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, 2019.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, 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, 2019, 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, 2019, 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, 2019, of the Company and our report dated February 21, 2020, 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 21, 2020

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, 2019 and 2018, 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, 2019, 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, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, 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, 2019, 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 21, 2020, 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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue - Disaggregation of Revenue - Refer to Note 4 to the Financial Statements

The Company is a highly diversified business with a wide range of products and services that are offered in various markets throughout the world. The Company’s business activities are carried out by numerous individual business units, which offer a unique set of products and include niche markets within specific geographic areas.

We identified revenue as a critical audit matter given the disaggregated nature of the Company’s operations and business units generating revenue. This required extensive audit effort due to the volume of the underlying transactions and distinctiveness of each individual business unit. High levels of auditor judgment were necessary to determine the nature, timing, and extent of audit procedures and the level of disaggregation within the Company at which to perform such procedures, especially given limited market data for certain products or geographic areas.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s revenue transactions included the following, among others:


•	We tested internal controls within the relevant revenue business processes, including controls over revenue recognition and controls over the review of significant revenue transactions and operating results.


•	For a sample of revenue transactions, we performed detail transaction testing by agreeing the amounts recognized to

source documents and determined that revenue was recorded appropriately.


•	For the revenue populations subject to detail testing, we tested the completeness of revenue by making selections from reciprocal populations (e.g., shipping logs) and determined whether the transaction was recorded as a sale in the general ledger.


•	For revenue transactions not subject to detail transaction testing, we aggregated the revenue transactions at the reporting unit level and performed substantive analytical procedures. We developed independent expectations of revenue based on data derived from published industry indices, market and customer trends, and the results of our detail revenue testing for similar business units and markets and compared these expectations to the revenue recorded by management.

•

For revenue transactions not subject to detail transaction testing, we aggregated the revenue transactions at the reporting unit level and performed substantive analytical procedures. We developed independent expectations of revenue based on data derived from published industry indices, market and customer trends, and the results of our detail revenue testing for similar business units and markets and compared these expectations to the revenue recorded by management.



/s/ DELOITTE & TOUCHE LLP


Chicago, Illinois
February 21, 2020

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

IDEX CORPORATION

CONSOLIDATED BALANCE SHEETS



	As of December 31,
	2019			2018
	(In thousands except share and per share amounts)
ASSETS
Current assets
Cash and cash equivalents	$	632,581		$	466,407
Receivables - net	298,186			312,192
Inventories	293,467			279,995
Other current assets	37,211			33,938
Total current assets	1,261,445			1,092,532
Property, plant and equipment - net	280,316			281,220
Goodwill	1,779,745			1,697,955
Intangible assets - net	388,031			383,327
Other noncurrent assets	104,375			18,823
Total assets	$	3,813,912		$	3,473,857
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Trade accounts payable	$	138,463		$	143,196
Accrued expenses	180,290			187,536
Short-term borrowings	388			483
Dividends payable	38,736			33,446
Total current liabilities	357,877			364,661
Long-term borrowings	848,864			848,335
Deferred income taxes	146,574			128,007
Other noncurrent liabilities	197,368			138,214
Total liabilities	1,550,683			1,479,217
Commitments and contingencies (Note 10)
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: 89,948,374 shares at December 31, 2019 and 90,112,028 shares at December 31, 2018	899			901
Additional paid-in capital	760,453			738,339
Retained earnings	2,615,131			2,342,079
Treasury stock at cost: 13,860,340 shares at December 31, 2019 and 14,159,251 shares at December 31, 2018	(985,909		)	(957,454		)
Accumulated other comprehensive loss	(127,345		)	(129,225		)
Total shareholders’ equity	2,263,229			1,994,640
Total liabilities and shareholders’ equity	$	3,813,912		$	3,473,857

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS



	For the Year Ended December 31,
	2019		2018			2017
	(In thousands except per share amounts)
Net sales	$	2,494,573	$	2,483,666		$	2,287,312
Cost of sales	1,369,539		1,365,771			1,260,634
Gross profit	1,125,034		1,117,895			1,026,678
Selling, general and administrative expenses	524,987		536,724			524,940
Loss (gain) on sale of businesses - net	—		—			(9,273		)
Restructuring expenses	21,044		12,083			8,455
Operating income	579,003		569,088			502,556
Other (income) expense - net	1,759		(3,985		)	2,394
Interest expense	44,341		44,134			44,889
Income before income taxes	532,903		528,939			455,273
Provision for income taxes	107,382		118,366			118,016
Net income	$	425,521	$	410,573		$	337,257
Earnings per common share:
Basic earnings per common share	$	5.62	$	5.36		$	4.41
Diluted earnings per common share	$	5.56	$	5.29		$	4.36
Share data:
Basic weighted average common shares outstanding	75,594		76,412			76,232
Diluted weighted average common shares outstanding	76,454		77,563			77,333

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	For the Year Ended December 31,
	2019			2018			2017
	(In thousands)
Net income	$	425,521		$	410,573		$	337,257
Other comprehensive income (loss):
Reclassification adjustments for derivatives, net of tax	4,882			5,006			4,210
Pension and other postretirement adjustments, net of tax	(3,069		)	9,825			(1,302		)
Foreign currency adjustments:
Cumulative translation adjustment	67			(48,114		)	110,421
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
Other comprehensive income (loss)	1,880			(33,283		)	112,146
Comprehensive income	$	427,401		$	377,290		$	449,403

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, 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
Net income	—		425,521			—			—			—			—			425,521
Adjustment for adoption of ASU 2016-02	—		28			—			—			—			—			28
Cumulative translation adjustment	—		—			67			—			—			—			67
Net change in retirement obligations (net of tax of $1,553)	—		—			—			(3,069		)	—			—			(3,069		)
Net change on derivatives designated as cash flow hedges (net of tax of $1,445)	—		—			—			—			4,882			—			4,882
Issuance of 696,133 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $5,493)	—		—			—			—			—			38,809			38,809
Repurchase of 388,953 shares of common stock	—		—			—			—			—			(54,668		)	(54,668		)
Share-based compensation	22,112		—			—			—			—			—			22,112
Shares surrendered for tax withholding	—		—			—			—			—			(12,596		)	(12,596		)
Cash dividends declared - $2.00 per common share outstanding	—		(152,497		)	—			—			—			—			(152,497		)
Balance, December 31, 2019	$	761,352	$	2,615,131		$	(94,353	)	$	(25,809	)	$	(7,183	)	$	(985,909	)	$	2,263,229

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



	For the Year Ended December 31,
	2019			2018			2017
	(In thousands)
Cash flows from operating activities
Net income	$	425,521		$	410,573		$	337,257
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (gain) on sale of fixed assets - net	156			946			315
Loss (gain) on sale of businesses - net	—			—			(9,273		)
Asset impairments	10,155			—			—
Depreciation and amortization	39,543			39,049			38,314
Amortization of intangible assets	37,333			38,495			45,902
Amortization of debt issuance expenses	1,355			1,332			1,320
Share-based compensation expense	27,669			24,754			24,405
Deferred income taxes	6,625			(4,345		)	(33,742		)
Non-cash interest expense associated with forward starting swaps	6,327			6,475			6,655
Changes in (net of the effect from acquisitions and divestitures):
Receivables	22,338			(23,419		)	(15,803		)
Inventories	(3,322		)	(23,031		)	760
Other current assets	(2,361		)	25,162			(20,031		)
Trade accounts payable	(9,115		)	(1,220		)	12,556
Accrued expenses	(37,086		)	4,148			19,710
Other - net	2,924			(19,574		)	24,408
Net cash flows provided by operating activities	528,062			479,345			432,753
Cash flows from investing activities
Purchases of property, plant and equipment	(50,912		)	(56,089		)	(43,858		)
Purchase of intellectual property	—			(4,000		)	—
Acquisition of businesses, net of cash acquired	(87,180		)	(20,205		)	(38,161		)
Proceeds from disposal of fixed assets	962			363			6,011
Proceeds from sale of businesses, net of cash sold	—			—			21,795
Other - net	115			(1,500		)	(533		)
Net cash flows used in investing activities	(137,015		)	(81,431		)	(54,746		)
Cash flows from financing activities
Borrowings under revolving credit facilities	—			—			33,000
Payments under revolving credit facilities	—			(11,284		)	(200,618		)
Payments under other long-term borrowings	(50,057		)	—			—
Dividends paid	(147,208		)	(127,478		)	(111,172		)
Proceeds from stock option exercises	38,809			27,639			22,935
Repurchases of common stock	(54,668		)	(173,926		)	(29,074		)
Shares surrendered for tax withholding	(12,596		)	(11,555		)	(6,228		)
Settlement of foreign exchange contracts	—			6,593			13,736
Other - net	(1,865		)	—			—
Net cash flows used in financing activities	(227,585		)	(290,011		)	(277,421		)
Effect of exchange rate changes on cash and cash equivalents	2,712			(17,446		)	39,400
Net increase in cash	166,174			90,457			139,986
Cash and cash equivalents at beginning of year	466,407			375,950			235,964
Cash and cash equivalents at end of year	$	632,581		$	466,407		$	375,950
Supplemental cash flow information
Cash paid for:
Interest	$	36,683		$	36,327		$	36,818
Income taxes - net	109,032			90,733			104,852
Significant non-cash activities:
Contingent consideration for acquisition	—			3,375			—
Debt acquired with acquisition of business	51,130			—			—
Capital expenditures for construction of new leased facility	—			11,616			—

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. 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 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 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 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 and product returns 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.

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 $15.7 million, $17.0 million and $15.8 million for 2019, 2018 and 2017, 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 amount 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 the second quarter of 2019, the Company began to evaluate strategic alternatives for one of its businesses in the Health & Science Technologies (“HST”) segment. Prior to making a final decision on the options that were presented for this business, the business was informed in the third quarter of 2019 of the loss of its largest customer. As a result, the Company accelerated its restructuring activities for this business and a decision was made to wind down the business over time. This event required an interim impairment test be performed on the long-lived tangible assets of the business, which resulted in an impairment charge of $9.7 million, consisting of $6.1 million related to a customer relationships intangible asset, $1.0 million related to an unpatented technology intangible asset, $2.0 million related to property, plant and equipment and $0.6 million related to a building right-of-use asset. In the fourth quarter of 2019, the Company completed the consolidation of one of its facilities in the HST segment into the Optics Center of Excellence in Rochester, New York, which also resulted in an impairment charge of $0.4 million related to a building right-of-use asset. These charges were recorded as Restructuring expenses in the Consolidated Statements of Operations. 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. See Note 14 for further discussion on restructuring activities.

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 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 outstanding (diluted) 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:



	2019	2018	2017
	(In thousands)
Basic weighted average common shares outstanding	75,594	76,412	76,232
Dilutive effect of stock options, restricted stock and performance share units	860	1,151	1,101
Diluted weighted average common shares outstanding	76,454	77,563	77,333

Options to purchase approximately 0.3 million, 0.3 million and zero shares of common stock in 2019, 2018 and 2017, 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 15 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	8 to 20 years
Unpatented technology and other	3 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 $92.4 million, $84.9 million and $76.4 million in 2019, 2018 and 2017, respectively. Research and development expenses, which include costs associated with developing new products and major improvements to existing products, were $56.4 million, $48.0 million and $42.4 million in 2019, 2018 and 2017, respectively.

Foreign Currency Translation and Transaction

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 monthly exchange rates for the year. Translation adjustments 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, 2019, 2018 and 2017 were $3.3 million, $(2.4) million and $20.5 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 U.S., 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 12 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 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). This standard introduced a new lessee model that requires most leases to be recorded on the balance sheet and eliminates the required use of bright line tests for determining lease classification from U.S. GAAP. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 2018-11, Leases (Topic 842): Targeted Improvements, which clarified ASU 2016-02 and had the same effective date as the original standard. ASU 2018-11 included an option to use the effective date of ASU 2016-02 as the date of initial application of transition as well as an option not to restate comparative periods in transition. In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842): Codification Improvements, which also clarified ASU 2016-02 and is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years.

The Company adopted this standard on January 1, 2019 using the optional transition method provided by the FASB in ASU 2018-11. As we did not restate comparative periods, the adoption had no impact on our previously reported results. We elected to use the practical expedient that allowed us not to reassess: (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases and the practical expedient that allows us to treat the lease and non-lease components as a single lease component for all asset classes. We also elected to account for short-term leases (i.e. leases with a term of one year or less) in accordance with ASC 842-20-25-2 (i.e. expensed over the term and not recorded on the balance sheet). The adoption of this standard impacted our consolidated balance sheet due to the recognition of right of use assets and lease liabilities. Upon adoption, we recognized right of use assets and lease liabilities of approximately $68 million that reflected the present value of future lease payments. The adoption of this standard did not have a material impact on our consolidated results of operations or cash flows. See Note 9 for further information.

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.

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit losses (Topic 326): Measurement of Credit Losses on Financial Instruments and in November 2018 issued a subsequent amendment, ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. ASU 2018-19 will affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that represent the contractual right to receive cash. ASU 2016-13 and ASU 2018-19 should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. ASU 2016-13 is effective for annual periods beginning after December 15, 2019, and interim periods therein. The adoption of this standard will not have a material impact on our consolidated financial statements.

2. 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.

2019 Acquisition

On July 18, 2019, the Company acquired the stock of Velcora Holding AB (“Velcora”) and its operating subsidiaries, Roplan and Steridose. Roplan is a global manufacturer of custom mechanical and shaft seals for a variety of end markets including food and beverage, marine, chemical, wastewater and water treatment. Steridose develops engineered hygienic mixers and valves for the global biopharmaceutical industry. Both companies are headquartered in Sweden, with operations in China, the United Kingdom and the United States and operate in our Health & Science Technologies segment. Velcora was acquired for cash consideration of $87.2 million and the assumption of $51.1 million of debt. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $85.9 million and $48.2 million, respectively. The goodwill is not deductible for tax purposes.

The Company made an initial allocation of the purchase price for the Velcora 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, including intangible asset appraisals, and continues to learn more about the newly acquired businesses, 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 appropriate adjustments to the purchase price allocation prior to the completion of the measurement period, as required.

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



(In thousands)	Total
Current assets, net of cash acquired	$	20,457
Property, plant and equipment	3,235
Goodwill	85,939
Intangible assets	48,183
Other noncurrent assets	788
Total assets acquired	158,602
Current liabilities	(7,607		)
Long-term borrowings	(51,130		)
Deferred income taxes	(12,231		)
Other noncurrent liabilities	(454		)
Net assets acquired	$	87,180

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.

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



(In thousands, except weighted average life)	Total		Weighted Average Life
Trade names	$	7,089	15
Customer relationships	34,677		12
Unpatented technology	6,417		9
Total acquired intangible assets	$	48,183

On September 3, 2019, the Company settled the debt assumed in the Velcora acquisition and incurred a loss on early retirement of $0.7 million which was recorded in Other (income) expense - net in the Consolidated Statements of Operations for the year ended December 31, 2019.

The Company incurred $1.7 million of acquisition-related transaction costs in 2019. 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 a $3.3 million fair value inventory step-up charge associated with the completed 2019 acquisition in the year ended December 31, 2019. This charge was recorded in Cost of sales.

2018 Acquisition

On July 23, 2018, the Company acquired Finger Lakes Instrumentation (“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 & Science 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.

In the third quarter of 2019, the Company finalized its allocation of the purchase price for the FLI acquisition 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.

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.

In the fourth quarter of 2018, the Company finalized its allocation of the purchase price for the thinXXS acquisition 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.

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. There were no divestitures that took place during the years ended December 31, 2019 and 2018. The Company concluded that the divestiture that took place during the year ended December 31, 2017 did not meet 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.

3. Balance Sheet Components



	December 31,
	2019		2018
	(In thousands)
RECEIVABLES
Customers	$	298,118	$	313,719
Other	6,415		5,182
Total	304,533		318,901
Less allowance for doubtful accounts	6,347		6,709
Total receivables - net	$	298,186	$	312,192
INVENTORIES
Raw materials and components parts	$	182,382	$	178,805
Work in process	28,761		37,495
Finished goods	82,324		63,695
Total	$	293,467	$	279,995
PROPERTY, PLANT AND EQUIPMENT



Land and improvements	$	32,240	$	32,100
Buildings and improvements	187,301		189,744
Machinery, equipment and other	397,498		372,804
Office and transportation equipment	95,759		96,350
Construction in progress	24,546		24,328
Total	737,344		715,326
Less accumulated depreciation and amortization	457,028		434,106
Total property, plant and equipment - net	$	280,316	$	281,220
ACCRUED EXPENSES
Payroll and related items	$	77,556	$	78,944
Management incentive compensation	14,408		25,321
Income taxes payable	9,905		23,844
Insurance	8,240		10,422
Warranty	5,581		5,303
Deferred revenue	17,633		8,055
Lease liability	15,235		—
Restructuring	6,110		6,170
Liability for uncertain tax positions	890		980
Accrued interest	1,735		1,759
Contingent consideration for acquisition	3,375		—
Other	19,622		26,738
Total accrued expenses	$	180,290	$	187,536
OTHER NONCURRENT LIABILITIES
Pension and retiree medical obligations	$	87,478	$	80,667
Transition tax payable	11,292		17,127
Liability for uncertain tax positions	3,008		3,183
Deferred revenue	2,129		3,027
Liability for construction of new leased facility	—		11,616
Lease liability	69,928		—
Contingent consideration for acquisition	—		3,375
Other	23,533		19,219
Total other noncurrent liabilities	$	197,368	$	138,214

The valuation and qualifying account activity for the years ended December 31, 2019, 2018 and 2017 is as follows:



	2019			2018			2017
	(In thousands)
ALLOWANCE FOR DOUBTFUL ACCOUNTS (1)
Beginning balance January 1	$	6,709		$	7,764		$	8,078
Charged to costs and expenses, net of recoveries	1,181			290			720
Utilization	(1,443		)	(1,396		)	(1,418		)
Currency translation and other	(100		)	51			384
Ending balance December 31	$	6,347		$	6,709		$	7,764

(1) Includes provision for doubtful accounts.

4. 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.

Revenue is recognized when control of 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. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of the consideration is probable. We determine the appropriate revenue recognition for our contracts with customers by analyzing the type, terms and conditions of each contract or arrangement with a customer.

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 geographical region based on location of the customer. The following tables present our revenue disaggregated by reporting unit and geographical region.

Revenue by reporting unit for the years ended December 31, 2019 and 2018 was as follows:



	For the Year Ended December 31,
	2019			2018
Energy	$	164,825		$	163,996
Valves	118,333			113,136
Water	250,589			251,020
Pumps	331,098			324,222
Agriculture	92,183			99,178
Intersegment elimination	(505		)	(277		)
Fluid & Metering Technologies	956,523			951,275
Scientific Fluidics & Optics	434,623			417,859
Sealing Solutions	200,495			200,316
Gast	133,471			126,787
Micropump	32,216			36,827
Material Processing Technologies	113,641			114,630
Intersegment elimination	(1,823		)	(449		)
Health & Science Technologies	912,623			895,970
Fire & Safety	403,949			396,926
Band-It	106,624			105,785
Dispensing	116,197			134,317
Intersegment elimination	(1,343		)	(607		)
Fire & Safety/Diversified Products	625,427			636,421
Total net sales	$	2,494,573		$	2,483,666

Revenue by geographical region for the years ended December 31, 2019 and 2018 was as follows:



	For the Year Ended December 31, 2019
	FMT			HST			FSDP			IDEX
U.S.	$	541,994		$	411,680		$	303,579		$	1,257,253
North America, excluding U.S.	58,256			21,735			26,328			106,319
Europe	170,698			263,523			159,184			593,405
Asia	125,031			201,765			103,379			430,175
Other (1)	61,049			15,743			34,300			111,092
Intersegment elimination	(505		)	(1,823		)	(1,343		)	(3,671		)
Total net sales	$	956,523		$	912,623		$	625,427		$	2,494,573



	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 can result in customer receivables, advance payments or billings in excess of revenue recognized. Customer receivables include both amounts billed and currently due from customers as well as unbilled amounts (contract assets) and are included in Receivables - net on our Consolidated Balance Sheets. Amounts are billed in accordance with contractual terms or as work progresses. 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 invoice 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 amount 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 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, 2019		December 31, 2018
Billed receivables	$	286,196	$	299,227
Unbilled receivables	11,922		14,492
Total customer receivables	$	298,118	$	313,719

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 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. We generally receive advance payments from customers related to maintenance services which we recognize ratably over the service term. Billings in excess of revenue recognized represent contract liabilities and 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. Contract liabilities are derecognized when revenue is recognized and the performance obligation is satisfied.

The composition of Deferred revenue was as follows:



	December 31, 2019		December 31, 2018
Deferred revenue - current	$	17,633	$	8,055
Deferred revenue - noncurrent	2,129		3,027
Total deferred revenue	$	19,762	$	11,082

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 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, certain promises may not be separately identifiable from other promises in the contract and, therefore, not distinct. As a result, 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% of total revenues in both the years ended December 31, 2019 and 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% of total revenues in both the years ended December 31, 2019 and 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.

5. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for 2019 and 2018, by reportable business segment, were as follows:



	Fluid & Metering Technologies			Health & Science Technologies			Fire & Safety/ Diversified Products			Total
	(In thousands)
Goodwill	$	606,785		$	889,852		$	408,152		$	1,904,789
Accumulated goodwill impairment losses	(20,721		)	(149,820		)	(30,090		)	(200,631		)
Balance at January 1, 2018	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
Acquisition adjustments	—			1,317			—			1,317
Balance at December 31, 2018	581,041			745,357			371,557			1,697,955
Foreign currency translation	(2,116		)	476			(2,509		)	(4,149		)
Acquisitions	—			85,939			—			85,939
Balance at December 31, 2019	$	578,925		$	831,772		$	369,048		$	1,779,745

ASC 350 requires that goodwill be tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. In 2019 and 2018, there were no events or circumstances that would have required an interim impairment test. 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, 2019, the Company’s annual impairment test 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 2020 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, 2019 and 2018:



	At December 31, 2019								At December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net		Weighted Average Life	Gross Carrying Amount		Accumulated Amortization			Net
			(In thousands)								(In thousands)
Amortized intangible assets:
Patents	$	6,678	$	(5,276	)	$	1,402	12	$	6,468	$	(4,693	)	$	1,775
Trade names	123,062		(64,938		)	58,124		16	115,899		(57,227		)	58,672
Customer relationships	275,575		(96,252		)	179,323		14	256,202		(85,652		)	170,550
Unpatented technology	101,721		(43,561		)	58,160		12	96,922		(35,685		)	61,237
Other	700		(578		)	122		10	700		(507		)	193
Total amortized intangible assets	507,736		(210,605		)	297,131			476,191		(183,764		)	292,427
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	$	598,636	$	(210,605	)	$	388,031		$	567,091	$	(183,764	)	$	383,327

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.

Amortization of intangible assets was $37.3 million, $38.5 million and $45.9 million in 2019, 2018 and 2017, respectively. Based on the intangible asset balances as of December 31, 2019, amortization expense is expected to approximate $38.4 million in 2020, $37.1 million in 2021, $35.2 million in 2022, $32.4 million in 2023 and $30.5 million in 2024.

6. Borrowings

Borrowings at December 31, 2019 and 2018 consisted of the following:



	2019		2018
	(In thousands)
Revolving Facility	$	—	$	—
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	622		1,078
Total borrowings	850,622		851,078
Less current portion	388		483
Less deferred debt issuance costs	983		1,593
Less unaccreted debt discount	387		667
Long-term borrowings	$	848,864	$	848,335

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

The 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 May 31, 2019, 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 prior five-year $700 million credit agreement, dated as of June 23, 2015, which was due to expire in June 2020.

Terms and fees of the 2019 Credit Agreement are essentially the same as the 2015 credit agreement except for certain fees and interest rate pricing that are more favorable to the Company.

The Credit Agreement consists of a revolving credit facility (the “Revolving Facility”) in an aggregate principal amount of $800 million, with a final maturity date of May 30, 2024. The maturity date may be extended under certain conditions for an additional one-year term. Up to $75 million of the Revolving Facility under the Credit Agreement 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 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 $400 million. The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain foreign subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement.

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 better of the Company’s senior, unsecured, long-term debt rating or the Company’s applicable leverage ratio. Interest is payable (a) in the case of base rate loans, quarterly, and (b) in the case of LIBOR rate loans, on the last day of the applicable interest period selected, or every three months from the effective date of such interest period for interest periods 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, (b) the applicable corporate credit ratings of the Company or (c) the applicable leverage ratio of the Company. Voluntary prepayments of any loans and voluntary reductions of the unutilized portion of the commitments under the Credit Agreement are permissible without penalty, subject to break funding payments and minimum notice and minimum reduction amount requirements.

The Credit Agreement contains affirmative and negative covenants usual and customary for such senior unsecured credit agreements, including an interest coverage ratio test and a leverage ratio test, in each case tested quarterly and, in the case of the leverage ratio, with an option to increase the ratio for 12 months in connection with certain acquisitions. The negative covenants include restrictions on the Company on granting liens, entering into transactions resulting in fundamental changes (such as mergers or sales of all or substantially all of the assets of the Company), making certain subsidiary dividends or distributions, engaging in materially different lines of businesses and allowing subsidiaries to incur certain additional debt.

The Credit Agreement also contains customary events of default (subject to grace periods, as appropriate).

At December 31, 2019, there was no balance outstanding under the Revolving Facility and $8.5 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Facility at December 31, 2019 of approximately $791.5 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.

As of December 31, 2019, the $300.0 million 4.5% Senior Notes are due in December 2020 but have not been classified as short-term borrowings on the Consolidated Balance Sheets as the Company has the ability and intent to either refinance or repay the Notes using the available borrowing capacity of the Revolving Facility. As a result, the 4.5% Senior Notes remain classified as long-term borrowings in the Consolidated Balance Sheets as of December 31, 2019.

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. In the case of the leverage ratio, there is an option to increase the ratio to 4.00 for 12 months in connection with certain acquisitions. At December 31, 2019, 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, 2019 have scheduled maturities as follows:



(In thousands)
2020	$	300,388
2021	350,234
2022	—
2023	100,000
2024	—
Thereafter	100,000
Total borrowings	$	850,622

7. 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 as well as interest rate exchange agreements designed to reduce the impact of interest rate changes on future interest expense that effectively convert a portion of floating-rate debt to fixed-rate debt.

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 16 for the amount of loss reclassified into income for interest rate contracts for the years ended December 31, 2019, 2018 and 2017. As of December 31, 2019, 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, 2019, 2018 and 2017 is $6.3 million, $6.5 million and $6.7 million, respectively.

Approximately $6.0 million of the pre-tax amount included in accumulated other comprehensive loss in shareholders’ equity at December 31, 2019 will be recognized in net income over the next 12 months as the underlying hedged transactions are realized.

At March 31, 2018, 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 were 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 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. Along with the repayment of the intercompany loans, the Company was required to make a capital contribution to one of its subsidiaries, which resulted in a $2.2 million stamp duty in Switzerland which was recorded within Selling, general and administrative expenses in the Consolidated Statements of Operations.

As a result of the foreign currency exchange contracts being settled in April 2018, the Company received $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.

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.

8. 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, 2019 and 2018:



	Basis of Fair Value Measurements
	Balance at December 31, 2019		Level 1		Level 2		Level 3
	(In thousands)
Available for sale securities	$	10,462	$	10,462	$	—	$	—
Contingent consideration	3,375		—		—		3,375



	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

There were no transfers of assets or liabilities between Level 1 and Level 2 in 2019 or 2018.

The Company utilized a Monte Carlo Simulation to determine the fair value of the contingent consideration associated with the acquisition of FLI as of the acquisition date. 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, 2019, the $3.4 million of contingent consideration is included in Accrued Expenses on the Consolidated Balance Sheets.

The carrying values 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, 2019, 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 $876.0 million compared to the carrying value of $850.2 million. At December 31, 2018, 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 $851.5 million compared to the carrying value of $850.4 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.

9. Leases

The Company leases certain office facilities, warehouses, manufacturing plants, equipment (which includes both office and plant equipment) and vehicles under operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Certain leases include one or more options to renew. The exercise of lease renewal options is at the Company’s sole discretion. There are currently no renewal periods included in any of the leases’ respective lease terms as they are not reasonably certain of being exercised. The Company does not have any material purchase options.

Certain of our lease agreements have rental payments that are adjusted periodically for inflation or that are based on usage. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Supplemental balance sheet information related to leases as of December 31, 2019 was as follows:



	Balance Sheet Caption	December 31, 2019
Operating leases:
Building right-of-use assets - net	Other noncurrent assets	$	75,381
Equipment right-of-use assets - net	Other noncurrent assets	6,993
Total right-of-use assets - net		$	82,374
Operating leases:
Current lease liabilities	Accrued expenses	$	15,235
Noncurrent lease liabilities	Other noncurrent liabilities	69,928
Total lease liabilities		$	85,163

third quarter of 2019 of the loss of its largest customer. As a result, the Company accelerated its restructuring activities for this business and a decision was made to wind down the business over time. This event required an interim impairment test be performed on its long-lived assets, which resulted in an impairment charge of $0.6 million related to its building right-of-use asset. In the fourth quarter of 2019, the Company completed the consolidation of one of its facilities in the HST segment into the Optics Center of Excellence in Rochester, New York, which also resulted in an impairment charge of $0.4 million related to its building right-of-use asset. These charges were recorded as Restructuring expenses in the Consolidated Statements of Operations. See Note 14 for further discussion.

As part of the adoption of the new lease standard, the Company derecognized its liability for the construction of a new leased facility that was recorded in Other noncurrent liabilities on the Consolidated Balance Sheets and recorded it as a right of use asset in Other noncurrent assets on the Consolidated Balance Sheets with a corresponding lease liability in Accrued expenses and Other noncurrent liabilities on the Consolidated Balance Sheets.

The components of lease cost for the year ended December 31, 2019 were as follows:



	December 31, 2019
Operating lease cost (1)	$	23,080
Variable lease cost	2,265
Total lease expense	$	25,345

(1) Includes short-term leases, which are immaterial.

Rental expense totaled $21.8 million and $19.0 million in 2018 and 2017, respectively.

Supplemental cash flow information related to leases for the year ended December 31, 2019 was as follows:



	December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	22,888
Right-of-use assets obtained in exchange for new operating lease liabilities	25,878

Other supplemental information related to leases as of December 31, 2019 was as follows:



Lease Term and Discount Rate	December 31, 2019
Weighted-average remaining lease term (years):
Operating leases - building and equipment	9.61
Operating leases - vehicles	1.92
Weighted-average discount rate:
Operating leases - building and equipment	4.08	%
Operating leases - vehicles	2.99	%

The Company uses its incremental borrowing rate to determine the present value of the lease payments. The Company used the incremental borrowing rate based on the information available at the transition date to determine the present value of the lease payments as of January 1, 2019.

Total lease liabilities at December 31, 2019 have scheduled maturities as follows:



Maturity of Lease Liabilities	Operating Leases (1)
2020	$	18,449
2021	15,070
2022	10,647
2023	8,894
2024	7,037
Thereafter	44,284
Total lease payments	104,381
Less: Imputed interest	(19,218		)
Present value of lease liabilities	$	85,163

(1) Excludes $6.4 million of legally binding minimum lease payments for leases signed but not yet commenced.

Total lease liabilities at December 31, 2018 had scheduled maturities as follows:



Maturity of Lease Liabilities	Operating Leases
2019	$	17,509
2020	13,162
2021	10,516
2022	7,979
2023	6,535
Thereafter	29,658
Total lease payments	$	85,359

10. Commitments and Contingencies

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:



	2019			2018			2017
	(In thousands)
Beginning balance at January 1	$	5,303		$	6,281		$	5,628
Provision for warranties	3,438			2,334			2,895
Claim settlements	(3,115		)	(2,981		)	(2,317		)
Other adjustments, including acquisitions, divestitures and currency translation	(45		)	(331		)	75
Ending balance at December 31	$	5,581		$	5,303		$	6,281

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.

11. Common and Preferred Stock

On December 1, 2015, the Company’s Board of Directors approved an increase of $300.0 million in the authorized level of repurchases of common stock. This followed the prior Board of Directors approved repurchase authorization of $400.0 million

that was announced by the Company on November 6, 2014. These authorizations have no expiration date. Repurchases under the program will be funded with future cash flow generation or borrowings available under the Revolving Facility. During 2019, the Company repurchased a total of 389 thousand shares at a cost of $54.7 million, compared to 1.3 million shares repurchased at a cost of $173.9 million in 2018. As of December 31, 2019, the amount of share repurchase authorization remaining was $322.3 million.

At December 31, 2019 and 2018, 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, 2019 and 2018.

12. Income Taxes

Pretax income for 2019, 2018 and 2017 was taxed in the following jurisdictions:



	2019		2018		2017
	(In thousands)
U.S.	$	377,166	$	357,585	$	302,515
Foreign	155,737		171,354		152,758
Total	$	532,903	$	528,939	$	455,273

The provision (benefit) for income taxes for 2019, 2018 and 2017 was as follows:



	2019			2018			2017
	(In thousands)
Current
U.S.	$	49,819		$	67,793		$	91,641
State and local	9,074			8,056			9,342
Foreign	41,864			46,862			50,775
Total current	100,757			122,711			151,758
Deferred
U.S.	10,158			(5,471		)	(36,390		)
State and local	(115		)	(17		)	3,305
Foreign	(3,418		)	1,143			(657		)
Total deferred	6,625			(4,345		)	(33,742		)
Total provision for income taxes	$	107,382		$	118,366		$	118,016

Deferred tax assets (liabilities) at December 31, 2019 and 2018 were:



	2019			2018
	(In thousands)
Employee and retiree benefit plans	$	28,097		$	27,615
Capital loss and other carryforwards	16,035			12,754
Operating lease assets	20,036			—
Operating lease liabilities	(19,530		)	—
Depreciation and amortization	(175,904		)	(168,485		)
Inventories	7,699			5,969
Allowances and accruals	7,765			11,540
Interest rate exchange agreement	2,113			3,543
Other	(14,998		)	(6,388		)
Total gross deferred tax (liabilities)	(128,687		)	(113,452		)
Valuation allowance	(16,035		)	(12,754		)
Total deferred tax (liabilities), net of valuation allowances	$	(144,722	)	$	(126,206	)

The deferred tax assets and liabilities recognized in the Company’s Consolidated Balance Sheets as of December 31, 2019 and 2018 were:



	2019			2018
	(In thousands)
Noncurrent deferred tax asset - Other noncurrent assets	$	1,852		$	1,801
Noncurrent deferred tax liabilities - Deferred income taxes	(146,574		)	(128,007		)
Net deferred tax liabilities	$	(144,722	)	$	(126,206	)

The Company had prepaid income taxes, recorded within Other current assets on the Consolidated Balance Sheets, of $13.4 million and $8.3 million as of December 31, 2019 and 2018, 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 2019, 2018 and 2017 are as follows:



	2019			2018			2017
	(In thousands)
Pretax income	$	532,903		$	528,939		$	455,273
Provision for income taxes:
Computed amount at statutory rate	$	111,910		$	111,077		$	159,346
State and local income tax (net of federal tax benefit)	8,163			8,280			5,841
Taxes on non-U.S. earnings-net of foreign tax credits	5,003			5,725			(24,914		)
Global Intangible Lowed-Taxed Income	2,324			2,725			—
Foreign-Derived Intangible Income Deduction	(5,811		)	(5,410		)	—
Effect of flow-through entities	1,316			1,215			192
U.S. business tax credits	(3,193		)	(3,056		)	(1,928		)
Domestic activities production deduction	—			—			(8,516		)
Capital loss on divestitures	—			—			(2,275		)
Share-based payments	(11,011		)	(9,348		)	(6,844		)
Valuation allowance	(117		)	—			(361		)
Impact of Tax Act	(334		)	10,298			(100		)
Other	(868		)	(3,140		)	(2,425		)
Total provision for income taxes	$	107,382		$	118,366		$	118,016

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law, which significantly changed existing U.S. tax law and includes many provisions applicable to the Company, including, but not limited to, reducing the U.S. federal statutory tax rate, imposing a one-time transition tax on deemed repatriation of deferred foreign income and adopting a territorial tax system. The Tax Act reduced the U.S. federal statutory tax rate from 35% to 21% effective January 1, 2018. The Tax Act also included a provision to tax global intangible low-taxed income of foreign subsidiaries, a special tax deduction for foreign-derived intangible income and a base erosion anti-abuse tax measure that may tax certain payments between a U.S. corporation and its subsidiaries. These additional provisions of the Tax Act were effective beginning January 1, 2018.

The Company has $26.5 million and $18.2 million of permanently reinvested earnings of non-U.S. subsidiaries as of December 31, 2019 and 2018, respectively. No deferred U.S. income taxes have been provided on the $26.5 million of 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 $5.4 million and $3.7 million as of December 31, 2019 and 2018, respectively.

During the years ended December 31, 2019, 2018 and 2017, the Company repatriated $99.0 million, $135.0 million and $3.3 million of foreign earnings, respectively. These actual distributions resulted in no incremental income tax expense for the years ended December 31, 2019 and 2018, and $6.4 million of incremental income tax benefit for the year ended December 31, 2017. 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, 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 (“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 of 2018, 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 updated its Transaction Tax obligation in the fourth quarter of 2018 recording a $3.9 million tax benefit which, together with the first quarter adjustment, resulted in an updated Transition Tax obligation of $26.5 million. The Company finalized its Transition Tax obligation in the fourth quarter of 2019 for an adjustment and foreign tax credit carrybacks which resulted in a final Transition Tax obligation of$20.6 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 ended December 31, 2017. During the second quarter of 2018, 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 treats the GILTI tax as a period cost.

Although the SAB 118 measurement period has closed, further technical guidance related to the Tax Act, including final regulations on a broad range of topics, is expected to be issued. In accordance with ASC 740, the Company will recognize any effects of the guidance in the period that such guidance is issued.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2019, 2018 and 2017 is as follows:



	2019			2018			2017
	(In thousands)
Beginning balance January 1	$	4,070		$	2,722		$	3,775
Gross increases for tax positions of prior years	—			2,308			537
Gross decreases for tax positions of prior years	—			(229		)	(587		)
Settlements	(140		)	(160		)	(604		)
Lapse of statute of limitations	(250		)	(571		)	(399		)
Ending balance December 31	$	3,680		$	4,070		$	2,722

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2019, 2018 and 2017, we had approximately $0.2 million, $0.1 million and $0.1 million, respectively, of accrued interest related to uncertain tax positions. The Company had no accrued penalties related to uncertain tax positions during these years.

The total amount of unrecognized tax benefits that would affect the Company’s effective tax rate if recognized is $3.0 million, $3.0 million and $0.9 million as of December 31, 2019, 2018 and 2017, respectively. The tax years 2013-2018 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 $0.9 million.

The Company had net operating loss and general business credit carryforwards related to prior acquisitions for U.S. federal purposes at December 31, 2019 and 2018 of $0.4 million and $1.3 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, 2019 and 2018 of $16.5 million and $29.5 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 indefinitely. At December 31, 2019 and 2018, the Company had U.S. state net operating loss carryforwards of approximately $17.4 million and $15.8 million, respectively. If unutilized, the U.S. state net operating loss will expire between 2020 and 2039. At December 31, 2019 and 2018, 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 $0.6 million, respectively.

The Company had a capital loss carryover for U.S. federal purposes at December 31, 2019 and 2018 of approximately $45.6 million and $46.1 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, 2019 and 2018, the Company recorded a valuation allowance against the deferred tax asset attributable to the U.S. federal capital loss carryover of $9.6 million and $9.7 million, respectively. At December 31, 2019 and 2018, the Company had U.S. state capital loss carryovers of $62.1 million and $62.7 million, respectively. If unutilized, the U.S. state capital loss carryovers will expire between 2021 and 2031. At December 31, 2019 and 2018, 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, 2019 and 2018, the Company had a foreign capital loss carryforward of approximately $13.8 million and $13.4 million, respectively. The foreign capital loss can be carried forward indefinitely. At both December 31, 2019 and 2018, the Company has a full valuation allowance against the deferred tax asset attributable to the foreign capital loss.

The Company had a foreign tax credit carryover for U.S. federal purposes at December 31, 2019 and 2018 of approximately $3.3 million and $6.6 million, respectively. U.S. federal foreign tax credit carryovers can be carried back one year and forward ten years, thus, if unutilized, the U.S. federal foreign tax credit carryover will expire in 2029. At December 31, 2019, the Company recorded a full valuation allowance against the deferred tax asset attributable to the U.S. federal foreign tax credit carryover.

13. 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 and 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, custom mechanical and shaft seals for a variety of end markets including food and beverage, marine, chemical, wastewater and water treatment, engineered hygienic mixers and valves for the global biopharmaceutical industry, 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.



	2019			2018			2017
	(In thousands)
NET SALES
Fluid & Metering Technologies
External customers	$	956,523		$	951,275		$	880,648
Intersegment sales	505			277			309
Total segment sales	957,028			951,552			880,957
Health & Science Technologies
External customers	912,623			895,970			819,719
Intersegment sales	1,823			449			412
Total segment sales	914,446			896,419			820,131
Fire & Safety/Diversified Products
External customers	625,427			636,421			586,945
Intersegment sales	1,343			607			588
Total segment sales	626,770			637,028			587,533
Intersegment eliminations	(3,671		)	(1,333		)	(1,309		)
Total net sales	$	2,494,573		$	2,483,666		$	2,287,312
OPERATING INCOME (LOSS) (1)
Fluid & Metering Technologies	$	285,256		$	275,060		$	241,030
Health & Science Technologies	200,200			205,679			179,567
Fire & Safety/Diversified Products	165,258			168,601			147,028
Corporate office (2)	(71,711		)	(80,252		)	(65,069		)
Total operating income	579,003			569,088			502,556
Interest expense	44,341			44,134			44,889
Other (income) expense - net	1,759			(3,985		)	2,394
Income before taxes	$	532,903		$	528,939		$	455,273



	2019		2018		2017
	(In thousands)
ASSETS
Fluid & Metering Technologies	$	1,150,712	$	1,107,777	$	1,101,580
Health & Science Technologies	1,507,108		1,329,368		1,323,373
Fire & Safety/Diversified Products	825,398		806,075		744,515
Corporate office	330,694		230,637		230,160
Total assets	$	3,813,912	$	3,473,857	$	3,399,628
DEPRECIATION AND AMORTIZATION (3)
Fluid & Metering Technologies	$	22,152	$	22,370	$	23,587
Health & Science Technologies	39,721		39,939		45,287
Fire & Safety/Diversified Products	14,333		14,493		14,541
Corporate office and other	670		742		801
Total depreciation and amortization	$	76,876	$	77,544	$	84,216
CAPITAL EXPENDITURES
Fluid & Metering Technologies	$	17,285	$	19,541	$	18,218
Health & Science Technologies	22,001		26,039		16,340
Fire & Safety/Diversified Products	9,811		10,318		6,363
Corporate office and other	1,815		191		2,937
Total capital expenditures	$	50,912	$	56,089	$	43,858


(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.


(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, 2019, 2018 and 2017 is shown below.



	2019		2018		2017
	(In thousands)
LONG-LIVED ASSETS — PROPERTY, PLANT AND EQUIPMENT
U.S.	$	165,721	$	171,111	$	145,808
North America, excluding U.S.	3,829		3,398		3,627
Europe	88,104		85,100		85,932
Asia	22,505		21,355		22,613
Other	157		256		370
Total long-lived assets - net	$	280,316	$	281,220	$	258,350

14. Restructuring

During 2019, 2018 and 2017, the Company recorded accruals for restructuring costs incurred to facilitate long-term, sustainable growth through cost reduction actions, consisting of employee reductions, facility rationalization and asset impairment charges. The restructuring costs included severance benefits, exit costs and asset impairment charges which 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 lease exit and contract termination costs.

2019 Initiative

During 2019, the Company recorded pre-tax restructuring expenses totaling $21.0 million related to the 2019 restructuring initiative. These expenses consisted of employee severance related to employee reductions across various functional areas, facility rationalization, contract termination costs and asset impairment charges. Severance payments will be substantially paid by the end of 2020 using cash from operations.

In the second quarter of 2019, the Company began to evaluate strategic alternatives for one of its businesses in the HST segment. Prior to making a final decision on the options that were presented for this business, the business was informed in the third quarter of 2019 of the loss of its largest customer. As a result, the Company accelerated its restructuring activities for this business and a decision was made to wind down the business over time. This event required an interim impairment test be performed on the long-lived tangible and intangible assets of the business, which resulted in an impairment charge of $9.7 million, consisting of $6.1 million related to a customer relationships intangible asset, $1.0 million related to an unpatented technology intangible asset, $2.0 million related to property, plant and equipment and $0.6 million related to a building right-of-use asset. In the fourth quarter of 2019, the Company also consolidated one of its facilities into the Optics Center of Excellence in Rochester, New York, which resulted in an impairment charge of $0.4 million related to a building right-of-use asset. These charges were recorded as Restructuring expenses in the Consolidated Statements of Operations.

Pre-tax restructuring expenses by segment for the 2019 initiative were as follows:



	Severance Costs		Exit Costs		Asset Impairment		Total Restructuring Costs
	(In thousands)
Fluid & Metering Technologies	$	2,879	$	—	$	—	$	2,879
Health & Science Technologies	3,000		1,094		10,155		14,249
Fire & Safety/Diversified Products	1,364		—		—		1,364
Corporate/Other	2,552		—		—		2,552
Total restructuring costs	$	9,795	$	1,094	$	10,155	$	21,044

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 were 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 Restructuring Costs
	(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

In addition, during the first quarter of 2017, the Company recorded pre-tax restructuring expenses totaling $4.8 million related to the 2016 restructuring initiative.

Restructuring accruals of $6.1 million and $6.2 million at December 31, 2019 and 2018, respectively, are reflected in Accrued expenses in our Consolidated Balance Sheets as follows:



	Restructuring Initiatives
	(In thousands)
Balance at January 1, 2018	$	4,180
Restructuring expenses	12,083
Payments, utilization and other	(10,093		)
Balance at December 31, 2018	6,170
Restructuring expenses	21,044
Payments, utilization and other	(21,104		)
Balance at December 31, 2019	$	6,110

15. 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, 2019

totaled 15.6 million, of which 3.4 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.

The Company typically grants equity awards annually at its regularly scheduled first quarter meeting of the Board of Directors based on their recommendation from the Compensation Committee.

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 on the date of grant. The fair value of each option grant is estimated on the date of the grant using the Binomial lattice option pricing model. The majority of the options issued to employees vest ratably over four years, with vesting beginning one year from the date of grant, and generally expire 10 years from the date of grant.

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



	Years Ended December 31,
	2019	2018	2017
Weighted average fair value of grants	$35.15	$38.13	$24.19
Dividend yield	1.18%	1.07%	1.45%
Volatility	24.77%	28.46%	29.41%
Risk-free interest rate	2.53% - 3.04%	2.03% - 3.17%	0.83% - 3.04%
Expected life (in years)	5.87	5.83	5.83

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, 2019, 2018 and 2017 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, 2019, 2018 and 2017, 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, 2019, and changes during the year ended December 31, 2019 is presented as follows:



Stock Options	Shares		Weighted Average Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2019	1,714,003		$	85.08	6.70	$	74,191,783
Granted	336,385		144.97
Exercised	(559,725	)	69.34
Forfeited/Expired	(104,124	)	116.94
Outstanding at December 31, 2019	1,386,539		$	103.58	6.95	$	94,764,140
Vested and expected to vest at December 31, 2019	1,275,591		$	66.82	6.93	$	88,158,634
Exercisable at December 31, 2019	578,542		$	79.52	5.57	$	53,502,516

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 2019, 2018 and 2017 was $49.5 million, $38.0 million and $26.1 million, respectively. In 2019, 2018 and 2017, cash received from

options exercised was $38.8 million, $27.6 million and $22.9 million, respectively, while the actual tax benefit realized for the tax deductions from stock options exercised totaled $10.4 million, $8.0 million and $9.5 million, respectively.

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



	Years Ended December 31,
	2019			2018			2017
	(In thousands)
Cost of goods sold	$	445		$	470		$	428
Selling, general and administrative expenses	8,705			8,313			7,347
Total expense before income taxes	9,150			8,783			7,775
Income tax benefit	(1,209		)	(1,616		)	(2,485		)
Total expense after income taxes	$	7,941		$	7,167		$	5,290

As of December 31, 2019, there was $13.2 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, 2019, and changes during the year ending December 31, 2019 is as follows:



Restricted Stock	Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2019	148,041		$	101.50
Granted	49,260		148.12
Vested	(51,253	)	80.64
Forfeited	(15,800	)	124.54
Unvested at December 31, 2019	130,248		$	124.61

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



	Years Ended December 31,
	2019			2018			2017
	(In thousands)
Cost of goods sold	$	261		$	367		$	335
Selling, general and administrative expenses	4,527			4,201			4,772
Total expense before income taxes	4,788			4,568			5,107
Income tax benefit	(920		)	(825		)	(1,654		)
Total expense after income taxes	$	3,868		$	3,743		$	3,453

As of December 31, 2019, there was $5.9 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. Cash-settled restricted stock awards are recorded at fair value on a quarterly basis using the market price of the Company’s stock on the last day of the quarter. 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, 2019, and changes during the year ending December 31, 2019 is as follows:



Cash-Settled Restricted Stock	Shares		Weighted-Average Fair Value
Unvested at January 1, 2019	88,225		$	126.26
Granted	25,950		145.38
Vested	(29,445	)	141.89
Forfeited	(10,170	)	159.78
Unvested at December 31, 2019	74,560		$	172.08

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



	Years Ended December 31,
	2019			2018			2017
	(In thousands)
Cost of goods sold	$	1,230		$	809		$	1,357
Selling, general and administrative expenses	4,118			2,391			3,241
Total expense before income taxes	5,348			3,200			4,598
Income tax benefit	(509		)	(337		)	(808		)
Total expense after income taxes	$	4,839		$	2,863		$	3,790

At December 31, 2019 and 2018, the Company has accrued $5.5 million and $4.5 million, respectively, for cash-settled restricted stock in Accrued expenses in the Consolidated Balance Sheets and has accrued $2.8 million and $2.4 million, respectively, for cash-settled restricted stock in Other non-current liabilities in the Consolidated Balance Sheets.

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 - 2019) 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 units are considered market condition awards, have been assessed at fair value on the date of grant using a Monte Carlo simulation model and are expensed ratably over the three-year term of the awards. The Company granted approximately 0.1 million of performance share units in each of 2019, 2018 and 2017.

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



	Years Ended December 31,
	2019	2018	2017
Weighted average fair value of grants	$207.26	$216.59	$115.74
Dividend yield	—%	—%	—%
Volatility	19.11%	17.42%	17.36%
Risk-free interest rate	2.49%	2.40%	1.45%
Expected life (in years)	2.83	2.85	2.85

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, 2019, and changes during the year ending December 31, 2019, is as follows:



Performance Share Units	Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2019	111,155		$	142.42
Granted	56,860		207.26
Vested	(54,545	)	249.44
Forfeited	(12,895	)	125.03
Unvested at December 31, 2019	100,575		$	178.97

Awards that vested in 2019 will result in 136,370 shares being issued in 2020.

Total compensation cost for performance share units is as follows:



	Years Ended December 31,
	2019			2018			2017
	(In thousands)
Cost of goods sold	$	—		$	—		$	—
Selling, general and administrative expenses	8,383			8,203			6,925
Total expense before income taxes	8,383			8,203			6,925
Income tax benefit	(641		)	(1,586		)	(2,342		)
Total expense after income taxes	$	7,742		$	6,617		$	4,583

As of December 31, 2019, there was $9.0 million of total unrecognized compensation cost related to performance shares that is expected to be recognized over a weighted-average period of 0.9 years.

16. Other Comprehensive Income (Loss)

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



	For the Year Ended December 31, 2019									For the Year Ended December 31, 2018
	Pre-tax			Tax			Net of tax			Pre-tax			Tax			Net of tax
	(In thousands)
Cumulative translation adjustment	$	67		$	—		$	67		$	(48,114	)	$	—		$	(48,114	)
Pension and other postretirement adjustments
Net gain (loss) arising during the year	(7,432		)	2,497			(4,935		)	9,963			(2,375		)	7,588
Amortization/recognition of settlement loss	2,810			(944		)	1,866			2,938			(701		)	2,237
Pension and other postretirement adjustments	(4,622		)	1,553			(3,069		)	12,901			(3,076		)	9,825
Reclassification adjustments for derivatives	6,327			(1,445		)	4,882			6,475			(1,469		)	5,006
Total other comprehensive income (loss)	$	1,772		$	108		$	1,880		$	(28,738	)	$	(4,545	)	$	(33,283	)



	For the Year Ended December 31, 2017
	Pre-tax			Tax			Net of tax
	(In thousands)
Foreign currency translation adjustments
Cumulative translation adjustment	$	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	109,238			—			109,238
Pension and other postretirement adjustments
Net gain (loss) arising during the year	(5,355		)	828			(4,527		)
Amortization/recognition of settlement loss	3,814			(589		)	3,225
Pension and other postretirement adjustments	(1,541		)	239			(1,302		)
Reclassification adjustments for derivatives	6,655			(2,445		)	4,210
Total other comprehensive income (loss)	$	114,352		$	(2,206	)	$	112,146

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



	For the Year Ended December 31,
	2019			2018			2017			Income Statement Caption
Foreign currency translation:
Reclassification upon sale of business	$	—		$	—		$	2,749		Loss (gain) on sale of businesses - net
Total before tax	—			—			2,749
Provision for income taxes	—			—			—
Total net of tax	$	—		$	—		$	2,749
Pension and other postretirement plans:
Amortization of service cost	$	2,858		$	3,246		$	3,580		Other (income) expense - net
Recognition of settlement loss	(48		)	(308		)	234			Other (income) expense - net
Total before tax	2,810			2,938			3,814
Provision for income taxes	(944		)	(701		)	(589		)
Total net of tax	$	1,866		$	2,237		$	3,225
Derivatives:
Reclassification adjustments	$	6,327		$	6,475		$	6,655		Interest expense
Total before tax	6,327			6,475			6,655
Provision for income taxes	(1,445		)	(1,469		)	(2,445		)
Total net of tax	$	4,882		$	5,006		$	4,210

The Company recognizes the service cost component in both Selling, general and administrative expenses and Cost of sales in the Consolidated Statements of Operations depending on the functional area of the underlying employees included in the plans.

17. Retirement Benefits

The Company sponsors several qualified and nonqualified defined benefit and defined contribution pension plans and other post-retirement 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.

Effective September 30, 2019, the IDEX Corporation Retirement Plan (“Plan”), a U.S. defined benefit plan, was amended to freeze the accrual of retirement benefits for all participants. This action impacted fewer than 60 participants, as the Plan had been closed to new entrants as of December 31, 2004 and frozen as of December 31, 2005 for all but certain older, longer service participants. The overall financial impact of the freeze was to reduce the Plan liabilities by approximately $1.2 million. In addition, the Company recorded a settlement charge of $0.7 million which was recorded in Other (income) expense - net in the Consolidated Statements of Operations for the year ended December 31, 2019. Subsequent to the freeze, termination of the Plan was approved in November 2019. Participants were notified in February 2020 and the Plan will be terminated in May 2020. As a result, the disclosures for the year ended December 31, 2019 were prepared on a liquidation basis of accounting.

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, 2019 and a statement of the funded status at December 31 for both years.



	Pension Benefits												Other Benefits
	2019						2018						2019			2018
	U.S.			Non-U.S.			U.S.			Non-U.S.
	(In thousands)
CHANGE IN BENEFIT OBLIGATION
Obligation at January 1	$	85,175		$	89,789		$	91,335		$	97,451		$	22,593		$	26,068
Service cost	653			1,844			886			2,105			561			668
Interest cost	2,796			1,440			2,634			1,389			849			810
Plan amendments	—			(156		)	—			52			—			—
Benefits paid	(3,520		)	(1,507		)	(5,171		)	(2,791		)	(676		)	(847		)
Actuarial loss (gain)	16,931			9,903			(4,497		)	(3,378		)	(161		)	(3,930		)
Currency translation	—			66			—			(3,335		)	91			(176		)
Settlements	(4,826		)	—			(12		)	(2,313		)	—			—
Curtailments	(1,538		)	—			—			—			—			—
Acquisition/Divestiture	—			—			—			—			—			—
Other	276			637			—			609			—			—
Obligation at December 31	$	95,947		$	102,016		$	85,175		$	89,789		$	23,257		$	22,593
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	$	83,580		$	33,532		$	76,041		$	36,316		$	—		$	—
Actual return on plan assets	17,446			3,406			2,070			496			—			—
Employer contributions	733			2,320			10,652			2,345			676			847
Benefits paid	(3,520		)	(1,507		)	(5,171		)	(2,791		)	(676		)	(847		)
Currency translation	—			916			—			(1,130		)	—			—
Settlements	(4,826		)	—			—			(2,313		)	—			—
Acquisition/Divestiture	—			—			—			—			—			—
Other	—			637			(12		)	609			—			—
Fair value of plan assets at December 31	$	93,413		$	39,304		$	83,580		$	33,532		$	—		$	—
Funded status at December 31	$	(2,534	)	$	(62,712	)	$	(1,595	)	$	(56,257	)	$	(23,257	)	$	(22,593	)
COMPONENTS ON THE CONSOLIDATED BALANCE SHEETS
Other noncurrent assets	$	1,921		$	14		$	3,058		$	—		$	—		$	—
Current liabilities	$	(564	)	$	(1,270	)	$	(556	)	$	(1,174	)	$	(1,127	)	$	(1,116	)
Other noncurrent liabilities	(3,891		)	(61,456		)	(4,097		)	(55,083		)	(22,130		)	(21,477		)
Net liability at December 31	$	(2,534	)	$	(62,712	)	$	(1,595	)	$	(56,257	)	$	(23,257	)	$	(22,593	)

The accumulated benefit obligation (“ABO”) for all defined benefit pension plans was $193.3 million and $169.5 million at December 31, 2019 and 2018, respectively.

The weighted average assumptions used in the measurement of the Company’s benefit obligation at December 31, 2019 and 2018 were as follows:



	U.S. Plans				Non-U.S. Plans				Other Benefits
	2019		2018		2019		2018		2019		2018
Discount rate	3.06	%	4.10	%	1.33	%	2.07	%	3.09	%	4.11	%
Rate of compensation increase	—	%	4.00	%	2.29	%	2.13	%	4.00	%	4.00	%

The pretax amounts recognized in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets as of December 31, 2019 and 2018 were as follows:



	Pension Benefits									Other Benefits
	2019					2018				2019			2018
	U.S.		Non-U.S.			U.S.		Non-U.S.
	(In thousands)
Prior service cost (credit)	$	46	$	(100	)	$	62	$	64	$	(46	)	$	(117	)
Net loss (gain)	21,432		19,304			22,478		12,955		(6,009		)	(6,386		)
Total	$	21,478	$	19,204		$	22,540	$	13,019	$	(6,055	)	$	(6,503	)

The amounts in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheet as of December 31, 2019 that are expected to be recognized as components of net periodic benefit cost during 2020 are as follows:



	U.S. Pension Benefit Plans		Non-U.S. Pension Benefit Plans			Other Benefit Plans			Total
	(In thousands)
Prior service cost (credit)	$	13	$	(21	)	$	(37	)	$	(45	)
Net loss (gain)	1,755		1,726			(506		)	2,975
Total	$	1,768	$	1,705		$	(543	)	$	2,930

The components of, and the weighted average assumptions used to determine, the net periodic benefit cost for the plans in 2019, 2018 and 2017 are as follows:



	Pension Benefits
	2019						2018						2017
	U.S.			Non-U.S.			U.S.			Non-U.S.			U.S.			Non-U.S.
	(In thousands)
Service cost	$	653		$	1,844		$	886		$	2,105		$	976		$	1,975
Interest cost	2,796			1,440			2,634			1,389			2,677			1,283
Expected return on plan assets	(3,319		)	(1,047		)	(3,943		)	(1,120		)	(3,832		)	(1,088		)
Settlement loss recognized	713			—			(1		)	(307		)	—			234
Special termination benefit recognized	276			—			—			—			—			—
Net amortization	1,614			1,117			2,712			1,271			2,566			1,809
Net periodic benefit cost	$	2,733		$	3,354		$	2,288		$	3,338		$	2,387		$	4,213



	Other Benefits
	2019			2018			2017
	(In thousands)
Service cost	$	561		$	668		$	610
Interest cost	849			810			818
Net amortization	(635		)	(737		)	(795		)
Net periodic benefit cost	$	775		$	741		$	633



	U.S. Plans						Non-U.S. Plans
	2019		2018		2017		2019		2018		2017
Discount rate	4.11%/2.99%*		3.46	%	3.91	%	2.07	%	1.82	%	1.76	%
Expected return on plan assets	4.00	%	5.50	%	5.50	%	3.12	%	3.09	%	3.20	%
Rate of compensation increase	4.00	%	4.00	%	4.00	%	2.13	%	2.37	%	2.29	%

A discount rate of 4.11% was used to determine the net periodic benefit cost for the period January 1, 2019 through August 31, 2019 and a discount rate of 2.99% was used to determine the net periodic benefit cost for the period September 1, 2019 through December 31, 2019 as a result of the remeasurement that occurred in conjunction with the decision to freeze the Plan.



	Other Benefits
	2019		2018		2017
Discount rate	4.11	%	3.50	%	3.94	%
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 2019 is as follows:



	Pension Benefits						Other Benefits
	U.S.			Non-U.S.
	(In thousands)
Net gain (loss) in current year	$	(1,265	)	$	(7,544	)	$	161
Prior service cost	—			156			—
Amortization of prior service cost (credit)	15			6			(70		)
Amortization of net loss (gain)	2,312			1,111			(565		)
Exchange rate effect on amounts in OCI	—			86			26
Total	$	1,062		$	(6,185	)	$	(448	)

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 $12.4 million, $12.2 million and $10.2 million for 2019, 2018 and 2017, respectively.

The Company, through its subsidiaries, participates in certain multi-employer pension plans covering approximately 259 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, $1.1 million, and $1.0 million for 2019, 2018 and 2017, respectively.

For measurement purposes, a 5.84% weighted average annual rate of increase in the per capita cost of covered health care benefits was assumed for 2019. The rate was assumed to decrease gradually each year to a rate of 4.45% 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 $0.1 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, 2019 and 2018, by asset category, were as follows:



	U.S. Plans				Non-U.S. Plans
	2019		2018		2019		2018
Equity securities	10	%	9	%	17	%	13	%
Fixed income securities	90	%	90	%	24	%	31	%
Cash/Commingled Funds/Other (1)	—	%	1	%	59	%	56	%
Total	100	%	100	%	100	%	100	%

The basis used to measure the defined benefit plans’ assets at fair value at December 31, 2019 and 2018 is summarized as follows:



	Basis of Fair Value Measurement
	Outstanding Balances		Level 1		Level 2		Level 3
As of December 31, 2019	(In thousands)
Equity
U.S. Large Cap	$	4,734	$	4,734	$	—	$	—
U.S. Small / Mid Cap	455		—		455		—
International	10,845		5,258		5,587		—
Fixed Income
U.S. Intermediate	640		—		640		—
U.S. Long Term	83,628		—		83,628		—
U.S. High Yield	1,346		—		1,346		—
International	7,516		296		7,220		—
Other Commingled Funds (1)	19,438		—		—		19,438
Cash and Equivalents	1,094		517		577		—
Other	3,021		—		3,021		—
	$	132,717	$	10,805	$	102,474	$	19,438


(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, 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.

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 2.5% 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, 2019, there were no shares of the Company’s stock held in plan assets.

Cash Flows

The Company expects to contribute approximately $3.0 million to its defined benefit plans and $1.1 million to its other postretirement benefit plans in 2020. The Company also expects to contribute approximately $12.8 million to its defined contribution plan and $10.2 million to its 401(k) savings plan in 2020.

Estimated Future Benefit Payments

The future estimated benefit payments for the next five years and the five years thereafter are as follows: 2020 — $49.4 million; 2021 — $49.2 million; 2022 — $5.7 million; 2023 — $5.6 million; 2024 — $5.9 million; 2025 to 2029 — $30.7 million.

18. Quarterly Results of Operations (Unaudited)

The unaudited quarterly results of operations for the years ended December 31, 2019 and 2018 are as follows:



	2019 Quarters (1)								2018 Quarters (1)
	First		Second		Third		Fourth		First		Second		Third		Fourth
	(In thousands, except per share amounts)
Net sales	$	622,231	$	642,099	$	624,246	$	605,997	$	612,324	$	634,360	$	622,888	$	614,094
Gross profit	283,834		292,337		281,978		266,885		276,652		287,367		280,233		273,643
Operating income	147,782		155,283		141,765		134,173		136,683		147,831		145,133		139,441
Net income	110,268		113,209		105,194		96,850		98,958		107,126		106,352		98,137
Basic EPS	$	1.46	$	1.50	$	1.39	$	1.28	$	1.29	$	1.40	$	1.39	$	1.29
Diluted EPS	$	1.44	$	1.48	$	1.37	$	1.26	$	1.27	$	1.38	$	1.37	$	1.27
Basic weighted average shares outstanding	75,442		75,460		75,698		75,779		76,419		76,539		76,562		76,128
Diluted weighted average shares outstanding	76,284		76,387		76,577		76,570		77,739		77,704		77,709		77,100

(1) Quarterly data includes acquisition of Finger Lakes Instrumentation (July 2018) and Velcora Holding AB (July 2019) from the date of acquisition. See Note 2 for further discussion.

19. Subsequent Events

On January 29, 2020, the Company entered into a definitive agreement to acquire Flow Management Devices, LLC (“Flow MD”) for cash consideration of $125 million. Flow MD is a leading provider of small volume provers used in the oil and gas industry. Flow MD is headquartered in Phoenix, Arizona, Flow MD and will operate in our Fluid and Metering Technologies Segment. We expect to close the transaction by the end of the first quarter 2020 subject to regulatory approvals and customary closing conditions.

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