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, 2020.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020, 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, 2020, 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, 2020, 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, 2020, of the Company and our report dated February 25, 2021, 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 25, 2021

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, 2020 and 2019, the related consolidated statements of operations, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, 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, 2020, 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 25, 2021, 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 5 to the Financial Statements

Critical Audit Matter Description

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 recorded to source documents and determined that revenue was recognized 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 and market and customer trends and compared our independent expectations to the revenue recorded by management.


/s/ DELOITTE & TOUCHE LLP


Chicago, Illinois
February 25, 2021

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

IDEX CORPORATION

CONSOLIDATED BALANCE SHEETS


	As of December 31,
	2020		2019
	(In thousands except share and per share amounts)
ASSETS
Current assets
Cash and cash equivalents	$	1,025,851	$	632,581
Receivables - net	293,146		298,186
Inventories	289,910		293,467
Other current assets	48,324		37,211
Total current assets	1,657,231		1,261,445
Property, plant and equipment - net	298,273		280,316
Goodwill	1,895,574		1,779,745
Intangible assets - net	415,563		388,031
Other noncurrent assets	147,757		104,375
Total assets	$	4,414,398	$	3,813,912
LIABILITIES AND EQUITY
Current liabilities
Trade accounts payable	$	151,993	$	138,463
Accrued expenses	208,828		180,290
Short-term borrowings	88		388
Dividends payable	38,149		38,736
Total current liabilities	399,058		357,877
Long-term borrowings	1,044,354		848,864
Deferred income taxes	163,863		146,574
Other noncurrent liabilities	266,797		197,368
Total liabilities	1,874,072		1,550,683
Commitments and contingencies (Note 11)
Shareholders’ equity
Preferred stock:
Authorized: 5,000,000 shares, $.01 per share par value; Issued: none	—		—
Common stock:
Authorized: 150,000,000 shares, $.01 per share par value; Issued: 90,071,763 shares at December 31, 2020 and 89,948,374 shares at December 31, 2019	901		899
Additional paid-in capital	775,153		760,453
Retained earnings	2,841,546		2,615,131
Treasury stock at cost: 14,111,221 shares at December 31, 2020 and 13,860,340 shares at December 31, 2019	(1,063,872)		(985,909)
Accumulated other comprehensive income (loss)	(13,525)		(127,345)
Total shareholders’ equity	2,540,203		2,263,229
Noncontrolling Interest	123		—
Total equity	2,540,326		2,263,229
Total liabilities and equity	$	4,414,398	$	3,813,912

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS


	For the Year Ended December 31,
	2020		2019		2018
	(In thousands except per share amounts)
Net sales	$	2,351,646	$	2,494,573	$	2,483,666
Cost of sales	1,324,222		1,369,539		1,365,771
Gross profit	1,027,424		1,125,034		1,117,895
Selling, general and administrative expenses	494,935		524,987		536,724


Restructuring expenses and asset impairments	11,776		21,044		12,083
Operating income	520,713		579,003		569,088
Other (income) expense - net	5,627		1,759		(3,985)
Interest expense	44,746		44,341		44,134
Income before income taxes	470,340		532,903		528,939
Provision for income taxes	92,562		107,382		118,366
Net income	$	377,778	$	425,521	$	410,573
Earnings per common share:
Basic earnings per common share	$	4.98	$	5.62	$	5.36
Diluted earnings per common share	$	4.94	$	5.56	$	5.29
Share data:
Basic weighted average common shares outstanding	75,741		75,594		76,412
Diluted weighted average common shares outstanding	76,400		76,454		77,563

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	For the Year Ended December 31,
	2020		2019		2018
	(In thousands)
Net income	$	377,778	$	425,521	$	410,573
Other comprehensive income (loss):
Reclassification adjustments for derivatives, net of tax	4,652		4,882		5,006
Pension and other postretirement adjustments, net of tax	1,385		(3,069)		9,825

Cumulative translation adjustment	107,783		67		(48,114)


Other comprehensive income (loss)	113,820		1,880		(33,283)
Comprehensive income	$	491,598	$	427,401	$	377,290

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY


	Common Stock and Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)						Treasury Stock		Total Shareholders’ Equity		Noncontrolling Interest		Total Equity
	Cumulative Translation Adjustment		Retirement Benefits Adjustments		Cumulative Unrealized Gain (Loss) on Derivatives
	(In thousands except share and per share amounts)
Balance, December 31, 2017	$	717,808	$	2,057,915	$	(46,306)	$	(29,154)	$	(14,047)	$	(799,674)	$	1,886,542	$	—	$	1,886,542
Net income	—		410,573		—		—		—		—		410,573		—		410,573
Adjustment for adoption of ASU 2016-16	—		(645)		—		—		—		—		(645)		—		(645)
Adjustment for adoption of ASU 2018-02	—		6,435		—		(3,411)		(3,024)				—		—		—
Cumulative translation adjustment	—		—		(48,114)		—		—		—		(48,114)		—		(48,114)
Net change in retirement obligations (net of tax of $3,076)	—		—		—		9,825		—		—		9,825		—		9,825
Net change on derivatives designated as cash flow hedges (net of tax of $1,469)	—		—		—		—		5,006		—		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		—		27,701
Repurchase of 1,273,961 shares of common stock	—										(173,926)		(173,926)		—		(173,926)
Share-based compensation	21,432		—		—		—		—		—		21,432		—		21,432
Shares surrendered for tax withholding	—		—		—		—		—		(11,555)		(11,555)		—		(11,555)
Cash dividends declared - $1.72 per common share outstanding	—		(132,199)		—		—		—		—		(132,199)		—		(132,199)
Balance, December 31, 2018	$	739,240	$	2,342,079	$	(94,420)	$	(22,740)	$	(12,065)	$	(957,454)	$	1,994,640	$	—	$	1,994,640
Net income	—		425,521		—		—		—		—		425,521		—		425,521
Adjustment for adoption of ASU 2016-02	—		28		—		—		—		—		28		—		28
Cumulative translation adjustment	—		—		67		—		—		—		67		—		67
Net change in retirement obligations (net of tax of $1,553)	—		—		—		(3,069)		—		—		(3,069)		—		(3,069)
Net change on derivatives designated as cash flow hedges (net of tax of $1,445)	—		—		—		—		4,882		—		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		—		38,809
Repurchase of 388,953 shares of common stock	—		—		—		—		—		(54,668)		(54,668)		—		(54,668)
Share-based compensation	22,112		—		—		—		—		—		22,112		—		22,112
Shares surrendered for tax withholding	—		—		—		—		—		(12,596)		(12,596)		—		(12,596)

Cash dividends declared - $2.00 per common share outstanding	—		(152,497)		—		—		—		—		(152,497)		—		(152,497)
Balance, December 31, 2019	$	761,352	$	2,615,131	$	(94,353)	$	(25,809)	$	(7,183)	$	(985,909)	$	2,263,229	$	—	$	2,263,229
Net income	—		377,778		—		—		—		—		377,778		—		377,778
Cumulative translation adjustment	—		—		107,783		—		—		—		107,783		—		107,783
Net change in retirement obligations (net of tax of $53)	—		—		—		1,385		—		—		1,385		—		1,385
Net change on derivatives designated as cash flow hedges (net of tax of $1,369)	—		—		—		—		4,652		—		4,652		—		4,652
Issuance of 688,563 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $4,967)	—		—		—		—		—		44,587		44,587		—		44,587
Repurchase of 876,423 shares of common stock	—		—		—		—		—		(110,342)		(110,342)		—		(110,342)
Share-based compensation	14,702		—		—		—		—		—		14,702		—		14,702
Shares surrendered for tax withholding	—		—		—		—		—		(12,208)		(12,208)		—		(12,208)
Cash dividends declared - $2.00 per common share outstanding	—		(151,363)		—		—		—		—		(151,363)		—		(151,363)
Contributions received from joint venture partner	—		—		—		—		—		—		—		123		123
Balance, December 31, 2020	$	776,054	$	2,841,546	$	13,430	$	(24,424)	$	(2,531)	$	(1,063,872)	$	2,540,203	$	123	$	2,540,326

See Notes to Consolidated Financial Statements.

IDEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Year Ended December 31,
	2020		2019		2018
	(In thousands)
Cash flows from operating activities
Net income	$	377,778	$	425,521	$	410,573
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain) loss on sale of fixed assets - net	(868)		156		946

Asset impairments	3,087		10,155		—
Depreciation and amortization	41,651		39,543		39,049
Amortization of intangible assets	41,844		37,333		38,495
Amortization of debt issuance expenses	1,716		1,355		1,332
Share-based compensation expense	19,375		27,669		24,754
Deferred income taxes	8,238		6,625		(4,345)

Non-cash interest expense associated with forward starting swaps	6,021		6,327		6,475


Changes in (net of the effect from acquisitions):
Receivables	20,873		22,338		(23,419)
Inventories	36,523		(3,322)		(23,031)
Other current assets	(10,276)		(2,361)		25,162
Trade accounts payable	2,702		(9,115)		(1,220)
Deferred revenue	38,967		8,680		(3,247)
Accrued expenses	(15,326)		(46,664)		7,125
Other - net	(3,032)		3,822		(19,304)
Net cash flows provided by operating activities	569,273		528,062		479,345
Cash flows from investing activities
Purchases of property, plant and equipment	(51,545)		(50,912)		(56,089)
Purchase of intellectual property	—		—		(4,000)
Acquisition of businesses, net of cash acquired	(123,133)		(87,180)		(20,205)
Proceeds from disposal of fixed assets	2,287		962		363
Contributions received from joint venture partner	120		—		—
Other - net	(306)		115		(1,500)
Net cash flows used in investing activities	(172,577)		(137,015)		(81,431)
Cash flows from financing activities
Borrowings under revolving credit facilities	150,000		—		—

Proceeds from issuance of 3.0% Senior Notes	499,100		—		—

Payment of 4.5% Senior Notes	(300,000)		—		—

Payments under revolving credit facilities	(150,000)		—		(11,284)
Payments under other long-term borrowings	(396)		(50,057)		—
Payment of make-whole redemption premium	(6,756)		—		—
Debt issuance costs	(4,749)		—		—
Dividends paid	(151,838)		(147,208)		(127,478)
Proceeds from stock option exercises	44,587		38,809		27,639

Repurchases of common stock	(110,342)		(54,668)		(173,926)
Shares surrendered for tax withholding	(12,208)		(12,596)		(11,555)
Settlement of foreign exchange contracts	—		—		6,593
Other - net	—		(1,865)		—
Net cash flows used in financing activities	(42,602)		(227,585)		(290,011)
Effect of exchange rate changes on cash and cash equivalents	39,176		2,712		(17,446)
Net increase in cash	393,270		166,174		90,457
Cash and cash equivalents at beginning of year	632,581		466,407		375,950
Cash and cash equivalents at end of year	$	1,025,851	$	632,581	$	466,407
Supplemental cash flow information
Cash paid for:
Interest	$	35,152	$	36,683	$	36,327
Income taxes - net	87,193		109,032		90,733
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, provers, 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, 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.

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 $9.9 million, $15.7 million and $17.0 million for 2020, 2019 and 2018, 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 expected 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 first in, first out 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 value, 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 value 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 fourth quarter of 2020, the Company consolidated certain facilities within the Fluid & Metering Technologies (“FMT”) segment, which resulted 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, which resulted 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. These charges were recorded as Restructuring expenses and asset impairments in the Consolidated Statements of Operations.

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 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 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 and asset impairments in the Consolidated Statements of Operations.

In 2018, the Company concluded that there were no long-lived assets with a fair value that was less than the carrying value. See Note 15 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 6 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.

Accounting Standards Codification (“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:


	2020	2019	2018
	(In thousands)
Basic weighted average common shares outstanding	75,741	75,594	76,412
Dilutive effect of stock options, restricted stock and performance share units	659	860	1,151
Diluted weighted average common shares outstanding	76,400	76,454	77,563

Options to purchase approximately 0.3 million shares of common stock in each of 2020, 2019 and 2018, 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 16 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			2 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 15 years
Trade names			5 to 20 years
Customer relationships			9 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 $82.3 million, $92.4 million and $84.9 million in 2020, 2019 and 2018, respectively. Research and development expenses, which include costs associated with developing new products and major improvements to existing products, were $48.2 million, $56.4 million and $48.0 million in 2020, 2019 and 2018, 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. Statement of Operations 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 income (loss) in the Consolidated Balance Sheets. The foreign currency transaction losses (gains) for the periods ending December 31, 2020, 2019 and 2018 were $3.0 million, $3.3 million and $(2.4) million, respectively, and are reported within Other (income) expense - net on the Consolidated Statements of Operations. See Note 8 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 bases 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 the 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 13 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 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 6 for further information.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the two-step goodwill impairment test by eliminating the second step of the test. Under this guidance, an entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying value over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. This guidance does not amend the optional qualitative assessment of goodwill impairment. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have a material impact on our consolidated financial statements. See Note 6 for further information.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which amends 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 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 replaces the prior “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. ASU 2018-19 affects 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. The Company adopted this standard on January 1, 2020 using the prospective transition approach. 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 was 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 10 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 5 for further details on revenue.

Recently Issued Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which eliminates the need to analyze whether the following apply in a given period (1) exception to the incremental approach for intraperiod tax allocation (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments and (3) exceptions in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU is also designed to improve the application of income tax-related guidance and simplify GAAP for (1) franchise taxes that are partially based on income, (2) transactions with a government that result in a step-up in the tax basis of goodwill, (3) separate financial statements of legal entities that are not subject to tax, and (4) enacted changes in tax laws in interim periods. ASU 2019-12 is effective for annual periods beginning after December 15, 2020, 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.

2020 Acquisitions

On November 23, 2020, the Company acquired Qualtek Manufacturing, Inc. (“Qualtek”), a manufacturer of high quality specialty metal components and parts by providing vertically integrated tool and die, metal stamping and metal finishing services. Headquartered in Colorado Springs, CO, Qualtek operates in our BAND-IT platform within the Fire & Safety/Diversified Products segment. Qualtek was acquired for cash consideration of $1.9 million. The entire purchase price was funded with cash on hand. Goodwill recognized as part of this transaction was $1.1 million. The goodwill recorded for the acquisition reflects the strategic fit, revenue and earnings growth potential of this business. The goodwill is deductible for tax purposes.

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

On February 28, 2020, the Company acquired the stock of Flow Management Devices, LLC (“Flow MD”), a privately held provider of flow measurement systems that ensure custody transfer accuracy in the oil and gas industry. Flow MD engineers and manufactures small volume provers. Headquartered in Phoenix, AZ, with operations in Houston, TX and Pittsburgh, PA, Flow MD operates in our Energy platform within the Fluid & Metering Technologies segment. Flow MD was acquired for cash consideration of $121.2 million. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $60.4 million and $53.0 million, respectively. The goodwill is deductible for tax purposes.

The Company made a preliminary allocation of the purchase price for the Flow MD 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. If the Company obtains additional information about these assets and liabilities, and learns more about the newly acquired business, we will refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company will make required adjustments to the purchase price allocation prior to the completion of the measurement period, if necessary.

The preliminary allocation of the purchase price 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	$	32,858
Property, plant and equipment	4,166
Goodwill	60,431
Intangible assets	53,000
Other noncurrent assets	1,344
Total assets acquired	151,799
Current liabilities	(32,291)
Deferred income taxes	2,054
Other noncurrent liabilities	(329)
Net assets acquired	$	121,233

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


(In thousands, except weighted average life)	Total		Weighted Average Life
Trade names	$	6,000	15
Customer relationships	31,500		10
Unpatented technology	15,500		20
Acquired intangible assets	$	53,000

The Company incurred $4.3 million of acquisition-related transaction costs in 2020. 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 $0.1 million fair value inventory step-up charge associated with the completed 2020 acquisition of Qualtek and a $4.1 million fair value inventory step-up charge associated with the completed 2020 acquisition of Flow MD in the year ended December 31, 2020. These charges were recorded in Cost of sales.

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 but also have operations in China, the United Kingdom and the United States. Roplan and Steridose 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 $86.6 million and $48.2 million, respectively. The goodwill is not deductible for tax purposes.

The Company finalized the 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.

The final allocation of the purchase price 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	$	20,248
Property, plant and equipment	1,656
Goodwill	86,613
Intangible assets	48,183
Other noncurrent assets	788
Total assets acquired	157,488
Current liabilities	(7,630)
Long-term borrowings	(51,130)
Deferred income taxes	(11,094)
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
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 was 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. In March 2020, the Company and the seller reached an agreement to settle the contingent consideration associated with the acquisition of FLI for $3.0 million, which was paid in April 2020.

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.

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 within Selling, general and administrative expenses.

On December 28, 2020, the Company completed the sale of its Avery Hardoll product line for $0.5 million in cash, resulting in a pre-tax loss on the sale of $0.4 million. The Company recorded $0.3 million of income tax benefit associated with this transaction during the year ended December 31, 2020. The results of Avery Hardoll were reported within the Fluid & Metering Technologies segment and generated $1.2 million of revenues in 2020 through the date of sale. The Company concluded that this divestiture did not meet the criteria for reporting discontinued operations. There were no divestitures that took place during the years ended December 31, 2019 and 2018.

3. Joint Venture

On May 12, 2020, a subsidiary of IDEX entered into a joint venture agreement with a third party to form a limited liability company (the “Joint Venture”) that will manufacture and sell high performance elastomer seals for the oil and gas industry to customers within the Kingdom of Saudi Arabia as well as export these high performance elastomer seals outside of the Kingdom of Saudi Arabia. The Joint Venture will be headquartered in Damman, Saudi Arabia and will operate in our Sealing Solutions platform within the Health & Science Technologies segment. In the fourth quarter of 2020, the Company contributed $147 thousand and owns 55% of the share capital while the third party partner contributed $120 thousand and owns 45% of the share capital. As of December 31, 2020, the Joint Venture had not yet begun its operations. Since we control the entity, we have consolidated the Joint Venture and recorded a noncontrolling interest in our consolidated financial statements.

4. Balance Sheet Components


	December 31,
	2020		2019
	(In thousands)
RECEIVABLES
Customers	$	288,288	$	298,118
Other	10,949		6,415
Total	299,237		304,533
Less allowance for doubtful accounts	6,091		6,347
Total receivables - net	$	293,146	$	298,186
INVENTORIES
Raw materials and components parts	$	173,248	$	182,382
Work in process	29,436		28,761
Finished goods	87,226		82,324
Total inventories	$	289,910	$	293,467
PROPERTY, PLANT AND EQUIPMENT
Land and improvements	$	33,705	$	32,240
Buildings and improvements	192,428		187,301
Machinery, equipment and other	430,423		397,498
Office and transportation equipment	95,549		95,759
Construction in progress	28,704		24,546
Total	780,809		737,344
Less accumulated depreciation and amortization	482,536		457,028
Total property, plant and equipment - net	$	298,273	$	280,316
ACCRUED EXPENSES
Payroll and related items	$	75,238	$	77,556
Management incentive compensation	15,763		14,408
Income taxes payable	13,453		9,905

Insurance	11,115		8,240
Warranty	7,394		5,581
Deferred revenue	28,374		17,633
Lease liability	16,721		15,235
Restructuring	3,868		6,110
Liability for uncertain tax positions	—		890
Accrued interest	3,592		1,735
Contingent consideration for acquisition	—		3,375
Other	33,310		19,622
Total accrued expenses	$	208,828	$	180,290
OTHER NONCURRENT LIABILITIES
Pension and retiree medical obligations	$	99,417	$	87,478
Transition tax payable	14,208		11,292
Liability for uncertain tax positions	1,071		3,008
Deferred revenue	30,354		2,129

Lease liability	94,250		69,928

Other	27,497		23,533
Total other noncurrent liabilities	$	266,797	$	197,368

The valuation and qualifying account activity for the years ended December 31, 2020, 2019 and 2018 is as follows:


	2020		2019		2018
	(In thousands)
ALLOWANCE FOR DOUBTFUL ACCOUNTS (1)
Beginning balance January 1	$	6,347	$	6,709	$	7,764
Charged to costs and expenses, net of recoveries	34		1,181		290
Utilization	(525)		(1,443)		(1,396)
Currency translation and other	235		(100)		51
Ending balance December 31	$	6,091	$	6,347	$	6,709

(1) Includes provision for doubtful accounts.

5. 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, provers, 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 amount, nature, timing and uncertainty of our revenue and cash flows are affected by economic factors. Revenue was attributed to geographical region based on the 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, 2020, 2019 and 2018 was as follows:


	For the Year Ended December 31,
	2020		2019		2018
	(In thousands)
Energy	$	199,980	$	164,825	$	163,996
Valves	107,833		118,333		113,136
Water	236,080		250,589		251,020
Pumps	265,281		331,098		324,222
Agriculture	87,130		92,183		99,178
Intersegment elimination	(830)		(505)		(277)
Fluid & Metering Technologies	895,474		956,523		951,275
Scientific Fluidics & Optics	415,827		434,623		417,859
Sealing Solutions	207,623		200,495		200,316
Gast	122,875		133,471		126,787
Micropump	29,637		32,216		36,827
Material Processing Technologies	120,000		113,641		114,630
Intersegment elimination	(2,609)		(1,823)		(449)
Health & Science Technologies	893,353		912,623		895,970
Fire & Safety	376,320		403,949		396,926
BAND-IT	88,065		106,624		105,785
Dispensing	98,466		116,197		134,317
Intersegment elimination	(32)		(1,343)		(607)
Fire & Safety/Diversified Products	562,819		625,427		636,421
Total net sales	$	2,351,646	$	2,494,573	$	2,483,666

Revenue by geographical region for the years ended December 31, 2020, 2019 and 2018 was as follows:


	For the Year Ended December 31, 2020
	FMT		HST		FSDP		IDEX
	(In thousands)
U.S.	$	505,757	$	387,652	$	269,899	$	1,163,308
North America, excluding U.S.	52,822		21,319		23,202		97,343
Europe	174,945		249,793		149,180		573,918
Asia	109,089		221,139		94,223		424,451
Other (1)	53,691		16,059		26,347		96,097
Intersegment elimination	(830)		(2,609)		(32)		(3,471)
Total net sales	$	895,474	$	893,353	$	562,819	$	2,351,646


	For the Year Ended December 31, 2019
	FMT		HST		FSDP		IDEX
	(In thousands)
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
	(In thousands)
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 expected losses as a result of customers’ inability to make required payments. Management evaluates the aging of 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, 2020		December 31, 2019
	(In thousands)
Billed receivables	$	273,536	$	286,196
Unbilled receivables	14,752		11,922
Total customer receivables	$	288,288	$	298,118

Advance payments, deposits and billings in excess of revenue recognized are included in Deferred revenue which is classified as current or noncurrent based on the timing of when we expect to recognize the revenue. The current portion is included in Accrued expenses and the noncurrent portion is included in Other noncurrent liabilities on our Consolidated Balance Sheets. Advance payments and deposits 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. We also receive deposits from customers on certain orders on which we will recognize as revenue at a point in time in the future. 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, 2020		December 31, 2019
	(In thousands)
Deferred revenue - current	$	28,374	$	17,633
Deferred revenue - noncurrent	30,354		2,129
Total deferred revenue	$	58,728	$	19,762

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 performance obligations may not be separately identifiable from other performance obligations 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 product or service 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 each of the years ended December 31, 2020, 2019 and 2018. 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 each of the years ended December 31, 2020, 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 incomplete contracts in the period in which such losses are determined.

6. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for 2020 and 2019, by reportable business segment, were as follows:


	FMT		HST		FSDP		Total
	(In thousands)
Goodwill	$	601,762	$	895,177	$	401,647	$	1,898,586
Accumulated goodwill impairment losses	(20,721)		(149,820)		(30,090)		(200,631)
Balance at January 1, 2019	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
Foreign currency translation	10,365		29,058		13,125		52,548
Acquisitions	60,431		—		1,052		61,483

Acquisition adjustments	—		1,798		—		1,798
Balance at December 31, 2020	$	649,721	$	862,628	$	383,225	$	1,895,574

ASC 350, Goodwill and Other Intangible Assets, 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 2020 and 2019, 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, 2020, 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 12 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 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, 2020 and 2019:


	At December 31, 2020							At December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net		Weighted Average Life	Gross Carrying Amount		Accumulated Amortization		Net
			(In thousands)							(In thousands)
Amortized intangible assets:
Patents	$	3,030	$	(1,740)	$	1,290	10	$	6,678	$	(5,276)	$	1,402
Trade names	130,793		(72,685)		58,108		16	123,062		(64,938)		58,124
Customer relationships	318,350		(120,294)		198,056		13	275,575		(96,252)		179,323

Unpatented technology	122,287		(55,131)		67,156		13	101,721		(43,561)		58,160
Other	700		(647)		53		10	700		(578)		122
Total amortized intangible assets	575,160		(250,497)		324,663			507,736		(210,605)		297,131
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	$	666,060	$	(250,497)	$	415,563		$	598,636	$	(210,605)	$	388,031

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

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

In 2020, the COVID-19 outbreak resulted in government lockdown mandates globally that forced us to both reduce hours and temporarily close some facilities at the beginning of the pandemic. These events required that an interim impairment test be performed on the definite-lived intangible assets at one of the Company’s businesses. The impairment test did not result in an impairment charge.

of $6.1 million related to customer relationships and $1.0 million related to unpatented technology. This charge was recorded as Restructuring expenses and asset impairments in the Consolidated Statements of Operations. See Note 15 for further discussion.

Amortization of intangible assets was $41.8 million, $37.3 million and $38.5 million in 2020, 2019 and 2018, respectively. Based on the intangible asset balances as of December 31, 2020, amortization expense is expected to approximate $42.9 million in 2021, $42.0 million in 2022, $38.6 million in 2023, $36.8 million in 2024 and $35.1 million in 2025.

7. Borrowings

Borrowings at December 31, 2020 and 2019 consisted of the following:


	2020		2019
	(In thousands)
Revolving Facility	$	—	$	—
4.50% Senior Notes, due December 2020	—		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
3.00% Senior Notes, due May 2030	500,000		—
Other borrowings	215		622
Total borrowings	1,050,215		850,622
Less current portion	88		388
Less deferred debt issuance costs	4,824		983
Less unaccreted debt discount	949		387
Long-term borrowings	$	1,044,354	$	848,864

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 a make-whole redemption 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.

The Company may redeem all or a portion of the 3.0% Senior Notes at any time prior to maturity at the redemption prices set forth in the Note Indenture (“Indenture”) governing the 3.0% Senior Notes. The Indenture and 3.0% 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 3.0% Senior Notes also require the Company to make an offer to repurchase the 3.0% Senior Notes upon a change of control triggering event (as defined in the Indenture) at a price equal to 101% of the principal amount plus accrued and unpaid interest, if any. The Indenture also provides for customary events of default, which include nonpayment, breach of covenants in the Indenture and certain events of bankruptcy and insolvency. Generally, if an event of default occurs, the Trustee or holders of at least 25% of the then outstanding 3.0% Senior Notes may declare the principal amount of all of the 3.0% Senior Notes to be due and payable immediately.

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 and wrote off 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 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.

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 31, 2024. The maturity date may be extended under certain conditions for an additional one-year term. Up to $75 million of the Revolving Facility is available for the issuance of letters of credit. Additionally, up to $50 million of the Revolving Facility is available to the Company for swing line loans, available on a same-day basis.

Proceeds of the Revolving Facility are available for use by the Borrowers for acquisitions, working capital and other general corporate purposes, including refinancing existing debt of the Company and its subsidiaries. The Company may request increases in the lending commitments under the Credit Agreement, but the aggregate lending commitments pursuant to such increases may not exceed $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 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 Credit Agreement requires payment to the lenders of a facility fee based upon the amount of the lenders’ commitments under the credit facility from time to time, determined based on the lower of the Company’s senior, unsecured long-term debt rating or the Company’s applicable leverage ratio. 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 customary affirmative and negative covenants for senior unsecured credit agreements. There are two key financial covenants that the Company is required to maintain in connection with the Credit Agreement 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 earnings before interest, income taxes, depreciation and amortization (“EBITDA”), both of which are tested quarterly and in the case of the leverage ratio under the Revolving Facility, 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 each financial covenant under Credit Agreement and the Notes. There are no financial covenants relating to the 3.0% Senior Notes or 4.2% Senior Notes; however, both are subject to cross-default provisions. The negative covenants include restrictions on the Company’s ability to grant liens, enter into transactions resulting in fundamental changes (such as mergers or sales of all or substantially all of the assets of the Company), make certain subsidiary dividends or distributions, engage in materially different lines of businesses and allow subsidiaries to incur certain additional debt.

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

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 at December 31, 2020 of approximately $792.8 million.

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 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.

As of December 31, 2020, the $350.0 million 4.2% Senior Notes are due in December 2021 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 4.2% Senior Notes remain classified as long-term borrowings in the Consolidated Balance Sheets as of December 31, 2020.

Total borrowings at December 31, 2020 have scheduled maturities as follows:


(In thousands)
2021	$	350,088
2022	—
2023	100,000
2024	—
2025	100,127
Thereafter	500,000
Total borrowings	$	1,050,215

8. 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 17 for the amount of loss reclassified into net income for interest rate contracts for the years ended December 31, 2020, 2019 and 2018. As of December 31, 2020, 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 was 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%. In conjunction with the early redemption of the 4.5% Senior Notes on May 27, 2020, the Company accelerated the recognition of the remaining $1.4 million of the pre-tax amount included in Accumulated other comprehensive income (loss) in shareholders’ equity related to the 4.5% Senior Notes and recorded such as Other (income) expense - net during the year ended December 31, 2020 in the Consolidated Statements of Operations.

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, 2020, 2019 and 2018 is $6.0 million, $6.3 million and $6.5 million, respectively.

The remaining $2.5 million included in Accumulated other comprehensive income (loss) in shareholders’ equity at December 31, 2020 will be recognized in net income over the next 12 months as the underlying hedged transaction is 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 year ended December 31, 2018, the Company recorded a gain of $0.9 million within Other (income) expense - net in the Consolidated Statements of Operations related to these foreign currency exchange contracts. During the year ended December 31, 2018, the Company recorded a foreign currency transaction loss of $0.9 million 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.

9. 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, 2020 and 2019:


	Basis of Fair Value Measurements
	Balance at December 31, 2020		Level 1		Level 2		Level 3
	(In thousands)

Available for sale securities	$	13,554	$	13,554	$	—	$	—


	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

There were no transfers of assets or liabilities between Level 1 and Level 2 in 2020 or 2019.

As of December 31, 2019, 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 represented management’s best estimate of the liability based on a range of FLI’s two-year operating results from August 1, 2018 to July 31, 2020. In March 2020, the Company and the seller reached an agreement to settle the contingent consideration for $3.0 million, which was paid in April 2020.

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, 2020, the fair value of the outstanding indebtedness under our 3.0% Senior Notes, 3.2% Senior Notes, 3.37% 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 $1,127.6 million compared to the carrying value of $1,049.3 million. 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. 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.

10. 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, 2020 and 2019 was as follows:


	Balance Sheet Caption	December 31, 2020		December 31, 2019
		(In thousands)
Operating leases:
Building right-of-use assets - net	Other noncurrent assets	$	100,775	$	75,381
Equipment right-of-use assets - net	Other noncurrent assets	5,811		6,993
Total right-of-use assets - net		$	106,586	$	82,374
Operating leases:
Current lease liabilities	Accrued expenses	$	16,721	$	15,235
Noncurrent lease liabilities	Other noncurrent liabilities	94,250		69,928
Total lease liabilities		$	110,971	$	85,163

In the fourth quarter of 2020, the Company consolidated certain facilities within the FMT segment, which resulted in an impairment charge of $0.9 million related to a building right-of-use asset that was exited early. The Company also relocated its corporate office, which resulted in an impairment charge of $0.4 million related to a building right-of-use asset that was exited early.

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 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 and asset impairments in the Consolidated Statements of Operations. See Note 15 for further discussion.

As part of the adoption of the new lease standard in 2019, 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 years ended December 31, 2020 and 2019 were as follows:


	December 31, 2020		December 31, 2019
	(In thousands)
Operating lease cost (1)	$	29,451	$	23,080
Variable lease cost	1,939		2,265
Total lease expense	$	31,390	$	25,345

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

Rental expense totaled $21.8 million in 2018.

Supplemental cash flow information related to leases for the years ended December 31, 2020 and 2019 was as follows:


	December 31, 2020		December 31, 2019
	(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities	$	28,673	$	22,888
Right-of-use assets obtained in exchange for new operating lease liabilities	40,432		25,878

Other supplemental information related to leases as of December 31, 2020 and 2019 was as follows:


Lease Term and Discount Rate	December 31, 2020		December 31, 2019
Weighted-average remaining lease term (years):
Operating leases - building and equipment	9.43		9.61
Operating leases - vehicles	2.01		1.92
Weighted-average discount rate:
Operating leases - building and equipment	3.51	%	4.08	%
Operating leases - vehicles	2.05	%	2.99	%

The Company uses its incremental borrowing rate to determine the present value of the lease payments.

Total lease liabilities at December 31, 2020 have scheduled maturities as follows:


Maturity of Lease Liabilities	Operating Leases
	(In thousands)
2021	$	19,717
2022	17,014
2023	13,662
2024	11,681
2025	11,141
Thereafter	57,570
Total lease payments	130,785
Less: Imputed interest	(19,814)
Present value of lease liabilities	$	110,971

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


Maturity of Lease Liabilities	Operating Leases
	(In thousands)
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

11. 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:


	2020		2019		2018
	(In thousands)
Beginning balance at January 1	$	5,581	$	5,303	$	6,281
Provision for warranties	3,001		3,438		2,334
Claim settlements	(2,676)		(3,115)		(2,981)
Other adjustments, including acquisitions, divestitures and currency translation	1,488		(45)		(331)
Ending balance at December 31	$	7,394	$	5,581	$	5,303

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.

12. Common and Preferred Stock

On March 17, 2020, the Company’s Board of Directors approved an increase of $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. 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 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.

At December 31, 2020 and 2019, 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, 2020 and 2019.

13. Income Taxes

Pretax income for 2020, 2019 and 2018 was taxed in the following jurisdictions:


	2020		2019		2018
	(In thousands)
U.S.	$	296,355	$	377,166	$	357,585
Foreign	173,985		155,737		171,354
Total	$	470,340	$	532,903	$	528,939

The provision (benefit) for income taxes for 2020, 2019 and 2018 was as follows:


	2020		2019		2018
	(In thousands)
Current
U.S.	$	29,548	$	49,819	$	67,793
State and local	4,603		9,074		8,056
Foreign	50,173		41,864		46,862
Total current	84,324		100,757		122,711
Deferred
U.S.	10,066		10,158		(5,471)
State and local	1,522		(115)		(17)
Foreign	(3,350)		(3,418)		1,143
Total deferred	8,238		6,625		(4,345)
Total provision for income taxes	$	92,562	$	107,382	$	118,366

Deferred tax assets (liabilities) at December 31, 2020 and 2019 were:


	2020		2019
	(In thousands)
Employee and retiree benefit plans	$	26,872	$	28,097
Capital loss and other carryforwards	16,316		16,035
Operating lease assets	24,705		20,036
Operating lease liabilities	(23,945)		(19,530)
Depreciation and amortization	(188,993)		(175,904)
Inventories	8,780		7,699
Allowances and accruals	7,343		7,765
Interest rate exchange agreement	745		2,113
Other	(16,946)		(14,998)
Total gross deferred tax (liabilities)	(145,123)		(128,687)
Valuation allowance	(16,316)		(16,035)
Total deferred tax (liabilities), net of valuation allowances	$	(161,439)	$	(144,722)

The deferred tax assets and liabilities recognized in the Company’s Consolidated Balance Sheets as of December 31, 2020 and 2019 were:


	2020		2019
	(In thousands)

Noncurrent deferred tax asset - Other noncurrent assets	$	2,424	$	1,852

Noncurrent deferred tax liabilities - Deferred income taxes	(163,863)		(146,574)
Net deferred tax liabilities	$	(161,439)	$	(144,722)

The Company had prepaid income taxes, recorded within Other current assets on the Consolidated Balance Sheets, of $20.9 million and $13.4 million as of December 31, 2020 and 2019, 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 2020, 2019 and 2018 are as follows:


	2020		2019		2018
	(In thousands)
Pretax income	$	470,340	$	532,903	$	528,939
Provision for income taxes:
Computed amount at statutory rate	$	98,771	$	111,910	$	111,077
State and local income tax (net of federal tax benefit)	5,954		8,163		8,280
Taxes on non-U.S. earnings-net of foreign tax credits	7,048		5,003		5,725
Global Intangible Low-Taxed Income	(2,731)		2,324		2,725
Foreign-Derived Intangible Income Deduction	(4,928)		(5,811)		(5,410)
Effect of flow-through entities	1,308		1,316		1,215

U.S. business tax credits	(3,163)		(3,193)		(3,056)



Share-based payments	(9,743)		(11,011)		(9,348)
Valuation allowance	70		(117)		—
Impact of Tax Act	—		(334)		10,298
Other	(24)		(868)		(3,140)
Total provision for income taxes	$	92,562	$	107,382	$	118,366

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted into law as a response to the COVID-19 pandemic. The CARES Act includes various provisions including, but not limited to, changes to Federal net operating losses, expanding the applicability of the interest limitation rules under Internal Revenue Code Section 163(j) and amending the 2017 Tax Cuts and Jobs Act to provide for a 15-year recovery period for qualified improvement property. In addition to the CARES Act, on December 27, 2020, the Consolidated Appropriations Act was enacted into law which enhances and expands certain provisions of the CARES Act. The Company has determined that neither of these enacted laws have a material impact for the year ending December 31, 2020.

The Company has $28.6 million and $26.5 million of permanently reinvested earnings of non-U.S. subsidiaries as of December 31, 2020 and 2019, respectively. No deferred U.S. income taxes have been provided on the $28.6 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 $4.3 million and $5.4 million as of December 31, 2020 and 2019, respectively.

During the years ended December 31, 2020, 2019 and 2018, the Company repatriated $27.0 million, $99.0 million and $135.0 million of foreign earnings, respectively. These actual distributions resulted in no incremental income tax expense for the years ended December 31, 2020, 2019 and 2018. These repatriations represent distributions of previously taxed income as well as distributions from liquidating subsidiaries.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2020, 2019 and 2018 is as follows:


	2020		2019		2018
	(In thousands)
Beginning balance January 1	$	3,680	$	4,070	$	2,722

Gross increases for tax positions of prior years	—		—		2,308
Gross decreases for tax positions of prior years	—		—		(229)
Settlements	(2,608)		(140)		(160)
Lapse of statute of limitations	—		(250)		(571)
Ending balance December 31	$	1,072	$	3,680	$	4,070

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2020, there was no accrued interest related to uncertain tax positions. As of December 31, 2019 and 2018, the Company had approximately $0.2 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 any of these years.

The total amount of unrecognized tax benefits that would affect the Company’s effective tax rate if recognized is $1.1 million, $3.7 million and $4.1 million as of December 31, 2020, 2019 and 2018, respectively. The tax years 2015-2019 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. However, these unrecognized tax benefits are long-term in nature and are not expected to change within the next 12 months.

The Company had net operating loss and general business credit carryforwards related to prior acquisitions for U.S. federal purposes at December 31, 2020 and 2019 of $0.1 million and $0.4 million, respectively. The U.S. federal business credit carryforwards are available for use against the Company’s consolidated U.S. federal taxable income and expire between 2025 and 2028. For non-U.S. purposes, the Company had net operating loss carryforwards at December 31, 2020 and 2019 of $7.4 million and $16.5 million, respectively, the majority of which relate to acquisitions. The entire balance of the non-U.S. net operating losses is available to be carried forward indefinitely. At December 31, 2020 and 2019, the Company had U.S. state net operating loss carryforwards of approximately $14.7 million and $17.4 million, respectively. If unutilized, the U.S. state net operating loss will expire between 2033 and 2039. At December 31, 2020 and 2019, 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, 2020 and 2019 of approximately $45.9 million and $45.6 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 between 2021 and 2025. At December 31, 2020 and 2019, 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 $9.6 million, respectively. At December 31, 2020 and 2019, the Company had U.S. state capital loss carryovers of $45.9 million and $62.1 million, respectively. If unutilized, the U.S. state capital loss carryovers will expire between 2021 and 2040. At December 31, 2020 and 2019, the Company recorded a valuation allowance against the deferred tax assets attributable to the U.S. state capital loss carryovers of $0.9 million and $0.8 million, respectively. At December 31, 2020 and 2019, the Company had a foreign capital loss carryforward of approximately $14.3 million and $13.8 million, respectively. The foreign capital loss can be carried forward indefinitely. At both December 31, 2020 and 2019, 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, 2020 and 2019 of approximately $3.3 million and $3.3 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 between 2029 and 2030. At December 31, 2020, the Company recorded a full valuation allowance against the deferred tax asset attributable to the U.S. federal foreign tax credit carryover.

14. 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, small volume provers, 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.


	2020		2019		2018
	(In thousands)
NET SALES
Fluid & Metering Technologies
External customers	$	895,474	$	956,523	$	951,275
Intersegment sales	830		505		277
Total segment sales	896,304		957,028		951,552
Health & Science Technologies
External customers	893,353		912,623		895,970
Intersegment sales	2,609		1,823		449
Total segment sales	895,962		914,446		896,419
Fire & Safety/Diversified Products
External customers	562,819		625,427		636,421
Intersegment sales	32		1,343		607
Total segment sales	562,851		626,770		637,028
Intersegment eliminations	(3,471)		(3,671)		(1,333)
Total net sales	$	2,351,646	$	2,494,573	$	2,483,666
OPERATING INCOME (LOSS) (1)
Fluid & Metering Technologies	$	235,011	$	285,256	$	275,060
Health & Science Technologies	206,356		200,200		205,679
Fire & Safety/Diversified Products	144,191		165,258		168,601
Corporate office and other	(64,845)		(71,711)		(80,252)
Total operating income	520,713		579,003		569,088
Interest expense	44,746		44,341		44,134
Other (income) expense - net	5,627		1,759		(3,985)
Income before taxes	$	470,340	$	532,903	$	528,939


	2020		2019		2018
	(In thousands)
ASSETS
Fluid & Metering Technologies	$	1,387,067	$	1,150,712	$	1,107,777
Health & Science Technologies	1,576,093		1,507,108		1,329,368
Fire & Safety/Diversified Products	891,864		825,398		806,075
Corporate office and other	559,374		330,694		230,637
Total assets	$	4,414,398	$	3,813,912	$	3,473,857
DEPRECIATION AND AMORTIZATION (2)
Fluid & Metering Technologies	$	25,939	$	22,152	$	22,370
Health & Science Technologies	41,778		39,721		39,939
Fire & Safety/Diversified Products	15,216		14,333		14,493
Corporate office and other	562		670		742
Total depreciation and amortization	$	83,495	$	76,876	$	77,544
CAPITAL EXPENDITURES
Fluid & Metering Technologies	$	11,924	$	17,285	$	19,541
Health & Science Technologies	27,626		22,001		26,039
Fire & Safety/Diversified Products	8,913		9,811		10,318
Corporate office and other	3,082		1,815		191
Total capital expenditures	$	51,545	$	50,912	$	56,089

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

(2)Excludes amortization of debt issuance expenses.

Information about the Company’s long-lived assets in different geographical regions for the years ended December 31, 2020, 2019 and 2018 is shown below.


	2020		2019		2018
	(In thousands)
LONG-LIVED ASSETS — PROPERTY, PLANT AND EQUIPMENT
U.S.	$	169,159	$	165,721	$	171,111
North America, excluding U.S.	5,028		3,829		3,398
Europe	99,989		88,104		85,100
Asia	23,950		22,505		21,355
Other	147		157		256
Total long-lived assets - net	$	298,273	$	280,316	$	281,220

15. Restructuring Expenses and Asset Impairments

During 2020, 2019 and 2018, the Company incurred restructuring costs to facilitate long-term, sustainable growth through cost reduction actions, consisting of employee reductions, facility rationalization and asset impairments. Restructuring costs include severance benefits, exit costs and asset impairments and are included in Restructuring expenses and asset impairments in the Consolidated Statements of Operations. Severance costs primarily consist of severance benefits through payroll continuation, COBRA subsidies, outplacement services, conditional separation costs and employer tax liabilities, while exit costs primarily consist of lease exit and contract termination costs.

2020 Initiative

During 2020, the Company recorded pre-tax restructuring expenses and asset impairments totaling $11.8 million related to the 2020 restructuring initiative. These expenses consisted of employee severance related to employee reductions across various functional areas, facility rationalization, contract termination costs and asset impairments. Severance payments will be substantially paid by the end of 2021 using cash from operations.

In the fourth quarter of 2020, the Company consolidated certain facilities within the FMT segment, which resulted 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, which resulted 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.

Pre-tax restructuring expenses and asset impairments by segment for the 2020 initiative were as follows:


	Severance Costs		Exit Costs		Asset Impairments		Total
	(In thousands)
Fluid & Metering Technologies	$	2,939	$	165	$	2,476	$	5,580
Health & Science Technologies	2,742		—		—		2,742
Fire & Safety/Diversified Products	2,524		—		—		2,524
Corporate/Other	319		—		611		930
Total restructuring costs	$	8,524	$	165	$	3,087	$	11,776

2019 Initiative

During 2019, the Company recorded pre-tax restructuring expenses and asset impairments 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 impairments. Severance payments were 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 and asset impairments in the Consolidated Statements of Operations.

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


	Severance Costs		Exit Costs		Asset Impairments		Total
	(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 and asset impairments 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 fully paid by the end of 2019 using cash from operations.

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


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

Restructuring accruals of $3.9 million and $6.1 million at December 31, 2020 and 2019, respectively, are reflected in Accrued expenses in our Consolidated Balance Sheets as follows:


	Restructuring Initiatives
	(In thousands)
Balance at January 1, 2019	$	6,170
Restructuring expenses	21,044
Payments, utilization and other	(21,104)
Balance at December 31, 2019	6,110
Restructuring expenses (1)	8,837
Payments, utilization and other	(11,079)
Balance at December 31, 2020	$	3,868

(1) Excludes $2.9 million of asset impairments related to property, plant and equipment and right-of-use assets.

16. 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, 2020 totaled 15.6 million, of which 3.0 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. The fair value of each option grant was estimated on the date of the grant using the Binomial lattice option pricing model.

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


	Years Ended December 31,
	2020	2019	2018
Weighted average fair value of grants	$34.22	$35.15	$38.13
Dividend yield	1.15%	1.18%	1.07%
Volatility	22.04%	24.77%	28.46%
Risk-free interest rate	1.39% - 1.66%	2.53% - 3.04%	2.03% - 3.17%
Expected life (in years)	5.80	5.87	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, 2020, 2019 and 2018 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, 2020, 2019 and 2018, 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, 2020, and changes during the year ended December 31, 2020 is presented as follows:


Stock Options	Shares	Weighted Average Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2020	1,386,539	$	103.58	6.95	$	94,764,140
Granted	353,130	172.93
Exercised	(511,960)	87.09
Forfeited/Expired	(263,983)	147.68
Outstanding at December 31, 2020	963,726	$	125.70	6.94	$	70,829,529
Vested and expected to vest at December 31, 2020	919,724	$	124.01	6.86	$	69,151,533
Exercisable at December 31, 2020	424,926	$	92.26	5.24	$	45,447,769

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 2020, 2019 and 2018 was $41.3 million, $49.5 million and $38.0 million, respectively. In 2020, 2019 and 2018, cash received

from options exercised was $44.6 million, $38.8 million and $27.6 million, respectively, while the actual tax benefit realized for the tax deductions from stock options exercised totaled $8.7 million, $10.4 million and $8.0 million, respectively.

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


	Years Ended December 31,
	2020		2019		2018
	(In thousands)
Cost of goods sold	$	501	$	445	$	470
Selling, general and administrative expenses	7,567		8,705		8,313
Total expense before income taxes	8,068		9,150		8,783
Income tax benefit	(907)		(1,209)		(1,616)
Total expense after income taxes	$	7,161	$	7,941	$	7,167

As of December 31, 2020, there was $9.1 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, 2020, and changes during the year ending December 31, 2020 is as follows:


Restricted Stock	Shares	Weighted-Average Grant Date Fair Value
Unvested at January 1, 2020	130,248	$	124.61
Granted	39,065	168.42
Vested	(39,683)	95.25
Forfeited	(18,330)	142.03
Unvested at December 31, 2020	111,300	$	147.13

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


	Years Ended December 31,
	2020		2019		2018
	(In thousands)
Cost of goods sold	$	318	$	261	$	367
Selling, general and administrative expenses	3,857		4,527		4,201

Total expense before income taxes	4,175		4,788		4,568
Income tax benefit	(876)		(920)		(825)
Total expense after income taxes	$	3,299	$	3,868	$	3,743

As of December 31, 2020, there was $5.8 million of total unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 1.0 year.

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, 2020, and changes during the year ending December 31, 2020 is as follows:


Cash-Settled Restricted Stock	Shares	Weighted-Average Fair Value
Unvested at January 1, 2020	74,560	$	172.08
Granted	20,780	173.30
Vested	(25,405)	173.26
Forfeited	(5,995)	199.20
Unvested at December 31, 2020	63,940	$	199.20

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


	Years Ended December 31,
	2020		2019		2018
	(In thousands)
Cost of goods sold	$	882	$	1,230	$	809
Selling, general and administrative expenses	3,677		4,118		2,391

Total expense before income taxes	4,559		5,348		3,200
Income tax benefit	(427)		(509)		(337)
Total expense after income taxes	$	4,132	$	4,839	$	2,863

At December 31, 2020 and 2019, the Company has accrued $5.4 million and $5.5 million, respectively, for cash-settled restricted stock in Accrued expenses in the Consolidated Balance Sheets and has accrued $2.9 million and $2.8 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 companies in the Russell Midcap Index (for awards granted from 2016 through 2019) or the S&P 500 Index (for awards granted in 2020) 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 42,690, 56,860 and 52,375 performance share units in 2020, 2019 and 2018, respectively.

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


	Years Ended December 31,
	2020	2019	2018
Weighted average fair value of grants	$224.14	$207.26	$216.59
Dividend yield	—%	—%	—%
Volatility	19.50%	19.11%	17.42%
Risk-free interest rate	1.30%	2.49%	2.40%
Expected life (in years)	2.94	2.83	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, 2020, and changes during the year ending December 31, 2020, is as follows:


Performance Share Units	Shares	Weighted-Average Grant Date Fair Value
Unvested at January 1, 2020	100,575	$	178.97
Granted	42,690	224.14
Vested	(24,395)	220.14
Forfeited	(60,175)	213.89
Unvested at December 31, 2020	58,695	$	218.16

Based on the Company’s relative total shareholder return rank during the three year period ended December 31, 2020, the Company achieved a 201% payout factor and issued 48,223 common shares in February 2021 for awards that vested in 2020.

Total compensation cost for performance share units is as follows:


	Years Ended December 31,
	2020		2019		2018
	(In thousands)
Cost of goods sold	$	—	$	—	$	—
Selling, general and administrative expenses	2,573		8,383		8,203

Total expense before income taxes	2,573		8,383		8,203
Income tax benefit	(217)		(641)		(1,586)
Total expense after income taxes	$	2,356	$	7,742	$	6,617

As of December 31, 2020, there was $4.8 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.

17. Other Comprehensive Income (Loss)

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


	For the Year Ended December 31, 2020						For the Year Ended December 31, 2019
	Pre-tax		Tax		Net of tax		Pre-tax		Tax		Net of tax
	(In thousands)
Cumulative translation adjustment	$	107,783	$	—	$	107,783	$	67	$	—	$	67



Pension and other postretirement adjustments
Net gain (loss) arising during the year	(1,438)		53		(1,385)		(7,432)		2,497		(4,935)
Amortization/recognition of settlement loss	2,876		(106)		2,770		2,810		(944)		1,866
Pension and other postretirement adjustments	1,438		(53)		1,385		(4,622)		1,553		(3,069)
Reclassification adjustments for derivatives	6,021		(1,369)		4,652		6,327		(1,445)		4,882
Total other comprehensive income (loss)	$	115,242	$	(1,422)	$	113,820	$	1,772	$	108	$	1,880


	For the Year Ended December 31, 2018
	Pre-tax		Tax		Net of tax
	(In thousands)
Cumulative translation adjustment	$	(48,114)	$	—	$	(48,114)



Pension and other postretirement adjustments
Net gain (loss) arising during the year	9,963		(2,375)		7,588
Amortization/recognition of settlement loss	2,938		(701)		2,237
Pension and other postretirement adjustments	12,901		(3,076)		9,825
Reclassification adjustments for derivatives	6,475		(1,469)		5,006
Total other comprehensive income (loss)	$	(28,738)	$	(4,545)	$	(33,283)

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


	For the Year Ended December 31,
	2020		2019		2018		Income Statement Caption
	(In thousands)





Pension and other postretirement plans:
Amortization of service cost	$	2,909	$	2,858	$	3,246	Other (income) expense - net
Recognition of settlement loss	(33)		(48)		(308)		Other (income) expense - net
Total before tax	2,876		2,810		2,938
Provision for income taxes	(106)		(944)		(701)
Total net of tax	$	2,770	$	1,866	$	2,237
Derivatives:
Reclassification adjustments	$	6,021	$	6,327	$	6,475	Interest expense, Other (income) expense - net
Total before tax	6,021		6,327		6,475
Provision for income taxes	(1,369)		(1,445)		(1,469)
Total net of tax	$	4,652	$	4,882	$	5,006

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.

18. Retirement Benefits

The Company sponsors several qualified and nonqualified defined benefit and defined contribution pension plans as well as 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. Subsequent to the freeze, termination of the Plan was approved in November 2019. In addition, the Company recorded a settlement charge of $0.7 million in Other (income) expense - net in the Consolidated Statements of Operations for the year ended December 31, 2019.

Participants were notified in February 2020 and the Plan was terminated in May 2020. As a result of the termination, the settlement threshold was reached in early 2020 and the Company recorded a settlement charge of $0.9 million in Other (income) expense - net in the Consolidated Statements of Operations for the year ended December 31, 2020. The settlement also triggered the remeasurement of net periodic benefit cost resulting in a reduction of $1.0 million to Other (income) expense - net in the Consolidated Statements of Operations for the year ended December 31, 2020 as a result of significant decreases in discount rates and strong asset performance in 2020. As of December 31, 2020, the Plan’s funded status is 113%, with assets valued at $93.4 million and liabilities of $82.6 million. The disclosures for the year ended December 31, 2020 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, 2020 and a statement of the funded status at December 31 for both years.


	Pension Benefits								Other Benefits
	2020				2019				2020		2019
	U.S.		Non-U.S.		U.S.		Non-U.S.
	(In thousands)
CHANGE IN BENEFIT OBLIGATION
Obligation at January 1	$	95,947	$	102,016	$	85,175	$	89,789	$	23,257	$	22,593
Service cost	134		2,215		653		1,844		616		561
Interest cost	1,274		1,056		2,796		1,440		624		849
Plan amendments	183		(1)		—		(156)		(2,905)		—
Benefits paid	(4,023)		(2,640)		(3,520)		(1,507)		(722)		(676)
Actuarial loss (gain)	6,504		7,279		16,931		9,903		3,241		(161)
Currency translation	—		8,941		—		66		62		91
Settlements	(6,064)		(3,802)		(4,826)		—		—		—
Curtailments	—		—		(1,538)		—		—		—
Acquisition/Divestiture	—		—		—		—		—		—
Other	—		624		276		637		—		—
Obligation at December 31	$	93,955	$	115,688	$	95,947	$	102,016	$	24,173	$	23,257
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1	$	93,413	$	39,304	$	83,580	$	33,532	$	—	$	—
Actual return on plan assets	16,225		3,620		17,446		3,406		—		—
Employer contributions	421		2,389		733		2,320		722		676
Benefits paid	(4,023)		(2,640)		(3,520)		(1,507)		(722)		(676)
Currency translation	—		2,669		—		916		—		—
Settlements	(6,064)		(3,802)		(4,826)		—		—		—
Acquisition/Divestiture	—		—		—		—		—		—
Other	—		624		—		637		—		—
Fair value of plan assets at December 31	$	99,972	$	42,164	$	93,413	$	39,304	$	—	$	—
Funded status at December 31	$	6,017	$	(73,524)	$	(2,534)	$	(62,712)	$	(24,173)	$	(23,257)
COMPONENTS ON THE CONSOLIDATED BALANCE SHEETS
Other noncurrent assets	$	10,754	$	3	$	1,921	$	14	$	—	$	—
Current liabilities	(510)		(1,520)		(564)		(1,270)		(990)		(1,127)
Other noncurrent liabilities	(4,227)		(72,007)		(3,891)		(61,456)		(23,183)		(22,130)
Net asset (liability) at December 31	$	6,017	$	(73,524)	$	(2,534)	$	(62,712)	$	(24,173)	$	(23,257)

The pension benefits actuarial loss in 2020 was primarily driven by the decrease in the discount rates from 2019 to 2020. The U.S. actuarial loss was partially offset due to an updated mortality base table and projection scale assumption for one of the plans. The Non-U.S. actuarial loss was partially offset due to updated mortality assumptions in the UK and Switzerland.

The other benefits actuarial loss in 2020 was primarily driven by the decrease in the discount rates from 2019 to 2020 and updated claims and contributions experience, partially offset by gains from benefit payments.

The accumulated benefit obligation (“ABO”) for all defined benefit pension plans was $204.4 million and $193.3 million at December 31, 2020 and 2019, respectively.

The weighted average assumptions used in the measurement of the Company’s benefit obligation at December 31, 2020 and 2019 were as follows:


	U.S. Plans				Non-U.S. Plans				Other Benefits
	2020		2019		2020		2019		2020				2019
Discount rate	2.14	%	3.06	%	0.95	%	1.33	%	2.20	%			3.09	%
Rate of compensation increase	—	%	—	%	2.32	%	2.29	%	—	%			4.00	%
Cash balance interest credit rate	4.00	%	4.00	%	1.00	%	1.00	%	—	%	—	%	—	%

The pretax amounts recognized in Accumulated other comprehensive income (loss) on the Consolidated Balance Sheets as of December 31, 2020 and 2019 were as follows:


	Pension Benefits								Other Benefits
	2020				2019				2020		2019
	U.S.		Non-U.S.		U.S.		Non-U.S.
	(In thousands)
Prior service cost (credit)	$	202	$	(92)	$	46	$	(100)	$	(2,914)	$	(46)
Net loss (gain)	13,414		24,536		21,432		19,304		(2,266)		(6,009)
Total	$	13,616	$	24,444	$	21,478	$	19,204	$	(5,180)	$	(6,055)

The components of, and the weighted average assumptions used to determine, the net periodic (benefit) cost for the plans in 2020, 2019 and 2018 are as follows:


	Pension Benefits
	2020				2019				2018
	U.S.		Non-U.S.		U.S.		Non-U.S.		U.S.		Non-U.S.
	(In thousands)
Service cost	$	134	$	2,215	$	653	$	1,844	$	886	$	2,105
Interest cost	1,274		1,056		2,796		1,440		2,634		1,389
Expected return on plan assets	(3,750)		(1,170)		(3,319)		(1,047)		(3,943)		(1,120)
Settlement loss recognized	910		(385)		713		—		(1)		(307)
Special termination benefit recognized	—		—		276		—		—		—
Net amortization	1,163		1,730		1,614		1,117		2,712		1,271
Net periodic (benefit) cost	$	(269)	$	3,446	$	2,733	$	3,354	$	2,288	$	3,338


	Other Benefits
	2020		2019		2018
	(In thousands)
Service cost	$	616	$	561	$	668
Interest cost	624		849		810
Net amortization	(542)		(635)		(737)
Net periodic benefit cost	$	698	$	775	$	741


	U.S. Plans						Non-U.S. Plans
	2020		2019		2018		2020		2019		2018
Discount rate	Various*		4.11%/2.99%**		3.46	%	1.33	%	2.07	%	1.82	%
Expected return on plan assets	4.00	%	4.00	%	5.50	%	3.00	%	3.12	%	3.09	%
Rate of compensation increase	—	%	4.00	%	4.00	%	2.29	%	2.13	%	2.37	%

*For the IDEX Corporation Retirement Plan, a discount rate of 3.07% was used to determine the net periodic (benefit) cost for the period January 1, 2020 through March 31, 2020, a discount rate of 2.97% was used to determine the net periodic (benefit) cost for the period April 1, 2020 through June 30, 2020, a discount rate of 2.41% was used to determine the net periodic (benefit) cost for the period July 1, 2020 through September 30, 2020 and a discount rate of 2.36% was used to determine the net periodic (benefit) cost for the period October 1, 2020 through December 31, 2020 as a result of the quarterly remeasurements that occurred in conjunction with the termination of the Plan.

For the Pulsafeeder, Inc. Pension Plan for Hourly Employees at Rochester, New York, a discount rate of 3.21% was used to determine the net periodic (benefit) cost for the period January 1, 2020 through June 30, 2020 and a discount rate of 2.62% was used to determine the net periodic (benefit) cost for the period July 1, 2020 through December 31, 2020 as a result of the remeasurement that occurred in conjunction with the ratification of the collective bargaining agreement.

**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
	2020		2019		2018
Discount rate	3.09	%	4.11	%	3.50	%
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 2020 is as follows:


	Pension Benefits				Other Benefits
	U.S.		Non-U.S.
	(In thousands)
Net gain (loss) in current year	$	5,971	$	(4,829)	$	(3,241)
Prior service cost	(182)		2		2,905
Amortization of prior service cost (credit)	27		(22)		(37)
Amortization of net loss (gain)	2,046		1,367		(504)
Exchange rate effect on amounts in other comprehensive income	—		(1,758)		2
Total	$	7,862	$	(5,240)	$	(875)

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 $12.5 million, $12.4 million and $12.2 million for 2020, 2019 and 2018, respectively.

The Company, through its subsidiaries, participates in certain multi-employer pension plans covering approximately 305 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 $1.1 million for 2020, 2019 and 2018, respectively.

For measurement purposes, a 5.64% weighted average annual rate of increase in the per capita cost of covered health care benefits was assumed for 2020. The rate was assumed to decrease gradually each year to a rate of 4.50% for 2038, and remain at that level thereafter.

Plan Assets

The Company’s pension plan weighted average asset allocations at December 31, 2020 and 2019, by asset category, were as follows:


	U.S. Plans				Non-U.S. Plans
	2020		2019		2020		2019
Equity securities	7	%	10	%	17	%	17	%
Fixed income securities	65	%	90	%	24	%	24	%
Cash/Commingled Funds/Other (1)	28	%	—	%	59	%	59	%
Total	100	%	100	%	100	%	100	%

The basis used to measure the defined benefit plans’ assets at fair value at December 31, 2020 and 2019 is summarized as follows:


	Basis of Fair Value Measurement
	Outstanding Balances		Level 1		Level 2		Level 3
As of December 31, 2020	(In thousands)
Equity
U.S. Large Cap	$	3,710	$	3,710	$	—	$	—
U.S. Small / Mid Cap	444		—		444		—
International	10,427		4,412		6,015		—
Fixed Income
U.S. Intermediate	14,263		—		14,263		—
U.S. Long Term	51,891		—		51,891		—
U.S. High Yield	296		—		296		—
International	8,448		257		8,191		—
Other Commingled Funds (1)	20,665		—		—		20,665
Cash and Equivalents	28,469		27,826		643		—
Other	3,523		—		3,523		—
	$	142,136	$	36,205	$	85,266	$	20,665

(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, 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.

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 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 approximately 2.5% per year. The general asset allocation guidelines for plan assets are that “equities” will constitute from 50% to 60% of the market value of total fund assets with a target of 60%, and “fixed income” obligations, including cash, will constitute from 40% to 50% with a target of 40%. 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, 2020, there were no shares of the Company’s stock held in plan assets.

Cash Flows

The Company expects to contribute approximately $3.4 million to its defined benefit plans and $1.0 million to its other postretirement benefit plans in 2021. The Company also expects to contribute approximately $13.1 million to its defined contribution plan and $10.1 million to its 401(k) savings plan in 2021.

Estimated Future Benefit Payments

The future estimated benefit payments for the next five years and the five years thereafter are as follows: 2021 — $88.5 million; 2022 — $5.9 million; 2023 — $5.9 million; 2024 — $6.1 million; 2025 — $6.3 million; 2026 to 2030 — $32.3 million.

19. Quarterly Results of Operations (Unaudited)

The unaudited quarterly results of operations for the years ended December 31, 2020 and 2019 are as follows:


	2020 Quarters (1)								2019 Quarters (1)
	First		Second		Third		Fourth		First		Second		Third		Fourth
	(In thousands, except per share amounts)
Net sales	$	594,462	$	561,249	$	581,113	$	614,822	$	622,231	$	642,099	$	624,246	$	605,997
Gross profit	271,956		234,800		251,500		269,168		283,834		292,337		281,978		266,885
Operating income	139,941		110,594		131,213		138,965		147,782		155,283		141,765		134,173
Net income (2)	101,998		70,864		103,848		101,068		110,268		113,209		105,194		96,850
Basic EPS	$	1.35	$	0.94	$	1.38	$	1.33	$	1.46	$	1.50	$	1.39	$	1.28
Diluted EPS	$	1.33	$	0.93	$	1.37	$	1.32	$	1.44	$	1.48	$	1.37	$	1.26
Basic weighted average shares outstanding	75,740		75,171		75,352		75,817		75,442		75,460		75,698		75,779
Diluted weighted average shares outstanding	76,452		75,937		75,960		76,367		76,284		76,387		76,577		76,570

(1) Quarterly data includes the acquisition of Flow MD (February 2020) and Velcora (July 2019) from the date of acquisition. See Note 2 for further discussion.
(2) Decline in second quarter net sales and net income is primarily attributed to impacts of COVID-19.

20. Subsequent Events

On January 8, 2021, the Company entered into a definitive agreement to acquire Abel Pumps, L.P. and certain of its affiliates (“ABEL”) for cash consideration of $103.5 million. ABEL is based in Büchen, Germany, with sales and service locations in Madrid, Spain and Pittsburgh, Pennsylvania. ABEL designs and manufactures highly engineered reciprocating positive displacement pumps for a variety of end markets, including mining, marine, power, water, wastewater and other general industries. ABEL will be part of our Pumps platform within the Fluid and Metering Technologies segment. The Company expects to close the transaction by the end of the first quarter 2021 subject to regulatory approval and customary closing conditions.

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