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

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related notes in this annual report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Item 1A, “Risk Factors” and elsewhere in this annual report.

2020 Overview

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

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

• Our Fluid & Metering Technologies segment designs, produces and distributes some of the most recognized names in positive displacement pumps and flow meters, compressors, injectors and other fluid-handling pump modules and systems.

*•*Our Health & Science Technologies segment focuses on precision engineered fluidics to support and enable growth in analytical instrumentation and the life sciences as well as pneumatic components and proprietary high performance seals and advanced sealing solutions. Within the fields of health and science, we leverage our capabilities in small-scale, highly accurate fluidics components and medical devices as well as integrated systems and solutions to support the worldwide growth in pharmaceutical drug discovery and new applications in life sciences and diagnostic testing.

*•*Our Fire & Safety/Diversified Products segment produces firefighting pumps and controls, apparatus valves, monitors, nozzles, 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.

For a detailed description of our operations within each segment, please refer to Part I, Item 1. “Business” of this Annual Report on Form 10-K. Within our three reportable segments, the Company maintains 13 platforms where we focus on organic growth and strategic acquisitions. Each of our 13 platforms is also a reporting unit that we annually test goodwill for impairment.

Our 2020 financial results were as follows:

• Sales of $2.4 billion were down 6.0% and organic sales were down 9.0% compared to the prior year, partially offset by a 3% increase in sales due to acquisitions (Flow MD - February 2020 and Velcora - July 2019).

• Operating income of $520.7 million was down 10% from the prior year and operating margin of 22.1% was down 110 basis points from the prior year.

• Net income decreased 11% from the prior year to $377.8 million in 2020.

• Diluted EPS of $4.94 decreased $0.62, or 11%, compared to 2019.

Our 2020 financial results, adjusted for $11.8 million of restructuring expenses and asset impairments, a $4.1 million fair value inventory step-up charge and an $8.4 million loss on early debt redemption, compared to our 2019 financial results, adjusted for $21.0 million of restructuring expenses and asset impairments and a $3.3 million fair value inventory step-up charge, were as follows (these non-GAAP measures have been reconciled to U.S. GAAP measures in Item 6, “Selected Financial Data”):

• Adjusted operating income of $536.6 million was down 11% from the prior year and adjusted operating margin of 22.8% was down 140 basis points from the prior year.

• Adjusted net income decreased 11% from the prior year to $396.5 million in 2020.

• Adjusted EPS of $5.19 was 11% lower than prior year adjusted EPS of $5.80.

Results of Operations

The following is a discussion and analysis of our results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019. For discussion related to the results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s annual report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 21, 2020. For purposes of this Item, reference is made to the Consolidated Statements of Operations in Part II, Item 8, “Financial Statements and Supplementary Data.” Segment operating income excludes unallocated corporate operating expenses. Management’s primary measurements of segment performance are sales, operating income and operating margin.

The Company is contributing in efforts to end the COVID-19 pandemic with several of our businesses pivoting to support many products that are being used in the fight against COVID-19. Safety is our top priority and we have implemented protocols at all of our facilities, including temperature taking, social distancing, enhanced cleaning and face coverings. These measures have enabled successful business continuity, allowing our facilities to remain in operation with only temporary shutdowns at the initial onset of the COVID-19 pandemic. Although we have remained in operation throughout the pandemic, satisfying customer needs in part through our focus on the development and manufacturing of products used in the fight against COVID-19, the pandemic and the enacted containment measures have adversely affected our business and results of operations. From the onset of the pandemic through the second quarter of 2020, our customers purchased less product than they have historically purchased; however, beginning in the third quarter and continuing through the fourth quarter of 2020 we began to see improvement in our end markets and we expect our end markets to continue to normalize to historical levels through 2021. Additionally, IDEX has implemented cost reduction actions, including employee reductions and facility consolidations, and continues to maintain a tight cost control environment. Moreover, COVID-19 and related measures to contain its impact have caused material disruptions in both national and global financial markets and economies. The continuing impact of COVID-19 and the enacted containment measures cannot be predicted and may continue to adversely affect, perhaps materially, our business, results of operations, financial condition and liquidity.

In the following discussion, and throughout this report, references to organic sales, a non-GAAP measure, refers to sales from continuing operations calculated according to U.S. GAAP but excludes (1) the impact of foreign currency translation and (2) sales from acquired or divested businesses during the first 12 months of ownership or prior to divestiture. The portion of sales attributable to foreign currency translation is calculated as the difference between (a) the period-to-period change in organic sales and (b) the period-to-period change in organic sales after applying prior period foreign exchange rates to the current year period. Management believes that reporting organic sales provides useful information to investors by helping identify underlying growth trends in our business and facilitating easier comparisons of our revenue performance with prior and future periods and to our peers. The Company excludes the effect of foreign currency translation from organic sales because foreign currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. The Company excludes the effect of acquisitions and divestitures because they can obscure underlying business trends and make comparisons of long-term performance difficult due to the varying nature, size and number of transactions from period to period and between the Company and its peers.

Performance in 2020 Compared with 2019

(In thousands)			2020						2019						Change
Net sales			$	2,351,646					$	2,494,573					(6)		%
Operating income			520,713						579,003						(10)		%

Sales in 2020 were $2.4 billion, a 6% decrease compared with last year. Organic sales declined 9% compared to prior year, partially offset by a 3% increase in sales from acquisitions (Flow MD - February 2020 and Velcora - July 2019). Sales to customers outside the U.S. represented approximately 51% of total sales in 2020 compared with 50% in 2019.

In 2020, Fluid & Metering Technologies contributed 38% of sales and 40% of total segment operating income; Health & Science Technologies contributed 38% of sales and 35% of total segment operating income; and Fire & Safety/Diversified Products contributed 24% of sales and 25% of total segment operating income.

Gross profit of $1.0 billion in 2020 decreased $97.6 million, or 9%, from 2019, and gross margin decreased 140 basis points to 43.7% in 2020 from 45.1% in 2019. The decrease in gross profit and gross margin is primarily due to lower volume and business mix, partially offset by price capture.

Selling, general and administrative (“SG&A”) expenses decreased to $494.9 million in 2020 from $525.0 million in 2019. The $30.1 million decrease is primarily due to restructuring savings, lower discretionary spending and lower stock compensation costs due to the departure of our former Chief Executive Officer, partially offset by increased funding of the IDEX Foundation and higher acquisition costs. As a percentage of sales, SG&A expenses were 21.1% for 2020 and 21.2% for 2019.

In 2020 and 2019, the Company incurred pre-tax restructuring expenses and asset impairments totaling $11.8 million and $21.0 million, respectively, to facilitate long-term, sustainable growth through cost reduction actions, primarily consisting of employee reductions, facility rationalization and asset impairments. The restructuring expenses and asset impairments in 2020 included severance benefits of $8.5 million, exit costs of $0.2 million and asset impairments of $3.1 million. In the fourth quarter of 2020, the Company consolidated certain facilities within the FMT segment resulting in an impairment charge of $2.5 million, consisting of $1.6 million related to property, plant and equipment which was not relocated to the new location and $0.9 million related to a building right-of-use asset that was exited early. The Company also relocated its corporate office resulting in an impairment charge of $0.6 million, consisting of $0.2 million related to property, plant and equipment which was not relocated to the new location and $0.4 million related to a building right-of-use asset that was exited early. The restructuring expenses and asset impairments in 2019 included severance benefits of $9.8 million, exit costs of $1.1 million and impairment charges of $10.1 million. 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, resulting in a $9.7 million impairment charge. In addition, in the fourth quarter of 2019, the Company completed the consolidation of one of its facilities into the Optics Center of Excellence in Rochester, New York, which resulted in a $0.4 million impairment charge.

Operating income of $520.7 million in 2020 decreased from $579.0 million in 2019, and operating margin of 22.1% in 2020 was down 110 basis points from 23.2% in 2019. Both operating income and operating margin decreased compared to 2019 primarily due to lower volume and business mix, partially offset by price capture and cost savings in the current year as well as higher asset impairments in the prior year.

Other (income) expense - net increased by $3.9 million from expense of $1.8 million in 2019 to expense of $5.6 million in 2020 primarily due to an $8.4 million loss on early debt redemption, partially offset by $3.5 million of lower pension expense and $0.6 million of higher gains on pension-related investments in 2020.

Interest expense increased to $44.7 million in 2020 from $44.3 million in 2019. The increase was primarily due to borrowings under the Revolving Facility (defined below) in 2020 and interest expense on the new 3.0% Senior Notes (defined below) issued during the second quarter of 2020, partially offset by write-offs related to the 4.2% Senior Notes (defined below).

The provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes decreased to $92.6 million in 2020 compared to $107.4 million in 2019. The effective tax rate decreased to 19.7% in 2020 compared to 20.2% in 2019 due to benefits associated with the finalization of the Global Intangible Low-Tax Income (“GILTI”) regulations in the third quarter of 2020 and the mix of global pre-tax income among jurisdictions.

Net income for the year of $377.8 million decreased from $425.5 million in 2019. Diluted earnings per share in 2020 of $4.94 decreased $0.62 from $5.56 in 2019.

Fluid & Metering Technologies Segment

(In thousands)			2020						2019						Change
Net sales			$	896,304					$	957,028					(6)		%
Operating income			235,011						285,256						(18)		%
Operating margin			26.2		%				29.8		%				(360)			bps

Sales of $896.3 million decreased $60.7 million, or 6%, in 2020 compared with 2019. This decrease reflected a 12% decline in organic sales, partially offset by a 6% increase from acquisitions (Flow MD - February 2020). In 2020, sales decreased 7% domestically and 6% internationally. Sales to customers outside the U.S. were approximately 44% of total segment sales in 2020 compared with 43% in 2019.

Sales within our Pumps platform decreased compared to 2019 due to compound effects of the industrial market weakness, declines in oil and gas markets and the economic impact of the COVID-19 pandemic on most markets and geographies. Sales within our Valves platform decreased compared to 2019 due to the impact of the COVID-19 pandemic and general industrial market slowdown in Europe and Asia. Sales within our Water platform decreased compared to 2019 due to lower project volume in the United States and Asian markets compounded by the impact of the COVID-19 pandemic on food service, hospitality and general industrial markets. Sales within our Agriculture platform decreased compared to 2019 due to decreased demand from agricultural OEM market customers in North America. Sales within our Energy platform increased compared to 2019 due to the acquisition of Flow MD, partially offset by weakness in the energy markets resulting from declines in energy prices.

Operating income and operating margin of $235.0 million and 26.2%, respectively, were lower than the $285.3 million and 29.8%, respectively, recorded in 2019, primarily due to lower volume, business mix, higher restructuring expenses and asset impairments as well as the fair value inventory step-up charge and the dilutive impact on margins from the Flow MD acquisition, partially offset by price capture and cost savings.

Health & Science Technologies Segment

(In thousands)			2020						2019						Change
Net sales			$	895,962					$	914,446					(2)		%
Operating income			206,356						200,200						3		%
Operating margin			23.0		%				21.9		%				110			bps

Sales of $896.0 million decreased $18.5 million, or 2%, in 2020 compared with 2019. This decrease reflected a 4% decline in organic sales, partially offset by a 2% increase from acquisitions (Velcora - July 2019). In 2020, sales decreased 6% domestically and increased 1% internationally. Sales to customers outside the U.S. were approximately 57% of total segment sales in 2020 compared with 55% in 2019.

Sales within our Micropump platform decreased compared to 2019 due to weakness in core printing and industrial distribution. Sales in our Gast platform decreased compared to 2019 due to the non-repeat of a large customer project, combined with the impact of COVID-19 and general industrial market slowdown, partially offset by a new COVID-19 initiative. Sales within our Scientific Fluidics & Optics platform decreased compared to 2019 due to the impact of the COVID-19 pandemic, which delayed investments in Analytical Instrumentation and in vitro diagnostics (“IVD”) and biotechnology, partially offset by increased demand for fluidics and optical technologies supporting COVID-19 testing. Sales within our Material Processing Technologies platform increased compared to 2019 due to strength in the food and pharmaceutical markets, partially offset by the impact of the COVID-19 pandemic. Sales within our Sealing Solutions platform increased compared to 2019 due to the Velcora acquisition and recovery of the semiconductor market, partially offset by the COVID-19 disruption of the automotive market and weakness in oil and gas markets.

Operating income and operating margin of $206.4 million and 23.0%, respectively, in 2020 were up from $200.2 million and 21.9%, respectively, in 2019, primarily due to price capture and cost savings in 2020 as well as the asset impairments in 2019, partially offset by lower volume and business mix.

Fire & Safety/Diversified Products Segment

(In thousands)			2020						2019						Change
Net sales			$	562,851					$	626,770					(10)		%
Operating income			144,191						165,258						(13)		%
Operating margin			25.6		%				26.4		%				(80)			bps

Sales of $562.9 million decreased $63.9 million, or 10%, in 2020 compared with 2019. This decrease reflected an 11% decline in organic sales, partially offset by a 1% favorable impact from foreign currency translation. In 2020, sales decreased 11% domestically and 9% internationally. Sales to customers outside the U.S. were approximately 52% of total segment sales in both 2020 and 2019.

Sales in our BAND-IT platform decreased compared to 2019 due to the disruption of the automotive and aviation markets as a result of the COVID-19 pandemic. Sales within our Dispensing platform decreased compared to 2019 due to lower capital

spending as a result of the COVID-19 pandemic. Sales within our Fire & Safety platform decreased compared to 2019 primarily due to the impact of the COVID-19 pandemic on the timing of municipal projects and truck manufacturer deliveries.

Operating income of $144.2 million and operating margin of 25.6%, respectively, were lower than the $165.3 million and 26.4%, respectively, in 2019, primarily due to due to volume declines, partially offset by price capture and cost savings.

Liquidity and Capital Resources

Operating Activities

Cash flows from operating activities increased $41.2 million, or 7.8%, to $569.3 million in 2020, primarily due to favorable working capital performance which more than offset the impact of lower earnings. At December 31, 2020, working capital was $1,258.2 million and the Company’s current ratio was 4.2 to 1. At December 31, 2020, the Company’s cash and cash equivalents totaled $1,025.9 million, of which $556.9 million was held outside of the United States. The COVID-19 pandemic has impacted and may continue to impact the Company’s operating cash flows through direct and indirect effects on the Company’s operations, customers and supply chain. Although the Company has been able to operate through the COVID-19 pandemic with only temporary shutdowns at the onset of the pandemic, any future disruptions due to operational shutdowns may impact the Company’s ability to operate as well as generate operating cash flow. Based on currently available information and management’s current expectations, the Company anticipates that it has sufficient cash on hand and sufficient access to capital to continue to fund operations for at least the next twelve months. However, the continuing impact of COVID-19 and its associated containment measures cannot be predicted with certainty and may increase our incremental borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition and liquidity, and we cannot assure that we will have access to external financing at times and on terms we consider acceptable, or at all, or that we will not experience other liquidity issues going forward.

Investing Activities

Cash flows used in investing activities increased $35.6 million to $172.6 million in 2020, primarily due to $123.1 million spent on the acquisitions of Flow MD and Qualtek in 2020 compared to $87.2 million spent on the acquisition of Velcora in 2019.

Cash flows from operations were more than adequate to fund capital expenditures of $51.5 million and $50.9 million in 2020 and 2019, respectively. The COVID-19 pandemic has impacted and may continue to impact the Company’s operating cash flows, which may lead to reductions in capital expenditures. The Company believes it has sufficient operating cash flow to continue to meet current obligations and invest in planned capital expenditures. Capital expenditures are generally expenditures for machinery and equipment that support growth, improved productivity, tooling, business system technology, replacement of equipment and investments in new facilities. Management believes that the Company has ample capacity in its plants and equipment to meet demand increases for future growth in the intermediate term.

Financing Activities

Cash flows used in financing activities decreased $185.0 million to $42.6 million in 2020, primarily as a result of proceeds from the issuance of the 3.0% Senior Notes and the repayment of debt assumed in the Velcora acquisition in the third quarter of 2019, partially offset by the early payment of the 4.5% Senior Notes as well as higher share repurchases and dividends paid in 2020.

On April 29, 2020, the Company completed a public offering of $500.0 million in aggregate principal amount of 3.0% Senior Notes due 2030 (the “3.0% Senior Notes”). The net proceeds from the offering were approximately $494.4 million, after deducting the issuance discount of $0.9 million, the underwriting commission of $3.3 million and offering expenses of $1.4 million. The net proceeds were used to redeem and repay the $300.0 million aggregate principal amount outstanding of its 4.5% Senior Notes due December 15, 2020 and the related accrued interest and make-whole premium, with the balance used for general corporate purposes. The 3.0% Senior Notes bear interest at a rate of 3.0% per annum, which is payable semi-annually in arrears on May 1 and November 1 of each year. The 3.0% Senior Notes mature on May 1, 2030.

On April 27, 2020, the Company provided notice of its election to redeem early, on May 27, 2020, the $300.0 million aggregate principal amount outstanding of its 4.5% Senior Notes at a redemption price of $300.0 million plus a make-whole redemption premium of $6.8 million and accrued and unpaid interest of $6.1 million using proceeds from the Company’s 3.0% Senior Notes. In addition, the Company recognized the remaining $1.4 million of the pre-tax amount included in Accumulated other comprehensive income (loss) in shareholders’ equity related to the interest rate exchange agreement associated with the

4.5% Senior Notes as well as the remaining $0.1 million of deferred issuance costs and $0.1 million of the debt issuance discount associated with the 4.5% Senior Notes for a total loss on early debt redemption of $8.4 million which was recorded within Other (income) expense - net in the Consolidated Statements of Operations.

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 consists of a revolving credit facility (the “Revolving Facility”), which is an $800.0 million unsecured, multi-currency bank credit facility expiring on May 31, 2024. 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. At December 31, 2020, there was no balance outstanding under the Revolving Facility and $7.2 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Facility of $792.8 million.

Borrowings under the Credit Agreement bear interest at either an alternate base rate or adjusted LIBOR plus, in each case, an applicable margin. Such applicable margin is based on the lower of the Company’s senior, unsecured, long-term debt rating or the Company’s applicable leverage ratio and can range from 0.00% to 1.275%. Based on the Company’s leverage ratio at December 31, 2020, the applicable margin was 1.00% resulting in a weighted average interest rate of 1.24% for the year ended December 31, 2020. Interest is payable (a) in the case of base rate loans, quarterly, and (b) in the case of LIBOR 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 Company may request increases in the lending commitments under the Credit Agreement, but the aggregate lending commitments pursuant to such increases may not exceed $400.0 million.

The Company has the right, subject to certain conditions set forth in the Credit Agreement, to designate certain foreign

subsidiaries of the Company as borrowers under the Credit Agreement. In connection with any such designation, the Company is required to guarantee the obligations of any such subsidiaries under the Credit Agreement.

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.

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.

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. 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, 2020, the Company was in compliance with both of these financial covenants, as the Company’s interest coverage ratio was 14.66 to 1 and the leverage ratio was 1.66 to 1. There are no financial covenants relating to the 3.0% Senior Notes or 4.20% Senior Notes; however, both are subject to cross-default provisions.

Share Repurchases

On March 17, 2020, the Company’s Board of Directors approved an increase $500.0 million in the authorized level of repurchases of common stock. This approval is in addition to the prior repurchase authorizations of the Board of Directors of

$300.0 million on December 1, 2015 and $400.0 million on November 6, 2014. Repurchases under the program will be funded with future cash flow generation or borrowings available under the Revolving Facility. During 2020, the Company repurchased a total of 876 thousand shares at a cost of $110.3 million compared to 389 thousand shares repurchased at a cost of $54.7 million in 2019. As of December 31, 2020, the amount of share repurchase authorization remaining was $712.0 million.

Impact of COVID-19 Pandemic

Although the COVID-19 pandemic has impacted and may continue to impact the Company’s operating cash flows, based on management’s current expectations and currently available information, the Company believes current cash, cash from operations and cash available under the Revolving Facility will be sufficient to meet its operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and postretirement funding requirements and quarterly dividend payments to holders of the Company’s common stock for the foreseeable future. Additionally, in the event that suitable businesses are available for acquisition upon acceptable terms, the Company may obtain all or a portion of the financing for these acquisitions through the incurrence of additional borrowings. As of December 31, 2020, there was no balance outstanding under the Revolving Facility and $7.2 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Facility of $792.8 million. The Company believes that additional borrowings through various financing alternatives remain available if required. However, the continuing impact of COVID-19 and its associated containment measures cannot be predicted with certainty and may increase our incremental borrowing costs and other costs of capital and otherwise adversely affect our business, results of operations, financial condition and liquidity, and we cannot assure that we will have access to external financing at times and on terms we consider acceptable, or at all, or that we will not experience other liquidity issues going forward.

Contractual Obligations

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

The following table summarizes our significant contractual obligations and commercial commitments at December 31, 2020 and the future periods in which such obligations are expected to be settled in cash. In addition, the table reflects the timing of principal and interest payments on outstanding borrowings. Additional detail regarding these obligations is provided in the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.”

			Payments Due by Period
Contractual Obligations			Total						Less Than 1 Year						1-3 Years						3-5 Years						More Than 5 Years
			(In thousands)
Borrowings (1)			$	1,228,087					$	386,360					$	141,543					$	135,184					$	565,000
Lease obligations			130,785						19,717						30,676						22,822						57,570
Purchase obligations (2)			169,187						154,824						13,819						293						251
Transition tax payable			14,208						—						3,612						10,596						—
Pension and post-retirement obligations			144,970						88,497						11,806						12,381						32,286
Total contractual obligations (3)			$	1,687,237					$	649,398					$	201,456					$	181,276					$	655,107

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

(2)Consists primarily of inventory commitments.

(3)Comprises liabilities recorded on the balance sheet of $1,272.6 million and obligations not recorded on the balance sheet of $414.6 million.

Critical Accounting Policies and Estimates

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

Revenue recognition — Revenue is recognized when control of 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 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. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize provisions for estimated losses on incomplete 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.

Goodwill, long-lived and intangible assets — The Company evaluates the recoverability of certain noncurrent assets utilizing various estimation processes. An impairment of a long-lived asset exists when the asset’s carrying value exceeds its fair value and is recorded when the carrying value is not recoverable through future operations. An impairment of an indefinite-lived intangible asset or goodwill exists when the carrying value of the reporting unit exceeds its fair value. Assessments of possible impairments of long-lived or indefinite-lived intangible assets or goodwill are made if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Additionally, testing for possible impairments of recorded indefinite-lived intangible asset balances and goodwill is performed annually. On October 31, or more frequently if triggering events occur, the Company compares the fair value of each reporting unit to the carrying value of each reporting unit to determine if a goodwill impairment exists. The amount and timing of impairment charges for these assets require the estimation of future cash flows to determine the fair value of the related assets.

The Company’s business acquisitions result in recording goodwill and other intangible assets, which affect the amount of amortization expense and possible impairment expense that the Company will incur in future periods. The Company follows the guidance prescribed in ASC 350, Goodwill and Other Intangible Assets, to test goodwill and intangible assets for impairment. The Company determines the fair value of each reporting unit utilizing an income approach (discounted cash flows) weighted 50% and a market approach (consisting of a comparable public company multiples methodology) weighted 50%. To determine the reasonableness of the calculated fair values, the Company reviews the assumptions to ensure that neither the income approach nor the market approach yielded significantly different valuations.

The key assumptions are updated every year for each reporting unit for the income and market approaches used to determine the fair value. Various assumptions are utilized including forecasted operating results, annual operating plans, strategic plans, economic projections, anticipated future cash flows, the weighted average cost of capital, market data and market multiples. The assumptions that have the most significant effect on the fair value calculations are the weighted average cost of capital, market multiples, forecasted EBITDA and terminal growth rates. The 2020 and 2019 ranges for these three assumptions utilized by the Company are as follows:

Assumptions			2020 Range						2019 Range
Weighted average cost of capital			8.25% to 11.0%						8.5% to 10.5%
Market multiples			13.0x to 24.0x						11.0x to 18.0x
Terminal growth rates			3.0% to 3.5%						3.0% to 3.5%

In assessing the fair value of the reporting units, the Company considers both the market approach and the income approach. Under the market approach, the fair value of the reporting unit is determined by the respective trailing twelve month EBITDA and the forward looking 2021 EBITDA (50% each), based on multiples of comparable public companies. The market approach is dependent on a number of significant management assumptions including forecasted EBITDA and selected market multiples. Under the income approach, the fair value of the reporting unit is determined based on the present value of estimated future cash flows. The income approach is dependent on a number of significant management assumptions including estimates of operating results, capital expenditures, net working capital requirements, long-term growth rates and discount rates. Weighting was equally attributed to both the market and income approaches (50% each) in arriving at the fair value of the reporting units.

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

Defined benefit retirement plans — The plan obligations and related assets of the defined benefit retirement plans are presented in Note 18 of the Notes to Consolidated Financial Statements in Part II, Item 8, “Financial Statements and Supplementary Data.” Level 1 assets are valued using unadjusted quoted prices for identical assets in active markets. Level 2 assets are valued using quoted prices or other observable inputs for similar assets. Level 3 assets are valued using unobservable inputs, but reflect the assumptions market participants would use in pricing the assets. Plan obligations and the annual pension expense are determined after consulting with actuaries on a number of key assumptions and on information provided by the Company. Key assumptions in the determination of the annual pension expense include the discount rate, the rate of salary increases and the estimated future return on plan assets. To the extent actual amounts differ from these assumptions and estimated amounts, results could be adversely affected.

The Society of Actuaries releases annual updates to mortality tables, which update life expectancy assumptions. IDEX adopts these annual updates and, in consideration of these tables, we modified the mortality assumptions used in determining our pension and post-retirement benefit obligations as of December 31, 2020, which will have a related impact on our annual benefit expense in future years. New mortality tables may result in additional funding requirements dependent upon the funded status of our plans. These expectations presume all other assumptions remain constant and there are no changes to applicable funding regulations.

Changes in the discount rate assumptions will impact the (gain) loss amortization and interest cost components of the projected benefit obligation (“PBO”), which in turn, may impact the Company’s funding decisions if the PBO exceeds plan assets. Each 100 basis point increase in the discount rate will cause a corresponding decrease in the PBO of approximately $28 million based upon the December 31, 2020 data. Each 100 basis point decrease in the discount rate will cause a corresponding increase in the PBO of approximately $34 million based upon the December 31, 2020 data.