Item 8. Financial Statements and Supplementary Data.

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Item 8. Financial Statements and Supplementary Data.

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IDEX CORPORATION

CONSOLIDATED BALANCE SHEETS


	As of December 31,
	2011			2010
	(In thousands except share and per share amounts)
ASSETS
Current assets
Cash and cash equivalents	$	230,259		$	235,136
Receivables — net		252,845			213,553
Inventories		254,258			196,546
Other current assets		51,799			47,523

Total current assets		789,161			692,758
Property, plant and equipment — net		213,717			188,562
Goodwill		1,431,366			1,207,001
Intangible assets — net		382,222			281,392
Other noncurrent assets		19,641			11,982

Total assets	$	2,836,107		$	2,381,695

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable	$	110,977		$	104,055
Accrued expenses		130,696			117,879
Short-term borrowings		2,444			119,445
Dividends payable		14,161			12,289

Total current liabilities		258,278			353,668
Long-term borrowings		806,366			408,450
Deferred income taxes		142,482			148,534
Other noncurrent liabilities		115,846			95,383

Total liabilities		1,322,972			1,006,035

Commitments and contingencies (Note 8)
Shareholders’ equity
Preferred stock:
Authorized: 5,000,000 shares, $.01 per share par value; Issued: none		—			—
Common stock:
Authorized: 150,000,000 shares, $.01 per share par value; Issued: 85,968,630 shares at December 31, 2011 and 84,636,668 shares at December 31, 2010		860			846
Additional paid-in capital		490,128			441,271
Retained earnings		1,142,412			1,005,040
Treasury stock at cost: 2,734,747 shares at December 31, 2011 and 2,566,985 shares at December 31, 2010		(64,796	)		(58,788	)
Accumulated other comprehensive loss		(55,469	)		(12,709	)

Total shareholders’ equity		1,513,135			1,375,660

Total liabilities and shareholders’ equity	$	2,836,107		$	2,381,695

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS


	For the Years Ended December 31,
	2011			2010			2009
	(In thousands except per share amounts)
Net sales	$	1,838,451		$	1,513,073		$	1,329,661
Cost of sales		1,099,778			894,590			807,275

Gross profit		738,673			618,483			522,386
Selling, general and administrative expenses		421,703			358,272			325,453
Restructuring expenses		12,314			11,095			12,079

Operating income		304,656			249,116			184,854
Other income (expense) — net		(1,443	)		(1,092	)		1,151
Interest expense		29,332			16,150			17,178

Income before income taxes		273,881			231,874			168,827
Provision for income taxes		80,024			74,774			55,436

Net income	$	193,857		$	157,100		$	113,391

Earnings per common share:
Basic earnings per common share	$	2.34		$	1.93		$	1.41

Diluted earnings per common share	$	2.32		$	1.90		$	1.40

Share data:
Basic weighted average common shares outstanding		82,145			80,466			79,716
Diluted weighted average common shares outstanding		83,543			81,983			80,727

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


	Common Stock and Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)									Treasury Stock			Total Shareholders’ Equity
			Cumulative Translation Adjustment			Retirement Benefits Adjustments			Cumulative Unrealized Loss on Derivatives
	(In thousands except share and per share amounts)
Balance, December 31, 2008	$	377,982		$	822,286		$	40,204		$	(33,654	)	$	(6,642	)	$	(55,393	)	$	1,144,783

Net income		—			113,391			—			—			—			—			113,391
Other comprehensive income, net of tax:
Cumulative translation adjustment		—			—			19,195			—			—			—			19,195
Net change in retirement obligations (net of tax expense of $3.5 million)		—			—			—			6,396			—			—			6,396
Net change on derivatives designated as cash flow hedges (net of tax benefit of $0.1 million)		—			—			—			—			(71	)		—			(71	)

Other comprehensive income		—			—			—			—			—			—			25,520

Comprehensive income		—			—			—			—			—			—			138,911

Issuance of 744,827 shares of common stock from issuance of unvested shares, exercise of stock options and deferred compensation plans		8,713			—			—			—			—			—			8,713
Share-based compensation		15,710			—			—			—			—			—			15,710
Unvested shares surrendered for tax withholding		—			—			—			—			—			(1,313	)		(1,313	)
Cash dividends declared — $.48 per common share outstanding		—			(38,700	)		—			—			—			—			(38,700	)

Balance, December 31, 2009	$	402,405		$	896,977		$	59,399		$	(27,258	)	$	(6,713	)	$	(56,706	)	$	1,268,104

Net income		—			157,100			—			—			—			—			157,100
Other comprehensive income, net of tax:
Cumulative translation adjustment		—			—			(21,097	)		—			—			—			(21,097	)
Net change in retirement obligations (net of tax benefit of $1.7 million)		—			—			—			(2,830	)		—			—			(2,830	)
Net change on derivatives designated as cash flow hedges (net of tax benefit of $11.9 million)		—			—			—			—			(14,210	)		—			(14,210	)

Other comprehensive loss		—			—			—			—			—			—			(38,137	)

Comprehensive income		—			—			—			—			—			—			118,963

Issuance of 1,222,274 shares of common stock from issuance of unvested shares, exercise of stock options and deferred compensation plans		22,354			—			—			—			—			—			22,354
Share-based compensation		17,358			—			—			—			—			—			17,358
Unvested shares surrendered for tax withholding		—			—			—			—			—			(2,082	)		(2,082	)
Cash dividends declared — $.60 per common share outstanding		—			(49,037	)		—			—			—			—			(49,037	)

Balance, December 31, 2010	$	442,117		$	1,005,040		$	38,302		$	(30,088	)	$	(20,923	)	$	(58,788	)	$	1,375,660

Net income		—			193,857			—			—			—			—			193,857
Other comprehensive income, net of tax:
Cumulative translation adjustment		—			—			(14,108	)		—			—			—			(14,108	)
Net change in retirement obligations (net of tax benefit of $4.2 million)		—			—			—			(8,398	)		—			—			(8,398	)
Net change on derivatives designated as cash flow hedges (net of tax benefit of $12.5 million)		—			—			—			—			(20,254	)		—			(20,254	)

Other comprehensive loss		—			—			—			—			—			—			(42,760	)

Comprehensive income		—			—			—			—			—			—			151,097

Issuance of 1,596,145 shares of common stock from issuance of unvested shares, exercise of stock options and deferred compensation plans		37,621			—			—			—			—			—			37,621
Share-based compensation		11,250			—			—			—			—			—			11,250
Unvested shares surrendered for tax withholding		—			—			—			—			—			(6,008	)		(6,008	)
Cash dividends declared — $.68 per common share outstanding		—			(56,485	)		—			—			—			—			(56,485	)

Balance, December 31, 2011	$	490,988		$	1,142,412		$	24,194		$	(38,486	)	$	(41,177	)	$	(64,796	)	$	1,513,135

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	For The Years Ended December 31,
	2011			2010			2009
	(In thousands)
Cash flows from operating activities
Net income	$	193,857		$	157,100		$	113,391
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (gain) on sale of fixed assets		(2,831	)		12			447
Depreciation and amortization		36,882			32,367			31,850
Amortization of intangible assets		35,504			25,741			24,496
Amortization of debt issuance expenses		1,263			547			308
Share-based compensation expense		12,076			17,358			15,710
Deferred income taxes		(3,576	)		(7,336	)		1,081
Excess tax benefit from share-based compensation		(5,298	)		(3,457	)		(2,762	)
Forward starting interest rate contract settlement		(38,707	)		(30,970	)		—
Changes in (net of the effect from acquisitions):
Receivables		(16,488	)		(22,162	)		26,069
Inventories		(607	)		(26,651	)		23,149
Trade accounts payable		(8,645	)		21,432			(16,310	)
Accrued expenses		7,411			17,941			(14,294	)
Other — net		6,400			2,555			9,397

Net cash flows provided by operating activities		217,241			184,477			212,532
Cash flows from investing activities
Cash purchases of property, plant and equipment		(35,175	)		(31,740	)		(25,059	)
Acquisition of businesses, net of cash acquired		(443,634	)		(91,286	)		—
Proceeds from fixed asset disposals		12,651			720			3,582
Other — net		(3,379	)		—			1,860

Net cash flows used in investing activities		(469,537	)		(122,306	)		(19,617	)
Cash flows from financing activities
Borrowings under credit facilities for acquisitions		365,000			53,866			—
Borrowings under revolving facilities		471,222			—			—
Borrowings under credit facilities and term loan		1,890			7,685			70,114
Proceeds from issuance of 4.2% Senior Notes		349,125			—			—
Proceeds from issuance of 2.58% Senior Euro Notes		—			96,762			—
Payments under revolving facilities, credit facilities and term loan		(906,115	)		(331,632	)		(225,604	)
Proceeds from issuance of 4.5% Senior Notes		—			298,427			—
Debt issuance costs		(5,451	)		(2,685	)		—
Dividends paid		(54,613	)		(46,334	)		(38,637	)
Proceeds from stock option exercises		33,064			18,057			7,694
Excess tax benefit from share-based compensation		5,298			3,457			2,762
Unvested shares surrendered for tax withholding		(6,008	)		(2,082	)		(1,313	)

Net cash flows provided by (used in) financing activities		253,412			95,521			(184,984	)
Effect of exchange rate changes on cash and cash equivalents		(5,993	)		3,918			4,242

Net increase (decrease) in cash		(4,877	)		161,610			12,173
Cash and cash equivalents at beginning of year		235,136			73,526			61,353

Cash and cash equivalents at end of period	$	230,259		$	235,136		$	73,526

Supplemental cash flow information
Cash paid for:
Interest	$	27,749		$	16,776		$	17,311
Income taxes		66,087			73,867			50,796
Significant non-cash activities:
Contingent consideration for acquisition		3,000			—			—
Debt acquired with acquisition of business		1,400			758			—
Issuance of unvested shares		12,488			5,603			5,131

See Notes to Consolidated Financial Statements.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	Significant Accounting Policies

Business

IDEX is an applied solutions company specializing in fluid and metering technologies, health and science technologies, dispensing equipment, and fire, safety and other diversified products built to its customers’ specifications. Its products are sold in niche markets to a wide range of industries throughout the world. The Company’s products include industrial pumps, compressors, flow meters, injectors and valves, and related controls for use in a wide variety of process applications; precision fluidics solutions, including pumps, valves, degassing equipment, corrective tubing, fittings, and complex manifolds, precision photonic solutions, optical filters and specialty medical equipment and devices used in life science applications; precision-engineered equipment for dispensing, metering and mixing paints; refinishing equipment; and engineered products for industrial and commercial markets, including fire and rescue, transportation equipment, oil and gas, electronics, and communications. These activities are grouped into four reportable segments: Fluid & Metering Technologies, Health & Science Technologies, Dispensing Equipment, and Fire & Safety/Diversified Products.

Principles of Consolidation

The consolidated financial statements include the Company and its subsidiaries. All intercompany transactions and accounts have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The principal areas of estimation reflected in the financial statements are revenue recognition, sales returns and allowances, allowance for doubtful accounts, inventory valuation, recoverability of long-lived assets, income taxes, product warranties, derivatives, contingencies and litigation, insurance-related items, share-based compensation and defined benefit retirement plans.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability of the sales price is reasonably assured. For product sales, delivery does not occur until the products have been shipped and risk of loss has been transferred to the customer. Revenue from services is recognized when the services are provided or ratably over the contract term. Some arrangements with customers may include multiple deliverables, including the combination of products and services. In such cases the Company has identified these as separate elements in accordance with ASC 605-25 and recognizes revenue consistent with the policy for each separate element based on the relative selling price method. Revenues from certain long-term contracts are recognized on the percentage-of-completion method. Percentage-of-completion is measured principally by the percentage of costs incurred to date for each contract to the estimated total costs for such contract at completion. Provisions for estimated losses on uncompleted long-term contracts are made in the period in which such losses are determined. Due to uncertainties inherent in the estimation process, it is reasonably possible that completion costs, including those arising from contract penalty provisions and final contract settlements, will be revised in the near-term. Such revisions to costs and income are recognized in the period in which the revisions are determined.

The Company records allowances for discounts, product returns and customer incentives at the time of sale as a reduction of revenue as such allowances can be reliably estimated based on historical experience and known

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

trends. The Company also offers product warranties and accrues its estimated exposure for warranty claims at the time of sale based upon the length of the warranty period, warranty costs incurred and any other related information known to the Company.

Shipping and Handling Costs

Shipping and handling costs are included in cost of sales and are recognized as a period expense during the period in which they are incurred.

Advertising Costs

Advertising costs of $13.4 million, $11.0 million and $11.4 million for December 31, 2011, 2010 and 2009, respectively, are expensed as incurred.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of 90 days or less to be cash and cash equivalents.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses as a result of customer’s inability to make required payments. Management evaluates the aging of the accounts receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of accounts receivables that may not be collected in the future and records the appropriate provision.

Inventories

The Company states inventories at the lower of cost or market. Cost, which includes material, labor, and factory overhead, is determined on a FIFO basis. We make adjustments to reduce the cost of inventory to its net realizable value, if required, at the business unit level for estimated excess, obsolescence or impaired balances. Factors influencing these adjustments include changes in market demand, product life cycle and engineering changes.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances that indicate that the carrying value of the assets may not be recoverable, as measured by comparing their net book value to the projected undiscounted future cash flows generated by their use. Impaired assets are recorded at their estimated fair value using a discounted cash flow analysis.

Goodwill and Indefinite-Lived Intangible Assets

The Company reviews the carrying value of goodwill and indefinite-lived intangible assets annually on October 31, or upon the occurrence of events or changes in circumstances that indicate that the carrying value of the goodwill or intangible assets may not be recoverable, in accordance with ASC 350. The Company evaluates the recoverability of each of these assets based on the estimated fair value of each of the fourteen reporting units and two indefinite-lived intangible assets. See Note 4 for a further discussion on goodwill and intangible assets.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Borrowing Expenses

Expenses, inclusive of commissions and professional fees, incurred in securing and issuing debt are capitalized and included in Other non-current assets and amortized over the life of the related borrowing and are included in Interest expense in the Consolidated Statements of Operations.

Earnings per Common Share

Earnings per common share (“EPS”) is computed by dividing net income by the weighted average number of shares of common stock (basic) plus common stock equivalents and unvested shares (diluted) outstanding during the year. Common stock equivalents consist of stock options and deferred compensation units (“DCUs”) and have been included in the calculation of weighted average shares outstanding using the treasury stock method.

ASC 260 concludes that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. If awards are considered participating securities, the Company is required to apply the two-class method of computing basic and diluted earnings per share. The Company has determined that its outstanding unvested shares are participating securities. Accordingly, earnings per common share were computed using the two-class method prescribed by ASC 260. Net income attributable to common shareholders was reduced by $1.2 million, $1.4 million and $0.8 million in 2011, 2010 and 2009, respectively.

Basic weighted average shares outstanding reconciles to diluted weighted average shares outstanding as follows:


	2011		2010		2009
	(In thousands)
Basic weighted average common shares outstanding		82,145		80,466		79,716
Dilutive effect of stock options, DCUs and unvested shares		1,398		1,517		1,011

Diluted weighted average common shares outstanding		83,543		81,983		80,727

Options to purchase approximately 0.7 million, 0.2 million and 2.2 million shares of common stock as of December 31, 2011, 2010 and 2009, respectively, were not included in the computation of diluted EPS because the exercise price was greater than the average market price of the Company’s common stock and, therefore, the effect of their inclusion would have been antidilutive.

Share-Based Compensation

The Company accounts for share-based payments in accordance with ASC 718. Accordingly, the Company expenses the fair value of awards made under its share-based compensation plans. That cost is recognized in the consolidated financial statements over the requisite service period of the grants. See Note 13 for further discussion on share-based compensation.

Depreciation and Amortization

Property and equipment are stated at cost, with depreciation and amortization provided using the straight-line method over the following estimated useful lives:


Land improvements			8 to 12 years
Buildings and improvements			8 to 30 years
Machinery, equipment and other			3 to 12 years
Office and transportation equipment			3 to 10 years

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Certain identifiable intangible assets are amortized over their estimated useful lives using the straight-line method. The estimated useful lives used in the computation of amortization of identifiable intangible assets are as follows:


Patents			5 to 17 years
Trade names			10 to 20 years
Customer relationships			3 to 20 years
Non-compete agreements			2 to 5 years
Unpatented technology and other			4 to 20 years

Research and Development Expenditures

Costs associated with research and development are expensed in the period incurred and are included in Cost of sales within the Consolidated Statements of Operations. Research and development expenses, which include costs associated with developing new products and major improvements to existing products, were $36.0 million, $31.8 million and $29.6 million in 2011, 2010 and 2009, respectively.

Foreign Currency Translation

The functional currency of substantially all operations outside the United States is the respective local currency. Accordingly, those foreign currency balance sheet accounts have been translated using the exchange rates in effect as of the balance sheet date. Income statement amounts have been translated using the average exchange rate for the year. The gains and losses resulting from changes in exchange rates from year to year have been reported in Accumulated other comprehensive income (loss) in the Consolidated Balance Sheets. The effect of transaction gains and losses is reported within Other income (expense)-net on the Consolidated Statements of Operations.

Income Taxes

Income tax expense includes United States, state, local and international income taxes. Deferred tax assets and liabilities are recognized for the tax consequences of temporary differences between the financial reporting and the tax basis of existing assets and liabilities and for loss carryforwards. The tax rate used to determine the deferred tax assets and liabilities is the enacted tax rate for the year and manner in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

Concentration of Credit Risk

The Company is not dependent on a single customer, the largest of which accounted for less than 2% of net sales for all years presented.

Recently Adopted Accounting Pronouncements

In October 2009, the FASB issued ASU No. 2009-13, “Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements.” ASU No. 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. This guidance establishes a selling price hierarchy for determining the fair value of a deliverable, which is based on: (a) vendor-specific objective evidence; (b) third-party evidence; or (c) estimated selling price. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

allocated at the inception of the arrangement to all deliverables using the relative selling price method. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company’s adoption of ASU No. 2009-13 effective January 1, 2011 did not have a material impact on its consolidated financial position, results of operations or cash flows.

In December 2010, the FASB issued ASU No. 2010-29, Business Combinations (Topic 805), “Disclosure of Supplementary Pro Forma Information for Business Combinations.” ASU No. 2010-29 requires revenues and earnings of the combined entity be disclosed as if the business combination occurred as of the beginning of the comparable prior annual reporting period. This ASU also requires additional disclosures about adjustments included in the reported pro forma revenues and earnings. The Company adopted the provisions of ASU No. 2010-29 prospectively for business combinations for which the acquisition date was on or after January 1, 2011.

In September 2011, the FASB issued ASU 2011-09, “Disclosures about an Employer’s Participation in a Multiemployer Plan.” ASU 2011-09 requires enhanced disclosures around an employer’s participation in multiemployer pension plans. The standard is intended to provide more information about an employer’s financial obligations to a multiemployer pension plan to help financial statement users better understand the financial health of the significant plans in which the employer participates. This guidance became effective for the Company for its fiscal 2011 year-end reporting. Its adoption did not have a material impact on its consolidated financial position, results of operations or cash flows.

New Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04, which is an update to Topic 820, “Fair Value Measurement.” This update establishes common requirements for measuring fair value and related disclosures in accordance with accounting principles generally accepted in the United Sates and international financial reporting standards. This amendment did not require additional fair value measurements. ASU 2011-04 is effective for all interim and annual reporting periods beginning after December 15, 2011. ASU 2011-04 is not expected to have a material impact on the consolidated financial position, results of operations or cash flows of the Company.

In June 2011, the FASB issued ASU 2011-05, an update to Topic 220, “Comprehensive Income.” This update eliminates the option of presenting the components of other comprehensive income as part of the statement of changes in stockholders’ equity, requires consecutive presentation of the statement of net income and other comprehensive income and requires reclassification adjustments from other comprehensive income to net income to be shown on the financial statements. ASU 2011-05 is effective for all interim and annual reporting periods beginning after December 15, 2011. ASU 2011-05 is not expected to have a material impact on the consolidated financial position, results of operations or cash flows of the Company.

In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. However, an entity can choose to adopt earlier even if its annual test date is before the issuance of the final standard, provided that the entity has not yet performed its 2011 annual impairment test or issued its financial statements. As of December 31, 2011, the Company did not elect to early adopt ASU 2011-08. ASU 2011-08 is not expected to have a material impact on the consolidated financial position, results of operations or cash flows of the Company.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2.	Restructuring

During 2011 and 2010 the Company recorded restructuring costs as a result 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. The costs incurred related to these initiatives are included in Restructuring expenses in the Consolidated Statements of Operations while the restructuring accruals are included in Accrued expenses in our Consolidated Balance Sheets.

2011 Initiatives

During 2011, the Company recorded $12.3 million of pre-tax restructuring expenses for exit costs and employee severance related to employee reductions across various functional areas as well as facility rationalization. The 2011 restructuring initiative included severance benefits for 292 employees.

2009 Initiatives

During 2010, the Company recorded $11.1 million of pre-tax restructuring expenses related to our 2009 restructuring initiative for employee severance related to employee reductions across various functional areas as well as facility closures resulting from the Company’s cost savings initiatives. The 2009 restructuring initiative included severance benefits for over 700 employees.

Pre-tax restructuring expenses, by segment, for 2011, were as follows:


	Severance Costs		Exit Costs		Total
	(In thousands)
Fluid & Metering Technologies	$	2,800	$	61	$	2,861
Health & Science Technologies		2,007		123		2,130
Dispensing Equipment		2,948		797		3,745
Fire & Safety/Diversified Products		1,482		—		1,482
Corporate/Other		2,096		—		2,096

Total restructuring costs	$	11,333	$	981	$	12,314

Pre-tax restructuring expenses, by segment, for 2010, were as follows:


	Severance Costs		Exit Costs		Total
	(In thousands)
Fluid & Metering Technologies	$	2,630	$	320	$	2,950
Health & Science Technologies		3,511		1,650		5,161
Dispensing Equipment		641		—		641
Fire & Safety/Diversified Products		589		—		589
Corporate/Other		1,754		—		1,754

Total restructuring costs	$	9,125	$	1,970	$	11,095

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Pre-tax restructuring expenses, by segment, for 2009, were as follows:


	Severance Costs		Exit Costs		Total
	(In thousands)
Fluid & Metering Technologies	$	2,694	$	1,364	$	4,058
Health & Science Technologies		2,201		1,303		3,504
Dispensing Equipment		1,155		860		2,015
Fire & Safety/Diversified Products		1,308		—		1,308
Corporate/Other		488		706		1,194

Total restructuring costs	$	7,846	$	4,233	$	12,079

Restructuring accruals of $5.9 million and $3.5 million at December 31, 2011 and 2010, respectively, are reflected in Accrued expenses in our Consolidated Balance Sheets as follows:


	2011 Initiative			2009 Initiative			Total
	(In thousands)
Balance at January 1, 2010	$	—		$	6,878		$	6,878
Restructuring expenses		—			11,095			11,095
Payments/utilization		—			(14,430	)		(14,430	)

Balance at December 31, 2010		—			3,543			3,543
Restructuring expenses		12,314			—			12,314
Payments/utilization		(6,439	)		(3,543	)		(9,982	)

Balance at December 31, 2011	$	5,875		$	—		$	5,875

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3.	Balance Sheet Components


	December 31,
	2011		2010
	(In thousands)
RECEIVABLES
Customers	$	254,816	$	212,899
Other		3,889		5,976

Total		258,705		218,875
Less allowance for doubtful accounts		5,860		5,322

Total receivables — net	$	252,845	$	213,553

INVENTORIES
Raw materials and components parts	$	155,577	$	126,901
Work in process		40,506		23,164
Finished goods		58,175		46,481

Total	$	254,258	$	196,546

PROPERTY, PLANT AND EQUIPMENT
Land and improvements	$	30,320	$	23,956
Buildings and improvements		128,932		127,272
Machinery, equipment and other		278,936		254,649
Office and transportation equipment		98,341		95,141
Construction in progress		8,820		7,003

Total		545,349		508,021
Less accumulated depreciation and amortization		331,632		319,459

Total property, plant and equipment — net	$	213,717	$	188,562


	December 31,
	2011		2010
	(In thousands)
ACCRUED EXPENSES
Payroll and related items	$	51,728	$	46,937
Management incentive compensation		17,402		19,985
Income taxes payable		8,456		6,126
Deferred income taxes		167		723
Insurance		6,495		5,544
Warranty		4,417		3,831
Deferred revenue		7,954		7,172
Restructuring		5,875		3,543
Interest rate exchange agreement		—		2,328
Liability for uncertain tax positions		1,061		1,647
Accrued interest		1,424		—
Contingent consideration for acquisition		1,500		—
Other		24,217		20,043

Total accrued expenses	$	130,696	$	117,879

OTHER NONCURRENT LIABILITIES
Pension and retiree medical obligations	$	91,542	$	74,559
Liability for uncertain tax positions		5,262		5,912
Deferred revenue		3,198		4,225
Other		15,844		10,687

Total other noncurrent liabilities	$	115,846	$	95,383

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	2011		2010		2009
	(In thousands)
VALUATION AND QUALIFYING ACCOUNTS(1)
Beginning balance January 1	$	5,322	$	6,160	$	5,600
Charged to costs and expenses		1,044		945		1,789
Deductions(2)		917		1,879		617
Currency translation and other		411		96		(612	)

Ending balance December 31	$	5,860	$	5,322	$	6,160

(1)	Includes provision for doubtful accounts, sales returns and sales discounts granted to customers.

(2)	Represents uncollectible accounts, net of recoveries.

4.	Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the years ended December 31, 2011 and 2010, by business segment, were as follows:


	Fluid & Metering Technologies			Health & Science Technologies			Dispensing Equipment			Fire & Safety/ Diversified Products			Total
	(In thousands)
Goodwill	$	528,634		$	404,383		$	135,063		$	149,114		$	1,217,194
Accumulated impairment losses		(6,659	)		—			(30,090	)		—			(36,749	)

Balance at January 1, 2010(1)		521,975			404,383			104,973			149,114			1,180,445
Acquisitions		10,254			35,227			—			—			45,481
Foreign currency translation		(8,463	)		(195	)		(6,193	)		(4,074	)		(18,925	)

Balance at December 31, 2010(1)		523,766			439,415			98,780			145,040			1,207,001
Acquisition adjustments		—			434			—			—			434
Acquisitions (Note 12)		—			231,189			—			—			231,189
Foreign currency translation		(2,765	)		(1,493	)		(1,926	)		(1,074	)		(7,258	)

Balance at December 31, 2011	$	521,001		$	669,545		$	96,854		$	143,966		$	1,431,366

(1)	Revised to reflect the movement of the MPT reporting unit from the Fluid & Metering Technologies segment to the Health & Science Technologies segment.

ASC 350 requires that goodwill be tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. Goodwill represents the purchase price in excess of the net amount assigned to assets acquired and liabilities assumed.

Goodwill and other acquired intangible assets with indefinite lives were tested for impairment as of October 31, 2011, the Company’s annual impairment date. In 2011, there were no triggering events or change in circumstances that would have required a review other than as of our annual test date. The Company concluded that the fair value of each of the reporting units and indefinite-lived intangible assets was in excess of the carrying value as of October 31, 2011. However, a 10% decrease in the fair value of the Water reporting unit within the Fluid & Metering Technologies segment could potentially result in a goodwill impairment charge. The total goodwill balance of the Water reporting unit as of October 31, 2011 was $222.3 million.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset at December 31, 2011 and 2010:


	At December 31, 2011									At December 31, 2010
	Gross Carrying Amount		Accumulated Amortization			Net		Weighted Average Life		Gross Carrying Amount		Accumulated Amortization			Net
			(In thousands)									(In thousands)
Amortizable intangible assets:
Patents	$	11,506	$	(4,315	)	$	7,191		11	$	9,906	$	(5,052	)	$	4,854
Trade names		72,823		(18,205	)		54,618		17		69,043		(13,769	)		55,274
Customer relationships		221,076		(69,280	)		151,796		10		169,065		(47,686	)		121,379
Non-compete agreements		4,801		(4,053	)		748		2		4,087		(3,501	)		586
Unpatented technology		70,741		(15,617	)		55,124		11		43,206		(9,407	)		33,799
Other		6,793		(3,156	)		3,637		10		5,957		(2,557	)		3,400

Total amortizable intangible assets		387,740		(114,626	)		273,114				301,264		(81,972	)		219,292
Unamortized intangible assets:
Banjo trade name		62,100		—			62,100				62,100		—			62,100
CVI Melles Griot trade name		47,008		—			47,008				—		—			—

Total intangible assets	$	496,848	$	(114,626	)	$	382,222			$	363,364	$	(81,972	)	$	281,392

The unamortized trade names are indefinite lived intangible assets which are tested for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired. Amortization of intangible assets was $35.5 million, $25.7 million and $24.5 million in 2011, 2010 and 2009, respectively. Amortization expense for each of the next five years is estimated to be approximately $39.9 million annually.

5.	Borrowings

Borrowings at December 31, 2011 and 2010 consisted of the following:


	2011		2010
	(In thousands)
Revolving Facility	$	50,798	$	—
Credit Facility		—		27,842
Term Loan		—		90,000
4.2% Senior Notes, due December 2021		349,125		—
4.5% Senior Notes, due December 2020		298,555		298,427
2.58% Senior Euro Notes, due June 2015		104,655		107,341
Other borrowings		5,677		4,285

Total borrowings		808,810		527,895
Less current portion		2,444		119,445

Total long-term borrowings	$	806,366	$	408,450

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On June 27, 2011, the Company entered into a credit agreement (the “Credit Agreement”) along with certain of its subsidiaries, as borrowers (the “Borrowers”), with Bank of America, N.A., as administrative agent, swing line lender and an issuer of letters of credit, and other lenders party thereto. The Credit Agreement replaced the Company’s previous $600.0 million credit facility, which was due to expire in December 2011.

The Credit Agreement consists of a revolving Credit Facility in an aggregate principal amount of $700.0 million with a maturity date of June 27, 2016. The maturity date may be extended under certain conditions for an additional one-year term prior to the second anniversary of the initial closing date of June 27, 2011. Up to $75.0 million of the Revolving Facility is available for the issuance of letters of credit. Additionally, up to $25.0 million of the Revolving Facility is available to the Company for swing line loans, available on a same-day basis.

Proceeds of the Revolving Facility are available for use by the Borrowers for working capital and other general corporate purposes, including refinancing existing debt of the Company and its subsidiaries. The Company may request increases in the lending commitments under the Credit Agreement, but the aggregate lending commitments may not exceed $950.0 million. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain foreign subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement. Under the Credit Agreement, Fluid Management Europe B.V., (“FME”) and IDEX UK Ltd. (“IDEX UK”) were approved by the lenders as designated borrowers. At December 31, 2011, FME had no borrowings under the Revolving Facility, while IDEX UK’s borrowings under the Revolving Facility were £7.0 million ($10.8 million). As IDEX UK’s borrowings under the Revolving Facility are British Pound denominated and the cash flows that will be used to make payments of principal and interest are predominately generated in British Pounds, the Company does not anticipate any significant foreign exchange gains or losses in servicing this debt.

Borrowings under the Revolving Facility bear interest, at either an alternate base rate or an adjusted LIBOR rate plus, an applicable margin. Such applicable margin is based on the Company’s senior, unsecured, long-term debt rating and can range from .875% to 1.70%. Based on the Company’s credit rating at December 31, 2011, the applicable margin was 1.05%. 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. An annual Revolving Facility fee, also based on the Company’s credit rating, is currently 20 basis points and is payable quarterly.

The Credit Agreement requires payment to the lenders of a facility fee based upon (a) the amount of the lenders’ commitments under the Revolving Facility from time to time and (b) the applicable corporate credit ratings of the Company. Voluntary prepayments of any loans and voluntary reductions of the unutilized portion of the commitments under the Revolving Facility are permissible without penalty, subject to break funding payments and minimum notice and minimum reduction amount requirements.

The Credit Agreement contains affirmative and negative covenants that the Company believes are usual and customary for senior unsecured credit agreements, including a financial covenant requiring the maintenance of a 3.25 to 1.0 or lower leverage ratio, which is the ratio of the Company’s consolidated total debt to its consolidated EBITDA, each as defined in the Credit Agreement.

The Credit Agreement also contains customary events of default (subject to grace periods, as appropriate) including among others: nonpayment of principal, interest or fees; breach of the representations or warranties in any material respect; breach of the financial, affirmative or negative covenants; payment default on, or

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

acceleration of, other material indebtedness; bankruptcy or insolvency; material judgments entered against the Company or any of its subsidiaries; certain specified events under the Employee Retirement Income Security Act of 1974, as amended; certain changes in control of the Company; and the invalidity or unenforceability of the Credit Agreement or other documents associated with the Credit Agreement.

At December 31, 2011, there was $50.8 million outstanding under the Revolving Facility with $7.8 million of outstanding letters of credit. The net available borrowing capacity under the Revolving Facility at December 31, 2011, was approximately $641.4 million.

On June 9, 2010, the Company completed a private placement of €81.0 million ($96.8 million) aggregate principal amount of 2.58% Series 2010 Senior Euro Notes due June 9, 2015 (“2.58% Senior Euro Notes”) pursuant to a Master Note Purchase Agreement, dated June 9, 2010 (the “Purchase Agreement”). The Purchase Agreement provides for the issuance of additional series of notes in the future, provided that the aggregate principal amount outstanding under the agreement at any time does not exceed $750.0 million. The 2.58% Senior Euro Notes bear interest at a rate of 2.58% per annum and will mature on June 9, 2015. The 2.58% Senior Euro Notes are unsecured obligations of the Company and rank pari passu in right of payment with all of the Company’s other senior debt. The Company may at any time prepay all or any portion of the 2.58% Senior Euro Notes; provided that any such portion is greater than 5% of the aggregate principal amount of Notes then outstanding under the Purchase Agreement. In the event of a prepayment, the Company would be required to pay an amount equal to par plus accrued interest plus a make-whole premium. The Purchase Agreement contains certain covenants that restrict the Company’s ability to, among other things, transfer or sell assets, create liens and engage in certain mergers or consolidations. In addition, the Company must comply with a leverage ratio and interest coverage ratio as set forth in the Purchase Agreement. The Purchase Agreement provides for customary events of default. In the case of an event of default arising from specified events of bankruptcy or insolvency, all outstanding 2.58% Senior Euro Notes will become due and payable immediately without further action or notice. In the case of payment events of defaults, any holder of the 2.58% Senior Euro Notes affected thereby may declare all the 2.58% Senior Euro Notes held by it due and payable immediately. In the case of any other event of default, a majority of the holders of the 2.58% Senior Euro Notes may declare all the 2.58% Senior Euro Notes to be due and payable immediately.

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 the $1.6 million issuance discount, the $1.9 million underwriting commission and $0.8 million offering expenses, were used to repay $250.0 million of outstanding bank indebtedness, with the balance used for general corporate purposes. The 4.5% Senior Notes bear interest at a rate of 4.5% per annum, which is payable semi-annually in arrears on each June 15 and December 15. The Company may redeem all or a portion of the 4.5% Senior Notes at any time prior to maturity at the redemption prices set forth in the Note Indenture governing the 4.5% Senior Notes. The Company may issue additional debt from time to time pursuant to the Indenture. The Indenture and 4.5% Senior Notes contain covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of the 4.5% Senior Notes also require the Company to make an offer to repurchase the 4.5% Senior Notes upon a change of control triggering event (as defined in the Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest, if any.

On December 9, 2011, the Company completed a public offering of $350.0 million 4.2% senior notes due December 15, 2021 (“4.2% Senior Notes”). The net proceeds from the offering of $346.2 million, after deducting the $0.9 million issuance discount, the $2.3 million underwriting commission and $0.6 million offering expenses, were used to repay $306.0 million of outstanding bank indebtedness, with the balance used for general corporate

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

purposes. The 4.2% Senior Notes bear interest at a rate of 4.2% per annum, which is payable semi-annually in arrears on each June 15 and December 15. The Company may redeem all or a portion of the 4.2% Senior Notes at any time prior to maturity at the redemption prices set forth in the Note Indenture governing the 4.2% Senior Notes. The Company may issue additional debt from time to time pursuant to the Indenture. The Indenture and 4.2% Senior Notes contain covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of the 4.2% Senior Notes also require the Company to make an offer to repurchase the 4.2% Senior Notes upon a change of control triggering event (as defined in the Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest, if any.

On April 15, 2010 and July 12, 2011, the Company entered into forward starting interest rate contracts in anticipation of the issuance of the 4.5% and 4.2% Senior Notes. See Note 6 for additional details regarding these contracts.

On December 21, 2011, the Company retired the outstanding balance of $82.0 million on its $100.0 million unsecured senior bank term loan agreement using proceeds from the Company’s 4.2% Senior Notes and the Revolving Facility.

Other borrowings of $5.7 million at December 31, 2011 were comprised of capital leases as well as debt at international locations maintained for working capital purposes. Interest is payable on the outstanding debt balances at the international locations at rates ranging from 1.5% to 5.2% per annum.

There are two key financial covenants that the Company is required to maintain in connection with the Revolving Facility and 2.58% Senior Euro Notes. The most restrictive financial covenants under these debt instruments require a minimum interest coverage ratio of 3.0 to 1 and a maximum leverage ratio of 3.25 to 1. At December 31, 2011, the Company was in compliance with both of these financial covenants. There are no financial covenants relating to the 4.5% Senior Notes or 4.2% Senior Notes.

Total borrowings at December 31, 2011 have scheduled maturities as follows (in thousands):


2012	$	2,444
2013		508
2014		488
2015		105,153
2016		51,308
Thereafter		648,909

Total borrowings	$	808,810

6.	Derivative Instruments

The Company enters into cash flow hedges to reduce the exposure to variability in certain expected future cash flows. The type of cash flow hedges the Company enters into includes foreign currency contracts and interest rate exchange agreements that effectively convert a portion of floating-rate debt to fixed-rate debt and are designed to reduce the impact of interest rate changes on future interest expense.

The effective portion of gains or losses on interest rate exchange agreements is reported in accumulated other comprehensive income (loss) in shareholders’ equity and reclassified into net income in the same period or

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

periods in which the hedged transaction affects net income. The remaining gain or loss in excess of the cumulative change in the present value of future cash flows or the hedged item, if any, is recognized into net income during the period of change.

Fair values relating to derivative financial instruments reflect the estimated amounts that the Company would receive or pay to sell or buy the contracts based on quoted market prices of comparable contracts at each balance sheet date.

On April 15, 2010, the Company entered into a forward starting interest rate contract with a notional amount of $300.0 million with a settlement date in December 2010. This contract was entered into in anticipation of the issuance of the 4.5% Senior Notes and was designed to lock in the market interest rate as of April 15, 2010. In December 2010, the Company settled and paid this interest rate contract for $31.0 million. The $31.0 million is being amortized into interest expense over the 10 year term of the 4.5% Senior Notes, which results in an effective interest rate of 5.8%.

On July 12, 2011, the Company entered into a forward starting interest rate contract with a notional amount of $350.0 million and a settlement date of September 30, 2011. This contract was entered into in anticipation of the issuance of the 4.2% Senior Notes and was designed to lock in the market interest rate as of July 12, 2011. On September 29, 2011, the Company settled this interest rate contract for $34.7 million with a payment made on October 3, 2011. Simultaneously, the Company entered into a separate interest rate contract with a notional amount of $350.0 million and a settlement date of February 28, 2012. The contract was entered into in anticipation of the expected issuance of the 4.2% Senior Notes and was designed to maintain the market rate as of July 12, 2011. In December 2011, the Company settled and paid the September interest rate contract for $4.0 million, resulting in a total settlement of $38.7 million. Of the $38.7 million, $0.8 was recognized as other expense in 2011 and the balance of $37.9 million is being amortized into interest expense over the 10 year term of the 4.2% Senior Notes, which results in an effective interest rate of 5.3%.

At December 31, 2011, approximately $7.6 million of the amount included in accumulated other comprehensive income (loss) in shareholders’ equity at December 31, 2011 will be recognized to net income over the next 12 months as the underlying hedged transactions are realized.

On May 31, 2011, the Company settled foreign currency exchange contracts with an aggregate notional amount of $0.5 million; the impact of this settlement was immaterial.

The following table sets forth the fair value amounts of derivative instruments held by the Company as of December 31, 2011 and 2010:


	Fair Value Assets (Liabilities)
	December 31, 2011		December 31, 2010			Balance Sheet Caption
	(In thousands)
Interest rate exchange agreement	$	—	$	(2,328	)	Accrued expenses
Foreign exchange contracts		—		176		Other current assets

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the gain (loss) recognized and the amounts and location of income (expense) and gain (loss) reclassified into income for interest rate contracts and foreign currency contracts for the year ended December 31, 2011 and 2010:


	Gain (Loss) Recognized in Other Comprehensive Income						Income (Expense) and Gain (Loss) Reclassified into Income						Income Statement Caption
	Twelve Months Ended December 31,
	2011			2010			2011			2010
	(In thousands)
Interest rate agreements	$	(38,797	)	$	(31,792	)	$	(6,197	)	$	(8,805	)	Interest expense
Interest rate agreements		—			—			(786	)		(440	)	Other expense
Foreign exchange contracts		(55	)		126			227			126		Sales

7.	Fair Value Measurements

ASC 820 “Fair Value Measurements and Disclosures” defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

	•		Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

	•		Level 2: Inputs, other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

	•		Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

The following table summarizes the basis used to measure the Company’s financial assets (liabilities) at fair value on a recurring basis in the balance sheet at December 31, 2011 and 2010:


	Basis of Fair Value Measurements
	Balance at December 31, 2011			Level 1		Level 2		Level 3
	(In thousands)
Money market investments	$	11,899		$	11,899		—		—
Available for sale securities		2,785			2,785		—		—
Contingent consideration		(3,000	)		—		—	$	(3,000	)


	Balance at December 31, 2010			Level 1		Level 2			Level 3
	(In thousands)
Money market investment	$	96,730		$	96,730		—			—
Interest rate agreements		(2,328	)		—		(2,328	)		—
Foreign currency contracts		176			—		176			—

There were no transfers of assets or liabilities between Level 1 and Level 2 in 2011 or 2010.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In determining the fair value of the Company’s interest rate exchange agreement derivatives, the Company uses a present value of expected cash flows based on market observable interest rate yield curves commensurate with the term of each instrument and the credit default swap market to reflect the credit risk of either the Company or the counterparty.

In determining the fair value of the Company’s contingent consideration, the Company uses a probability weighted estimate based on an independent appraisal, adjusted for the time value of money. The Company increased the fair value of the contingent consideration from $2.7 million at September 30, 2011 to $3.0 million at December 31, 2011 based on updated estimates.

The carrying value of our cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates their fair values because of the short term nature of these instruments. At December 31, 2011, the fair value of our Revolving Facility, 2.58% Senior Euro Notes, 4.5% Senior Notes and 4.2% Senior Notes, based on quoted market prices and current market rates for debt with similar credit risk and maturity, was approximately $810.8 million compared to the carrying value of $803.1 million.

8.	Commitments and Contingencies

The Company leases certain office facilities, warehouses and data processing equipment under operating leases. Rental expense totaled $19.0 million, $13.9 million and $12.2 million 2011, 2010, and 2009, respectively.

The aggregate future minimum lease payments for operating and capital leases as of December 31, 2011 were as follows:


	Operating		Capital
	(In thousands)
2012	$	13,679	$	586
2013		11,047		591
2014		6,512		558
2015		4,825		555
2016		3,325		555
2017 and thereafter		7,666		1,234

Warranty costs are provided for at time of sale. The warranty provision is based on historical costs and adjusted for specific known claims. A roll forward of the warranty reserve is as follows:


	2011			2010			2009
	(In thousands)
Beginning balance January 1	$	3,831		$	4,383		$	3,751
Provision for warranties		4,648			4,331			4,507
Claim settlements		(4,443	)		(4,665	)		(3,918	)
Other adjustments, including acquisitions and currency translation		381			(218	)		43

Ending balance December 31	$	4,417		$	3,831		$	4,383

The Company is party to various legal proceedings arising in the ordinary course of business, none of which is expected to have a material adverse effect on its business, financial condition, results of operations or cash flow.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9.	Common and Preferred Stock

On December 6, 2011, the Company announced that its Board of Directors increased the authorized level for repurchases of its common stock by approximately $50.0 million. The increased authorization will be added to the approximately $75.0 million that remains available from the existing authorization approved by the Board of Directors on April 21, 2008, resulting in a total authorized repurchase amount of $125.0 million. No shares were purchased in 2011 and 2010.

At December 31, 2011 and 2010, the Company had 150 million shares of authorized common stock, with a par value of $.01 per share and 5 million shares of authorized preferred stock with a par value of $.01 per share. No preferred stock was issued as of December 31, 2011 and 2010.

10.	Income Taxes

Pretax income for 2011, 2010 and 2009 was taxed in the following jurisdictions:


	2011		2010		2009
	(In thousands)
Domestic	$	192,857	$	161,573	$	114,389
Foreign		81,024		70,301		54,438

Total	$	273,881	$	231,874	$	168,827

The provision (benefit) for income taxes for 2011, 2010, and 2009, was as follows:


	2011			2010			2009
	(In thousands)
Current
U.S.	$	48,823		$	59,384		$	34,921
State and local		3,434			4,548			2,704
Foreign		31,343			18,178			16,730

Total current		83,600			82,110			54,355
Deferred
U.S.		4,792			(6,550	)		1,658
State and local		(1,103	)		(293	)		110
Foreign		(7,265	)		(493	)		(687	)

Total deferred		(3,576	)		(7,336	)		1,081

Total provision for income taxes	$	80,024		$	74,774		$	55,436

Deferred tax assets (liabilities) at December 31, 2011 and 2010 were:


	2011			2010
	(In thousands)
Employee and retiree benefit plans	$	38,626		$	17,764
Depreciation and amortization		(213,002	)		(179,889	)
Inventories		10,274			6,934
Allowances and accruals		14,103			16,690
Interest rate exchange agreement		23,714			11,995
Other		10,033			1,617

Total	$	(116,252	)	$	(124,889	)

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The deferred tax assets and liabilities recognized in the Company’s Consolidated Balance Sheets as of December 31, 2011 and 2010 were:


	2011			2010
	(In thousands)
Deferred tax asset — other current assets	$	26,037		$	23,829
Deferred tax asset — other noncurrent assets		360			539

Total deferred tax assets		26,397			24,368
Deferred tax liability — accrued expenses		(167	)		(723	)
Noncurrent deferred tax liability — deferred income taxes		(142,482	)		(148,534	)

Total deferred tax liabilities		(142,649	)		(149,257	)

Net deferred tax liabilities	$	(116,252	)	$	(124,889	)

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to pretax income. The computed amount and the differences for 2011, 2010, and 2009 are shown in the following table:


	2011			2010			2009
	(In thousands)
Pretax income	$	273,881		$	231,874		$	168,827

Provision for income taxes:
Computed amount at statutory rate of 35%	$	95,858		$	81,156		$	59,089
State and local income tax (net of federal tax benefit)		1,515			2,766			1,829
Taxes on non-U.S. earnings-net of foreign tax credits		(4,522	)		(8,545	)		(4,117	)
Effect of flow-through entities		(6,922	)		(516	)		(535	)
U.S. business tax credits		(917	)		(935	)		(754	)
Domestic activities production deduction		(4,589	)		(4,720	)		(1,925	)
Other		(399	)		5,568			1,849

Total provision for income taxes	$	80,024		$	74,774		$	55,436

The Company has not provided an estimate for any U.S. or additional foreign taxes on undistributed earnings of foreign subsidiaries that might be payable if these earnings were repatriated since the Company considers these amounts to be permanently invested.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2011, 2010 and 2009 are shown in the following table:


	2011			2010			2009
	(In thousands)
Beginning balance January 1	$	6,440		$	5,285		$	4,009
Gross increases for tax positions of prior years		1,828			3,049			2,138
Gross decreases for tax positions of prior years		(1,595	)		(675	)		—
Settlements		(338	)		(517	)		(628	)
Lapse of statute of limitations		(787	)		(702	)		(234	)

Ending balance December 31	$	5,548		$	6,440		$	5,285

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

We recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2011, 2010 and 2009 we had approximately $0.5 million, $0.8 million and $0.9 million, respectively, of accrued interest related to uncertain tax positions. As of December 31, 2011, 2010 and 2009 we had approximately $0.2 million, $0.4 million and $0.2 million, respectively, of accrued penalties related to uncertain tax positions.

The total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is $5.0 million, $5.8 million and $4.4 million as of December 31, 2011, December 31, 2010 and December 31, 2009, respectively. The tax years 2006-2010 remain open to examination by major taxing jurisdictions. Due to the potential for resolution of federal, state and foreign examinations, and the expiration of various statutes of limitation, it is reasonably possible that the Company’s gross unrecognized tax benefits balance may change within the next 12 months by a range of zero to $1.1 million.

The Company had net operating loss carry forwards for U.S. federal purposes at December 31, 2011 and 2010 of $14.0 and $3.5 million, respectively. For non-U.S. purposes, the Company had net operating loss carry forwards at December 31, 2011 and 2010 of $12.4 and $13.7 million, respectively. The federal net operating loss carry forwards are available for use against the Company’s consolidated federal taxable income and expire between 2019 and 2030. The entire balance of the non-U.S. net operating losses are available to be carried forward, with $0.7 million of these losses beginning to expire during the years 2018 through 2020. The remaining $11.5 million of such losses can be carried forward indefinitely.

At December 31, 2011 and 2010, the Company had a foreign capital loss carry forward of approximately $1.1 million and $1.3 million respectively. The foreign capital loss can be carried forward indefinitely. At December 31, 2011 and 2010, the Company has a valuation allowance against the deferred tax asset attributable to the foreign capital loss of $0.2 million and $0.4 million, respectively. At December 31, 2011 and 2010, the Company had state net operating loss and credit carry forwards of approximately $18.0 million and $18.7 million, respectively. If unutilized, the state net operating loss will expire between 2016 and 2030. At December 31, 2011 and 2010, the Company recorded a valuation allowance against the deferred tax asset attributable to the state net operating loss of $0.3 million and $0.4 million, respectively.

11.	Business Segments and Geographic Information

IDEX has four reportable business segments: Fluid & Metering Technologies, Health & Science Technologies, Dispensing Equipment, and Fire & Safety/Diversified Products. Reporting units in the Fluid & Metering Technologies segment include Banjo, Energy, CFP and Water. Reporting units in the Health & Science Technologies segment include IH&S, IOP, PPE, Gast, Micropump and MPT. The Dispensing Equipment segment is a reporting unit. Reporting units in the Fire & Safety/Diversified Products segment include Fire Suppression, Rescue Tools and Band-It.

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 water and wastewater industries. The Health & Science Technologies segment designs, produces and distributes a wide range of precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems used in beverage, food processing, pharmaceutical and cosmetics, pneumatic components and sealing solutions, including very high precision, low-flow rate pumping solutions required in analytical instrumentation, clinical diagnostics and drug discovery, high performance molded and extruded, biocompatible medical devices and implantables, air compressors used in medical, dental and industrial applications, optical components and coatings for applications in the fields of

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

scientific research, defense, 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 Dispensing Equipment segment produces 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 produces firefighting pumps and controls, rescue tools, lifting bags and other components and systems for the fire and rescue industry, and engineered stainless steel banding and clamping devices used in a variety of industrial and commercial applications.

Information on the Company’s business segments is presented below, based on the nature of products and services offered. The Company evaluates performance based on several factors, of which operating income is the primary financial measure. Intersegment sales are accounted for at fair value as if the sales were to third parties. Certain prior year amounts have been revised to reflect the movement of the MPT reporting unit from the Fluid & Metering Technologies Segment to the Health & Science Technologies Segment.


	2011			2010			2009
	(In thousands)
NET SALES
Fluid & Metering Technologies:
External customers	$	816,409		$	704,179		$	620,670
Intersegment sales		466			712			866

Total segment sales		816,875			704,891			621,536
Health & Science Technologies:
External customers		620,659			418,535			318,908
Intersegment sales		1,653			3,717			4,993

Total segment sales		622,312			422,252			323,901
Dispensing Equipment:
External customers		116,857			125,127			127,279
Intersegment sales		553			193			—

Total segment sales		117,410			125,320			127,279
Fire & Safety/Diversified Products:
External customers		284,526			265,232			262,804
Intersegment sales		489			269			5

Total segment sales		285,015			265,501			262,809
Intersegment eliminations		(3,161	)		(4,891	)		(5,864	)

Total net sales	$	1,838,451		$	1,513,073		$	1,329,661

OPERATING INCOME(1)
Fluid & Metering Technologies	$	159,984		$	127,192		$	97,867
Health & Science Technologies		110,871			87,084			54,134
Dispensing Equipment		15,409			19,490			15,147
Fire & Safety/Diversified Products		70,492			62,844			59,884
Corporate office and other(2)		(52,100	)		(47,494	)		(42,178	)

Total operating income		304,656			249,116			184,854
Interest expense		29,332			16,150			17,178
Other income (expense)-net		(1,443	)		(1,092	)		1,151

Income before taxes	$	273,881		$	231,874		$	168,827

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	2011		2010		2009
	(In thousands)
ASSETS
Fluid & Metering Technologies	$	1,048,682	$	1,040,601	$	1,011,392
Health & Science Technologies		1,201,994		718,884		598,786
Dispensing Equipment		149,813		205,540		164,979
Fire & Safety/Diversified Products		292,587		278,567		285,893
Corporate office and other(2)		143,031		138,103		37,107

Total assets	$	2,836,107	$	2,381,695	$	2,098,157

DEPRECIATION AND AMORTIZATION(3)
Fluid & Metering Technologies	$	32,258	$	31,762	$	31,540
Health & Science Technologies		30,165		17,384		15,337
Dispensing Equipment		3,181		3,753		3,124
Fire & Safety/Diversified Products		5,335		4,885		5,328
Corporate office and other		1,447		324		1,017

Total depreciation and amortization	$	72,386	$	58,108	$	56,346

CAPITAL EXPENDITURES
Fluid & Metering Technologies	$	12,481	$	17,206	$	12,785
Health & Science Technologies		13,000		7,618		6,447
Dispensing Equipment		1,179		1,129		864
Fire & Safety/Diversified Products		4,465		3,513		3,686
Corporate office and other		3,423		3,303		1,743

Total capital expenditures	$	34,548	$	32,769	$	25,525

(1)	Segment operating income excludes net unallocated corporate operating expenses.

(2)	Includes intersegment eliminations.

(3)	Excludes amortization of debt issuance expenses.

Information about the Company’s operations in different geographical regions for the years ended December 31, 2011, 2010 and 2009 is shown below. Net sales were attributed to geographic areas based on location of the customer, and no country outside the U.S. was greater than 10% of total revenues.


	2011		2010		2009
	(In thousands)
NET SALES
U.S.	$	857,990	$	766,067	$	698,822
Europe		492,125		402,056		361,774
Other countries		488,336		344,950		269,065

Total net sales	$	1,838,451	$	1,513,073	$	1,329,661

LONG-LIVED ASSETS — PROPERTY, PLANT AND EQUIPMENT
U.S.	$	124,102	$	108,951	$	105,165
Europe		63,433		68,756		61,766
Other countries		26,182		10,855		11,352

Total long-lived assets — net	$	213,717	$	188,562	$	178,283

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12.	Acquisitions

All of the Company’s acquisitions have been accounted for under ASC 805, Business Combinations. Accordingly, the accounts of the acquired companies, after adjustments to reflect fair values assigned to assets and liabilities, have been included in the consolidated financial statements from their respective dates of acquisition.

2011 Acquisitions

On January 31, 2011, the Company acquired the membership interests of AT Films. AT Films specializes in optical components and coatings for applications in the fields of scientific research, defense, aerospace, telecommunications and electronics manufacturing. AT Films’ core competence is the design and manufacture of filters, splitters, reflectors and mirrors with the precise physical properties required to support their customers’ most challenging and cutting-edge optical applications. Headquartered in Boulder, Colorado, AT Films has annual revenues of approximately $9.0 million. AT Films operates within the Health & Science Technologies segment as a part of the IOP platform. The Company acquired AT Films for an aggregate purchase price of $34.5 million, consisting of $31.8 million in cash and contingent consideration valued at approximately $2.7 million as of the opening balance sheet date. As of December 31, 2011, the Company expects to pay $3.0 million, which is the maximum amount under the contingent consideration arrangement. Goodwill and intangible assets recognized as part of this transaction were $18.2 million and $11.4 million, respectively. The $18.2 million of goodwill is deductible for tax purposes.

On March 11, 2011, the Company completed the acquisition of Microfluidics. 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 operates within the Health & Science Technologies segment as a part of the MPT reporting unit. The Company acquired Microfluidics for an aggregate purchase price of $18.5 million in cash. Headquartered in Newton, Massachusetts, Microfluidics has annual revenues of approximately $16.0 million. Goodwill and intangible assets recognized as part of this transaction were $5.7 million and $9.7 million, respectively. The $5.7 million of goodwill is not deductible for tax purposes.

On June 10, 2011, the Company completed the acquisition of CVI MG. CVI MG is a global leader in the design and manufacture of precision photonic solutions used in the life sciences, research, semiconductor, security and defense markets. CVI MG’s innovative products are focused on the generation, control and productive use of light for a variety of key science and industrial applications. Products include specialty lasers and light sources, electro-optical components, specialty shutters, opto-mechanical assemblies and components. In addition, CVI MG produces critical components for life science research, electronics manufacturing, military and other industrial applications including lenses, mirrors, filters and polarizers. These components are utilized in a number of important applications such as spectroscopy, cytometry (cell counting), guidance systems for target designation, remote sensing, menology and optical lithography. CVI MG operates within the Health and Science Technologies segment as part of the IOP platform. The Company acquired CVI MG for an aggregate purchase price of $394.7 million, consisting of $393.3 million in cash and the assumption of approximately $1.4 million of debt. Approximately $365.0 million of the cash payment was financed with borrowings under the Company’s Revolving Facility. Headquartered in Albuquerque, New Mexico, with manufacturing sites located on three continents, CVI MG has annual revenues of approximately $178.0 million. Goodwill and intangible assets recognized as part of this transaction were $207.3 million and $115.8 million, respectively. Approximately $117.7 million of goodwill is deductible for tax purposes.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The purchase price for CVI MG, AT Films and Microfluidics has been allocated to the assets acquired and liabilities assumed based on estimated fair values at the date of the acquisition. The Company is continuing to evaluate the initial purchase price allocations with respect to certain inventory items and contingent liabilities, as of the acquisition date, which will be adjusted as additional information relative to the fair values of the assets and liabilities of the businesses, become known. Accordingly, management has used its best estimate in the initial purchase price allocation as of the date of the filing of these financial statements.

The allocation of the acquisition costs to the assets acquired and liabilities assumed, based on their estimated fair values, is as follows:


	AT Films			Microfluidics			CVI MG			Total
	(In thousands)
Accounts receivable	$	947		$	1,760		$	23,978		$	26,685
Inventory		852			2,226			55,435			58,513
Other current assets, net of cash acquired		73			852			6,627			7,552
Property, plant and equipment		5,019			567			30,972			36,558
Goodwill		18,187			5,740			207,262			231,189
Intangible assets		11,435			9,717			115,777			136,929
Other assets		2,704			563			1,943			5,210

Total assets acquired		39,217			21,425			441,994			502,636
Total liabilities assumed		(4,706	)		(2,889	)		(48,680	)		(56,275	)

Net assets acquired	$	34,511		$	18,536		$	393,314		$	446,361

Of the $136.9 million of acquired intangible assets, $47.0 million was assigned to the CVI MG trade name and is not subject to amortization. The remaining $89.9 million of acquired intangible assets consist of patents, trade names, customer relationships, non-compete and unpatented technology. The goodwill recorded for the acquisitions reflects the strategic fit and revenue and earnings growth potential of these businesses.

The acquired intangible assets and weighted average amortization periods are as follows:


	Total		Weighted Average Life
Patents	$	3,017		10
Trade names		4,168		15
Customer relationships		53,895		7
Non-compete agreements		793		2
Unpatented technology		28,048		6

2011 acquired intangible assets	$	89,921

The Company incurred $5.8 million of acquisition-related transaction costs in 2011. These costs were recorded in selling, general and administrative expense and were related to completed transactions, pending transactions and potential transactions, including certain transactions that ultimately were not completed.

In accordance with ASU 2010-29, “Disclosure of Supplementary Pro Forma Information for Business Combinations,” the following unaudited pro forma information illustrates the effect on the Company’s net sales and net income for December 31, 2011 and 2010, assuming that the 2011 acquisitions had taken place at the

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

beginning of 2010. The pro forma net income reflects adjustments for the year ended December 31, 2010 to include $16.4 million of pre-tax acquisition fair value inventory charges. The pro forma net income reflects adjustments for the year ended December 31, 2011 to exclude $24.1 million of pre-tax acquisition-related costs and fair value inventory charges. The 2011 and 2010 supplemental pro forma net income are also adjusted to reflect the comparable impact of additional depreciation and amortization expense resulting from the fair value measurement of tangible and intangible assets and financing costs relating to the 2011 acquisitions.


	Twelve Months Ended December 31,
	2011		2010
	(In thousands)
Net sales	$	1,921,515	$	1,706,085
Net income		205,168		146,873
Diluted earnings per share	$	2.46	$	1.79

These pro forma results do not purport to be indicative of the results of operations that would have resulted had the acquisitions occurred on the date indicated or that may result in the future.

2010 Acquisitions

On April 15, 2010, the Company acquired the stock of PPE, previously referred to as Seals, Ltd, a leading provider of proprietary high performance seals and advanced sealing solutions for a diverse range of global industries, including analytical instrumentation, semiconductor/solar and process technologies. PPE consists of the Polymer Engineering and Perlast divisions. PPE’s Polymer Engineering division focuses on sealing solutions for hazardous duty applications. The Perlast division produces highly engineered seals for analytical instrumentation, pharmaceutical, electronics, and food applications. Headquartered in Blackburn, England, PPE operates as part of the Health & Science Technologies Segment with annual revenues of approximately $32.0 million (£21 million). The Company acquired PPE for an aggregate purchase price of $54.0 million, consisting of $51.3 million in cash and the assumption of approximately $2.7 million of debt related items. The cash payment was financed with borrowings under the Company’s credit facility. Goodwill and intangible assets recognized as part of this transaction were $29.7 million and $17.2 million, respectively. The $29.7 million of goodwill is not deductible for tax purposes.

On July 21, 2010, the Company acquired the stock of OBL, S.r.l. (“OBL”), a leading provider of mechanical and hydraulic diaphragm pumps. OBL provides polymer blending systems and related accessories for a diverse range of global industries, including water, waste water, oil and gas, petro-chemical and power generation markets. Headquartered in Milan, Italy, with annual revenues of approximately $10.9 million (€8.5 million), OBL operates within IDEX’s Fluid & Metering Technologies segment as part of the Water reporting unit. The Company acquired OBL for cash consideration of $15.4 million. Goodwill and intangible assets recognized as part of this transaction were $7.7 million and $4.0 million, respectively. The $7.7 million of goodwill is not deductible for tax purposes.

On September 17, 2010, the Company acquired the assets of Periflo, a leading provider of peristaltic pumps for the industrial and municipal water & waste water markets. Periflo offers a complete family of peristaltic hose pumps for a wide variety of applications. Headquartered in Loveland, Ohio, with annual revenues of approximately $3.5 million, Periflo operates within IDEX’s Fluid & Metering Technologies segment as part of the Water reporting unit. The Company acquired Periflo for cash consideration of $4.3 million. Goodwill and intangible assets recognized as part of this transaction were $2.5 million and $0.7 million, respectively. The $2.5 million of goodwill is deductible for tax purposes.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On November 1, 2010, the Company acquired the stock of Fitzpatrick, 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 expands the capability of IDEX’s Quadro Engineering business by adding coarse particle sizing, roll compaction and drying systems to Quadro’s fine particle processing. Headquartered in Elmhurst, Illinois, Fitzpatrick has annual revenues of approximately $22.0 million. Fitzpatrick operates in the MPT reporting unit within the Health & Science Technologies segment. The Company acquired Fitzpatrick for cash consideration of approximately $20.3 million. Goodwill and intangible assets recognized as part of this transaction were $6.0 million and $8.0 million, respectively. The $6.0 million of goodwill is not deductible for tax purposes.

The allocation of the acquisition costs to the assets acquired and liabilities assumed, based on their estimated fair values were as follows:


	2010
	(In thousands)
Current assets, net of cash acquired	$	24,679
Property, plant and equipment		18,344
Goodwill		45,915
Intangible assets		29,861
Other assets		2,906

Total assets acquired		121,705
Total liabilities assumed		(30,439	)

Net assets acquired	$	91,266

Acquired intangible assets consist of trademarks, customer relationships, unpatented technology and non-compete agreements, which are being amortized over a life of 2-15 years. The goodwill recorded for the acquisitions reflects the strategic fit and revenue and earnings growth potential of these businesses.

The Company incurred $4.0 million of acquisition related transaction costs in 2010, relating to completed, pending and potential transactions that ultimately were not completed.

13.	Share-Based Compensation

The Company maintains two share-based compensation plans for executives, non-employee directors, and certain key employees which authorize the granting of stock options, unvested shares, unvested share units, and other types of awards consistent with the purpose of the plans. The number of shares authorized for issuance under the Company’s plans as of December 31, 2011 totals 10.6 million, of which 4.1 million shares were available for future issuance. Stock options granted under these plans are generally non-qualified, and are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. The majority of the options issued to employees become exercisable in four equal installments, beginning one year from the date of grant, and generally expire 10 years from the date of grant. Stock options granted to non-employee directors cliff vest after one year. Unvested share and unvested share unit awards generally cliff vest after three years for employees and non-employee directors. The Company issued 341,876, 264,915 and 273,000 of unvested shares as compensation to key employees in 2011, 2010 and 2009, respectively.

All unvested shares carry dividend and voting rights, and the sale of the shares is restricted prior to the date of vesting.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company accounts for share-based payments in accordance with ASC 718. Accordingly, the Company expenses the fair value of awards made under its share-based plans. That cost is recognized in the consolidated financial statements over the requisite service period of the grants.

Weighted average option fair values and assumptions for the period specified are disclosed in the following table:


	Years Ended December 31,
	2011	2010	2009
Weighted average fair value of grants	$12.30	$ 9.56	$ 5.32
Dividend yield	1.46%	1.51%	2.35%
Volatility	32.72%	33.43%	32.53%
Risk-free interest rate	0.28% - 5.61%	0.32% - 5.67%	0.69% - 4.63%
Expected life (in years)	6.14	5.98	5.85

The assumptions are as follows:

	•		The Company estimated volatility using its historical share price performance over the contractual term of the option.

	•		The Company uses historical data to estimate the expected life of the option. The expected life assumption for the years ended December 31, 2011, 2010 and 2009 is an output of the Binomial lattice option-pricing model, which incorporates vesting provisions, rate of voluntary exercise and rate of post-vesting termination over the contractual life of the option to define expected employee behavior.

	•		The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. For the years ended December 31, 2011, 2010 and 2009, we present the range of risk-free one-year forward rates, derived from the U.S. treasury yield curve, utilized in the Binomial lattice option-pricing model.

	•		The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the option.

The Company’s policy is to recognize compensation cost on a straight-line basis over the requisite service period for the entire award. Additionally, the Company’s general policy is to issue new shares of common stock to satisfy stock option exercises or grants of unvested shares.

Total compensation cost for stock options is as follows:


	Years Ended December 31,
	2011(1)			2010			2009
	(In thousands)
Cost of goods sold	$	805		$	804		$	945
Selling, general and administrative expenses		6,153			6,923			6,288

Total expense before income taxes		6,958			7,727			7,233
Income tax benefit		(2,208	)		(2,450	)		(2,322	)

Total expense after income taxes	$	4,750		$	5,277		$	4,911

(1)	Reflects the forfeiture of stock options related to the Company’s transition to a new CEO in August 2011.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Total compensation cost for unvested shares is as follows:


	Years Ended December 31,
	2011(1)			2010			2009
	(In thousands)
Cost of goods sold	$	684		$	311		$	248
Selling, general and administrative expenses		4,434			8,382			8,229
Restructuring expenses		—			938			—

Total expense before income taxes		5,118			9,631			8,477
Income tax benefit		(1,827	)		(2,097	)		(1,444	)

Total expense after income taxes	$	3,291		$	7,534		$	7,033

(1)	Reflects the forfeiture of unvested shares related to the Company’s transition to a new CEO in August 2011.

Recognition of compensation cost was consistent with recognition of cash compensation for the same employees. Compensation cost capitalized as part of inventory was immaterial.

As of December 31, 2011, there was $8.3 million and $9.0 million of total unrecognized compensation cost related to stock options and unvested shares, respectively, that is expected to be recognized over a weighted-average period of 1.4 years and 1.1 years, respectively.

A summary of the Company’s stock option activity as of December 31, 2011, and changes during the year ended December 31, 2011 is presented in the following table:


Stock Options	Shares			Weighted Average Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2011		5,404,223		$	26.85		6.29	$	66,329,686
Granted		770,350			40.98
Exercised		(1,333,185	)		24.10

Forfeited/Expired		(527,344	)		31.79

Outstanding at December 31, 2011		4,314,044		$	29.61		7.01	$	34,899,200

Vested and expected to vest at December 31, 2011		3,659,049		$	28.51		6.55	$	32,886,227
Exercisable at December 31, 2011		2,805,172		$	27.76		5.84	$	26,371,747

The intrinsic value for stock options outstanding and exercisable is defined as the difference between the market value of the Company’s common stock as of the end of the period, and the grant price. The total intrinsic value of options exercised in 2011, 2010 and 2009, was $21.9 million, $14.4 million and $5.3 million, respectively. In 2011, 2010 and 2009, cash received from options exercised was $33.1 million, $18.1 million and $7.7 million, respectively, while the actual tax benefit realized for the tax deductions from stock options exercised totaled $8.0 million, $5.2 million and $1.9 million, respectively.

A summary of the Company’s unvested share activity as of December 31, 2011, and changes during the year ending December 31, 2011 is presented in the following table:


Unvested Shares	Shares			Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2011		950,097		$	29.83
Granted		341,876			38.81
Vested		(386,338	)		32.84
Forfeited		(292,260	)		30.03

Nonvested at December 31, 2011		613,375		$	32.44

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Unvested share grants accrue dividends and their fair value is equal to the market price of the Company’s stock at the date of the grant.

14.	Retirement Benefits

The Company sponsors several qualified and nonqualified pension plans and other postretirement plans for its employees. The Company uses a measurement date of December 31 for its defined benefit pension plans and post retirement medical plans. The Company employs the measurement date provisions of ASC 715, “Compensation-Retirement Benefits”, which require the measurement date of plan assets and liabilities to coincide with the sponsor’s year end.

The following table provides a reconciliation of the changes in the benefit obligations and fair value of plan assets over the two-year period ended December 31, 2011, and a statement of the funded status at December 31 for both years.


	Pension Benefits												Other Benefits
	2011						2010						2011			2010
	U.S.			Non-U.S.			U.S.			Non-U.S.
	(In thousands)
CHANGE IN BENEFIT OBLIGATION
Obligation at January 1	$	90,102		$	42,245		$	81,212		$	39,342		$	20,068		$	18,059
Service cost		1,759			1,078			1,665			719			691			528
Interest cost		4,506			2,320			4,525			2,148			1,035			1,008
Plan amendments		—			9			101			128			—			(400	)
Benefits paid		(4,224	)		(1,703	)		(3,567	)		(1,542	)		(734	)		(842	)
Actuarial loss		10,159			18			6,166			3,561			60			1,598
Currency translation		—			(906	)		—			(2,117	)		(47	)		117
Curtailments/settlements		(791	)		—			—			—			—			—
Acquisition		—			4,702			—			6			—			—

Obligation at December 31	$	101,511		$	47,763		$	90,102		$	42,245		$	21,073		$	20,068

CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	$	58,147		$	17,400		$	53,210		$	15,376		$	—		$	—
Actual return on plan assets		(459	)		(720	)		5,631			1,842			—			—
Employer contributions		6,946			1,569			2,873			1,765			734			842
Benefits paid		(4,224	)		(1,703	)		(3,567	)		(1,542	)		(734	)		(842	)
Currency translation		—			(57	)		—			(381	)		—			—
Settlements		(791	)		—			—			—			—			—
Other		—			425			—			340			—			—

Fair value of plan assets at December 31	$	59,619		$	16,914		$	58,147		$	17,400		$	—		$	—

Funded status at December 31	$	(41,892	)	$	(30,849	)	$	(31,955	)	$	(24,845	)	$	(21,073	)	$	(20,068	)
COMPONENTS ON THE CONSOLIDATED BALANCE SHEETS
Current liabilities	$	(602	)	$	(733	)	$	(657	)	$	(653	)	$	(937	)	$	(999	)
Noncurrent liabilities		(41,290	)		(30,116	)		(31,298	)		(24,192	)		(20,136	)		(19,069	)

Net liability at December 31	$	(41,892	)	$	(30,849	)	$	(31,955	)	$	(24,845	)	$	(21,073	)	$	(20,068	)

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The accumulated benefit obligation for all defined benefit pension plans was $143.0 million and $126.4 million at December 31, 2011 and 2010, respectively.

The weighted average assumptions used in the measurement of the Company’s benefit obligation at December 31, 2011 and 2010 were as follows:


	U.S. Plans						Non-U.S. Plans
	2011			2010			2011			2010
Discount rate		4.45	%		5.20	%		4.68	%		5.35	%
Rate of compensation increase		3.90	%		3.90	%		2.96	%		3.37	%

The pretax amounts recognized in Accumulated other comprehensive income (loss) as of December 31, 2011 and 2010 were as follows:


	Pension Benefits								Other Benefits
	2011				2010				2011			2010
	U.S.		Non-U.S.		U.S.		Non-U.S
	(In thousands)
Prior service cost (credit)	$	419	$	127	$	597	$	131	$	(2,697	)	$	(3,044	)
Net loss		49,509		8,781		38,813		7,629		2,198			2,313

Total	$	49,928	$	8,908	$	39,410	$	7,760	$	(499	)	$	(731	)

The amounts in Accumulated other comprehensive income (loss) as of December 31, 2011, that are expected to be recognized as components of net periodic benefit cost during 2012 are as follows:


	U.S. Pension Benefit Plans		Non-U.S. Pension Benefit Plans		Other Benefit Plans			Total
	(In thousands)
Prior service cost (credit)	$	126	$	9	$	(373	)	$	(238	)
Net loss		6,240		315		225			6,780

Total	$	6,366	$	324	$	(148	)	$	6,542

The following tables provide the components of, and the weighted average assumptions used to determine, the net periodic benefit cost for the plans in 2011, 2010 and 2009:


	Pension Benefits
	2011						2010						2009
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
	(In thousands)
Service cost	$	1,759		$	1,078		$	1,665		$	719		$	1,551		$	824
Interest cost		4,506			2,320			4,525			2,148			4,375			2,122
Expected return on plan assets		(4,755	)		(1,117	)		(4,396	)		(945	)		(3,505	)		(780	)
Net amortization		4,855			442			4,401			302			5,299			370

Net periodic benefit cost	$	6,365		$	2,723		$	6,195		$	2,224		$	7,720		$	2,536

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Other Benefits
	2011			2010			2009
	(In thousands)
Service cost	$	691		$	528		$	468
Interest cost		1,035			1,008			1,018
Net amortization		(156	)		(370	)		(385	)

Net periodic benefit cost	$	1,570		$	1,166		$	1,101


	U.S. Plans									Non-U.S. Plans
	2011			2010			2009			2011			2010			2009
Discount rate		5.20	%		5.80	%		6.30	%		5.35	%		5.88	%		5.73	%
Expected return on plan assets		8.25	%		8.50	%		8.50	%		6.17	%		6.28	%		6.05	%
Rate of compensation increase		3.90	%		3.89	%		4.00	%		3.37	%		3.35	%		3.17	%

The following table provides pretax amounts recognized in Accumulated other comprehensive income (loss) in 2011:


	Pension Benefits
	U.S.			Non-U.S.			Other Benefits
	(In thousands)
Net loss in current year	$	(15,374	)	$	(1,855	)	$	(60	)
Prior service cost		—			(9	)		—
Amortization of prior service cost (credit)		178			10			(346	)
Amortization of net loss (gain)		4,678			432			190
Exchange rate effect on amounts in OCI		—			273			(15	)

Total	$	(10,518	)	$	(1,149	)	$	(231	)

The discount rates for our plans are derived by matching the plan’s cash flows to a yield curve that provides the equivalent yields on zero-coupon bonds for each maturity. The discount rate selected is the rate that produces the same present value of cash flows.

In selecting the expected rate of return on plan assets, the Company considers the historical returns and expected returns on plan assets. The expected returns are evaluated using asset return class, variance and correlation assumptions based on the plan’s target asset allocation and current market conditions.

Prior service costs are amortized on a straight-line basis over the average remaining service period of active participants. Gains and losses in excess of 10% of the greater of the benefit obligation or the market value of assets are amortized over the average remaining service period of active participants.

Costs of defined contribution plans were $7.8 million, $7.0 million and $8.8 million for 2011, 2010 and 2009, respectively.

The Company, through its subsidiaries, participates in certain multiemployer pension plans covering approximately 400 participants under U.S. collective bargaining agreements. None of these plans are considered individually significant to the Company as contributions to these plans totaled $1.0 million, $0.9 million, and $0.8 million for 2011, 2010, and 2009, respectively.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For measurement purposes, a 7.6% weighted average annual rate of increase in the per capita cost of covered health care benefits was assumed for 2011. The rate was assumed to decrease gradually each year to a rate of 4.48% for 2028, and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A 1% increase in the assumed health care cost trend rates would increase the service and interest cost components of the net periodic benefit cost by $0.2 million and the health care component of the accumulated postretirement benefit obligation by $1.5 million. A 1% decrease in the assumed health care cost trend rate would decrease the service and interest cost components of the net periodic benefit cost by $0.1 million and the health care component of the accumulated postretirement benefit obligation by $1.3 million.

Plan Assets

The Company’s pension plan weighted average asset allocations at December 31, 2011 and 2010, by asset category, were as follows:


	2011			2010
Equity securities		65	%		67	%
Fixed income securities		35			33

Total		100	%		100	%

The following tables summarize the basis used to measure defined benefit plans’ assets at fair value at December 31, 2011 and 2010:


	Basis of Fair Value Measurement
	Outstanding Balances		Level 1		Level 2		Level 3
As of December 31, 2011	(In thousands)
Equity	$	14,968	$	14,968	$	—	$	—
Absolute return funds(1)
U.S.		38,449		38,449		—		—
Non U.S.		21,709		16,520		5,189		—
Other(2)		1,015		1,015		—		—

	$	76,141	$	70,952	$	5,189	$	—


	Basis of Fair Value Measurement
	Outstanding Balances		Level 1		Level 2		Level 3
As of December 31, 2010	(In thousands)
Equity	$	13,644	$	13,644	$	—	$	—
Absolute return funds(1)
U.S.		38,325		18,549		19,776		—
Non U.S.		22,838		17,400		5,438		—
Other(2)		740		740		—		—

	$	75,547	$	50,333	$	25,214	$	—

(1)	Primarily funds invested by managers that have a global mandate with the flexibility to allocate capital broadly across a wide range of asset classes and strategies including, but not limited to equities, fixed income, commodities, interest rate futures, currencies and other securities to outperform an agreed benchmark with specific return and volatility targets.

(2)	Primarily cash and cash equivalents.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Equities that are valued using quoted prices are valued at the published market prices. Equities in a common collective trust or a registered investment company that are valued using significant other observable inputs are valued at the net asset value (“NAV”) provided by the fund administrator. The NAV is based on value of the underlying assets owned by the fund minus its liabilities. Fixed income securities that are valued using significant other observable inputs are valued at prices obtained from independent financial service industry-recognized vendors.

Investment Policies and Strategies

The investment objectives of the Company’s plan assets are to earn the highest possible rate of return consistent with the tolerance for risk as determined periodically by the Company in its role as a fiduciary. The general guidelines of asset allocation of fund assets are that “equities” will represent from 55% to 75% of the market value of total fund assets with a target of 66%, and “fixed income” obligations, including cash, will represent from 25% to 45% with a target of 34%. The term “equities” includes common stock, convertible bonds and convertible stock. The term “fixed income” includes preferred stock and/or contractual payments with a specific maturity date. The Company strives to maintain asset allocations within the designated ranges by conducting periodic reviews of fund allocations and plan liquidity needs, and rebalancing the portfolio accordingly. The total fund performance is monitored and results measured using a 3- to 5-year moving average against long-term absolute and relative return objectives to meet actuarially determined forecasted benefit obligations. No restrictions are placed on the selection of individual investments by the qualified investment fund managers. The performance of the investment fund managers is reviewed on a regular basis, using appointed professional independent advisors. As of December 31, 2011 and 2010, there were no shares of the Company’s stock held in plan assets.

Cash Flows

The Company expects to contribute approximately $9.4 million to its defined benefit plans and $0.9 million to its other postretirement benefit plans in 2012. The Company also expects to contribute approximately $11.7 million to its defined contribution plans in 2012.

Estimated Future Benefit Payments

The future estimated benefit payments for the next five years and the five years thereafter are as follows: 2012 — $9.9 million; 2013 — $9.4 million; 2014 — $10.7 million; 2015 — $10.0 million; 2016 — $10.0 million; 2017 to 2021 — $55.9 million.

IDEX CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15.	Quarterly Results of Operations (Unaudited)

The following table summarizes the unaudited quarterly results of operations for the years ended December 31, 2011 and 2010.


	2011 Quarters								2010 Quarters
	First		Second		Third		Fourth		First		Second		Third		Fourth
	(In thousands, except per share amounts)								(In thousands, except per share amounts)
Net sales	$	427,089	$	453,798	$	476,881	$	480,683	$	355,598	$	378,526	$	373,731	$	405,218
Gross profit		178,700		184,839		181,532		193,602		147,541		154,821		154,133		161,988
Operating income		77,721		79,629		71,305		76,001		57,893		62,780		62,439		66,004
Net income		47,951		50,182		48,336		47,388		36,625		40,398		38,564		41,513
Basic EPS	$	.58	$	.61	$	.58	$	.57	$	.45	$	.50	$	.47	$	.51
Diluted EPS	$	.57	$	.60	$	.58	$	.57	$	.45	$	.49	$	.47	$	.50
Basic weighted average shares outstanding		81,430		82,151		82,402		82,596		80,080		80,369		80,517		80,899
Diluted weighted average shares outstanding		83,248		83,778		83,586		83,573		81,509		81,800		81,938		82,686

16.	Subsequent Events

On February 6, 2012, the Company announced that it will realign its reportable segments to include the Dispensing Equipment segment as part of the Fire & Safety/Diversified Products segment. As such, effective in 2012 the Company’s reportable segments will be disclosed as: Fluid & Metering Technologies, Health & Science Technologies and Fire & Safety/Diversified Products.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of IDEX Corporation

We have audited the accompanying consolidated balance sheets of IDEX Corporation and subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2011. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 2012, expressed an unqualified opinion on the Company’s internal control over financial reporting.




Deloitte & Touche LLP

Chicago, Illinois

February 24, 2012

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of IDEX Corporation

We have audited the internal control over financial reporting of IDEX Corporation and subsidiaries (the “Company”) as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Advanced Thin Films (AT Films), which was acquired on January 31, 2011, Microfluidics, which was acquired on March 11, 2011, and CVI Melles Griot (CVI MG), which was acquired on June 10, 2011. These exclusions constitute 29.5% and 17.4% of net and total assets, respectively, 6.7% of net sales, and (1.9)% of net income of the consolidated financial statement amounts as of and for the year ended December 31, 2011. Accordingly, our audit did not include the internal control over financial reporting at AT Films, Microfluidics and CVI MG. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”). A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2011, of the Company and our report dated February 24, 2012, expressed an unqualified opinion on those consolidated financial statements.




Deloitte & Touche LLP

Chicago, Illinois

February 24, 2012

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America, and includes those policies and procedures that:

	•		Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

	•		Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

	•		Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining effective internal control over financial reporting for the Company. Management has used the framework set forth in the report entitled “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission to assess the effectiveness of the Company’s internal control over financial reporting. Management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2011.

The Company completed the acquisitions of AT Films in January 2011, Microfluidics in March 2011 and CVI MG in June 2011. Due to the timing of the acquisitions, management has excluded these acquisitions from our evaluation of effectiveness of internal controls over financial reporting. This exclusion represented 6.7% of total sales and (1.9)% of net income as well as 29.5% of net assets and 17.4% of total assets for the year ended December 31, 2011.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2011, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears herein.




Andrew K. Silvernail
Chairman of the Board and Chief Executive Officer




Heath A. Mitts
Vice President and Chief Financial Officer

Lake Forest, Illinois

February 24, 2012

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