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

Cautionary Statement Under the Private Securities Litigation Reform Act

This management’s discussion and analysis, including, but not limited to, the section entitled “2013 Overview and Outlook”, and other portions of this report, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. These statements may relate to, among other things, capital expenditures, cost reductions, cash flow, and operating improvements and are indicated by words or phrases such as “anticipate,” “estimate,” “plans,” “expects,” “projects,” “should,” “will,” “management believes,” “the Company believes,” “we believe,” “the Company intends” and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from the results described in those statements. These risks and uncertainties include, but are not limited to, the risks described in Item 1A, "Risk Factors" of this report, economic and political consequences resulting from terrorist attacks and wars; levels of industrial activity and economic conditions in the U.S. and other countries around the world; pricing pressures and other competitive factors, and levels of capital spending in certain industries — all of which could have a material impact on our order rates and results, particularly in light of the low levels of order backlogs we typically maintain; our ability to make acquisitions and to integrate and operate acquired businesses on a profitable basis; the relationship of the U.S. dollar to other currencies and its impact on pricing and cost competitiveness; political and economic conditions in foreign countries in which we operate; interest rates; capacity utilization and its effect on costs; labor markets; market conditions and material costs; and developments with respect to contingencies, such as litigation and environmental matters. The forward-looking statements included in this report are only made as of the date of this report, and we undertake no obligation to update them to reflect subsequent events or circumstances. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented here.

2013 Overview and Outlook

IDEX is an applied solutions company specializing in fluid and metering technologies, health and science technologies, and fire, safety and other diversified products built to customer specifications. IDEX’s products are sold in niche markets to a wide range of industries throughout the world. Accordingly, our businesses are affected by levels of industrial activity and economic conditions in the U.S. and in other countries where we do business and by the relationship of the U.S. dollar to other currencies. Levels of capacity utilization and capital spending in the industries that use our products and overall industrial activity are important factors that influence the demand for our products.

The Company has three reportable business segments: Fluid & Metering Technologies, Health & Science Technologies and Fire & Safety/Diversified Products. Within our three reportable segments, the Company maintains six platforms, where we will invest in organic growth and acquisitions with a strategic view towards a platform with the potential for at least $500 million in revenue, and seven groups, where we will focus on organic growth and strategic acquisitions. The Fluid & Metering Technologies segment contains the Energy, Water (comprised of Water Services & Technology and Diaphragm & Dosing Pump Technology), and Chemical, Food & Process platforms as well as the Agricultural group (comprised of Banjo.) The Health & Science Technologies segment contains the IDEX Optics & Photonics, Scientific Fluidics and Material Processing Technologies platforms, as well as the Sealing Solutions and the Industrial (comprised of Micropump and Gast) groups. The Fire & Safety/Diversified Products segment is comprised of the Dispensing, Rescue, Band-It, and Fire Suppression groups. Each platform/group is comprised of one or more of our 15 reporting units: five reporting units within Fluid & Metering Technologies (Energy; Chemical, Food, & Process; Water Services & Technology; Banjo; Diaphragm & Dosing Pump Technology); six reporting units within Health & Science Technologies (IDEX Optics and Photonics; Scientific Fluidics; Material Processing Technology; Sealing Solutions; Micropump; and Gast); and four reporting units within Fire & Safety/Diversified Products (Dispensing, Rescue, Band-It, and Fire Suppression).

The Fluid & Metering Technologies segment designs, produces and distributes positive displacement pumps, flow meters, valves, injectors, and other fluid-handling pump modules and systems and provides flow monitoring and other services for the food, chemical, general industrial, water and wastewater, agricultural and energy industries. The Health & Science Technologies segment designs, produces and distributes a wide range of precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems used in beverage, food processing, pharmaceutical and cosmetics, pneumatic components and sealing solutions, including very high precision, low-flow rate pumping solutions required in analytical instrumentation, clinical diagnostics and drug discovery, high performance molded and extruded, biocompatible medical devices and implantables, air compressors used in medical, dental and industrial applications, optical components and coatings for applications in the fields of scientific research, defense, biotechnology, life sciences, aerospace, telecommunications and electronics manufacturing, laboratory and commercial equipment used in the production of micro and nano scale materials, precision photonic solutions used in life sciences, research and defense markets, and precision gear and peristaltic pump technologies that meet exacting original equipment manufacturer specifications. The Fire & Safety/Diversified Products segment produces firefighting pumps and controls, rescue tools, lifting bags and other components and systems for the

fire and rescue industry, and engineered stainless steel banding and clamping devices used in a variety of industrial and commercial applications, precision equipment for dispensing, metering and mixing colorants and paints used in a variety of retail and commercial businesses around the world.

Some of our 2013 financial results are as follows:

•	Sales of $2.0 billion increased 4%; organic sales — excluding acquisitions and foreign currency translation — were up 2%.

•	Operating income of $395.5 million increased 208%.

•	Net income increased 578% to $255.2 million.

•	Diluted EPS of $3.09 increased $2.64 or 587% compared to 2012.

Overall we believe market conditions are marginally better than a year ago but still remain uneven. On a regional basis, North American demand has remained strong, the European market continues to stabilize, the emerging markets are growing, and Asia remains uneven. For 2014, based on the Company’s current outlook, we anticipate 3 to 5 percent organic revenue growth in 2014 and EPS of $3.33 to $3.43.

Results of Operations

The following is a discussion and analysis of our results of operations for each of the three years in the period ended December 31, 2013. For purposes of this Item, reference is made to the Consolidated Statements of Operations in Part II, Item 8, “Financial Statements and Supplementary Data.” Segment operating income excludes unallocated corporate operating expenses.

In the following discussion, and throughout this report, references to organic sales, a non-GAAP measure, refers to sales from continuing operations calculated according to generally accepted accounting principles in the United States but excludes (1) the impact of foreign currency translation and (2) sales from acquired businesses during the first twelve months of ownership. The portion of sales attributable to foreign currency translation is calculated as the difference between (a) the period-to-period change in organic sales and (b) the period-to-period change in organic sales after applying prior period foreign exchange rates to the current year period. Management believes that reporting organic sales provides useful information to investors by helping identify underlying growth trends in our business and facilitating easier comparisons of our revenue performance with prior and future periods and to our peers. The Company excludes the effect of foreign currency translation from organic sales because foreign currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. The Company excludes the effect of acquisitions because the nature, size, and number of acquisitions can vary dramatically from period to period and between the Company and its peers and can also obscure underlying business trends and make comparisons of long-term performance difficult. In addition, this report references EBITDA and Adjusted EBITDA. These non-GAAP measures have been reconciled to Net income and Operating income within Item 6, "Selected Financial Data". Given the acquisitive nature of the Company which results in a higher level of amortization expense at recently acquired businesses, EBITDA and Adjusted EBITDA provides management with a better representation of performance of businesses across our three segments.

Management’s primary measurements of segment performance are sales, operating income, and operating margin. In addition, due to the highly acquisitive nature of the Company, the determination of net income includes amortization of acquired intangible assets and, as a result, management reviews EBITDA and Adjusted EBITDA as a percentage of sales. These measures are monitored by management and significant changes in operating results versus current trends in end markets and variances from forecasts are analyzed with segment management.

Performance in 2013 Compared with 2012

(In thousands)	2013				2012				Change
Net sales	$	2,024,130			$	1,954,258			4	%
Operating income	395,513				128,218				208	%
Operating margin	19.5		%		6.6		%		1,290		bps
EBITDA	$	474,669			$	206,766			130	%
EBITDA as a percentage of net sales	23.5		%		10.6		%		1,290		bps
Adjusted EBITDA	$	474,669			$	437,758			8	%
Adjusted EBITDA as a percentage of net sales	23.5		%		22.4		%		110		bps
Capital expenditures	$	31,536			$	35,520			(11	)%
Capital expenditures as a percentage of net sales	1.6		%		1.8		%		(20	)	bps

Sales in 2013 were $2,024 million, a 4% increase from the comparable period last year. This increase reflects a 2% increase in organic sales and 2% from acquisitions (ERC — April 2012, Matcon — July 2012 and FTL —March 2013). Organic sales to customers outside the U.S. represented approximately 51% of total sales in the period compared with 50% in 2012.

In 2013, Fluid & Metering Technologies contributed 43% of sales and 47% of operating income; Health & Science Technologies contributed 35% of sales and 30% of operating income; and Fire & Safety/Diversified Products contributed 22% of sales and 23% of operating income.

Gross profit of $873.4 million in 2013 increased $69.7 million, or 8.7%, from 2012. Gross margins were 43.1% in 2013 and 41.1% in 2012.

SG&A expenses increased to $477.9 million in 2013 from $444.5 million in 2012. The $33.4 million increase reflects approximately $10.4 million of incremental costs from new acquisitions, $5.6 million of cost-out actions, a $1.7 million pension settlement, $1.2 million related to environmental reserve costs, and $18.6 million of volume-related expenses, partially offset by a $4.0 million gain on the settlement of the contingent consideration related to the Matcon business acquired in July 2012. As a percentage of sales, SG&A expenses were 23.6% for 2013 and 22.7% for 2012.

During 2012, the Company recorded pre-tax restructuring expenses totaling $32.5 million. These restructuring expenses were mainly attributable to employee severance related to employee reductions across various functional areas, the termination of a defined benefit pension plan and facility rationalization resulting from the Company’s cost savings initiatives. These initiatives included exit costs related to five facility closures and severance benefits for 491 employees in 2012.

Operating income of $395.5 million in 2013 increased from the $128.2 million recorded in 2012, primarily reflecting an increase in volume, improved productivity and the impact of the $198.5 million asset impairment charges and the $32.5 million of restructuring-related charges recorded in 2012. Operating margin of 19.5% in 2013 was up from 6.6% in 2012 primarily due to volume leverage, productivity and the impact of asset impairment charges and restructuring-related charges in 2012.

Interest expense decreased slightly to $42.2 million in 2013 from $42.3 million in 2012. The decrease was principally due to lower debt levels.

The provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes increased to $97.9 million in 2013 compared to $48.6 million in 2012. The effective tax rate decreased to 27.7% in 2013 compared to 56.3% in 2012, mainly due to the 2012 nonrecurring asset impairment charge recorded in the fourth quarter of 2012. The impairment charge increased our 2012 effective tax rate by 26.9%. Our effective tax rate was also impacted by recognition of the 2012 U.S. R&D credit in 2013 due to the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013 which reinstated the U.S. R&D Credit retroactively to January 1, 2012, recognition of additional UK R&D tax benefits, revaluation of the UK deferred tax liability due to the reduction in the UK statutory tax rate, the settlement of the contingent consideration agreement related to the Matcon business acquired in July 2012, and the mix of global pre-tax income among jurisdictions.

Net income for the year of $255.2 million increased from the $37.6 million earned in 2012. Diluted earnings per share in 2013 of $3.09 increased $2.64 from $0.45 in 2012.

Fluid & Metering Technologies Segment

(In thousands)	2013				2012				Change
Net sales	$	871,814			$	833,288			5	%
Operating income	211,256				146,650				44	%
Operating margin	24.2		%		17.6		%		660		bps
EBITDA	$	237,100			$	176,312			34	%
EBITDA as a percentage of net sales	27.2		%		21.2		%		600		bps
Adjusted EBITDA	$	237,100			$	210,295			13	%
Adjusted EBITDA as a percentage of sales	27.2		%		25.2		%		200		bps
Capital expenditures	$	11,581			$	13,535			(14	)%
Capital expenditures as a percentage of net sales	1.3		%		1.6		%		(30	)	bps

Sales of $871.8 million increased $38.5 million, or 5%, in 2013 compared with 2012. This increase reflected 4% organic growth and 1% favorable foreign currency translation. The increase in organic sales was attributable to growth across all our platforms and groups within the segment. In 2013, organic sales increased approximately 3% domestically and 6% internationally. Organic sales to customers outside the U.S. were approximately 46% of total segment sales in 2013, compared with 47% in 2012.

Sales within our Energy platform increased compared to 2012, due to the strength of OEM truck builds and electronic retrofits in North America. Additional growth has been driven by growth across the LPG market, including North America, China, India and Russia. Sales within our CFP platform increased compared to 2012 on continued strength in the chemical markets, particularly with project opportunities in the Middle East and Asia, coupled with solid aftermarket performance. The CFP North American industrial distribution market started the year soft, but gradually recovered in the second half of 2013. Sales increases within our Agriculture group were driven by strong OEM demand in North America, new product introductions and an increase in market share. The sales increase in WST was driven by share gains and strong global project activity, specifically for projects in the US and Japan. DDPT saw only modest sales growth due to softness in several core markets, but this was offset by a pickup in the Middle East and the semiconductor markets.

Operating income and operating margin of $211.3 million and 24.2%, respectively, were higher than the $146.7 million and 17.6% recorded in 2012, primarily due to volume leverage and productivity initiatives as well as the impact of the $27.7 million of impairment charges and $6.3 million of restructuring charges recorded in 2012.

Health & Science Technologies Segment

(In thousands)	2013				2012				Change
Net sales	$	714,650			$	695,235			3	%
Operating income (loss)	136,707				(62,835		)		318	%
Operating margin	19.1		%		(9.0		)%		2,810		bps
EBITDA	$	180,711			$	(23,365	)		873	%
EBITDA as a percentage of net sales	25.3		%		(3.4		)%		2,870		bps
Adjusted EBITDA	$	180,711			$	162,177			11	%
Adjusted EBITDA as a percentage of sales	25.3		%		23.3		%		200		bps
Capital expenditures	$	12,280			$	13,140			(7	)%
Capital expenditures as a percentage of net sales	1.7		%		1.9		%		(20	)	bps

Sales of $714.7 million increased $19.4 million, or 3%, in 2013 compared with 2012. This increase reflected 6% growth from acquisitions (ERC, Matcon and FTL), offset by a 1% unfavorable foreign currency translation and a 2% decrease in organic sales. In 2013, organic sales decreased 1% domestically and 3% internationally. Organic sales to customers outside the U.S. were approximately 53% of total segment sales in 2013 compared with 51% in 2012.

Sales within our MPT platform increased compared to 2012 due to large projects in the pharmaceutical and chemical markets, driven by released capital spending, particularly in North America and Europe. Sales within our Scientific Fluidics

platform increased on the success of new products introduced throughout 2013 and share gains. In the latter part of 2013, Scientific Fluidics benefited from the the easing of National Institute of Health funding constraints, which opened up further spending in our core Analytical Instruments and In Vitro Diagnostic markets. Sales within our Specialty Seals group increased compared to 2012 due to a full nine months of sales from FTL, acquired in March 2013, continued strong growth in oil & gas, and stability in the scientific and commercial aircraft end markets. Sales within our IOP platform decreased compared to 2012, primarily from continued weak demand in the defense, biotechnology and electronics end markets as well as the decision to exit certain product lines. Sales in our Industrial group decreased compared to 2012 due to several original equipment manufacturer (“OEM”) orders that did not repeat in 2013.

Operating income and operating margin of $136.7 million and 19.1%, respectively, in 2013 were up from the operating loss and negative operating margin of $62.8 million and 9.0%, respectively, recorded in 2012, primarily due to volume leverage and productivity initiatives as well as the impact of the $170.8 million of impairment charges and the $14.7 million of restructuring charges recorded in 2012.

Fire & Safety/Diversified Products Segment

(In thousands)	2013				2012				Change
Net sales	$	445,049			$	437,053			2	%
Operating income	102,730				96,120				7	%
Operating margin	23.1		%		22.0		%		110		bps
EBITDA	$	109,924			$	103,370			6	%
EBITDA as a percentage of net sales	24.7		%		23.7		%		100		bps
Adjusted EBITDA	$	109,924			$	111,710			(2	)%
Adjusted EBITDA as a percentage of sales	24.7		%		25.6		%		(90	)	bps
Capital expenditures	$	5,040			$	6,654			(24	)%
Capital expenditures as a percentage of net sales	1.1		%		1.5		%		(40	)	bps

Sales of $445.0 million increased $8.0 million, or 2%, in 2013 compared with 2012. This increase reflected 1% organic growth and 1% favorable foreign currency translation. In 2013, organic sales increased 1% domestically and 2% internationally. Organic sales to customers outside the U.S. were approximately 56% of total segment sales in 2013, compared with 57% in 2012.

Sales within our Dispensing group decreased due to the fulfillment of the 2012 large replenishment order in the first quarter of 2013. However, excluding this order, sales increased on strength in our core North American markets, driven by low volatile organic compound ("VOC") programs, and expanded sales from our low-end automatic dispenser, X-Smart, in EMEA and Asia. The sales increase within our Band-It group was driven by general strength in the oil and gas applications market and large automotive blanket orders for new vehicle platforms in North America. Sales within our Fire Suppression group increased as a result of orders for fire suppression trailers at power production facilities, project orders in China, and a stable core business in North America and Western Europe. Sales within our Rescue group increased as a result of robust demand for our rescue tools within the North American and European markets.

Operating income and operating margin of $102.7 million and 23.1%, respectively, were higher than the $96.1 million and 22.0% recorded in 2012, primarily due to the impact of the $8.3 million of restructuring charges recorded in 2012, as well as volume leverage, partially offset by mix across businesses.

Performance in 2012 Compared with 2011

(In thousands)	2012				2011				Change
Net sales	$	1,954,258			$	1,838,451			6	%
Operating income	128,218				304,656				(58	)%
Operating margin	6.6		%		16.6		%		(1,000	)	bps
EBITDA	$	206,766			$	375,599			(45	)%
EBITDA as a percentage of net sales	10.6		%		20.4		%		(980	)	bps
Adjusted EBITDA	$	437,758			$	387,913			13	%
Adjusted EBITDA as a percentage of net sales	22.4		%		21.1		%		130		bps
Capital expenditures	$	35,520			$	34,548			3	%
Capital expenditures as a percentage of net sales	1.8		%		1.9		%		(10	)	bps

Sales in 2012 were $1,954.3 million, a 6% increase from the comparable period last year. This increase reflects a 3% increase in organic sales, 5% from acquisitions (AT Films — January 2011, Microfluidics — March 2011, CVI MG — June 2011, ERC — April 2012 and Matcon — July 2012) and 2% unfavorable foreign currency translation. Organic sales to customers outside the U.S. represented approximately 50% of total sales in the period compared with 52% in 2011.

In 2012, Fluid & Metering Technologies contributed 43% of sales and 82% of operating income; Health & Science Technologies contributed 35% of sales and (35)% of operating income; and Fire & Safety/Diversified Products contributed 22% of sales and 53% of operating income.

Gross profit of $803.7 million in 2012 increased $65.0 million, or 9%, from 2011. Gross margins were 41.1% in 2012 and 40.2% in 2011.

SG&A expenses increased to $444.5 million in 2012 from $421.7 million in 2011. The $22.8 million increase reflects approximately $26.8 million of incremental costs from acquisitions, $2.7 million for a benefit from forfeited CEO equity compensation recorded in 2011 and a $2.8 million gain from the sale of a facility in Italy recorded in 2011, partially offset by $9.5 million of cost savings initiatives. As a percentage of sales, SG&A expenses were 22.7% for 2012 and 22.9% for 2011.

During 2012, the Company recorded pre-tax restructuring expenses totaling $32.5 million, compared with $12.3 million for the same period in 2011. These restructuring expenses were mainly attributable to employee severance related to employee reductions across various functional areas, the termination of a defined benefit pension plan and facility rationalization resulting from the Company’s cost savings initiatives. These initiatives included exit costs related to five facility closures and severance benefits for 491 employees in 2012 and severance benefits for 292 employees in 2011.

During 2012, the Company concluded that a non-cash impairment charge was required to reduce the carrying value of goodwill and intangible assets within the IOP reporting unit and goodwill and long-lived assets within the WST reporting unit. The goodwill within IOP primarily originated from the 2011 acquisition of CVI Melles Griot and the goodwill in WST primarily originated from the 2008 acquisitions of IETG and ADS. As a result of our annual test, an impairment charge was required within IOP due to continued softness in the Optics & Photonics end markets. In addition, we were required to perform an interim impairment test within WST at December 31, 2012 due to the reorganization of certain FMT businesses in the fourth quarter. This reorganization, combined with continued softness in municipal end markets, contributed to the impairment charge. As a result of the above testing, the Company recorded a pre-tax charge of $198.5 million in the fourth quarter of 2012.

No additional impairments were identified at any of the other reporting units in 2012.

Operating income of $128.2 million in 2012 was down from the $304.7 million recorded in 2011, primarily reflecting $198.5 million of asset impairment charges and an increase of $20.2 million in restructuring-related charges, partially offset by an increase in volume and improved productivity. Operating margin of 6.6% in 2012 was down from 16.6% in 2011 primarily due to the impact of asset impairment charges and restructuring-related charges, as well as the dilutive impact from acquisitions, partially offset by volume leverage and productivity.

Interest expense increased to $42.3 million in 2012 from $29.3 million in 2011. The increase was principally due to higher debt levels resulting from the CVI MG acquisition and higher interest rates associated with replacing our Revolving Facility debt in 2011 with fixed rate 4.2% Senior Notes.

The provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes decreased to $48.6 million in 2012 compared to $80.0 in 2011. The effective tax rate increased to 56.3% in 2012 compared to 29.2% in 2011, mainly due to the nonrecurring asset impairment charge recorded in the fourth quarter of 2012. The impairment charge increased our effective tax rate by 26.9%. Our effective tax rate was also impacted by the mix of global pre-tax income among jurisdictions, a reversal of disallowed executive compensation expense in the prior year and the impact of recent acquisitions.

Net income for the year of $37.6 million decreased from the $193.9 million earned in 2011. Diluted earnings per share in 2012 of $0.45 decreased $1.87, or 81%, from $2.32 in 2011.

Fluid & Metering Technologies Segment

(In thousands)	2012				2011				Change
Net sales	$	833,288			$	831,287			—	%
Operating income	146,650				164,818				(11	)%
Operating margin	17.6		%		19.8		%		(220	)	bps
EBITDA	$	176,312			$	196,937			(10	)%
EBITDA as a percentage of net sales	21.2		%		23.7		%		(250	)	bps
Adjusted EBITDA	$	210,295			$	199,798			5	%
Adjusted EBITDA as a percentage of net sales	25.2		%		24.0		%		120		bps
Capital expenditures	$	13,535			$	12,543			8	%
Capital expenditures as a percentage of net sales	1.6		%		1.5		%		10		bps

Sales of $833.3 million increased $2.0 million in 2012 compared with 2011. This increase reflected 2% organic growth offset by 2% unfavorable foreign currency translation. The increase in organic sales was largely attributed to growth across our Energy platform and our Agricultural group. In 2012, organic sales increased approximately 7% domestically and decreased 3% internationally. Organic sales to customers outside the U.S. were approximately 47% of total segment sales in 2012, compared with 48% in 2011.

Sales within our Energy platform increased compared to 2011, due to strong demand for systems used in midstream and downstream oil and gas applications both domestically and internationally. Additionally, large Energy project sales to emerging markets drove international sales growth, partially offset by weakness in the European downstream markets due to general economic conditions. Domestic sales growth within Energy was driven by the transportation end markets and strength in our distribution channel. Sales within our CFP platform increased compared to 2011 on strong general industrial and chemical demand in both our OEM and distributor channels in North America and Asia. In addition, CFP sales growth accelerated in emerging markets. Sales within our Agriculture group increased due to robust demand in North America. DDPT sales increased compared to 2011, due to a modest increase in project activity for the chemical and industrial businesses. Offsetting these sales increases, was a sales decrease in our WST group, which continues to face funding headwinds in the municipal water end market.

Operating income and operating margin of $146.7 million and 17.6%, respectively, were lower than the $164.8 million and 19.8% recorded in 2011, primarily due to $27.7 million of impairment charges and an increase of $3.4 million of restructuring charges, partially offset by productivity and cost reduction initiatives.

Health & Science Technologies Segment

(In thousands)	2012				2011				Change
Net sales	$	695,235			$	607,900			14	%
Operating income (loss)	(62,835		)		106,037				(159	)%
Operating margin	(9.0		)%		17.4		%		(2,640	)	bps
EBITDA	$	(23,365	)		$	134,270			(117	)%
EBITDA as a percentage of net sales	(3.4		)%		22.1		%		(2,550	)	bps
Adjusted EBITDA	$	162,177			$	136,400			19	%
Adjusted EBITDA as a percentage of net sales	23.3		%		22.4		%		90		bps
Capital expenditures	$	13,140			$	12,938			2	%
Capital expenditures as a percentage of net sales	1.9		%		2.1		%		(20	)	bps

Sales of $695.2 million increased $87.3 million, or 14%, in 2012 compared with 2011. This increase reflected 16% growth from acquisitions (AT Films, Microfluidics, CVI MG, ERC and Matcon), offset by a 1% unfavorable foreign currency translation and a 1% decrease in organic sales. In 2012, organic sales increased 2% domestically and decreased 4% internationally. Organic sales to customers outside the U.S. were approximately 51% of total segment sales in both 2012 and 2011.

Sales within our MPT platform increased compared to 2011 due to a full twelve months of sales from Microfluidics, acquired in March 2011, strength in Asian food and pharmaceutical markets, and large project orders received in the second half of 2011 which shipped during the first half of 2012. Sales within our Scientific Fluidics platform decreased compared to 2011 due to slowed instrumentation end markets driven by National Institutes of Health funding concerns, inventory reduction programs by our customers and inconsistent OEM demand in North America, partially offset by modest growth in the life sciences end market, particularly in Asia. Sales within our Sealing Solutions group increased slightly compared to 2011 due to an increase in distributor sales and an upturn in the diesel and gas engine markets. Sales within our IOP platform increased compared to 2011 primarily as a result of our CVI MG acquisition. However, 2012 sales within our IOP platform were lower than anticipated due to weak demand in the defense, biotech and electronics end markets. Sales in our Industrial group decreased compared to 2011 due to lower sales to distributors and slower sales into automotive end markets.

An operating loss of $62.8 million in 2012 was down from the $106.0 million of income recorded in 2011, primarily due to $170.8 million of impairment charges and $14.7 million of current period restructuring charges, partially offset by the $15.8 million acquisition fair value inventory charge for CVI MG recorded in 2011 and productivity from prior period restructuring actions. A negative operating margin of 9.0% in 2012 was down from 17.4% in 2011, due to the dilutive impact from acquisitions, current period restructuring charges and impairment charges.

Fire & Safety/Diversified Products Segment

(In thousands)	2012				2011				Change
Net sales	$	437,053			$	402,425			9	%
Operating income	96,120				85,901				12	%
Operating margin	22.0		%		21.3		%		70		bps
EBITDA	$	103,370			$	95,525			8	%
EBITDA as a percentage of net sales	23.7		%		23.7		%		—		bps
Adjusted EBITDA	$	111,710			$	100,752			11	%
Adjusted EBITDA as a percentage of net sales	25.6		%		25.0		%		60		bps
Capital expenditures	$	6,654			$	5,644			18	%
Capital expenditures as a percentage of net sales	1.5		%		1.4		%		10		bps

Sales of $437.1 million increased $34.6 million, or 9%, in 2012 compared with 2011. This increase reflected 11% organic growth offset by 2% unfavorable foreign currency translation. In 2012, organic sales increased 29% domestically and 1% internationally. Organic sales to customers outside the U.S. were approximately 57% of total segment sales in 2012, compared with 63% in 2011.

Sales within our Dispensing group increased on strength in our core North American markets driven by a large replenishment project, which began shipping in the second quarter of 2012. The sales increase within our Band-It group was driven by general North American industrial market improvement and strength in the oil and gas applications market. Sales within our Fire Suppression group increased as a result of geographic expansions into Asian markets and through the penetration into product adjacencies. Sales within our Rescue group increased as a result of robust demand for our rescue tools within North American markets and traction in South and Central America initiatives.

Operating income of $96.1 million was higher than the $85.9 million recorded in 2011, primarily due to volume leverage and productivity, partially offset by an increase of $3.1 million in restructuring charges and a $2.8 million gain on the sale of a facility in 2011. Operating margin of 22.0% in 2012 was up from 21.3% in 2011, primarily due to improved productivity and cost reduction initiatives, partially offset by current period restructuring charges and the gain on the sale of a facility in 2011.

Liquidity and Capital Resources

At December 31, 2013, working capital was $686.3 million and the Company’s current ratio was 3.25 to 1. Cash flows from operating activities increased $75.3 million, or 23.1%, to $401.5 million in 2013, primarily due to higher operating income. At December 31, 2013, the Company’s cash and cash equivalents totaled $439.6 million, of which $309.1 million was held outside of the United States. During the year ended December 31, 2013, the Company repatriated $11.7 million of foreign earnings resulting in $0.9 million of incremental income tax expense. The Company has made no 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.

Cash flows from operations were more than adequate to fund capital expenditures of $31.5 million and $35.5 million in 2013 and 2012, respectively. Capital expenditures were generally for machinery and equipment that improved productivity, although a portion was for business system technology and replacement of equipment and facilities. Management believes that the Company has ample capacity in its plants and equipment to meet demand increases for future growth in the intermediate term.

The Company acquired FTL Seals Technology, Ltd ("FTL") in March 2013 for cash consideration of $34.5 million (£23.1 million). The entire purchase price was funded with borrowings under the Revolving Facility.

The Company maintains a revolving credit facility (the “Revolving Facility”), which is a $700.0 million unsecured, multi-currency bank credit facility expiring on June 27, 2016. At December 31, 2013, $10.0 million was outstanding under the Revolving Facility, with $8.7 million of outstanding letters of credit. The net available borrowing capacity under the Revolving Facility at December 31, 2013, was approximately $681.3 million. Borrowings under the Revolving Facility bear interest, at either an alternate base rate or an adjusted LIBOR rate plus, in each case, an applicable margin. This applicable margin is based on the Company’s senior, unsecured, long-term debt rating and can range from .875% to 1.70%. Based on the Company’s credit rating at December 31, 2013, 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.

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, which is payable semi-annually in arrears on each June 9th and December 9th 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 approximately $295.7 million, after deducting a $1.6 million issuance discount, a $1.9 million underwriting commission and $0.8 million offering expenses, were used to repay $250.0 million of outstanding bank indebtedness, with the balance used for general corporate purposes. The 4.5% Senior Notes bear interest at a rate of 4.5% per annum, which is payable semi-annually in arrears on each June 15 and December 15. The Company may redeem all or a portion of the 4.5% Senior Notes at any time prior to maturity at the redemption prices set forth in the Note Indenture governing the 4.5% Senior Notes. The Company may issue additional debt from time to time pursuant to the Indenture. The Indenture and 4.5% Senior Notes contain covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of the 4.5% Senior Notes also require the Company to make an offer to repurchase the 4.5% Senior Notes upon a change of control triggering event (as defined in the Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest, if any.

On December 9, 2011, the Company completed a public offering of $350.0 million 4.2% senior notes due December 15, 2021 (“4.2% Senior Notes”). The net proceeds from the offering of approximately $346.2 million, after deducting a $0.9 million issuance discount, a $2.3 million underwriting commission and $0.6 million offering expenses, were used to repay $306.0 million of outstanding bank indebtedness, with the balance used for general corporate purposes. The 4.2% Senior Notes bear interest at a rate of 4.2% per annum, which is payable semi-annually in arrears on each June 15 and December 15. The Company may redeem all or part of the 4.2% Senior Notes at any time prior to maturity at the redemption prices set forth in the Note Indenture governing the 4.2% Senior Notes. The Company may issue additional debt from time to time pursuant to the Indenture. The Indenture and 4.2% Senior Notes contain covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all the Company’s assets. The terms of the 4.2% Senior Notes also require the Company to make an offer to repurchase the 4.2% Senior Notes upon a change of control triggering event (as defined in the Indenture) at a price equal to 101% of their principal amount plus accrued and unpaid interest, if any.

On April 15, 2010, the Company entered into a forward starting interest rate contract with a notional amount of $300.0 million and 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%.

There are two key financial covenants that the Company is required to maintain in connection with the Revolving Facility and the 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, 2013, the Company was in compliance with both of these financial covenants, as the Company’s interest coverage ratio was 11.73 to 1 and the leverage ratio was 1.63 to 1. There are no financial covenants relating to the 4.5% Senior Notes or 4.2% Senior Notes; however, both are subject to cross-default provisions.

On November 8, 2013, the Company’s Board of Directors approved an increase in the authorized level for repurchases of common stock by $300.0 million. Repurchases under the program will be funded with future cash flow generation. During 2013, the Company purchased a total of 2.9 million shares at a cost of $167.5 million compared to 2.2 million shares purchased at a cost of $89.6 million in 2012. As of December 31, 2013 there was $368 million remaining under authorized repurchases.

The Company believes current cash, cash from operations and cash available under the Revolving Facility will be sufficient to meet its operating cash requirements, planned capital expenditures, interest on all borrowings, pension and postretirement funding requirements, authorized share repurchases and annual dividend payments to holders of the Company’s stock for the next twelve months. Additionally, in the event that suitable businesses are available for acquisition upon acceptable terms, the Company may obtain all or a portion of the financing for these acquisitions through the incurrence of

additional borrowings. As of December 31, 2013, $10.0 million was outstanding under the Revolving Facility, with $8.7 million of outstanding letters of credit, resulting in net available borrowing capacity under the Revolving Facility at December 31, 2013 of approximately $681.3 million.

Contractual Obligations

Our contractual obligations include pension and postretirement medical benefit plans, rental payments under operating leases, payments under capital leases, and other long-term obligations arising in the ordinary course of business. There are no identifiable events or uncertainties, including the lowering of our credit rating that would accelerate payment or maturity of any of these commitments or obligations.

The following table summarizes our significant contractual obligations and commercial commitments at December 31, 2013, and the future periods in which such obligations are expected to be settled in cash. In addition, the table reflects the timing of principal and interest payments on outstanding borrowings. Additional detail regarding these obligations is provided in the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”

Payments Due by Period	Total				Less Than 1 Year				1-3 Years				3-5 Years				More Than 5 Years
	(In thousands)
Borrowings(1)	$	991,761			$	33,968			$	181,468			$	56,400			$	719,925
Operating lease obligations	50,065				15,426				19,553				9,141				5,945
Capital lease obligations(2)	3,008				564				1,152				1,292				—
Purchase obligations(3)	98,740				96,153				2,587				—				—
Pension and post-retirement obligations	98,883				9,098				17,511				19,314				52,960
Total contractual obligations(4)	$	1,242,457			$	155,209			$	222,271			$	86,147			$	778,830

(1)	Includes interest payments based on contractual terms and current interest rates for variable debt.

(2)	Consists primarily of tangible personal property leases.

(3)	Consists primarily of inventory commitments.

(4)	Comprises liabilities recorded on the balance sheet of $841.2 million, and obligations not recorded on the balance sheet of $401.3 million.

Critical Accounting Policies

We believe that the application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”

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

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

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

Goodwill, long-lived and intangible assets — The Company evaluates the recoverability of certain noncurrent assets utilizing various estimation processes. An impairment of a long-lived asset exists when the asset’s carrying amount exceeds its fair value, and is recorded when the carrying amount is not recoverable through future operations. An indefinite lived intangible asset or goodwill impairment exists when the carrying amount of intangible assets and goodwill exceeds its fair value. Assessments of possible impairments of goodwill, long-lived or intangible assets are made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. Additionally, testing for possible impairment of recorded goodwill and indefinite-lived intangible asset balances is performed annually. The amount and timing of impairment charges for these assets require the estimation of future cash flows and the fair value of the related assets.

The Company’s business acquisitions result in recording goodwill and other intangible assets, which affect the amount of amortization expense and possible impairment expense that the Company will incur in future periods. The Company follows the guidance prescribed in ASC 350, “Goodwill and Other Intangible Assets” to test goodwill and intangible assets for impairment. Annually, on October 31, or more frequently if triggering events occur, the Company compares the fair value of their reporting units to the carrying value of each reporting unit to determine if a goodwill impairment exists.

The Company determines the fair value of each reporting unit utilizing an income approach (discounted cash flows) weighted 50% and a market approach consisting of a comparable public company multiples methodology weighted 50%. To determine the reasonableness of the calculated fair values, the Company reviews the assumptions to ensure that neither the income approach nor the market approach yielded significantly different valuations.

The key assumptions are updated every year for each reporting unit for the income and market methodology used to determine fair value. Various assumptions are utilized including forecasted operating results, annual operating plans, strategic plans, economic projections, anticipated future cash flows, the weighted average cost of capital, market data and market multiples. The assumptions that have the most significant effect on the fair value calculation are the weighted average cost of capital, the market multiples and terminal growth rates. The 2013 and 2012 ranges for these three assumptions utilized by the Company are as follows:

Assumptions		2013 Range		2012 Range
Weighted average cost of capital		10.0% to 14.5%		10.0% to 14.0%
Market multiples		7.5x to 14.5x		7.5x to 11.0x
Terminal growth rates		3.0% to 3.5%		3.0% to 3.5%

In assessing the fair value of the reporting units, the Company considered both the market approach and income approach. Under the market approach, the fair value of the reporting unit is based on comparing the reporting unit to comparable publicly traded companies. Under the income approach, the fair value of the reporting unit is based on the present value of estimated future cash flows. The income approach is dependent on a number of significant management assumptions including estimates of operating results, capital expenditures, other operating costs and discount rates. Weighting was equally attributed to both the market and income approaches (50% each) in arriving at the fair value of the reporting units.

In 2013, there were no triggering events or changes in circumstances that would have required a review other than as of our annual test date. Based on the results of our measurement at October 31, 2013, all reporting units had a fair value that was significantly in excess of carrying value, except for our IOP reporting unit, which had a fair value greater than 10% above carrying value. The IOP reporting unit was written down to its fair value in 2012 as result of our goodwill impairment and thus the fair value continues to be near the carrying value.

In 2012, as a result of our annual impairment test for the IOP reporting unit and as a result of the reorganization of certain FMT reporting units, the Company determined that the fair value of the IOP and WST reporting units was less than the carrying value of the net assets of the reporting units, and thus the Company performed step two of the goodwill impairment test. In step two of the goodwill impairment test, the Company determined the implied fair value of the goodwill and compared it to the carrying value, which resulted in a $149.8 million goodwill impairment charge at the IOP reporting unit and a $20.7 million impairment charge at the WST reporting unit.

The unamortized Banjo trade name was determined to be an indefinite lived intangible asset which is tested for impairment on an annual basis in accordance with ASC 350 or more frequently if events or changes in circumstances indicate

that the asset might be impaired. The Company uses the relief-from-royalty method, a form of the income approach. The relief-from-royalty method is dependent on a number of significant management assumptions, including estimates of revenues, royalty rates and discount rates.

In 2013, there were no triggering events or changes in circumstances that would have required a review other than as of our annual test date and the Company concluded that the fair value of the Banjo trade name was in excess of the carrying value as of October 31, 2013.

In 2012, as a result of our annual impairment test, the Company concluded that the fair value of the CVI Melles Griot trade names within the IOP reporting unit was less than the carrying value, resulting in a $21.0 million impairment charge. The Company also determined that the CVI Melles Griot trade names no longer had an indefinite life and reclassified the remaining $26.0 million to definite lived assets that will be amortized over a remaining useful life of 15 years.

A long-lived asset impairment exists when the carrying amount of the asset exceeds its fair value. Assessments of possible impairments of long-lived assets are made when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable through future operations. The amount and timing of impairment charges for these assets require the estimation of future cash flows and the fair value of the related assets. In 2013, the Company concluded that certain long lived assets had a fair value that was less than the carrying value of the assets, resulting in $2.7 million of impairment charges. In 2012, the Company concluded that certain long lived assets within the WST reporting unit had a fair value that was less than the carrying value of the assets, resulting in a $7.0 million impairment charge.

Defined benefit retirement plans — The plan obligations and related assets of the defined benefit retirement plans are presented in Note 15 of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.” Level 1 assets are valued using unadjusted quoted prices for identical assets in active markets. Level 2 assets are valued using quoted prices or other observable inputs for similar assets. Level 3 assets are valued using unobservable inputs, but reflect the assumptions market participants would use in pricing the assets. Plan obligations and the annual pension expense are determined by consulting with actuaries using a number of assumptions provided by the Company. Key assumptions in the determination of the annual pension expense include the discount rate, the rate of salary increases, and the estimated future return on plan assets. To the extent actual amounts differ from these assumptions and estimated amounts, results could be adversely affected.

Changes in the discount rate assumptions will impact the (gain) loss amortization and interest cost components of the projected benefit obligation (PBO), which in turn, may impact the Company’s funding decisions if the PBO exceeds plan assets. Each 100 basis point increase or decrease in the discount rate will cause a corresponding decrease or increase, respectively, in the PBO of an estimated $23.0 million based upon the December 31, 2013 data.

Recently Adopted Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-02 which requires additional disclosures regarding the reporting of reclassifications out of accumulated other comprehensive income. ASU 2013-02 requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. This guidance is effective for reporting periods beginning after December 15, 2012. The Company adopted this guidance effective January 1, 2013 and its adoption did not impact the consolidated financial position, results of operations or cash flows of the Company. See Note 14 for a further discussion on other comprehensive income (loss).