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

2018 Overview and Outlook

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

The Company has three reportable business segments: Fluid & Metering Technologies, Health & Science Technologies and Fire & Safety/Diversified Products. Within our three reportable segments, the Company maintains 13 platforms, where we focus on organic growth and strategic acquisitions. Each of our 13 platforms is also a reporting unit that we annually test goodwill for impairment.

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

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

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

Our 2018 financial results were as follows:

•	Sales of $2.5 billion increased 9%, reflecting an 8% increase in organic sales and a 1% increase due to foreign currency translation.

•	Operating income of $569.1 million was up 13% and operating margin of 22.9% was up 90 basis points from the prior year.

•	Net income increased 22% to $410.6 million.

•	Diluted EPS of $5.29 increased $0.93, or 21%, compared to 2017.

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

•	Adjusted operating income of $581.2 million was up 16% and adjusted operating margin of 23.4% was up 150 basis points from the prior year.

•	Adjusted net income increased 26% to $419.6 million.

•	Adjusted EPS of $5.41 was 26% higher than prior year adjusted EPS of $4.31.

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

Results of Operations

The following is a discussion and analysis of our results of operations for each of the three years in the period ended December 31, 2018. For purposes of this Item, reference is made to the Consolidated Statements of Operations in Part II, Item 8, “Financial Statements and Supplementary Data.” Segment operating income excludes unallocated corporate operating expenses. Management’s primary measurements of segment performance are sales, operating income and operating margin.

In the following discussion, and throughout this report, references to organic sales, a non-GAAP measure, refers to sales from continuing operations calculated according to generally accepted accounting principles in the United States but excludes (1) the impact of foreign currency translation and (2) sales from acquired or divested businesses during the first twelve months of ownership or divestiture. The portion of sales attributable to foreign currency translation is calculated as the difference between (a) the period-to-period change in organic sales and (b) the period-to-period change in organic sales after applying prior period foreign exchange rates to the current year period. Management believes that reporting organic sales provides useful information to investors by helping identify underlying growth trends in our business and facilitating easier comparisons of our revenue performance with prior and future periods and to our peers. The Company excludes the effect of foreign currency translation from organic sales because foreign currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. The Company excludes the effect of acquisitions and divestitures because they can obscure underlying business trends and make comparisons of long-term performance difficult due to the varying nature, size and number of transactions from period to period and between the Company and its peers.

Performance in 2018 Compared with 2017

(In thousands)	2018				2017				Change
Net sales	$	2,483,666			$	2,287,312			9	%
Operating income	569,088				502,556				13	%
Operating margin	22.9		%		22.0		%		90		bps

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

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

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

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

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

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

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

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

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

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

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

Fluid & Metering Technologies Segment

(In thousands)	2018				2017				Change
Net sales	$	951,552			$	880,957			8	%
Operating income	275,060				241,030				14	%
Operating margin	28.9		%		27.4		%		150		bps

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

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

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

Health & Science Technologies Segment

(In thousands)	2018				2017				Change
Net sales	$	896,419			$	820,131			9	%
Operating income	205,679				179,567				15	%
Operating margin	22.9		%		21.9		%		100		bps

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

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

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

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

Fire & Safety/Diversified Products Segment

(In thousands)	2018				2017				Change
Net sales	$	637,028			$	587,533			8	%
Operating income	168,601				147,028				15	%
Operating margin	26.5		%		25.0		%		150		bps

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

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

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

Performance in 2017 Compared with 2016

(In thousands)	2017				2016				Change
Net sales	$	2,287,312			$	2,113,043			8	%
Operating income	502,556				412,397				22	%
Operating margin	22.0		%		19.5		%		250		bps

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

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

Gross profit of $1.0 billion in 2017 increased $95.9 million, or 10%, from 2016, while gross margin increased 90 basis points to 44.9% in 2017 from 44.0% in 2016. The increase in gross profit and margin is primarily a result of increased sales volume and the dilutive impact in the prior year attributable to $14.7 million of fair value inventory step-up charges from 2016 acquisitions.

SG&A expenses increased to $524.9 million in 2017 from $492.4 million in 2016. The $32.5 million increase is mainly attributable to $15.2 million of net incremental impact from acquisitions and divestitures as well as higher variable compensation and stock compensation expense. As a percentage of sales, SG&A expenses were 23.0% for 2017 and 23.3% for 2016.

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

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

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

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

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

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

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

Fluid & Metering Technologies Segment

(In thousands)	2017				2016				Change
Net sales	$	880,957			$	849,101			4	%
Operating income	241,030				217,500				11	%
Operating margin	27.4		%		25.6		%		180		bps

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

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

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

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

Health & Science Technologies Segment

(In thousands)	2017				2016				Change
Net sales	$	820,131			$	744,809			10	%
Operating income (loss)	179,567				153,691				17	%
Operating margin	21.9		%		20.6		%		130		bps

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

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

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

Fire & Safety/Diversified Products Segment

(In thousands)	2017				2016				Change
Net sales	$	587,533			$	520,009			13	%
Operating income	147,028				123,605				19	%
Operating margin	25.0		%		23.8		%		120		bps

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

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

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

Liquidity and Capital Resources

Operating Activities

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

Investing Activities

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

Cash flows from operations were more than adequate to fund capital expenditures of $56.1 million and $43.9 million in 2018 and 2017, respectively. Capital expenditures were generally for machinery and equipment that supported growth, improved productivity, tooling, business system technology, replacement of equipment and investments in new facilities. Management believes that the Company has ample capacity in its plants and equipment to meet demand increases for future growth in the intermediate term.

Financing Activities

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

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

The Company maintains a revolving credit facility (the “Revolving Facility”), which is a $700.0 million unsecured, multi-currency bank credit facility expiring on June 23, 2020. At December 31, 2018, there was no balance outstanding under the Revolving Facility and $8.8 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Facility at December 31, 2018 of $691.2 million. Borrowings under the Revolving Facility bear interest, at either an alternate base rate or an adjusted LIBOR rate plus, in each case, an applicable margin. This applicable margin is based on the Company’s senior, unsecured, long-term debt rating and can range from .005% to 1.50%. Based on the Company’s credit rating at December 31, 2018, the applicable margin was 1.10%. Interest is payable (a) in the case of base rate loans, quarterly, and (b) in the case of LIBOR rate loans, on the maturity date of the borrowing, or quarterly from the effective date for borrowings exceeding three months. The Company may request increases in the lending commitments under the Credit Agreement, but the aggregate lending commitments pursuant to such increases may not exceed $350.0 million. An annual Revolving Facility fee, also based on the Company’s credit rating, is currently 15 basis points and is payable quarterly.

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

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

On December 6, 2010, the Company completed a public offering of $300.0 million 4.5% senior notes due December 15, 2020 (“4.5% Senior Notes”). The net proceeds from the offering of $295.7 million, after deducting a $1.6 million issuance discount, a $1.9 million underwriting commission and $0.8 million of offering expenses, were used to repay $250.0 million of outstanding bank indebtedness, with the balance used for general corporate purposes. The 4.5% Senior Notes bear interest at a rate of 4.5% per annum, which is payable semi-annually in arrears on each June 15 and December 15. The Company may redeem all or a portion of the 4.5% Senior Notes at any time prior to maturity at the redemption prices set forth in the 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 of 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.

There are two key financial covenants that the Company is required to maintain in connection with the Revolving Facility and the Notes, a minimum interest coverage ratio of 3.0 to 1 and a maximum leverage ratio of 3.50 to 1. At December 31, 2018, the Company was in compliance with both of these financial covenants, as the Company’s interest coverage ratio was 15.65 to 1 and the leverage ratio was 1.27 to 1. There are no financial covenants relating to the 4.5% Senior Notes or 4.2% Senior Notes; however, both are subject to cross-default provisions.

On December 1, 2015 the Company’s Board of Directors approved an increase of $300.0 million in the authorized level for repurchases of common stock. This followed the prior Board of Directors approved repurchase authorization of $400.0 million that was announced by the Company on November 6, 2014. Repurchases under the program will be funded with future cash flow generation or borrowings available under the Revolving Facility. During 2018, the Company purchased a total of 1.3 million shares at a cost of $173.9 million compared to 0.3 million shares purchased in 2017 at a cost of $29.1 million. As of December 31, 2018, the amount of share repurchase authorization remaining is $377.0 million.

The Company believes current cash, cash from operations and cash available under the Revolving Facility will be sufficient to meet its operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and postretirement funding requirements, authorized share repurchases and annual dividend payments to holders of the Company’s common stock for the next twelve months. Additionally, in the event that suitable businesses are available for acquisition 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, 2018, there was no balance outstanding under the Revolving Facility and $8.8 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Facility at December 31, 2018 of approximately $691.2 million.

Contractual Obligations

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

The following table summarizes our significant contractual obligations and commercial commitments at December 31, 2018 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)	$	944,398			$	35,265			$	692,538			$	111,540			$	105,055
Lease obligations	85,359				17,509				23,678				14,514				29,658
Purchase obligations (2)	136,040				133,311				2,688				41				—
Repatriation tax payable	17,127				—				—				5,217				11,910
Pension and post-retirement obligations	110,436				11,357				22,831				21,937				54,311
Total contractual obligations (3)	$	1,293,360			$	197,442			$	741,735			$	153,249			$	200,934

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

(2)	Consists primarily of inventory commitments.

(3)	Comprises liabilities recorded on the balance sheet of $955.1 million and obligations not recorded on the balance sheet of $345.5 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, require 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 — Revenue is recognized when control of the promised products or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those products or providing those services. A performance obligation is a promise in a contract to transfer a distinct product or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Our performance obligations are satisfied at a point in time or over time as work progresses. Revenue from products and services transferred to customers at a point in time is recognized when obligations under the terms of the contract with our customer are satisfied. Generally, this occurs with the transfer of control of the asset, which is in line with shipping terms. Certain units recognize revenue over time because control transfers continuously to our customers. Revenue is recognized over time as work is performed based on the relationship between actual costs incurred to date for each contract and the total estimated costs for such contract at completion of the performance obligation (i.e. the cost-to-cost method) or is recognized ratably over the contract term. As a significant change in one or more of these estimates could affect the profitability of our contracts, we review and update our estimates regularly. Due to uncertainties inherent in the estimation process, it is reasonably possible that completion costs will be revised. Such revisions to costs and income are recognized in the period in which the revisions are determined as a cumulative catch-up adjustment. The impact of the adjustment on profit recorded to date on a contract is recognized in the period the adjustment is identified. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize provisions for estimated losses on uncompleted contracts in the period in which such losses 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 (primarily assurance-type) 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 impairment of an indefinite-lived intangible asset or goodwill exists when the carrying amount of the intangible asset or goodwill exceeds its fair value. Assessments of possible impairments of long-lived or indefinite-lived intangible assets or goodwill are made if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Additionally, testing for possible impairments of recorded indefinite-lived intangible asset balances and goodwill is performed annually. On October 31, or more frequently if triggering events occur, the Company compares the fair value of each reporting unit to the carrying amount of each reporting unit to determine if a goodwill impairment exists. The amount and timing of impairment charges for these assets require the estimation of future cash flows to determine the fair value of the related assets. In 2018 and 2017, the Company concluded that there were no long-lived assets with a fair value that was less than the carrying value.

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. 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 approaches 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 calculations are the weighted average cost of capital, market multiples, forecasted EBITDA and terminal growth rates. The 2018 and 2017 ranges for these three assumptions utilized by the Company are as follows:

Assumptions	2018 Range		2017 Range
Weighted average cost of capital	9.5% to 11.0%		8.75% to 10.5%
Market multiples	11.0x to 17.0x		11.0x to 20.0x
Terminal growth rates	3.0% to 3.5%		3.0% to 3.5%

In assessing the fair value of the reporting units, the Company considers both the market approach and the income approach. Under the market approach, the fair value of the reporting unit is determined by the respective trailing twelve month EBITDA and the forward looking 2019 EBITDA (50% each), based on multiples of comparable public companies. The market approach is dependent on a number of significant management assumptions including forecasted EBITDA and selected market multiples. Under the income approach, the fair value of the reporting unit is determined based on the present value of estimated future cash flows. The income approach is dependent on a number of significant management assumptions including estimates of operating results, capital expenditures, net working capital requirements, long-term growth rates 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.

The Banjo trade name and the Akron Brass trade name are indefinite-lived intangible assets which are tested for impairment on an annual basis in accordance with ASC 350 or more frequently if events or changes in circumstances indicate that the assets might be impaired. The Company uses the relief-from-royalty method, a form of the income approach, to determine the fair value of these trade names. The relief-from-royalty method is dependent on a number of significant management assumptions, including estimates of revenues, royalty rates and discount rates.

In 2018 and 2017, there were no events that occurred or circumstances that changed that would have required a review other than as of our annual test date. In 2018 and 2017, there were no impairment charges recorded.

Defined benefit retirement plans — The plan obligations and related assets of the defined benefit retirement plans are presented in Note 16 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 after consulting with actuaries on a number of key assumptions and on information provided by the Company. Key assumptions in the determination of the annual pension expense include the discount rate, the rate of salary increases and the estimated future return on plan assets. To the extent actual amounts differ from these assumptions and estimated amounts, results could be adversely affected.

The Society of Actuaries releases annual updates to mortality tables, which update life expectancy assumptions. IDEX adopts these annual updates and, in consideration of these tables, we modified the mortality assumptions used in determining our pension and post-retirement benefit obligations as of December 31, 2018, which will have a related impact on our annual benefit expense in future years. New mortality tables may result in additional funding requirements dependent upon the funded status of our plans. These expectations presume all other assumptions remain constant and there are no changes to applicable funding regulations.

Changes in the discount rate assumptions will impact the (gain) loss amortization and interest cost components of the projected benefit obligation (“PBO”), which in turn, may impact the Company’s funding decisions if the PBO exceeds plan assets. Each 100 basis point increase in the discount rate will cause a corresponding decrease in the PBO of approximately $25 million based

upon the December 31, 2018 data. Each 100 basis point decrease in the discount rate will cause a corresponding increase in the PBO of approximately $31 million based upon the December 31, 2018 data.