Item 8. Financial Statements and Supplementary Data.

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Item 8. Financial Statements and Supplementary Data.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America, and as defined in Exchange Act Rule 13a-15(f).

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting.

Management has used the framework set forth in the report entitled “Internal Control — Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission to assess the effectiveness of the Company’s internal control over financial reporting. Based on that assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2018.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2018, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears herein.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of IDEX Corporation

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of IDEX Corporation and subsidiaries (the “Company”) as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018, of the Company and our report dated February 28, 2019, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

Definition and Limitations of Internal Control over Financial Reporting

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



/s/ DELOITTE & TOUCHE LLP


Chicago, Illinois
February 28, 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of IDEX Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of IDEX Corporation and subsidiaries (the "Company") as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2019, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.



/s/ DELOITTE & TOUCHE LLP


Chicago, Illinois
February 28, 2019

We have served as the Company’s auditor since 1987.

IDEX CORPORATION

CONSOLIDATED BALANCE SHEETS



	As of December 31,
	2018			2017
	(In thousands except share and per share amounts)
ASSETS
Current assets
Cash and cash equivalents	$	466,407		$	375,950
Receivables - net	312,192			294,166
Inventories	279,995			259,724
Other current assets	33,938			74,203
Total current assets	1,092,532			1,004,043
Property, plant and equipment - net	281,220			258,350
Goodwill	1,697,955			1,704,158
Intangible assets - net	383,327			414,746
Other noncurrent assets	18,823			18,331
Total assets	$	3,473,857		$	3,399,628
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable	$	143,196		$	147,067
Accrued expenses	187,536			184,705
Short-term borrowings	483			258
Dividends payable	33,446			28,945
Total current liabilities	364,661			360,975
Long-term borrowings	848,335			858,788
Deferred income taxes	128,007			137,638
Other noncurrent liabilities	138,214			155,685
Total liabilities	1,479,217			1,513,086
Commitments and contingencies (Note 9)
Shareholders’ equity
Preferred stock:
Authorized: 5,000,000 shares, $.01 per share par value; Issued: none	—			—
Common stock:
Authorized: 150,000,000 shares, $.01 per share par value; Issued: 90,112,028 shares at December 31, 2018 and 90,162,211 shares at December 31, 2017	901			902
Additional paid-in capital	738,339			716,906
Retained earnings	2,342,079			2,057,915
Treasury stock at cost: 14,159,251 shares at December 31, 2018 and 13,468,675 shares at December 31, 2017	(957,454		)	(799,674		)
Accumulated other comprehensive loss	(129,225		)	(89,507		)
Total shareholders’ equity	1,994,640			1,886,542
Total liabilities and shareholders’ equity	$	3,473,857		$	3,399,628

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS



	For the Year Ended December 31,
	2018			2017			2016
	(In thousands except per share amounts)
Net sales	$	2,483,666		$	2,287,312		$	2,113,043
Cost of sales	1,365,771			1,260,634			1,182,276
Gross profit	1,117,895			1,026,678			930,767
Selling, general and administrative expenses	536,724			524,940			492,398
Loss (gain) on sale of businesses - net	—			(9,273		)	22,298
Restructuring expenses	12,083			8,455			3,674
Operating income	569,088			502,556			412,397
Other (income) expense - net	(3,985		)	2,394			(1,731		)
Interest expense	44,134			44,889			45,616
Income before income taxes	528,939			455,273			368,512
Provision for income taxes	118,366			118,016			97,403
Net income	$	410,573		$	337,257		$	271,109
Earnings per common share:
Basic earnings per common share	$	5.36		$	4.41		$	3.57
Diluted earnings per common share	$	5.29		$	4.36		$	3.53
Share data:
Basic weighted average common shares outstanding	76,412			76,232			75,803
Diluted weighted average common shares outstanding	77,563			77,333			76,758

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	For the Year Ended December 31,
	2018			2017			2016
	(In thousands)
Net income	$	410,573		$	337,257		$	271,109
Other comprehensive income (loss):
Reclassification adjustments for derivatives, net of tax	5,006			4,210			4,361
Pension and other postretirement adjustments, net of tax	9,825			(1,302		)	3,049
Foreign currency adjustments:
Cumulative translation adjustment	(48,114		)	110,421			(76,822		)
Tax effect of reversal of indefinite assertion on certain intercompany loans	—			(3,932		)	—
Reclassification of foreign currency translation to earnings upon sale of businesses	—			2,749			14,257
Other comprehensive income (loss)	(33,283		)	112,146			(55,155		)
Comprehensive income	$	377,290		$	449,403		$	215,954

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY



	Common Stock and Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)									Treasury Stock			Total Shareholders’ Equity
	Cumulative Translation Adjustment		Retirement Benefits Adjustments			Cumulative Unrealized Gain (Loss) on Derivatives
	(In thousands except share and per share amounts)
Balance, December 31, 2015	$	680,525	$	1,666,680		$	(92,979	)	$	(30,901	)	$	(22,618	)	$	(757,416	)	$	1,443,291
Net income	—		271,109			—			—			—			—			271,109
Cumulative translation adjustment	—		—			(62,565		)	—			—			—			(62,565		)
Net change in retirement obligations (net of tax of $2,107)	—		—			—			3,049			—			—			3,049
Net change on derivatives designated as cash flow hedges (net of tax of $2,490)	—		—			—			—			4,361			—			4,361
Issuance of 594,919 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $5,305)	253		—			—			—			—			29,987			30,240
Repurchase of 738,593 shares of common stock	—														(54,950		)	(54,950		)
Share-based compensation	17,337		—			—			—			—			—			17,337
Shares surrendered for tax withholding	—		—			—			—			—			(4,928		)	(4,928		)
Cash dividends declared - $1.36 per common share outstanding	—		(103,050		)	—			—			—			—			(103,050		)
Balance, December 31, 2016	$	698,115	$	1,834,739		$	(155,544	)	$	(27,852	)	$	(18,257	)	$	(787,307	)	$	1,543,894
Net income	—		337,257			—			—			—			—			337,257
Cumulative translation adjustment	—		—			113,170			—			—			—			113,170
Net change in retirement obligations (net of tax of $239)	—		—			—			(1,302		)	—			—			(1,302		)
Net change on derivatives designated as cash flow hedges (net of tax of $2,445)	—		—			—			—			4,210			—			4,210
Issuance of 557,591 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $6,027)	—		—			—			—			—			22,935			22,935
Repurchase of 266,000 shares of common stock	—		—			—			—			—			(29,074		)	(29,074		)
Share-based compensation	19,693		—			—			—			—			—			19,693
Shares surrendered for tax withholding	—		—			—			—			—			(6,228		)	(6,228		)
Tax effect of reversal of indefinite assertion on certain intercompany loans	—		—			(3,932		)	—			—			—			(3,932		)
Cash dividends declared - $1.48 per common share outstanding	—		(114,081		)	—			—			—			—			(114,081		)
Balance, December 31, 2017	$	717,808	$	2,057,915		$	(46,306	)	$	(29,154	)	$	(14,047	)	$	(799,674	)	$	1,886,542
Net income	—		410,573			—			—			—			—			410,573
Adjustment for adoption of ASU 2016-16	—		(645		)	—			—			—			—			(645		)
Adjustment for adoption of ASU 2018-02	—		6,435			—			(3,411		)	(3,024		)	—			—
Cumulative translation adjustment	—		—			(48,114		)	—			—			—			(48,114		)
Net change in retirement obligations (net of tax of $3,076)	—		—			—			9,825			—			—			9,825
Net change on derivatives designated as cash flow hedges (net of tax of $1,469)	—		—			—			—			5,006			—			5,006
Issuance of 583,385 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $4,267)	—		—			—			—			—			27,701			27,701
Repurchase of 1,273,961 shares of common stock	—		—			—			—			—			(173,926		)	(173,926		)
Share-based compensation	21,432		—			—			—			—			—			21,432
Shares surrendered for tax withholding	—		—			—			—			—			(11,555		)	(11,555		)
Cash dividends declared - $1.72 per common share outstanding	—		(132,199		)	—			—			—			—			(132,199		)
Balance, December 31, 2018	$	739,240	$	2,342,079		$	(94,420	)	$	(22,740	)	$	(12,065	)	$	(957,454	)	$	1,994,640

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



	For the Year Ended December 31,
	2018			2017			2016
	(In thousands)
Cash flows from operating activities
Net income	$	410,573		$	337,257		$	271,109
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (gain) on sale of fixed assets - net	946			315			(28		)
Loss (gain) on sale of businesses - net	—			(9,273		)	22,298
Asset impairments	—			—			205
Depreciation and amortization	39,049			38,314			37,854
Amortization of intangible assets	38,495			45,902			49,038
Amortization of debt issuance expenses	1,332			1,320			1,295
Share-based compensation expense	24,754			24,405			20,326
Deferred income taxes	(4,345		)	(33,742		)	(17,308		)
Non-cash interest expense associated with forward starting swaps	6,475			6,655			6,851
Pension settlement	—			—			3,554
Changes in (net of the effect from acquisitions and divestitures):
Receivables	(23,419		)	(15,803		)	302
Inventories	(23,031		)	760			32,747
Other current assets	25,162			(20,031		)	(22,006		)
Trade accounts payable	(1,220		)	12,556			73
Accrued expenses	4,148			19,710			(5,470		)
Other - net	(19,574		)	24,408			(923		)
Net cash flows provided by operating activities	479,345			432,753			399,917
Cash flows from investing activities
Purchases of property, plant and equipment	(56,089		)	(43,858		)	(38,242		)
Purchase of intellectual property	(4,000		)	—			—
Acquisition of businesses, net of cash acquired	(20,205		)	(38,161		)	(510,001		)
Proceeds from disposal of fixed assets	363			6,011			49
Proceeds from sale of businesses, net of cash sold	—			21,795			39,064
Other - net	(1,500		)	(533		)	(69		)
Net cash flows used in investing activities	(81,431		)	(54,746		)	(509,199		)
Cash flows from financing activities
Borrowings under revolving credit facilities	—			33,000			501,529
Proceeds from issuance of 3.20% Senior Notes	—			—			100,000
Proceeds from issuance of 3.37% Senior Notes	—			—			100,000
Payments under revolving credit facilities	(11,284		)	(200,618		)	(520,125		)
Debt issuance costs	—			—			(246		)
Dividends paid	(127,478		)	(111,172		)	(102,650		)
Proceeds from stock option exercises	27,639			22,935			30,240
Purchases of common stock	(173,926		)	(29,074		)	(57,272		)
Shares surrendered for tax withholding	(11,555		)	(6,228		)	(4,928		)
Settlement of foreign exchange contracts	6,593			13,736			—
Net cash flows provided by (used in) financing activities	(290,011		)	(277,421		)	46,548
Effect of exchange rate changes on cash and cash equivalents	(17,446		)	39,400			(29,320		)
Net increase (decrease) in cash	90,457			139,986			(92,054		)
Cash and cash equivalents at beginning of year	375,950			235,964			328,018
Cash and cash equivalents at end of year	$	466,407		$	375,950		$	235,964
Supplemental cash flow information
Cash paid for:
Interest	$	36,327		$	36,818		$	37,067
Income taxes - net	90,733			104,852			109,399
Significant non-cash activities:
Contingent consideration for acquisition	3,375			—			—
Capital expenditures for construction of new leased facility	11,616			—			—

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significant Accounting Policies

Business

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. The Company’s products include industrial pumps, compressors, flow meters, injectors, valves and related controls for use in a wide variety of process applications; precision fluidics solutions, including pumps, valves, degassing equipment, corrective tubing, fittings and complex manifolds, optical filters and specialty medical equipment and devices for use in life science applications; precision-engineered equipment for dispensing, metering and mixing paints; and engineered products for industrial and commercial markets, including fire and rescue, transportation equipment, oil and gas, electronics and communications. These activities are grouped into three reportable segments: Fluid & Metering Technologies, Health & Science Technologies and Fire & Safety/Diversified Products.

Principles of Consolidation

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

Use of Estimates

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

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.

The Company’s other revenue not accounted for under Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), is not material to its results of operations.

Shipping and Handling Costs

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

Advertising Costs

Advertising costs of $17.0 million, $15.8 million and $15.3 million for 2018, 2017 and 2016, respectively, are expensed as incurred within Selling, general and administrative expenses.

Cash and Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of 3 months or less to be cash and cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at face amounts less an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated losses as a result of customers’ inability to make required payments. Management evaluates the aging of the accounts receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of accounts receivable that may not be collected in the future and records the appropriate provision.

Inventories

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

Impairment of Long-Lived Assets

A long-lived asset is reviewed for impairment if an event occurs or circumstances change that would more likely than not reduce the fair value of a long-lived asset below its carrying amount, as measured by comparing its net book value to the projected undiscounted future cash flows generated by its use. A long-lived asset impairment exists when the carrying amount of the asset exceeds its fair value. The amount and timing of the impairment charge for this asset requires the estimation of future cash flows to determine the fair value of the asset. An impaired asset is recorded at its estimated fair value based on a discounted cash flow analysis. 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. In 2016, the Company concluded that certain long-lived assets had a fair value that was less than the carrying value of the assets, resulting in $0.2 million, respectively, of long-lived asset impairment charges.

Goodwill and Indefinite-Lived Intangible Assets

The Company reviews the carrying value of goodwill and indefinite-lived intangible assets annually as of October 31, or if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company evaluates the recoverability of these assets based on the estimated fair value of each of the 13 reporting units and the indefinite-lived intangible assets. See Note 5 for a further discussion on goodwill and intangible assets.

Borrowing Expenses

Expenses incurred in securing and issuing debt are capitalized and included as a reduction of Long-term borrowings. These amounts are amortized over the life of the related borrowing and the related amortization is included in Interest expense.

Earnings per Common Share

Earnings per common share (“EPS”) is computed by dividing net income by the weighted average number of shares of common stock (basic) plus common stock equivalents (diluted) outstanding during the year. Common stock equivalents consist of stock

options, which have been included in the calculation of weighted average shares outstanding using the treasury stock method, restricted stock and performance share units.

ASC 260, Earnings per Share, concludes that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. If awards are considered participating securities, the Company is required to apply the two-class method of computing basic and diluted earnings per share. The Company has determined that its outstanding shares of restricted stock are participating securities. Accordingly, EPS was computed using the two-class method prescribed by ASC 260.

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



	2018	2017	2016
	(In thousands)
Basic weighted average common shares outstanding	76,412	76,232	75,803
Dilutive effect of stock options, restricted stock and performance share units	1,151	1,101	955
Diluted weighted average common shares outstanding	77,563	77,333	76,758

Options to purchase approximately 0.3 million, zero and 0.9 million shares of common stock in 2018, 2017 and 2016, respectively, were not included in the computation of diluted EPS because the effect of their inclusion would have been antidilutive.

Share-Based Compensation

The Company accounts for share-based payments in accordance with ASC 718, Compensation-Stock Compensation. Accordingly, the Company expenses the fair value of awards made under its share-based compensation plans. That cost is recognized in the consolidated financial statements over the requisite service period of the grants. See Note 14 for further discussion on share-based compensation.

Depreciation and Amortization

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



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

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



Patents	5 to 17 years
Trade names	5 to 20 years
Customer relationships	6 to 20 years
Unpatented technology and other	7 to 20 years

Research and Development Expenditures

Costs associated with engineering activities, including research and development, are expensed in the period incurred and are included in Cost of sales.

Total engineering expenses, which include research and development as well as application and support engineering, were $84.9 million, $76.4 million and $68.8 million in 2018, 2017 and 2016, respectively. Research and development expenses, which include costs associated with developing new products and major improvements to existing products, were $48.0 million, $42.4 million and $39.4 million in 2018, 2017 and 2016, respectively.

Foreign Currency

The functional currency of substantially all operations outside the United States is the respective local currency. Accordingly, those foreign currency balance sheet accounts have been translated using the exchange rates in effect as of the balance sheet date. Income statement amounts have been translated using the average exchange rate for the year. The gains and losses resulting from changes in exchange rates from year to year have been reported in Accumulated other comprehensive loss in the Consolidated Balance Sheets. The foreign currency transaction losses (gains) for the periods ending December 31, 2018, 2017 and 2016 were $(2.4) million, $20.5 million and $(6.2) million, respectively, and are reported within Other (income) expense - net on the Consolidated Statements of Operations. Of the $20.5 million reported as foreign currency transaction losses for the period ending December 31, 2017, $20.2 million was due to intercompany loans established in conjunction with the SFC Koenig acquisition. See Note 7 for further discussion.

Income Taxes

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

Refer to Note 11 for further discussion on income taxes.

Concentration of Credit Risk

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

Recently Adopted Accounting Standards

In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allows an entity to reclassify the stranded tax effects in accumulated other comprehensive income (loss) to retained earnings in the statement of shareholders’ equity. The Company early adopted this standard on a retrospective basis on January 1, 2018. The adoption resulted in an increase of $6.4 million to Retained earnings and a corresponding change of $6.4 million to Accumulated other comprehensive income (loss) at January 1, 2018.

In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which clarifies the definition of a business and assists entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Under this guidance, when substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business. In addition, in order to be considered a business, an acquisition would have to include at a minimum an input and a substantive process that together significantly contribute to the ability to create an output. The amended guidance also narrows the definition of outputs by more closely aligning it with how outputs are described in the FASB guidance for revenue recognition. The Company adopted this standard on January 1, 2018 and accounted for the purchase of the intellectual property assets from Phantom Controls utilizing this guidance. See Note 5 for further information.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which amends Accounting Standards Codification (“ASC”) 740, Income Taxes. This ASU requires that the income tax consequences of an intra-entity asset transfer other than inventory are recognized at the time of the transfer. An entity will continue to recognize the income tax consequences of an intercompany transfer of inventory when the inventory is sold to a third party. The Company adopted this standard on a modified retrospective basis on January 1, 2018. The adoption resulted in a decrease of $7.3 million to Other current assets, a decrease of $6.7 million to Deferred income taxes and a decrease of $0.6 million to Retained earnings at January 1, 2018.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force). This ASU addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business

combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The Company adopted this standard on January 1, 2018. The adoption of this standard did not have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which replaces numerous requirements in U.S. GAAP, including industry-specific requirements, and provides companies with a new five-step model for recognizing revenue from contracts with customers. Under ASU 2014-09, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The FASB has also issued the following standards which clarify ASU 2014-09 and have the same effective date as the original standard: ASU 2016-08, Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross versus Net); ASU 2016-10, Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing; ASU 2016-12, Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients; and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.

In 2016, we established an implementation team and analyzed the impact of the standard by surveying business units and performing extensive contract reviews to identify potential differences that may result from applying the requirements of the new standard. The contract reviews generally supported the recognition of revenue at a point in time, which was consistent with the revenue recognition model used by most of our business units. As a result, revenue recognition was unchanged under the new standard. For our business units that previously recognized revenue under a percentage of completion model, revenue recognition was also unchanged as the contract reviews supported the recognition of revenue over time. The Company implemented the appropriate changes to its processes, systems and controls to comply with the new guidance. The Company adopted this standard on January 1, 2018 using the modified retrospective approach applied to contracts that were not completed as of January 1, 2018. The adoption of this standard did not have an impact on our consolidated financial statements, except to provide additional disclosures. The Company elected the following practical expedients: significant financing component, sales tax presentation, contract costs, shipping and handling activities and disclosures. See Note 4 for further details on revenue.

New Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The standard introduces a new lessee model that will require most leases to be recorded on the balance sheet and eliminates the required use of bright line tests in current U.S. GAAP for determining lease classification. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. This standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. This new guidance requires adoption on a retrospective basis unless it is impracticable to apply, in which case the company would be required to apply the amendments prospectively as of the earliest date practicable. In July 2018, the FASB also issued the following standards which clarify ASU 2016-02 and have the same effective date as the original standard: ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 includes an option to not restate comparative periods in transition and elect to use the effective date of ASU 2016-02 as the date of initial application of transition.

We will adopt this standard on January 1, 2019 using the transition method that allows us to apply this standard prospectively as of January 1, 2019. As we will not restate comparative periods, the adoption will have no impact on our previously reported results. We expect to use the package of practical expedients that allows us to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. We additionally expect to use the practical expedient that allows lessees to treat the lease and non-lease components of leases as a single lease component. The adoption of the new standard will have a material impact on our consolidated balance sheet due to the recognition of right of use assets and lease liabilities. Upon adoption, we expect to recognize right of use assets and lease liabilities of approximately $70 million that reflect the present value of future lease payments. We do not expect the adoption of this standard to have a material impact on our results of operations or cash flows.

Acquisitions and Divestitures

All of the Company’s acquisitions of businesses have been accounted for under ASC 805, Business Combinations. Accordingly, the accounts of the acquired companies, after adjustments to reflect the fair values assigned to assets and liabilities, have been included in the Company’s consolidated financial statements from their respective dates of acquisition. The results of operations of the acquired companies have been included in the Company’s consolidated results since the date of each acquisition. Supplemental pro forma information has not been provided as the acquisitions did not have a material impact on the Company’s consolidated results of operations individually or in the aggregate.

2018 Acquisition

On July 23, 2018, the Company acquired FLI, a technology leader in the design, development and production of low-noise cooled CCD and high speed, high-sensitivity Scientific CMOS cameras for the astronomy and life science markets. Headquartered in Lima, NY, FLI operates in our Health & Sciences Technologies segment. FLI was acquired for an aggregate purchase price of $23.6 million, consisting of $20.2 million in cash and contingent consideration valued at $3.4 million as of the opening balance sheet date. The contingent consideration is based on the achievement of financial objectives during the 24-month period following the close of the transaction. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $12.4 million and $7.9 million, respectively. Acquired intangible assets consist of trade names, customer relationships and unpatented technology. The goodwill recorded for the acquisition reflects the strategic fit, revenue and earnings growth potential of this business. The goodwill is deductible for tax purposes.

The Company made an initial allocation of the purchase price for the FLI acquisition as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy. As the Company continues to obtain additional information about these assets and liabilities, and continues to learn more about the newly acquired business, we will refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company will make the appropriate adjustments to the purchase price allocation prior to the completion of the measurement period, as required.

The Company incurred $3.0 million of acquisition-related transaction costs in 2018. These costs were recorded in Selling, general and administrative expenses and were related to completed transactions, pending transactions and potential transactions, including transactions that ultimately were not completed.

2017 Acquisition

On December 8, 2017, the Company acquired the stock of thinXXS, a leader in the design, manufacture, and sale of microfluidic components serving the point of care, veterinary, and life science markets. The business was acquired to complement our existing CiDRA Precision Services business and expand on our microfluidic and nanofluidic capabilities. Headquartered in Zweibrücken, Germany, thinXXS operates in our Health & Science Technologies segment. thinXXS was acquired for cash consideration of $38.2 million and the assumption of $1.2 million of debt. The purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of the transaction were $25.2 million and $10.6 million, respectively. Acquired intangible assets consist of trade names, customer relationships and unpatented technology. The goodwill recorded for the acquisition reflects the strategic fit, revenue and earnings growth potential of this business. The goodwill is not deductible for tax purposes.

The Company finalized its allocation of the purchase price for the thinXXS acquisition as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements were classified as Level 3 in the fair value hierarchy.

The Company incurred $1.3 million of acquisition-related transaction costs in 2017. These costs were recorded in Selling, general and administrative expenses and were related to completed transactions, pending transactions and potential transactions, including transactions that ultimately were not completed.

2016 Acquisitions

On March 16, 2016, the Company acquired the stock of Akron Brass, a producer of a large array of engineered life–safety products for the safety and emergency response markets, which includes apparatus valves, monitors, nozzles, specialty lighting, electronic vehicle–control systems and firefighting hand tools. The business was acquired to complement and create synergies

with our existing Hale, Class 1, and Godiva businesses. Headquartered in Wooster, Ohio, Akron Brass operates in our Fire & Safety/Diversified Products segment. Akron Brass was acquired for cash consideration of $221.4 million. The purchase price was funded with borrowings under the Company’s revolving facilities. Goodwill and intangible assets recognized as part of the transaction were $124.6 million and $90.4 million, respectively. The goodwill is not deductible for tax purposes.

On July 1, 2016, the Company acquired the stock of AWG Fittings, a producer of engineered products for the safety and emergency response markets, including valves, monitors and nozzles. The business was acquired to complement and create synergies with our existing Hale, Class 1, Godiva and Akron Brass businesses. Headquartered in Ballendorf, Germany, AWG Fittings operates in our Fire & Safety/Diversified Products segment. AWG Fittings was acquired for cash consideration of $47.5 million (€42.8 million). The purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of the transaction were $22.1 million and $10.3 million, respectively. The goodwill is not deductible for tax purposes.

On August 31, 2016, the Company acquired the stock of SFC Koenig, a producer of highly engineered expanders and check valves for critical applications across the transportation, hydraulic, aviation and medical markets. Headquartered in Dietikon, Switzerland, SFC Koenig operates in our Health & Science Technologies segment. SFC Koenig was acquired for cash consideration of $241.1 million (€215.9 million). The purchase price was funded with cash on hand and borrowings under the Company’s revolving facilities. Goodwill and intangible assets recognized as part of the transaction were $141.3 million and $117.0 million, respectively. The goodwill is not deductible for tax purposes.

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



	Akron Brass			AWG Fittings			SFC Koenig			Total
(In thousands)
Accounts receivable	$	14,523		$	5,867		$	9,190		$	29,580
Inventory	29,157			11,766			20,639			61,562
Other assets, net of cash acquired	446			565			4,501			5,512
Property, plant and equipment	12,195			6,595			4,637			23,427
Goodwill	124,643			22,055			141,298			287,996
Intangible assets	90,400			10,279			116,998			217,677
Deferred income taxes	—			3,928			—			3,928
Total assets acquired	271,364			61,055			297,263			629,682
Current liabilities	(7,081		)	(5,117		)	(11,704		)	(23,902		)
Deferred income taxes	(36,439		)	—			(36,168		)	(72,607		)
Other noncurrent liabilities	(6,445		)	(8,444		)	(8,283		)	(23,172		)
Net assets acquired	$	221,399		$	47,494		$	241,108		$	510,001

Acquired intangible assets consist of trade names, customer relationships and unpatented technology. The goodwill recorded for the acquisitions reflects the strategic fit, revenue and earnings growth potential of these businesses.

Of the $217.7 million of acquired intangible assets, $28.8 million was assigned to the Akron Brass trade name and is not subject to amortization. The acquired intangible assets and weighted average amortization periods are as follows:



(In thousands, except weighted average life)	Total		Weighted Average Life
Trade names	$	14,078	15
Customer relationships	134,519		13
Unpatented technology	40,280		13
Amortized intangible assets	188,877
Indefinite lived - Akron Brass trade name	28,800
Total acquired intangible assets	$	217,677

The Company incurred $4.7 million of acquisition-related transaction costs in 2016. These costs were recorded in Selling, general and administrative expenses and were related to completed transactions, pending transactions and potential transactions, including transactions that ultimately were not completed. The Company also incurred $14.7 million of non-cash acquisition fair value inventory step-up charges associated with the completed 2016 acquisitions. These charges were recorded in Cost of sales.

Divestitures

The Company periodically reviews its operations for businesses which may no longer be aligned with its strategic objectives and focuses on core business and customers. Any resulting gain or loss recognized due to divestitures is recorded within Loss (gain) on sale of businesses - net. The Company concluded that none of the divestitures that took place during the years ended December 31, 2018, 2017 and 2016 met the criteria for reporting discontinued operations.

On October 31, 2017, the Company completed the sale of its Faure Herman subsidiary for $21.8 million in cash, resulting in a pre-tax gain on the sale of $9.3 million. There was no income tax expense associated with this transaction. The results of Faure Herman were reported within the Fluid & Metering Technologies segment and generated $14.1 million of revenues in 2017 through the date of sale.

On July 29, 2016, the Company completed the sale of its Hydra-Stop product line for $15.0 million in cash, resulting in a pre-tax gain on the sale of $5.8 million. In addition, the Company earned $1.0 million for the achievement of 2016 net sales objectives and $1.0 million for the achievement of 2017 net sales objectives, which represents the maximum earn outs for both 2016 and 2017. The Company recorded $2.8 million of income tax expense associated with this transaction during the year ended December 31, 2016. The results of Hydra-Stop were reported within the Fluid & Metering Technologies segment and generated $7.5 million of revenues in 2016 through the date of sale.

On September 9, 2016, the Company completed the sale of its Melles Griot KK (“CVI Japan”) subsidiary for $17.5 million in cash, resulting in a pre-tax loss on the sale of $7.9 million. The Company recorded $3.4 million of income tax benefit associated with this transaction during the year ended December 31, 2016. The results of CVI Japan were reported within the Health & Science Technologies segment and generated $13.1 million of revenues in 2016 through the date of sale.

On October 10, 2016, the Company completed the sale of its IETG and 40Seven subsidiaries for $2.7 million in cash, resulting in a pre-tax loss on the sale of $4.2 million. There was no income tax impact associated with this transaction. The results of IETG and 40Seven were reported within the Fluid & Metering Technologies segment and generated $8.3 million of revenues in 2016 through the date of sale.

On December 30, 2016, the Company completed the sale of its Korea Electro-Optics Co., Ltd. (“CVI Korea”) subsidiary for $3.8 million in cash, resulting in a pre-tax loss on the sale of $16.0 million. The Company recorded $9.1 million of income tax benefit associated with this transaction during the year ended December 31, 2016. The results of CVI Korea were reported within the Health & Science Technologies segment and generated $11.7 million of revenues in 2016 through the date of sale.

Balance Sheet Components



	December 31,
	2018		2017
	(In thousands)
RECEIVABLES
Customers	$	313,719	$	297,796
Other	5,182		4,134
Total	318,901		301,930
Less allowance for doubtful accounts	6,709		7,764
Total receivables - net	$	312,192	$	294,166
INVENTORIES
Raw materials and components parts	$	178,805	$	169,676
Work in process	37,495		33,668
Finished goods	63,695		56,380
Total	$	279,995	$	259,724
PROPERTY, PLANT AND EQUIPMENT
Land and improvements	$	32,100	$	32,984
Buildings and improvements	189,744		175,467
Machinery, equipment and other	372,804		356,728
Office and transportation equipment	96,350		96,541
Construction in progress	24,328		14,715
Total	715,326		676,435
Less accumulated depreciation and amortization	434,106		418,085
Total property, plant and equipment - net	$	281,220	$	258,350
ACCRUED EXPENSES
Payroll and related items	$	78,944	$	75,869
Management incentive compensation	25,321		24,320
Income taxes payable	23,844		28,033
Insurance	10,422		9,424
Warranty	5,303		6,281
Deferred revenue	8,055		11,031
Restructuring	6,170		4,180
Liability for uncertain tax positions	980		1,745
Accrued interest	1,759		1,759
Other	26,738		22,063
Total accrued expenses	$	187,536	$	184,705
OTHER NONCURRENT LIABILITIES
Pension and retiree medical obligations	$	80,667	$	99,646
Transition tax payable	17,127		27,877
Liability for uncertain tax positions	3,183		1,047
Deferred revenue	3,027		3,297
Liability for construction of new leased facility	11,616		—
Contingent consideration for acquisition	3,375		—
Other	19,219		23,818
Total other noncurrent liabilities	$	138,214	$	155,685

The valuation and qualifying account activity for the years ended December 31, 2018, 2017 and 2016 is as follows:



	2018			2017			2016
	(In thousands)
ALLOWANCE FOR DOUBTFUL ACCOUNTS (1)
Beginning balance January 1	$	7,764		$	8,078		$	7,812
Charged to costs and expenses, net of recoveries	290			720			1,425
Utilization	(1,396		)	(1,418		)	(1,585		)
Currency translation and other	51			384			426
Ending balance December 31	$	6,709		$	7,764		$	8,078

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

Revenue

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. The Company’s products include industrial pumps, compressors, flow meters, injectors, valves and related controls for use in a wide variety of process applications; precision fluidics solutions, including pumps, valves, degassing equipment, corrective tubing, fittings and complex manifolds, optical filters and specialty medical equipment and devices for use in life science applications; precision-engineered equipment for dispensing, metering and mixing paints; and engineered products for industrial and commercial markets, including fire and rescue, transportation equipment, oil and gas, electronics and communications. The Company’s revenue is accounted for under ASC 606, which we adopted on January 1, 2018 using the modified retrospective method.

Disaggregation of Revenue

We have a comprehensive offering of products, including technologies, built to customers’ specifications that are sold in niche markets throughout the world. We disaggregate our revenue from contracts with customers by reporting unit and geographical region for each of our segments as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Revenue was attributed to geographic areas based on location of the customer and no country outside the U.S. was greater than 10% of total revenues. The following tables present our revenue disaggregated by reporting unit and geographical region.

Revenue by reporting unit for the year ended December 31, 2018 was as follows:



	For the Year Ended December 31, 2018
Energy	$	163,996
Valves	113,136
Water	251,020
Pumps	324,222
Agriculture	99,178
Intersegment elimination	(277		)
Fluid & Metering Technologies	951,275
Scientific Fluidics & Optics	417,859
Sealing Solutions	200,316
Gast	126,787
Micropump	36,827
Material Processing Technologies	114,630
Intersegment elimination	(449		)
Health & Science Technologies	895,970
Fire & Safety	396,926
Band-It	105,785
Dispensing	134,317
Intersegment elimination	(607		)
Fire & Safety/Diversified Products	636,421
Total net sales	$	2,483,666

Revenue by geographical region for the year ended December 31, 2018 was as follows:



	For the Year Ended December 31, 2018
	FMT			HST			FSDP			IDEX
U.S.	$	540,697		$	392,140		$	297,717		$	1,230,554
North America, excluding U.S.	57,917			18,770			28,779			105,466
Europe	172,630			278,634			164,307			615,571
Asia	119,822			189,342			111,169			420,333
Other (1)	60,486			17,533			35,056			113,075
Intersegment elimination	(277		)	(449		)	(607		)	(1,333		)
Total net sales	$	951,275		$	895,970		$	636,421		$	2,483,666

(1) Other includes: South America, Middle East, Australia and Africa.

Contract Balances

The timing of revenue recognition, billings and cash collections results in customer receivables, advance payments and billings in excess of revenue recognized. Customer receivables include amounts billed and currently due from customers as well as unbilled amounts (contract assets) and are included in Receivables on our Consolidated Balance Sheets. Amounts are billed in accordance with contractual terms or as work progresses in accordance with contractual terms. Unbilled amounts arise when the timing of billing differs from the timing of revenue recognized, such as when contract provisions require specific milestones to be met before a customer can be billed. Unbilled amounts primarily relate to performance obligations satisfied over time when the cost-to-cost method is utilized and the revenue recognized exceeds the amount billed to the customer as there is not yet a right to payment in accordance with contractual terms. Unbilled amounts are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Customer receivables are

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

The composition of Customer receivables was as follows:



	December 31, 2018		January 1, 2018
Billed receivables	$	299,227	$	285,800
Unbilled receivables	14,492		11,996
Total customer receivables	$	313,719	$	297,796

Advance payments and billings in excess of revenue recognized are included in Deferred revenue which is classified as current or noncurrent based on the timing of when we expect to recognize the revenue. The current portion is included in Accrued expenses and the noncurrent portion is included in Other noncurrent liabilities on our Consolidated Balance Sheets. Advance payments and billings in excess of revenue recognized represent contract liabilities and are recorded when customers remit contractual cash payments in advance of us satisfying performance obligations under contractual arrangements, including those with performance obligations satisfied over time. Billings in excess of revenue recognized primarily relate to performance obligations satisfied over time when the cost-to-cost method is utilized and revenue cannot yet be recognized as the Company has not completed the corresponding performance obligation. We generally receive advance payments from customers related to maintenance services which we recognize ratably over the service term. Contract liabilities are derecognized when revenue is recognized and the performance obligation is satisfied.

The composition of Deferred revenue was as follows:



	December 31, 2018		January 1, 2018
Deferred revenue - current	$	8,055	$	11,031
Deferred revenue - noncurrent	3,027		3,297
Total deferred revenue	$	11,082	$	14,328

Performance Obligations

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. For our contracts that require complex design, manufacturing and installation activities that are not separately identifiable from other promises in the contract and, therefore, not distinct, the entire contract is accounted for as a single performance obligation. For our contracts that include distinct products or services that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct products or services. Certain of our contracts have multiple performance obligations for which we allocate the transaction price to each performance obligation using an estimate of the standalone selling price of each distinct product or service in the contract. For product sales, each product sold to a customer generally represents a distinct performance obligation. In such cases, the observable standalone sales are used to determine the standalone selling price. In certain cases, we may be required to estimate standalone selling price using the expected cost plus margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct product or service.

Our performance obligations are satisfied at a point in time or over time as work progresses. Performance obligations are supported by contracts with customers that provide a framework for the nature of the distinct products or services or bundle of products and services. We define service revenue as revenue from activities that are not associated with the design, development or manufacture of a product or the delivery of a software license.

Revenue from products and services transferred to customers at a point in time approximated 95% in the year ended December 31, 2018. Revenue recognized at a point in time relates to the majority of our product sales. Revenue on these contracts 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.

Revenue from products and services transferred to customers over time approximated 5% in the year ended December 31, 2018. Revenue earned by certain business units within the Water, Energy, Material Processing Technologies (“MPT”) and Dispensing reporting units is recognized over time because control transfers continuously to our customers. When accounting for over-time contracts, we use an input measure to determine the extent of progress towards completion of the performance obligation. For certain business units within the Water, Energy and MPT reporting units, 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). We believe this measure of progress best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Incurred cost represents work performed, which corresponds with the transfer of control to the customer. Contract costs include labor, material and overhead. Contract estimates are based on various assumptions to project the outcome of future events. These assumptions include labor productivity and availability; the complexity of the work to be performed; the cost and availability of materials; the performance of subcontractors; and the availability and timing of funding from the customer. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. For certain business units within the Energy and Dispensing reporting units, revenue 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, including those arising from contract penalty provisions and final contract settlements, 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. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. 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.

Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for 2018 and 2017, by reportable business segment, were as follows:



	Fluid & Metering Technologies			Health & Science Technologies			Fire & Safety/ Diversified Products			Total
	(In thousands)
Goodwill	$	594,158		$	849,119		$	389,946		$	1,833,223
Accumulated goodwill impairment losses	(20,721		)	(149,820		)	(30,090		)	(200,631		)
Balance at January 1, 2017	573,437			699,299			359,856			1,632,592
Foreign currency translation	15,748			19,225			18,206			53,179
Acquisitions	—			23,929			—			23,929
Disposition of businesses	(3,121		)	—			—			(3,121		)
Acquisition adjustments	—			(2,421		)	—			(2,421		)
Balance at December 31, 2017	586,064			740,032			378,062			1,704,158
Foreign currency translation	(5,023		)	(8,391		)	(6,505		)	(19,919		)
Acquisitions	—			12,399			—			12,399
Disposition of businesses	—			—			—			—
Acquisition adjustments	—			1,317			—			1,317
Balance at December 31, 2018	$	581,041		$	745,357		$	371,557		$	1,697,955

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

Goodwill and other acquired intangible assets with indefinite lives were tested for impairment as of October 31, 2018, the Company’s annual impairment date. 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 the income approaches (50% each) in arriving at the fair value of the reporting units.

The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset at December 31, 2018 and 2017:



	At December 31, 2018								At December 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net		Weighted Average Life	Gross Carrying Amount		Accumulated Amortization			Net
			(In thousands)								(In thousands)
Amortized intangible assets:
Patents	$	6,468	$	(4,693	)	$	1,775	12	$	9,633	$	(7,143	)	$	2,490
Trade names	115,899		(57,227		)	58,672		16	117,206		(50,604		)	66,602
Customer relationships	256,202		(85,652		)	170,550		14	317,316		(124,566		)	192,750
Unpatented technology	96,922		(35,685		)	61,237		12	91,166		(29,428		)	61,738
Other	700		(507		)	193		10	839		(573		)	266
Total amortized intangible assets	476,191		(183,764		)	292,427			536,160		(212,314		)	323,846
Indefinite-lived intangible assets:
Banjo trade name	62,100		—			62,100			62,100		—			62,100
Akron Brass trade name	28,800		—			28,800			28,800		—			28,800
Total intangible assets	$	567,091	$	(183,764	)	$	383,327		$	627,060	$	(212,314	)	$	414,746

On June 22, 2018, the Company acquired the intellectual property assets of Phantom Controls (“Phantom”) for cash consideration of $4.0 million. The operational capabilities and innovative pump operation of Phantom’s technology complements our existing water-flow expertise of Hale, Akron Brass and Class 1 to improve fire ground safety and reduce operational complexity during mission critical response. This acquisition of intellectual property assets did not meet the definition of a business under ASU 2017-01 and thus the Company recorded the entire purchase price to the Unpatented technology class of intangible assets on the Consolidated Balance Sheets.

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.

Amortization of intangible assets was $38.5 million, $45.9 million and $49.0 million in 2018, 2017 and 2016, respectively. Based on the intangible asset balances as of December 31, 2018, amortization expense is expected to approximate $36.5 million in 2019, $34.8 million in 2020, $33.9 million in 2021, $32.2 million in 2022 and $29.3 million in 2023.

Borrowings

Borrowings at December 31, 2018 and 2017 consisted of the following:



	2018		2017
	(In thousands)
Revolving Facility	$	—	$	10,740
4.50% Senior Notes, due December 2020	300,000		300,000
4.20% Senior Notes, due December 2021	350,000		350,000
3.20% Senior Notes, due June 2023	100,000		100,000
3.37% Senior Notes, due June 2025	100,000		100,000
Other borrowings	1,078		1,446
Total borrowings	851,078		862,186
Less current portion	483		258
Less deferred debt issuance costs	1,593		2,204
Less unaccreted debt discount	667		936
Total long-term borrowings	$	848,335	$	858,788

On June 13, 2016, the Company completed a private placement of $100 million aggregate principal amount of 3.20% Senior Notes due June 13, 2023 and $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 Purchase Agreement contains certain covenants that restrict the Company’s ability to, among other things, transfer or sell assets, incur indebtedness, create liens, transact with affiliates and engage in certain mergers or consolidations or other change of control transactions. In addition, the Company must comply with a leverage ratio and interest coverage ratio, as further described below, and the Purchase Agreement also limits the outstanding principal amount of priority debt that may be incurred by the Company to 15% of consolidated assets. 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 of the outstanding Notes will become due and payable immediately without further action or notice. In the case of payment event of default, any holder of the Notes affected thereby may declare all of the Notes held by it due and payable immediately. In the case of any other event of default, a majority of the holders of the Notes may declare all of the Notes to be due and payable immediately.

On June 23, 2015, the Company entered into a credit agreement (the “Credit Agreement”) along with certain of its subsidiaries, as borrowers (the “Borrowers”), Bank of America, N.A., as administrative agent, swing line lender and an issuer of letters of credit, with other agents party thereto. The Credit Agreement replaced the Company’s existing five-year $700 million credit agreement, dated as of June 27, 2011, which was due to expire on June 27, 2016.

The Credit Agreement consists of a revolving credit facility (the “Revolving Facility”) in an aggregate principal amount of $700 million, with a final maturity date of June 23, 2020. The maturity date may be extended under certain conditions for an additional one-year term. Up to $75 million of the Revolving Facility is available for the issuance of letters of credit. Additionally, up to $50 million of the Revolving Facility is available to the Company for swing line loans, available on a same-day basis.

Proceeds of the Revolving Facility are available for use by the Borrowers for acquisitions, working capital and other general corporate purposes, including refinancing existing debt of the Company and its subsidiaries. The Company may request increases in the lending commitments under the Credit Agreement, but the aggregate lending commitments pursuant to such increases may not exceed $350 million. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain foreign subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries.

Borrowings under the Credit Agreement bear interest at either an alternate base rate or an adjusted LIBOR rate plus, in each case, an applicable margin. Such 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 Credit Agreement requires payment to the lenders of a facility fee based upon (a) the amount of the lenders’ commitments under the credit facility from time to time and (b) the applicable corporate credit ratings of the Company. Voluntary prepayments of any loans and voluntary reductions of the unutilized portion of the commitments under the credit facility are permissible without penalty, subject to break funding payments and minimum notice and minimum reduction amount requirements.

The negative covenants include, among other things, limitations (each of which is subject to customary exceptions for financings of this type) on our ability to grant liens; enter into transactions resulting in fundamental changes (such as mergers or sales of all or substantially all of the assets of the Company); restrict subsidiary dividends or other subsidiary distributions; enter into transactions with the Company’s affiliates; and incur certain additional subsidiary debt.

The Credit Agreement also contains customary events of default (subject to grace periods, as appropriate) including among others: nonpayment of principal, interest or fees; breach of the representations or warranties in any material respect; breach of the financial, affirmative or negative covenants; payment default on, or acceleration of, other material indebtedness; bankruptcy or insolvency; material judgments entered against the Company or any of its subsidiaries; certain specified events under the Employee Retirement Income Security Act of 1974, as amended; certain changes in control of the Company; and the invalidity or unenforceability of the Credit Agreement or other documents associated with the Credit Agreement.

At December 31, 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.

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 15th and December 15th. The Company may redeem all or a portion of the 4.2% Senior Notes at any time prior to maturity at the redemption prices set forth in the Note Indenture governing the 4.2% Senior Notes. The Company may issue additional debt from time to time pursuant to the Indenture. The Indenture and 4.2% Senior Notes contain covenants that limit the Company’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale-leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all 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 15th and December 15th. 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, which is the ratio of the Company’s consolidated total debt to its consolidated EBITDA. At December 31, 2018, the Company was in compliance with

both of these financial covenants. There are no financial covenants relating to the 4.5% Senior Notes or 4.2% Senior Notes; however, both are subject to cross-default provisions.

Total borrowings at December 31, 2018 have scheduled maturities as follows:



(In thousands)
2019	$	483
2020	300,595
2021	350,000
2022	—
2023	100,000
Thereafter	100,000
Total borrowings	$	851,078

Derivative Instruments

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

The effective portion of gains or losses on interest rate exchange agreements is reported in accumulated other comprehensive income (loss) in shareholders’ equity and reclassified into net income in the same period or periods in which the hedged transaction affects net income. The remaining gain or loss in excess of the cumulative change in the present value of future cash flows or the hedged item, if any, is recognized in net income during the period of change. See Note 15 for the amount of loss reclassified into income for interest rate contracts for the years ended December 31, 2018, 2017 and 2016. As of December 31, 2018, the Company did not have any interest rate contracts outstanding.

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 million 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%.

The amount of expense reclassified into interest expense for interest rate contracts for the years ended December 31, 2018, 2017 and 2016 is $6.5 million, $6.7 million and $6.9 million, respectively.

Approximately $6.3 million of the pre-tax amount included in accumulated other comprehensive loss in shareholders’ equity at December 31, 2018 will be recognized in net income over the next 12 months as the underlying hedged transactions are realized.

At December 31, 2017, the Company had outstanding foreign currency exchange contracts with a combined notional value of €180 million that were not designated as hedges for accounting purposes and, as a result, the change in the fair value of these foreign currency exchange contracts and the corresponding foreign currency gain or loss on the revaluation of the intercompany loans are

both recorded through earnings within Other (income) expense - net in the Consolidated Statements of Operations each period as incurred.

In April 2018, the Company settled all of its outstanding foreign currency exchange contracts in conjunction with its repayment of the underlying intercompany loans and did not extend these foreign currency exchange contracts. This resulted in the Company receiving $6.6 million of proceeds. During the years ended December 31, 2018 and 2017, the Company recorded gains of $0.9 million and $19.8 million, respectively, within Other (income) expense - net in the Consolidated Statements of Operations related to these foreign currency exchange contracts. During the years ended December 31, 2018 and 2017, the Company recorded foreign currency transaction losses of $0.9 million and $20.2 million, respectively, within Other (income) expense - net in the Consolidated Statements of Operations related to these intercompany loans. In connection with the elimination of the intercompany loans and their conversion to capital, the Company paid a $2.2 million stamp duty in Switzerland which was recorded within Selling, general and administrative expenses in the Consolidated Statements of Operations.

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

The following table sets forth the fair value amounts of derivative instruments held by the Company as of December 31, 2018 and 2017:



	Fair Value Assets (Liabilities)
	December 31, 2018		December 31, 2017		Balance Sheet Caption
	(In thousands)
Foreign currency exchange contracts	$	—	$	5,779	Other current assets

Fair Value Measurements

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

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


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

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

The following table summarizes the basis used to measure the Company’s financial assets (liabilities) at fair value on a recurring basis in the balance sheets at December 31, 2018 and 2017:



	Basis of Fair Value Measurements
	Balance at December 31, 2018		Level 1		Level 2		Level 3
	(In thousands)
Available for sale securities	$	7,598	$	7,598	$	—	$	—
Contingent consideration	3,375		—		—		3,375



	Basis of Fair Value Measurements
	Balance at December 31, 2017		Level 1		Level 2		Level 3
	(In thousands)
Available for sale securities	$	6,742	$	6,742	$	—	$	—
Foreign currency exchange contracts	5,779		—		5,779		—

There were no transfers of assets or liabilities between Level 1 and Level 2 in 2018 or 2017.

The Company utilized a Monte Carlo Simulation during the earn-out period to determine the fair value of the contingent consideration associated with the acquisition of FLI. The $3.4 million represents management’s best estimate of the liability, based on a range of outcomes of FLI’s two-year operating results, from August 1, 2018 to July 31, 2020, and is expected to be paid during the third quarter of 2020. As of December 31, 2018, the $3.4 million of contingent consideration is included in Other noncurrent liabilities on the Consolidated Balance Sheets.

The carrying value of our cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates their fair values because of the short term nature of these instruments. At December 31, 2018, the fair value of the outstanding indebtedness under our 3.2% Senior Notes, 3.37% Senior Notes, 4.5% Senior Notes, 4.2% Senior Notes and other borrowings based on quoted market prices and current market rates for debt with similar credit risk and maturity was approximately $851.5 million compared to the carrying value of $850.4 million. At December 31, 2017, the fair value of the outstanding indebtedness under our Revolving Facility, 3.2% Senior Notes, 3.37% Senior Notes, 4.5% Senior Notes and 4.2% Senior Notes based on quoted market prices and current market rates for debt with similar credit risk and maturity was approximately $886.3 million compared to the carrying value of $861.0 million. These fair value measurements are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions to entities with a credit rating similar to ours.

Commitments and Contingencies

The Company leases certain office facilities, warehouses and data processing equipment under operating leases. Rental expense totaled $21.8 million, $19.0 million and $18.6 million in 2018, 2017 and 2016, respectively.

The aggregate future minimum lease payments for leases as of December 31, 2018 were as follows:



	Lease Obligations

2019	$	17,509
2020	13,162
2021	10,516
2022	7,979
2023	6,535
2024 and thereafter	29,658
	$	85,359

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



	2018			2017			2016
	(In thousands)
Beginning balance at January 1	$	6,281		$	5,628		$	7,936
Provision for warranties	2,334			2,895			1,828
Claim settlements	(2,981		)	(2,317		)	(3,539		)
Other adjustments, including acquisitions, divestitures and currency translation	(331		)	75			(597		)
Ending balance at December 31	$	5,303		$	6,281		$	5,628

The Company and certain of its subsidiaries are involved in pending and threatened legal, regulatory and other proceedings arising in the ordinary course of business. These proceedings may pertain to matters such as product liability or contract disputes, and may also involve governmental inquiries, inspections, audits or investigations relating to issues such as tax matters, intellectual property, environmental, health and safety issues, governmental regulations, employment and other matters. Although the results of such legal proceedings cannot be predicted with certainty, the Company believes that the ultimate disposition of these matters

will not have a material adverse effect, individually or in the aggregate, on the Company’s business, financial condition, results of operations or cash flows.

Common and Preferred Stock

On December 1, 2015 the Company’s Board of Directors approved a $300.0 million increase in the authorized level for repurchases of common stock. Repurchases under the program will be funded with future cash flow generation or borrowings available under the Revolving Facility. During 2018, the Company repurchased a total of 1.3 million shares at a cost of $173.9 million, compared to 0.3 million shares purchased at a cost of $29.1 million in 2017. As of December 31, 2018, the amount of share repurchase authorization remaining was $377 million.

At December 31, 2018 and 2017, the Company had 150 million shares of authorized common stock, with a par value of $.01 per share, and five million shares of authorized preferred stock, with a par value of $.01 per share. No preferred stock was outstanding at December 31, 2018 and 2017.

Income Taxes

Pretax income for 2018, 2017 and 2016 was taxed in the following jurisdictions:



	2018		2017		2016
	(In thousands)
U.S.	$	357,585	$	302,515	$	265,260
Foreign	171,354		152,758		103,252
Total	$	528,939	$	455,273	$	368,512

The provision (benefit) for income taxes for 2018, 2017 and 2016 was as follows:



	2018			2017			2016
	(In thousands)
Current
U.S.	$	67,793		$	91,641		$	67,668
State and local	8,056			9,342			4,503
Foreign	46,862			50,775			42,540
Total current	122,711			151,758			114,711
Deferred
U.S.	(5,471		)	(36,390		)	(6,249		)
State and local	(17		)	3,305			(331		)
Foreign	1,143			(657		)	(10,728		)
Total deferred	(4,345		)	(33,742		)	(17,308		)
Total provision for income taxes	$	118,366		$	118,016		$	97,403

Deferred tax assets (liabilities) at December 31, 2018 and 2017 were:



	2018			2017
	(In thousands)
Employee and retiree benefit plans	$	27,615		$	31,804
Capital loss carryforwards	12,754			12,853
Depreciation and amortization	(168,485		)	(176,592		)
Inventories	5,969			8,548
Allowances and accruals	11,540			4,572
Interest rate exchange agreement	3,543			5,007
Other	(6,388		)	(8,019		)
Total gross deferred tax (liabilities)	(113,452		)	(121,827		)
Capital loss valuation allowance	(12,754		)	(12,853		)
Total deferred tax (liabilities), net of valuation allowances	$	(126,206	)	$	(134,680	)

The deferred tax assets and liabilities recognized in the Company’s Consolidated Balance Sheets as of December 31, 2018 and 2017 were:



	2018			2017
	(In thousands)
Noncurrent deferred tax asset - Other noncurrent assets	$	1,801		$	2,958
Noncurrent deferred tax liabilities - Deferred income taxes	(128,007		)	(137,638		)
Net deferred tax liabilities	$	(126,206	)	$	(134,680	)

The Company had prepaid income taxes, recorded within Other current assets on the Consolidated Balance Sheets, of $8.3 million and $40.9 million as of December 31, 2018 and 2017, respectively.

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to pretax income. The computed amount and the differences for 2018, 2017 and 2016 are as follows:



	2018			2017			2016
	(In thousands)
Pretax income	$	528,939		$	455,273		$	368,512
Provision for income taxes:
Computed amount at statutory rate	$	111,077		$	159,346		$	128,979
State and local income tax (net of federal tax benefit)	8,280			5,841			4,070
Taxes on non-U.S. earnings-net of foreign tax credits	5,725			(24,914		)	(6,666		)
Global Intangible Lowed-Taxed Income	2,725			—			—
Foreign-Derived Intangible Income Deduction	(5,410		)	—			—
Effect of flow-through entities	1,215			192			(8,735		)
U.S. business tax credits	(3,056		)	(1,928		)	(1,665		)
Domestic activities production deduction	—			(8,516		)	(9,043		)
Capital loss on divestitures	—			(2,275		)	(23,444		)
Share-based payments	(9,348		)	(6,844		)	(6,520		)
Valuation allowance	—			(361		)	17,973
Impact of Tax Act	10,298			(100		)	—
Other	(3,140		)	(2,425		)	2,454
Total provision for income taxes	$	118,366		$	118,016		$	97,403

On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act included significant changes to the existing tax law, including, but not limited to, a permanent reduction to the U.S. federal corporate income tax rate from 35% to 21%, effective January 1, 2018 and the creation of a modified territorial tax system with a one-time repatriation tax on certain deferred foreign income (“Transition Tax”). The income tax effects of the Tax Act on the Company are further described below.

The Company has $18.2 million and $350 million of permanently reinvested earnings of non-U.S. subsidiaries as of December 31, 2018 and 2017, respectively. The significant decrease in permanently reinvested earnings of non-U.S. subsidiaries was due to the Company’s removal of its permanently reinvested assertion on all non-U.S. subsidiaries except for its entity in India, mainly in response to the deemed distribution and repatriation tax incurred in 2017 as a result of the Tax Act. No deferred U.S. income taxes have been provided on the $18.2 million permanently reinvested earnings, as these earnings are considered to be reinvested for an indefinite period of time. It should also be noted that the aforementioned earnings will not incur U.S. taxes when ultimately repatriated other than potentially U.S. state and local taxes and/or U.S. federal income taxes on foreign exchange gains or losses crystalized on the distribution of such earnings. Such distributions could also be subject to additional foreign withholding and foreign income taxes. The amount of unrecognized deferred income tax liabilities on currently permanently reinvested earnings is estimated to be $3.7 million as of December 31, 2018.

During the years ended December 31, 2018, 2017 and 2016, the Company repatriated $135 million, $3.3 million and $28.8 million of foreign earnings, respectively. These actual distributions resulted in no incremental income tax expense, $6.4 million of incremental income tax benefit and $2.7 million of incremental income tax expense in 2018, 2017 and 2016, respectively. These repatriations represent distributions of previously taxed income as well as distributions from liquidating subsidiaries.

Because the changes included in the Tax Act were broad and complex, on December 22, 2017, the SEC issued Staff Accounting Bulletin (“SAB 118”), which provided guidance on accounting for the tax effects of the Tax Act. SAB 118 provided a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company was required to reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 was complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act was incomplete but it was able to determine a reasonable estimate, it was required to record a provisional estimate to be included in the financial statements. As of December 31, 2018, the Company, as required under SAB 118, has completed the accounting for all of the enactment-date income tax effects of the Tax Act. The Company’s completed accounting of the enactment-date income tax effects of the Tax Act is as follows:

Deemed Repatriation Transition Tax: The Deemed Repatriation Transition Tax is a tax on previously untaxed accumulated and current earnings and profits of certain foreign subsidiaries. To determine the amount of the Transition Tax, the Company had to determine, in addition to other factors, the amount of post-1986 earnings and profits of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company was able to make a reasonable estimate of the Transition Tax and recorded a provisional Transition Tax obligation of $30.3 million for the year ended December 31, 2017. During the first quarter, the IRS released Revenue Procedure 2018-17 and Notice 2018-26, the effects of which increased the provisional Transition Tax by $0.1 million. The Company finalized its Transaction Tax obligation in the fourth quarter 2018 recording a $3.9 million tax benefit which, together with the first quarter adjustment, resulted in a final Transition Tax obligation of $26.5 million.

Reduction of U.S. federal corporate tax rate: The Tax Act reduces the corporate tax rate to 21%, effective January 1, 2018. The Company recorded a decrease in its deferred tax liability of $40.6 million, with a corresponding adjustment to deferred income tax benefit of $40.6 million for the year ended December 31, 2017. The Company finalized the impact of the rate change on its deferred tax liability in the fourth quarter of 2018 recording an additional $1.1 million tax benefit. The total reduction to the deferred tax liability related to the rate change was $41.7 million.

Removal of Permanent Reinvestment Representation on certain undistributed foreign earnings: As a result of the enactment of the Tax Act, the Company had decided to remove the Permanent Reinvestment Representation with respect to certain of its subsidiaries in Canada, Italy and Germany as of December 31, 2017. Under the mandatory repatriation provisions of the Tax Act, post-1986 undistributed earnings were taxed in the U.S. as if they were distributed before December 31, 2017. However, with the removal of the Permanent Reinvestment Representation with respect to select subsidiaries in Canada, Italy and Germany, the non-creditable withholding taxes and any local country taxes associated with future dividends from these subsidiaries were required to be recorded as deferred tax liabilities as of the end of 2017. The Company recorded a provisional increase in its deferred tax liability of $9.2 million, with a corresponding adjustment to deferred income tax expense of $9.2 million for the year ending December 31, 2017. During the second quarter, the deferred tax liability was reduced by $1.4 million to $7.8 million. No adjustments were made to the deferred tax liability during the third quarter of 2018. The Company removed the Permanent Reinvestment Representation during the fourth quarter of 2018 for all remaining non-U.S. subsidiaries except for its entity in India. This change resulted in an additional $9.1 million increase to its deferred tax liability with a corresponding adjustment to deferred tax expense.

Global intangible low taxed income (GILTI): The Tax Act creates a new requirement that certain income (i.e. GILTI) earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFC’s U.S. shareholder. GILTI is the excess of the U.S. shareholder’s “net CFC tested income” over the net deemed intangible income return, which is currently defined as the excess of (1) 10% of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income. In January 2018, FASB released guidance on the accounting for the GILTI tax. The guidance indicates that either accounting for deferred taxes related to GILTI tax inclusions or treating the GILTI tax as a period cost are both acceptable methods subject to an accounting policy election. The Company will treat the GILTI tax as a period cost.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2018, 2017 and 2016 is as follows:



	2018			2017			2016
	(In thousands)
Beginning balance January 1	$	2,722		$	3,775		$	7,228
Gross increases for tax positions of prior years	2,308			537			201
Gross decreases for tax positions of prior years	(229		)	(587		)	(93		)
Settlements	(160		)	(604		)	(2,014		)
Lapse of statute of limitations	(571		)	(399		)	(1,547		)
Ending balance December 31	$	4,070		$	2,722		$	3,775

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2018, 2017 and 2016, we had approximately $0.1 million, $0.1 million and $0.1 million, respectively, of accrued interest related

to uncertain tax positions. As of December 31, 2018 and 2017, the Company had no accrued penalties related to uncertain tax positions, while in 2016 we had approximately $0.1 million.

The total amount of unrecognized tax benefits that would affect the Company’s effective tax rate if recognized is $3.0 million, $0.9 million and $1.8 million as of December 31, 2018, 2017 and 2016, respectively. The tax years 2012-2017 remain open to examination by major taxing jurisdictions. Due to the potential for resolution of federal, state and foreign examinations and the expiration of various statutes of limitation, it is reasonably possible that the Company’s gross unrecognized tax benefits balance may change within the next 12 months by a range of zero to $1 million.

The Company had net operating loss and credit carryforwards related to prior acquisitions for U.S. federal purposes at December 31, 2018 and 2017 of $1.3 million and $2.4 million, respectively. The U.S. federal net operating loss carryforwards are available for use against the Company’s consolidated U.S. federal taxable income and expire between 2021 and 2028. For non-U.S. purposes, the Company had net operating loss carryforwards at December 31, 2018 and 2017 of $29.5 million and $24.5 million, respectively, the majority of which relates to acquisitions. The entire balance of the non-U.S. net operating losses is available to be carried forward. At December 31, 2018 and 2017, the Company had U.S. state net operating loss carryforwards of approximately $15.8 million and $6.7 million, respectively. If unutilized, the U.S. state net operating loss will expire between 2019 and 2038. At December 31, 2018 and 2017, the Company recorded a valuation allowance against the deferred tax asset attributable to the U.S. state net operating loss of $0.6 million and $0.1 million, respectively.

The Company had a capital loss carryover for U.S. federal purposes at December 31, 2018 and 2017 of approximately $46.1 million and $46.0 million, respectively. U.S. federal capital loss carryovers can be carried back three years and forward five years, thus, if unutilized, the U.S. federal capital loss carryover will expire in 2021. At December 31, 2018 and 2017, the Company recorded a valuation allowance against the deferred tax asset attributable to the U.S. federal capital loss carryover of $9.7 million and $9.7 million, respectively. At December 31, 2018 and 2017, the Company had U.S. state capital loss carryovers of $62.7 million and $62.7 million, respectively. If unutilized, the U.S. state capital loss carryovers will expire between 2021 and 2031. At December 31, 2018 and 2017, the Company recorded a valuation allowance against the deferred tax assets attributable to the U.S. state capital loss carryovers of $0.8 million and $0.8 million, respectively. At December 31, 2018 and 2017, the Company had a foreign capital loss carryforward of approximately $13.4 million and $14.2 million, respectively. The foreign capital loss can be carried forward indefinitely. At both December 31, 2018 and 2017, the Company has a full valuation allowance against the deferred tax asset attributable to the foreign capital loss.

Business Segments and Geographic Information

IDEX has three reportable business segments: Fluid & Metering Technologies, Health & Science Technologies and Fire & Safety/Diversified Products.

The Fluid & Metering Technologies segment designs, produces and distributes positive displacement pumps, flow meters, injectors, and other fluid-handling pump modules and systems and provides flow monitoring and other services for the food, chemical, general industrial, water & wastewater, agriculture and energy industries.

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 Fire & Safety/Diversified Products segment designs, produces and distributes 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.

Information on the Company’s business segments is presented below based on the nature of products and services offered. The Company evaluates performance based on several factors, of which sales, operating income and operating margin are the primary financial measures. Intersegment sales are accounted for at fair value as if the sales were to third parties.



	2018			2017			2016
	(In thousands)
NET SALES
Fluid & Metering Technologies
External customers	$	951,275		$	880,648		$	848,708
Intersegment sales	277			309			393
Total segment sales	951,552			880,957			849,101
Health & Science Technologies
External customers	895,970			819,719			744,380
Intersegment sales	449			412			429
Total segment sales	896,419			820,131			744,809
Fire & Safety/Diversified Products
External customers	636,421			586,945			519,955
Intersegment sales	607			588			54
Total segment sales	637,028			587,533			520,009
Intersegment eliminations	(1,333		)	(1,309		)	(876		)
Total net sales	$	2,483,666		$	2,287,312		$	2,113,043
OPERATING INCOME (LOSS) (1)
Fluid & Metering Technologies	$	275,060		$	241,030		$	217,500
Health & Science Technologies	205,679			179,567			153,691
Fire & Safety/Diversified Products	168,601			147,028			123,605
Corporate office (2)	(80,252		)	(65,069		)	(82,399		)
Total operating income	569,088			502,556			412,397
Interest expense	44,134			44,889			45,616
Other (income) expense - net	(3,985		)	2,394			(1,731		)
Income before taxes	$	528,939		$	455,273		$	368,512



	2018		2017		2016
	(In thousands)
ASSETS
Fluid & Metering Technologies	$	1,107,777	$	1,101,580	$	1,065,670
Health & Science Technologies	1,329,368		1,323,373		1,266,036
Fire & Safety/Diversified Products	806,075		744,515		705,735
Corporate office	230,637		230,160		117,503
Total assets	$	3,473,857	$	3,399,628	$	3,154,944
DEPRECIATION AND AMORTIZATION (3)
Fluid & Metering Technologies	$	22,370	$	23,587	$	28,458
Health & Science Technologies	39,939		45,287		45,298
Fire & Safety/Diversified Products	14,493		14,541		11,956
Corporate office and other	742		801		1,180
Total depreciation and amortization	$	77,544	$	84,216	$	86,892
CAPITAL EXPENDITURES
Fluid & Metering Technologies	$	19,541	$	18,218	$	16,389
Health & Science Technologies	26,039		16,340		15,665
Fire & Safety/Diversified Products	10,318		6,363		5,945
Corporate office and other	191		2,937		243
Total capital expenditures	$	56,089	$	43,858	$	38,242


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


(2)	2017 includes a $9.3 million gain on the sale of a business and 2016 includes a $22.3 million loss on the sale of businesses - net.


(3)	Excludes amortization of debt issuance expenses.

Information about the Company’s long-lived assets in different geographical regions for the years ended December 31, 2018, 2017 and 2016 is shown below.



	2018		2017		2016
	(In thousands)
LONG-LIVED ASSETS — PROPERTY, PLANT AND EQUIPMENT
U.S.	$	171,111	$	145,808	$	152,504
North America, excluding U.S.	3,398		3,627		1,533
Europe	85,100		85,932		71,681
Asia	21,355		22,613		21,793
Other	256		370		305
Total long-lived assets - net	$	281,220	$	258,350	$	247,816

Restructuring

During 2018, the first and fourth quarters of 2017 and the fourth quarter of 2016, the Company recorded restructuring costs as part of restructuring initiatives that support the implementation of key strategic efforts designed to facilitate long-term, sustainable growth through cost reduction actions, primarily consisting of employee reductions and facility rationalization. The costs incurred related to these initiatives were included in Restructuring expenses in the Consolidated Statements of Operations while the related accruals were included in Accrued expenses in the Consolidated Balance Sheets. Severance costs primarily consisted of severance benefits through payroll continuation, COBRA subsidies, outplacement services, conditional separation costs and employer tax liabilities, while exit costs primarily consisted of asset disposals or impairments and lease exit and contract termination costs.

2018 Initiative

During 2018, the Company recorded pre-tax restructuring expenses totaling $12.1 million related to the 2018 restructuring initiative. These expenses consisted of employee severance related to employee reductions across various functional areas as well as facility rationalization and contract termination costs. Severance payments will be substantially paid by the end of 2019 using cash from operations.

Pre-tax restructuring expenses by segment for the 2018 initiative were as follows:



	Severance Costs		Exit Costs		Total
	(In thousands)
Fluid & Metering Technologies	$	2,305	$	153	$	2,458
Health & Science Technologies	5,454		450		5,904
Fire & Safety/Diversified Products	2,184		—		2,184
Corporate/Other	1,537		—		1,537
Total restructuring costs	$	11,480	$	603	$	12,083

2017 Initiative

During the fourth quarter of 2017, the Company recorded pre-tax restructuring expenses totaling $3.7 million related to the 2017 restructuring initiative. These expenses consisted of employee severance related to employee reductions across various functional areas as well as facility rationalization and contract termination costs. Severance payments were fully paid by the end of 2018 using cash from operations.

Pre-tax restructuring expenses by segment for the 2017 initiative were as follows:



	Severance Costs		Exit Costs		Total Restructuring Costs
	(In thousands)
Fluid & Metering Technologies	$	1,375	$	433	$	1,808
Health & Science Technologies	1,510		158		1,668
Fire & Safety/Diversified Products	182		—		182
Corporate/Other	—		—		—
Total restructuring costs	$	3,067	$	591	$	3,658

2016 Initiative

During the first quarter of 2017, the Company recorded pre-tax restructuring expenses totaling $4.8 million related to the 2016 restructuring initiative. During the fourth quarter of 2016, the Company recorded pre-tax restructuring expenses totaling $3.7 million related to the 2016 restructuring initiative. These expenses consisted of employee severance related to employee reductions across various functional areas as well as facility rationalization costs. Severance payments were substantially paid by the end of 2017 using cash from operations.

Pre-tax restructuring expenses by segment for the 2016 initiative were as follows:



	2017						2016
	Severance Costs		Exit Costs		Total Restructuring Costs		Total Restructuring Costs
	(In thousands)
Fluid & Metering Technologies	$	1,566	$	—	$	1,566	$	932
Health & Science Technologies	2,470		558		3,028		1,117
Fire & Safety/Diversified Products	73		—		73		1,425
Corporate/Other	130		—		130		200
Total restructuring costs	$	4,239	$	558	$	4,797	$	3,674

Restructuring accruals of $6.2 million and $4.2 million at December 31, 2018 and 2017, respectively, are reflected in Accrued expenses in our Consolidated Balance Sheets as follows:



	Restructuring Initiatives
	(In thousands)
Balance at January 1, 2017	$	3,893
Restructuring expenses	8,455
Payments, utilization and other	(8,168		)
Balance at December 31, 2017	4,180
Restructuring expenses	12,083
Payments, utilization and other	(10,093		)
Balance at December 31, 2018	$	6,170

Share-Based Compensation

The Company maintains two share-based compensation plans for executives, non-employee directors and certain key employees that authorize the granting of stock options, restricted stock, performance share units and other types of awards consistent with the purpose of the plans. The number of shares authorized for issuance under the Company’s plans as of December 31, 2018 totaled 15.6 million, of which 4.3 million shares were available for future issuance. The Company’s policy is to recognize compensation cost on a straight-line basis, assuming forfeitures, over the requisite service period for the entire award.

Stock Options

Stock options granted under the Company’s plans are generally non-qualified and are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. The majority of the options issued to employees become exercisable in four equal installments, beginning one year from the date of grant, and generally expire 10 years from the date of grant. Stock options granted to non-employee directors cliff vest after one year.

Weighted average option fair values and assumptions for the period are as follows:



	Years Ended December 31,
	2018	2017	2016
Weighted average fair value of grants	$38.13	$24.19	$18.56
Dividend yield	1.07%	1.45%	1.69%
Volatility	28.46%	29.41%	29.70%
Risk-free interest rate	2.03% - 3.17%	0.83% - 3.04%	0.53% - 2.49%
Expected life (in years)	5.83	5.83	5.91

The assumptions are as follows:


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


•	The Company uses historical data to estimate the expected life of the option. The expected life assumption for the years ended December 31, 2018, 2017 and 2016 is an output of the Binomial lattice option-pricing model, which incorporates vesting provisions, rate of voluntary exercise and rate of post-vesting termination over the contractual life of the option to define expected employee behavior.


•	The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. For the years ended December 31, 2018, 2017 and 2016, we present the range of risk-free one-year forward rates, derived from the U.S. treasury yield curve, utilized in the Binomial lattice option-pricing model.


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

A summary of the Company’s stock option activity as of December 31, 2018, and changes during the year ended December 31, 2018 is presented as follows:



Stock Options	Shares		Weighted Average Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2018	1,924,683		$	71.07	6.87	$	117,209,218
Granted	314,895		138.40
Exercised	(455,558	)	60.81
Forfeited/Expired	(70,017	)	97.68
Outstanding at December 31, 2018	1,714,003		$	85.08	6.70	$	74,191,783
Vested and expected to vest at December 31, 2018	1,635,247		$	83.77	6.61	$	72,632,325
Exercisable at December 31, 2018	836,917		$	66.52	5.26	$	50,027,326

The intrinsic value for stock options outstanding and exercisable is defined as the difference between the market value of the Company’s common stock as of the end of the period and the grant price. The total intrinsic value of options exercised in 2018, 2017 and 2016 was $38.0 million, $26.1 million and $26.5 million, respectively. In 2018, 2017 and 2016, cash received from options exercised was $27.6 million, $22.9 million and $30.2 million, respectively, while the actual tax benefit realized for the tax deductions from stock options exercised totaled $8.0 million, $9.5 million and $9.6 million, respectively.

Total compensation cost for stock options is recorded in the Consolidated Statements of Operations as follows:



	Years Ended December 31,
	2018			2017			2016
	(In thousands)
Cost of goods sold	$	470		$	428		$	427
Selling, general and administrative expenses	8,313			7,347			6,561
Total expense before income taxes	8,783			7,775			6,988
Income tax benefit	(1,616		)	(2,485		)	(2,213		)
Total expense after income taxes	$	7,167		$	5,290		$	4,775

As of December 31, 2018, there was $13.7 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.3 years.

Restricted Stock

Restricted stock awards generally cliff vest after three years for employees and non-employee directors. Unvested restricted stock carries dividend and voting rights and the sale of the shares is restricted prior to the date of vesting. Dividends are paid on restricted stock awards and their fair value is equal to the market price of the Company’s stock at the date of the grant. A summary of the Company’s restricted stock activity as of December 31, 2018, and changes during the year ending December 31, 2018 is as follows:



Restricted Stock	Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2018	182,023		$	83.37
Granted	46,460		138.30
Vested	(68,172	)	79.19
Forfeited	(12,270	)	95.79
Unvested at December 31, 2018	148,041		$	101.50

Total compensation cost for restricted stock is recorded in the Consolidated Statements of Operations as follows:



	Years Ended December 31,
	2018			2017			2016
	(In thousands)
Cost of goods sold	$	367		$	335		$	390
Selling, general and administrative expenses	4,201			4,772			4,401
Total expense before income taxes	4,568			5,107			4,791
Income tax benefit	(825		)	(1,654		)	(1,410		)
Total expense after income taxes	$	3,743		$	3,453		$	3,381

As of December 31, 2018, there was $5.5 million of total unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 1.1 years.

Cash-Settled Restricted Stock

The Company also maintains a cash-settled share based compensation plan for certain employees. Cash-settled restricted stock awards generally cliff vest after three years. Dividend equivalents are paid on certain cash-settled restricted stock awards. A summary of the Company’s unvested cash-settled restricted stock activity as of December 31, 2018, and changes during the year ending December 31, 2018 is as follows:



Cash-Settled Restricted Stock	Shares		Weighted-Average Fair Value
Unvested at January 1, 2018	94,730		$	131.97
Granted	30,795		137.82
Vested	(27,880	)	137.11
Forfeited	(9,420	)	126.26
Unvested at December 31, 2018	88,225		$	126.26

Total compensation cost for cash-settled restricted stock is recorded in the Consolidated Statements of Operations as follows:



	Years Ended December 31,
	2018			2017			2016
	(In thousands)
Cost of goods sold	$	809		$	1,357		$	764
Selling, general and administrative expenses	2,391			3,241			2,224
Total expense before income taxes	3,200			4,598			2,988
Income tax benefit	(337		)	(808		)	(419		)
Total expense after income taxes	$	2,863		$	3,790		$	2,569

At December 31, 2018 and 2017, the Company has $4.5 million and $4.5 million, respectively, included in Accrued expenses in the Consolidated Balance Sheets and $2.4 million and $3.0 million, respectively, included in Other non-current liabilities.

Performance Share Units

Beginning in 2013, the Company granted performance share units to selected key employees that may be earned based on IDEX total shareholder return over the three-year period following the date of grant. Performance share units are expected to be made annually and are paid out at the end of a three-year period based on the Company’s performance. Performance is measured by determining the percentile rank of the total shareholder return of IDEX common stock in relation to the total shareholder return of the S&P Midcap 400 Industrial Group (for awards granted prior to 2016) or the Russell Midcap Index (for awards granted in 2016 - 2018) for the three-year period following the date of grant. The payment of awards following the three-year award period will be based on performance achieved in accordance with the scale set forth in the plan agreement and may range from 0 percent to 250 percent of the initial grant. A target payout of 100 percent is earned if total shareholder return is equal to the 50th percentile of the peer group. Performance share units earn dividend equivalents for the award period, which will be paid to participants with the award payout at the end of the period based on the actual number of performance share units that are earned. Payments made at the end of the award period will be in the form of stock for performance share units and will be in cash for dividend equivalents. The Company’s performance share awards are considered performance condition awards and the grant date fair value of the awards, based on a Monte Carlo simulation model, is expensed ratably over the three-year term of the awards. The Company granted approximately 0.1 million of performance share units in each of 2018, 2017 and 2016.

Weighted average performance share unit fair values and assumptions for the period specified are as follows:



	Years Ended December 31,
	2018	2017	2016
Weighted average fair value of grants	$216.59	$115.74	$111.42
Dividend yield	—%	—%	—%
Volatility	17.42%	17.36%	17.99%
Risk-free interest rate	2.40%	1.45%	0.89%
Expected life (in years)	2.85	2.85	2.86

The assumptions are as follows:


•	The Company estimated volatility using its historical share price performance over the remaining performance period as of the grant date.


•	The Company uses a Monte Carlo simulation model that uses an expected life commensurate with the performance period. As a result, the expected life of the performance share units was assumed to be the period from the grant date to the end of the performance period.


•	The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with a term commensurate with the remaining performance period.


•	Total Shareholder Return is determined assuming that dividends are reinvested in the issuing entity over the performance period, which is mathematically equivalent to utilizing a 0% dividend yield.

A summary of the Company’s performance share unit activity as of December 31, 2018, and changes during the year ending December 31, 2018, is as follows:



Performance Share Units	Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2018	136,870		$	113.81
Granted	52,375		216.59
Vested	(69,995	)	111.42
Forfeited	(8,095	)	139.17
Unvested at December 31, 2018	111,155		$	142.42

Awards that vested in 2018 will result in 174,994 shares being issued in 2019.

Total compensation cost for performance share units is as follows:



	Years Ended December 31,
	2018			2017			2016
	(In thousands)
Cost of goods sold	$	—		$	—		$	—
Selling, general and administrative expenses	8,203			6,925			5,559
Total expense before income taxes	8,203			6,925			5,559
Income tax benefit	(1,586		)	(2,342		)	(1,859		)
Total expense after income taxes	$	6,617		$	4,583		$	3,700

As of December 31, 2018, there was $8.2 million of total unrecognized compensation cost related to performance shares that is expected to be recognized over a weighted-average period of 1.0 year.

Other Comprehensive Income (Loss)

The components of Other comprehensive income (loss) are as follows:



	For the Year Ended December 31, 2018									For the Year Ended December 31, 2017
	Pre-tax			Tax			Net of tax			Pre-tax			Tax			Net of tax
	(In thousands)
Foreign currency translation adjustments
Cumulative translation adjustment	$	(48,114	)	$	—		$	(48,114	)	$	110,421		$	—		$	110,421
Reclassification of foreign currency translation to earnings upon sale of business	—			—			—			2,749			—			2,749
Tax effect of reversal of indefinite assertion on certain intercompany loans	—			—			—			(3,932		)	—			(3,932		)
Foreign currency translation adjustments	(48,114		)	—			(48,114		)	109,238			—			109,238
Pension and other postretirement adjustments
Net gain (loss) arising during the year	9,963			(2,375		)	7,588			(5,355		)	828			(4,527		)
Amortization/recognition of settlement loss	2,938			(701		)	2,237			3,814			(589		)	3,225
Pension and other postretirement adjustments	12,901			(3,076		)	9,825			(1,541		)	239			(1,302		)
Reclassification adjustments for derivatives	6,475			(1,469		)	5,006			6,655			(2,445		)	4,210
Total other comprehensive income (loss)	$	(28,738	)	$	(4,545	)	$	(33,283	)	$	114,352		$	(2,206	)	$	112,146



	For the Year Ended December 31, 2016
	Pre-tax			Tax			Net of tax
	(In thousands)
Foreign currency translation adjustments
Cumulative translation adjustment	$	(76,822	)	$	—		$	(76,822	)
Reclassification of foreign currency translation to earnings upon sale of business	14,257			—			14,257
Tax effect of reversal of indefinite assertion on certain intercompany loans	—			—			—
Foreign currency translation adjustments	(62,565		)	—			(62,565		)
Pension and other postretirement adjustments
Net gain (loss) arising during the year	(1,927		)	789			(1,138		)
Amortization/recognition of settlement loss	7,083			(2,896		)	4,187
Pension and other postretirement adjustments, net	5,156			(2,107		)	3,049
Reclassification adjustments for derivatives	6,851			(2,490		)	4,361
Total other comprehensive income (loss)	$	(50,558	)	$	(4,597	)	$	(55,155	)

Amounts reclassified from accumulated other comprehensive income (loss) to net income are summarized as follows:



	For the Year Ended December 31,
	2018			2017			2016			Income Statement Caption
Foreign currency translation:
Reclassification upon sale of business	$	—		$	2,749		$	14,257		Loss (gain) on sale of businesses - net
Total before tax	—			2,749			14,257
Provision for income taxes	—			—			—
Total net of tax	$	—		$	2,749		$	14,257
Pension and other postretirement plans:
Amortization of service cost	$	3,246		$	3,580		$	3,529		Other (income) expense - net
Recognition of settlement loss	(308		)	234			3,554			Other (income) expense - net
Total before tax	2,938			3,814			7,083
Provision for income taxes	(701		)	(589		)	(2,896		)
Total net of tax	$	2,237		$	3,225		$	4,187
Derivatives:
Reclassification adjustments	$	6,475		$	6,655		$	6,851		Interest expense
Total before tax	6,475			6,655			6,851
Provision for income taxes	(1,469		)	(2,445		)	(2,490		)
Total net of tax	$	5,006		$	4,210		$	4,361

Retirement Benefits

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

During 2016, the Company offered a voluntary lump-sum pension payment opportunity to certain terminated vested U.S. pension plan participants. Total lump-sum payments of $11.0 million were made for those participants electing to receive lump sums using pension plan assets. The Company recognized pretax settlement losses of $3.5 million in the fourth quarter of 2016 for those plans where the settlement payment exceeded the sum of the plans’ service and interest costs.

The following table provides a reconciliation of the changes in the benefit obligations and fair value of plan assets over the two-year period ended December 31, 2018 and a statement of the funded status at December 31 for both years.



	Pension Benefits												Other Benefits
	2018						2017						2018			2017
	U.S.			Non-U.S.			U.S.			Non-U.S.
	(In thousands)
CHANGE IN BENEFIT OBLIGATION
Obligation at January 1	$	91,335		$	97,451		$	90,256		$	87,764		$	26,068		$	24,636
Service cost	886			2,105			976			1,975			668			610
Interest cost	2,634			1,389			2,677			1,283			810			818
Plan amendments	—			52			—			—						—
Benefits paid	(5,171		)	(2,791		)	(6,258		)	(1,942		)	(847		)	(738		)
Actuarial loss (gain)	(4,497		)	(3,378		)	3,684			(15		)	(3,930		)	592
Currency translation	—			(3,335		)	—			9,323			(176		)	150
Settlements	(12		)	(2,313		)	—			(2,452		)				—
Acquisition/Divestiture	—			—			—			(482		)				—
Other	—			609			—			1,997						—
Obligation at December 31	$	85,175		$	89,789		$	91,335		$	97,451		$	22,593		$	26,068
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	$	76,041		$	36,316		$	73,688		$	32,586		$	—		$	—
Actual return on plan assets	2,070			496			5,046			1,792			—			—
Employer contributions	10,652			2,345			3,565			2,702			847			738
Benefits paid	(5,171		)	(2,791		)	(6,258		)	(1,942		)	(847		)	(738		)
Currency translation				(1,130		)	—			2,446			—			—
Settlements				(2,313		)	—			(2,452		)	—			—
Acquisition/Divestiture							—			—			—			—
Other	(12		)	609			—			1,184			—			—
Fair value of plan assets at December 31	$	83,580		$	33,532		$	76,041		$	36,316		$	—		$	—
Funded status at December 31	$	(1,595	)	$	(56,257	)	$	(15,294	)	$	(61,135	)	$	(22,593	)	$	(26,068	)
COMPONENTS ON THE CONSOLIDATED BALANCE SHEETS
Other noncurrent assets	$	3,058		$	—		$	—		$	—		$	—		$	—
Current liabilities	$	(556	)	$	(1,174	)	$	(658	)	$	(1,159	)	$	(1,116	)	$	(1,034	)
Other noncurrent liabilities	(4,097		)	(55,083		)	(14,636		)	(59,976		)	(21,477		)	(25,034		)
Net liability at December 31	$	(1,595	)	$	(56,257	)	$	(15,294	)	$	(61,135	)	$	(22,593	)	$	(26,068	)

The accumulated benefit obligation (“ABO”) for all defined benefit pension plans was $169.5 million and $182.7 million at December 31, 2018 and 2017, respectively.

The weighted average assumptions used in the measurement of the Company’s benefit obligation at December 31, 2018 and 2017 were as follows:



	U.S. Plans				Non-U.S. Plans				Other Benefits
	2018		2017		2018		2017		2018		2017
Discount rate	4.10	%	3.46	%	2.07	%	1.82	%	4.11	%	3.50	%
Rate of compensation increase	4.00	%	4.00	%	2.13	%	2.37	%	4.00	%	4.00	%

The pretax amounts recognized in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets as of December 31, 2018 and 2017 were as follows:



	Pension Benefits								Other Benefits
	2018				2017				2018			2017
	U.S.		Non-U.S.		U.S.		Non-U.S.
	(In thousands)
Prior service cost (credit)	$	62	$	64	$	86	$	18	$	(117	)	$	(483	)
Net loss	22,478		12,955		27,789		17,986		(6,386		)	(2,866		)
Total	$	22,540	$	13,019	$	27,875	$	18,004	$	(6,503	)	$	(3,349	)

The amounts in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheet as of December 31, 2018 that are expected to be recognized as components of net periodic benefit cost during 2019 are as follows:



	U.S. Pension Benefit Plans		Non-U.S. Pension Benefit Plans		Other Benefit Plans			Total
	(In thousands)
Prior service cost (credit)	$	15	$	6	$	(70	)	$	(49	)
Net loss	1,931		1,131		(564		)	2,498
Total	$	1,946	$	1,137	$	(634	)	$	2,449

The components of, and the weighted average assumptions used to determine, the net periodic benefit cost for the plans in 2018, 2017 and 2016 are as follows:



	Pension Benefits
	2018						2017						2016
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
	(In thousands)
Service cost	$	886		$	2,105		$	976		$	1,975		$	1,016		$	1,627
Interest cost	2,634			1,389			2,677			1,283			3,043			1,429
Expected return on plan assets	(3,943		)	(1,120		)	(3,832		)	(1,088		)	(4,777		)	(993		)
Settlement loss recognized	(1		)	(307		)	—			234			3,339			215
Net amortization	2,712			1,271			2,566			1,809			3,226			1,008
Net periodic benefit cost	$	2,288		$	3,338		$	2,387		$	4,213		$	5,847		$	3,286



	Other Benefits
	2018			2017			2016
	(In thousands)
Service cost	$	668		$	610		$	601
Interest cost	810			818			811
Net amortization	(737		)	(795		)	(705		)
Net periodic benefit cost	$	741		$	633		$	707



	U.S. Plans						Non-U.S. Plans
	2018		2017		2016		2018		2017		2016
Discount rate	3.46	%	3.91	%	4.12	%	1.82	%	1.76	%	2.99	%
Expected return on plan assets	5.50	%	5.50	%	6.50	%	3.09	%	3.20	%	4.58	%
Rate of compensation increase	4.00	%	4.00	%	4.00	%	2.37	%	2.29	%	2.98	%



	Other Benefits
	2018		2017		2016
Discount rate	3.50	%	3.94	%	4.10	%
Expected return on plan assets	—	%	—	%	—	%
Rate of compensation increase	4.00	%	4.00	%	4.00	%

The pretax change recognized in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheet in 2018 is as follows:



	Pension Benefits					Other Benefits
	U.S.		Non-U.S.
	(In thousands)
Net gain (loss) in current year	$	2,624	$	2,754		$	3,930
Prior service cost	—		(52		)	—
Amortization of prior service cost (credit)	24		3			(366		)
Amortization of net loss (gain)	2,687		961			(371		)
Exchange rate effect on amounts in OCI	—		746			(39		)
Total	$	5,335	$	4,412		$	3,154

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

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

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

Costs of defined contribution plans were $12.2 million, $10.2 million and $10.1 million for 2018, 2017 and 2016, respectively.

The Company, through its subsidiaries, participates in certain multi-employer pension plans covering approximately 343 participants under U.S. collective bargaining agreements. None of these plans are considered individually significant to the Company as contributions to these plans totaled $1.1 million, $1.0 million, and $1.3 million for 2018, 2017 and 2016, respectively.

For measurement purposes, a 6.04% weighted average annual rate of increase in the per capita cost of covered health care benefits was assumed for 2018. The rate was assumed to decrease gradually each year to a rate of 4.50% for 2038, and remain at that level thereafter. Assumed health care cost trend rates have an effect on the amounts reported for the health care plans. A 1% increase in the assumed health care cost trend rates would increase the service and interest cost components of the net periodic benefit cost by $0.2 million and the health care component of the accumulated postretirement benefit obligation by $1.9 million. A 1% decrease in the assumed health care cost trend rate would decrease the service and interest cost components of the net periodic benefit cost by $0.1 million and the health care component of the accumulated postretirement benefit obligation by $1.6 million.

Plan Assets

The Company’s pension plan weighted average asset allocations at December 31, 2018 and 2017, by asset category, were as follows:



	U.S. Plans				Non-U.S. Plans
	2018		2017		2018		2017
Equity securities	9	%	47	%	13	%	14	%
Fixed income securities	90	%	51	%	31	%	30	%
Cash/Commingled Funds/Other (1)	1	%	2	%	56	%	56	%
Total	100	%	100	%	100	%	100	%

The basis used to measure the defined benefit plans’ assets at fair value at December 31, 2018 and 2017 is summarized as follows:



	Basis of Fair Value Measurement
	Outstanding Balances		Level 1		Level 2		Level 3
As of December 31, 2018	(In thousands)
Equity
U.S. Large Cap	$	3,759	$	3,759	$	—	$	—
U.S. Small / Mid Cap	770		—		770		—
International	7,532		4,445		3,087		—
Fixed Income
U.S. Intermediate	581		—		581		—
U.S. Long Term	75,096		—		75,096		—
U.S. High Yield	1,098		—		1,098		—
International	8,604		244		8,360		—
Other Commingled Funds (1)	15,555		—		—		15,555
Cash and Equivalents	1,944		1,074		870		—
Other	2,173		—		2,173		—
	$	117,112	$	9,522	$	92,035	$	15,555


(1)	Other commingled funds represent pooled institutional investments in non-U.S. plans.



	Basis of Fair Value Measurement
	Outstanding Balances		Level 1		Level 2		Level 3
As of December 31, 2017	(In thousands)
Equity
U.S. Large Cap	$	16,402	$	16,402	$	—	$	—
U.S. Small / Mid Cap	7,966		7,051		915		—
International	16,844		13,205		3,639		—
Fixed Income
U.S. Intermediate	13,568		13,483		85		—
U.S. Short Duration	13,362		13,362		—		—
U.S. High Yield	9,529		8,462		1,067		—
International	13,311		3,767		9,544		—
Other Commingled Funds (1)	16,059		—		—		16,059
Cash and Equivalents	2,613		1,346		1,267		—
Other	2,851		—		2,851		—
	$	112,505	$	77,078	$	19,368	$	16,059


(1)	Other commingled funds represent pooled institutional investments in non-U.S. plans.

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

Investment Policies and Strategies

The investment objective of the U.S. plan, consistent with prudent standards for preservation of capital and maintenance of liquidity, is to earn the highest possible total rate of return consistent with the plan’s tolerance for risk. The general asset allocation guidelines for plan assets are that “equities” will constitute 10% and “fixed income” obligations, including cash, will constitute from 90% of the market value of total fund assets. The investment objective of the UK plan, consistent with prudent standards for preservation of capital and maintenance of liquidity, is to earn a target return of UK Gilts plus 2% per year. The general asset allocation guidelines for plan assets are that “equities” will constitute from 40% to 50% of the market value of total fund assets with a target of 40%, and “fixed income” obligations, including cash, will constitute from 50% to 60% with a target of 60%. The term “equities” includes common stock, while the term “fixed income” includes obligations with contractual payments and a specific maturity date. The Company, through the use of a professional independent advisor, will monitor the asset allocation daily and maintain an asset allocation that closely replicates the designated targets. Diversification of assets is employed to ensure that adverse performance of one security or security class does not have an undue detrimental impact on the portfolio as a whole. Diversification is interpreted to include diversification by type, characteristic and number of investments as well as by investment style of designated investment fund managers. No restrictions are placed on the selection of individual investments by the investment fund managers. The total fund performance and the performance of the investment fund managers is reviewed on a regular basis using an appointed professional independent advisor. As of December 31, 2018, there were no shares of the Company’s stock held in plan assets.

Cash Flows

The Company expects to contribute approximately $0.6 million to its defined benefit plans and $1.1 million to its other postretirement benefit plans in 2019. The Company also expects to contribute approximately $12.0 million to its defined contribution plan and $9.7 million to its 401(k) savings plan in 2019.

Estimated Future Benefit Payments

The future estimated benefit payments for the next five years and the five years thereafter are as follows: 2019 — $11.4 million; 2020 — $11.5 million; 2021 — $11.3 million; 2022 — $11.0 million; 2023 — $10.9 million; 2024 to 2028 — $54.3 million.

Quarterly Results of Operations (Unaudited)

The unaudited quarterly results of operations for the years ended December 31, 2018 and 2017 are as follows:



	2018 Quarters (1)								2017 Quarters (1)
	First		Second		Third		Fourth		First		Second		Third		Fourth
	(In thousands, except per share amounts)
Net sales	$	612,324	$	634,360	$	622,888	$	614,094	$	553,552	$	573,366	$	574,490	$	585,904
Gross profit	276,652		287,367		280,233		273,643		250,941		256,925		257,930		260,882
Operating income	136,683		147,831		145,133		139,441		115,671		125,133		126,504		135,248
Net income	98,958		107,126		106,352		98,137		75,899		83,844		83,768		93,746
Basic EPS	$	1.29	$	1.40	$	1.39	$	1.29	$	0.99	$	1.10	$	1.09	$	1.23
Diluted EPS	$	1.27	$	1.38	$	1.37	$	1.27	$	0.99	$	1.08	$	1.08	$	1.21
Basic weighted average shares outstanding	76,419		76,539		76,562		76,128		76,115		76,220		76,309		76,283
Diluted weighted average shares outstanding	77,739		77,704		77,709		77,100		76,894		77,320		77,523		77,597

(1) Quarterly data includes acquisition of thinXXS (December 2017) and Finger Lakes Instrumentation (July 2018) from the date of acquisition. Quarterly data also includes the gain on the sale of Faure Herman (October 2017) and the results of the divested business through the date of disposition. See Note 2 for further discussion.

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