Company incurred pre-tax restructuring expenses totaling $12.1 million and $8.5 million, respectively, as part of initiatives that support the implementation of key strategic efforts designed to facilitate long-term, sustainable growth through cost reduction actions primarily consisting of employee reductions and facility rationalization.

19

Operating income of $569.1 million in 2018 increased from $502.6 million in 2017, primarily due to volume leverage, partially offset by the gain on the sale of a business in 2017 and higher restructuring costs in 2018. Operating margin of 22.9% in 2018 was up 90 basis points from 22.0% in 2017 primarily due to higher volume and productivity initiatives, partially offset by the gain on the sale of a business in 2017 and higher restructuring costs in 2018.

Other (income) expense - net changed by $6.4 million, from expense of $2.4 million in 2017 to income of $4.0 million in 2018 mainly due to a foreign currency transaction gain on intercompany loans in 2018.

Interest expense decreased to $44.1 million in 2018 from $44.9 million in 2017. The decrease was primarily due to slightly lower borrowings on the revolving credit facility during 2018 compared to 2017.

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 $118.4 million in 2018 compared to $118.0 million in 2017. The effective tax rate decreased to 22.4% in 2018 compared to 25.9% in 2017 due to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), including the one-time Transition Tax incurred in 2017 on the mandatory deemed repatriation of foreign earnings, the 14% decrease in the U.S. statutory income tax rate and the introduction of the Foreign-Derived Intangible Income (“FDII”) deduction, as well as the excess tax benefits related to share-based compensation. These amounts were offset by the removal of the domestic production activities deduction, the new Global Intangible Low-Taxed Income (“GILTI”) provision, increased limitation on the deductibility of executive compensation and the mix of global pre-tax income among jurisdictions.

Net income for the year of $410.6 million increased from $337.3 million in 2017. Diluted earnings per share in 2018 of $5.29 increased $0.93 from $4.36 in 2017.

Fluid & Metering Technologies Segment
(In thousands)
2018
 
2017
 
Change
 
Net sales
$
951,552

 
$
880,957

 
8
%
 
Operating income
275,060

 
241,030

 
14
%
 
Operating margin
28.9
%
 
27.4
%
 
150

bps

Sales of $951.6 million increased $70.6 million, or 8%, in 2018 compared with 2017. This increase reflected a 9% increase in organic sales and a 1% favorable impact from foreign currency translation, partially offset by a 2% decline from a divestiture (Faure Herman - October 2017). In 2018, sales were up 5% domestically and 12% internationally. Sales to customers outside the U.S. were approximately 43% of total segment sales in 2018 compared with 42% in 2017.

Sales within our Pumps platform increased compared to 2017 due to strength in the North American industrial distribution market as well as strength in the oil and gas end market and lease automated custody transfer (“LACT”) products. Sales within the Water platform increased compared to 2017 due to strong international sales and increased project demand. Sales within our Agriculture platform increased year over year due to broad based demand across both OEM and distribution channels in North America and Europe. Sales within the Valves platform increased over 2017 primarily due to strong demand within the chemical end market in Europe and Asia. Sales within our Energy platform decreased slightly compared to 2017 primarily as a result of the divestiture of our Faure Herman business in October 2017, partially offset by strong truck builds and project gains in the LPG end market.

Operating income and operating margin of $275.1 million and 28.9%, respectively, were higher than the $241.0 million and 27.4%, respectively, recorded in 2017, primarily due to higher volume and productivity initiatives, partially offset by higher restructuring expenses in 2018 and the divestiture in 2017.

Health & Science Technologies Segment
(In thousands)
2018
 
2017
 
Change
 
Net sales
$
896,419

 
$
820,131

 
9
%
 
Operating income
205,679

 
179,567

 
15
%
 
Operating margin
22.9
%
 
21.9
%
 
100

bps

Sales of $896.4 million increased $76.3 million, or 9%, in 2018 compared with 2017. This increase reflected a 6% increase in organic sales, a 2% increase from acquisitions (FLI - July 2018 and thinXXS - December 2017) and a 1% favorable impact

20

from foreign currency translation. In 2018, sales increased 7% domestically and 11% internationally. Sales to customers outside the U.S. were approximately 56% of total segment sales in 2018 and 55% in 2017.

Sales within our Scientific Fluidics & Optics platform increased compared to 2017 due to new product introductions, market share gains, strong demand across our end markets, including IVD, biotechnology, semiconductor and defense and the Finger Lakes Instrumentation and thinXXS acquisitions. Sales within our Material Processing Technologies platform increased compared to 2017 primarily due to the timing of several large projects in 2018 and continued demand within the pharmaceutical end market in Asia, partially offset by the impact of strategic changes in product focus which resulted in discontinued product offerings in 2017. Sales within our Sealing Solutions platform increased compared to 2017 due to the extremely strong global demand in the semiconductor end market and strength in the energy, automotive and industrial end markets. Sales in our Gast platform increased compared to 2017 primarily due to the impact of OEM tailwinds and higher distribution volume as well as new product introductions. Sales within our Micropump platform increased compared to 2017 due to increasing demand in the printing end market.

Operating income and operating margin of $205.7 million and 22.9%, respectively, in 2018 were up from $179.6 million and 21.9%, respectively, in 2017, primarily due to higher volume and productivity initiatives, partially offset by higher restructuring expenses in the current year related to site consolidations.

Fire & Safety/Diversified Products Segment
(In thousands)
2018
 
2017
 
Change
 
Net sales
$
637,028

 
$
587,533

 
8
%
 
Operating income
168,601

 
147,028

 
15
%
 
Operating margin
26.5
%
 
25.0
%
 
150

bps

Sales of $637.0 million increased $49.5 million, or 8%, in 2018 compared with 2017. This increase reflected a 7% increase in organic sales and a 1% favorable impact from foreign currency translation. In 2018, sales increased 6% domestically and 11% internationally. Sales to customers outside the U.S. were approximately 53% of total segment sales in 2018 compared with 52% in 2017.

Sales within our Dispensing platform increased compared to 2017 due to strong global demand led by the U.S. and Asia. Sales increased in our Band-It platform compared to 2017 due to market share gain across all global regions, strength in the energy, automotive and industrial end markets and several large project gains. Sales within our Fire & Safety platform increased compared to 2017 primarily due to OEM and distribution strength as well as strong demand for rescue tools across all geographies.

Operating income of $168.6 million and operating margin of 26.5%, respectively, were higher than the $147.0 million and 25.0%, respectively, in 2017, primarily due to increased volume and productivity initiatives, partially offset by higher restructuring expenses in 2018.

Performance in 2017 Compared with 2016
(In thousands)
2017
 
2016
 
Change
 
Net sales
$
2,287,312

 
$
2,113,043

 
8
%
 
Operating income
502,556

 
412,397

 
22
%
 
Operating margin
22.0
%
 
19.5
%
 
250

bps

Sales in 2017 were $2.3 billion, an 8% increase from 2016. This increase reflects a 6% increase in organic sales and a 2% increase from acquisitions/divestitures (Acquisitions: thinXXS - December 2017; SFC Koenig - September 2016; AWG Fittings - July 2016 and Akron Brass - March 2016 / Divestitures: Faure Herman - October 2017; CVI Korea - December 2016; IETG - October 2016; CVI Japan - September 2016 and Hydra-Stop - July 2016). Sales to customers outside the U.S. represented approximately 49% of total sales in 2017 compared with 50% in 2016.

In 2017, Fluid & Metering Technologies contributed 38% of sales and 42% of total segment operating income; Health & Science Technologies contributed 36% of sales and 32% of total segment operating income; and Fire & Safety/Diversified Products contributed 26% of sales and 26% of total segment operating income.


21

Gross profit of $1.0 billion in 2017 increased $95.9 million, or 10%, from 2016, while gross margin increased 90 basis points to 44.9% in 2017 from 44.0% in 2016. The increase in gross profit and margin is primarily a result of increased sales volume and the dilutive impact in the prior year attributable to $14.7 million of fair value inventory step-up charges from 2016 acquisitions.
 
SG&A expenses increased to $524.9 million in 2017 from $492.4 million in 2016. The $32.5 million increase is mainly attributable to $15.2 million of net incremental impact from acquisitions and divestitures as well as higher variable compensation and stock compensation expense. As a percentage of sales, SG&A expenses were 23.0% for 2017 and 23.3% for 2016.

In 2017, the Company divested its Faure Herman business for a pre-tax gain of $9.3 million. In 2016, the Company divested four businesses during the year (Hydra-Stop - July 2016; CVI Japan - September 2016; IETG - October 2016; and CVI Korea - December 2016) for a pre-tax loss-net of $22.3 million.

In 2017 and 2016, the Company incurred pre-tax restructuring expenses totaling $8.5 million and $3.7 million, respectively, as part of initiatives that support the implementation of key strategic efforts designed to facilitate long-term, sustainable growth through cost reduction actions primarily consisting of employee reductions and facility rationalization.

Operating income of $502.6 million in 2017 increased from $412.4 million in 2016, primarily due to a gain on a divestiture in 2017 compared to a net loss on four divestitures in 2016, higher sales volume and the $14.7 million of fair value inventory step- up charges from 2016 acquisitions, partially offset by higher restructuring costs in 2017 and overall higher SG&A costs in 2017 due to higher variable and share-based compensation as well as outside consulting costs. Operating margin of 22.0% in 2017 was up 250 basis points from 19.5% in 2016 primarily due to the gain on the sale of a business in 2017 compared to a net loss on the sale of businesses in 2016, the dilutive impact in the prior year due to $14.7 million of fair value inventory step-up charges from 2016 acquisitions, as well as higher volume and productivity initiatives.

Other (income) expense - net changed by $4.1 million, from income of $1.7 million in 2016 to expense of $2.4 million in 2017 mainly due to a $4.7 million foreign exchange gain on intercompany loans in the prior year that did not repeat in 2017 due to the fact that the Company entered into foreign currency exchange contracts to minimize the earnings impact associated with these intercompany loans.

Interest expense decreased to $44.9 million in 2017 from $45.6 million in 2016. The decrease was primarily due to slightly lower borrowings in 2017 compared with 2016.

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 $118.0 million in 2017 compared to $97.4 million in 2016. The effective tax rate decreased to 25.9% in 2017 compared to 26.4% in 2016 due to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), a change in the permanent reinvestment assertion related to certain foreign subsidiaries as well as the incurrence of certain foreign income withholding taxes in the prior year. These amounts were offset by the prior year tax benefits on the divestitures of CVI Korea and CVI Japan, certain return-to-provision adjustments, a partial change in the assertion of permanent reinvestment of certain foreign earnings, as well as the mix of global pre-tax income among jurisdictions.

Net income for the year of $337.3 million increased from $271.1 million in 2016. Diluted earnings per share in 2017 of $4.36 increased $0.83 from $3.53 in 2016.

Fluid & Metering Technologies Segment
(In thousands)
2017
 
2016
 
Change
 
Net sales
$
880,957

 
$
849,101

 
4
%
 
Operating income
241,030

 
217,500

 
11
%
 
Operating margin
27.4
%
 
25.6
%
 
180

bps

Sales of $881.0 million increased $31.9 million, or 4%, in 2017 compared with 2016. This increase reflected a 6% increase in organic sales and a 2% decline from divestitures (Faure Herman - October 2017; IETG - October 2016; and Hydra-Stop - July 2016). In 2017, sales were up 7% domestically and down 1% internationally. Sales to customers outside the U.S. were approximately 42% of total segment sales in 2017 compared with 44% in 2016.

Sales within our Energy platform decreased compared to 2016 primarily due to the impact of the 2017 divestiture as well as a large, non-recurring project in 2016 and weakness in the midstream oil and gas markets, partially offset by continued strength within the aviation market, increased market share in LPG mobile and increasing truck builds. Sales within our Pumps platform

22

increased compared to 2016 due to strength in the upstream oil market and the improving economy as well as a strong U.S. distribution channel. Sales within the Water platform decreased slightly compared to 2016 primarily due to the Hydra-Stop and IETG divestitures, partially offset by increased municipal spending and share gain from new product development. Sales within our Agriculture platform increased year over year due to increased demand across both OEM and distribution channels as well as pre-season order strength in the fourth quarter of 2017. Sales within the Valves platform increased over 2016 as a result of strong global industrial markets as well as an uptick in chemical markets.

Operating income and operating margin of $241.0 million and 27.4%, respectively, were higher than the $217.5 million and 25.6%, respectively, recorded in 2016, primarily due to productivity initiatives and higher volume.

Health & Science Technologies Segment
(In thousands)
2017
 
2016
 
Change
 
Net sales
$
820,131

 
$
744,809

 
10
%
 
Operating income (loss)
179,567

 
153,691

 
17
%
 
Operating margin
21.9
%
 
20.6
%
 
130

bps

Sales of $820.1 million increased $75.3 million, or 10%, in 2017 compared with 2016. This increase reflected an 8% increase in organic sales, a 3% increase from acquisitions / divestitures (Acquisitions: thinXXS - December 2017 and SFC Koenig - September 2016 / Divestitures: CVI Korea - December 2016 and CVI Japan - September 2016) and 1% of favorable foreign currency translation. In 2017, sales increased 10% both domestically and internationally. Sales to customers outside the U.S. were approximately 55% of total segment sales in both 2017 and 2016.

Sales within our Scientific Fluidics & Optics platform increased compared to 2016 due to strong demand in all primary end markets, including analytical instrumentation, in-vitro diagnostics and biotechnology, DNA sequencing and semiconductor, partially offset by the impact of the CVI Japan and CVI Korea divestitures in 2016. Sales within our Material Processing Technologies platform were relatively flat compared to the prior year primarily due to the impact of strategic changes in product focus which resulted in discontinued products, offset by global strength in the food and pharma end markets and a strong project funnel. Sales within our Sealing Solutions platform increased significantly compared to 2016 due to the full year impact of the SFC Koenig acquisition in 2016 as well as strength in the semiconductor market and an uptick in the oil and gas, mining and automotive markets. Sales in our Gast platform remained relatively flat year over year primarily due to the impact of OEM headwinds during the first half of 2017 offset by increasing demand in industrial and dental markets. Sales within our Micropump platform increased year over year due to solid demand in the North American industrial markets.

Operating income and operating margin of $179.6 million and 21.9%, respectively, in 2017 were up from $153.7 million and 20.6%, respectively, in 2016, primarily due to higher volume and the dilutive impact of the inventory step-up charge related to the SFC Koenig acquisition in the prior year, partially offset by higher restructuring expenses in 2017, costs associated with site consolidations within the Material Processing Technologies and the Scientific Fluidics & Optics platforms as well as additional engineering investments and operational challenges as a result of the strong growth within the segment.

Fire & Safety/Diversified Products Segment
(In thousands)
2017
 
2016
 
Change
 
Net sales
$
587,533

 
$
520,009

 
13
%
 
Operating income
147,028

 
123,605

 
19
%
 
Operating margin
25.0
%
 
23.8
%
 
120

bps

Sales of $587.5 million increased $67.5 million, or 13.0%, in 2017 compared with 2016. This increase reflected a 4% increase in organic sales and a 9% decline due to acquisitions (AWG Fittings - July 2016 and Akron Brass - March 2016). In 2017, sales increased 9% domestically and 17% internationally. Sales to customers outside the U.S. were approximately 52% of total segment sales in 2017 compared with 51% in 2016.

Sales within our Dispensing platform decreased slightly compared to 2016 due to declining markets in Latin America and U.S. retail, partially offset by growing strength in Europe and Asia. Sales increased in our Band-It platform compared to the prior year as a result of rebounding energy markets as well as strength across the transportation and industrial markets and increasing demand in Asia and Latin America. Sales within our Fire & Safety platform increased significantly compared to 2016 primarily due to the full year impact of the prior year acquisitions as well as strength in municipal and North American OEM markets.

23

Operating income of $147.0 million and operating margin of 25.0% were higher than the $123.6 million and 23.8%, respectively, in 2016, primarily due to higher volume and productivity, as well as the full year impact of the Akron Brass and AWG Fittings acquisitions on 2017 financial results and the inclusion of $7.5 million of fair value inventory step-up charges related to the acquisitions in the prior year period.

Liquidity and Capital Resources

Operating Activities

Cash flows from operating activities increased $46.6 million, or 11%, to $479.3 million in 2018, primarily due to higher net income in 2018, partially offset by investments in working capital to support long-term growth. At December 31, 2018, working capital was $727.9 million and the Company’s current ratio was 3.0 to 1. At December 31, 2018, the Company’s cash and cash equivalents totaled $466.4 million, of which $326.5 million was held outside of the United States.

Investing Activities

Cash flows used in investing activities increased $26.7 million to $81.4 million in 2018, primarily due to $12.2 million of higher capital expenditures in 2018, $4.0 million spent on the purchase of intellectual property assets from Phantom Controls, Inc. (“Phantom”), $5.6 million of lower proceeds from the disposal of fixed assets in 2018, $21.8 million of proceeds from the sale of a business in 2017 which did not reoccur in 2018 and lower spending of $18.0 million on acquisitions in 2018 compared to 2017.

Cash flows from operations were more than adequate to fund capital expenditures of $56.1 million and $43.9 million in 2018 and 2017, respectively. Capital expenditures were generally for machinery and equipment that supported growth, improved productivity, tooling, business system technology, replacement of equipment and investments in 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.

Financing Activities

Cash flows used in financing activities increased $12.6 million to $290.0 million in 2018, primarily due to $16.3 of higher dividend payments and $144.9 million of higher purchases of common stock, partially offset by $156.3 million of lower repayments under the revolving credit facility (net of borrowings).

On June 13, 2016, the Company completed a private placement of a $100 million aggregate principal amount of 3.20% Senior Notes due June 13, 2023 and a $100 million aggregate principal amount of 3.37% Senior Notes due June 13, 2025 (collectively, the “Notes”) pursuant to a Note Purchase Agreement, dated June 13, 2016 (the “Purchase Agreement”). Each series of Notes bears interest at the stated amount per annum, which is payable semi-annually in arrears on each June 13th and December 13th. The Notes are unsecured obligations of the Company and rank pari passu in right of payment with all of the Company’s other unsecured, unsubordinated debt. The Company may at any time prepay all, or any portion of the Notes; provided that such portion is greater than 5% of the aggregate principal amount of the Notes then outstanding. In the event of a prepayment, the Company will pay an amount equal to par plus accrued interest plus a make-whole amount. In addition, the Company may repurchase the Notes by making an offer to all holders of the Notes, subject to certain conditions.

The 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, 2018, there was no balance outstanding under the Revolving Facility and $8.8 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Facility at December 31, 2018 of $691.2 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, 2018, the applicable margin was 1.10%. Interest is payable (a) in the case of base rate loans, quarterly, and (b) in the case of LIBOR rate loans, on the maturity date of the borrowing, or quarterly from the effective date for borrowings exceeding three months. The 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.

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 $346.2 million, after deducting a $0.9 million issuance discount, a $2.3 million underwriting commission and $0.6 million of 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

24

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 of 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.

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 $295.7 million, after deducting a $1.6 million issuance discount, a $1.9 million underwriting commission and $0.8 million of 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 N