IDEX Corporation (NYSE: IEX) today announced its financial results for the quarter and year ended December 31, 2020.

2020 Highlights

• Full year EPS of $4.94; adjusted EPS of $5.19
• Full year cash from operations of $569 million, up 8 percent, resulting in record full year free cash flow of $518 million, up 9 percent
• Record fourth quarter orders of $679 million were up 10 percent overall and 7 percent organically
• Fourth quarter EPS of $1.32; adjusted EPS of $1.37
• Announced the acquisition of Abel Pumps, L.P. and certain of its affiliates in January 2021

Full Year 2020

Orders of $2.4 billion were down 3 percent compared with the prior year (-4 percent organic and +1 percent acquisition).

Sales of $2.4 billion were down 6 percent compared with the prior year (-9 percent organic and +3 percent acquisition).

Gross margin of 43.7 percent was down 140 basis points compared with the prior year as a result of lower volume and business mix, partially offset by price capture. Excluding a $4.1 million pre-tax fair value inventory step-up charge related to the Flow MD acquisition, adjusted gross margin of 43.9 percent was down 130 basis points compared with the adjusted prior year.

Operating income of $520.7 million resulted in an operating margin of 22.1 percent, down 110 basis points from the prior year primarily due to lower volume and business mix, partially offset by price capture and cost savings in the current year as well as higher asset impairments in the prior year. Excluding the $4.1 million pre-tax fair value inventory step-up charge and $11.8 million of restructuring expenses and asset impairments, adjusted operating income was $536.6 million with an adjusted operating margin of 22.8 percent, down 140 basis points from the adjusted prior year. Adjusted operating income drove adjusted EBITDA of $622.9 million which was 27 percent of sales and covered interest expense by almost 14 times.

Provision for income taxes of $92.6 million resulted in an effective tax rate (ETR) of 19.7 percent, which was lower than the prior year ETR of 20.2 percent primarily due to benefits associated with the finalization of the Global Intangible Low-Tax Income ("GILTI") regulations in the third quarter of 2020.

Net income was $377.8 million which resulted in EPS of $4.94, down 62 cents, or 11 percent, from the prior year EPS. Excluding the $3.2 million fair value inventory step-up charge, the $6.5 million loss on early debt redemption, and $9.1 million of restructuring expenses and asset impairments, all net of related tax benefits, adjusted EPS of $5.19 decreased 61 cents, or 11 percent, from the prior year adjusted EPS.

Cash from operations of $569.3 million was up 8 percent from the prior year and was 151 percent of net income primarily due to working capital improvements, partially offset by lower earnings. Cash from operations led to free cash flow of $517.7 million, which was up 9 percent from the prior year and was 131 percent of adjusted net income.

The Company repurchased 876 thousand shares of common stock for $110.3 million in 2020.

Fourth Quarter 2020

Orders of $678.6 million were up 10 percent compared with the prior year period (+7 percent organic, +1 percent acquisition and +2 percent foreign currency translation).

Sales of $614.8 million were up 2 percent compared with the prior year period (-1 percent organic, +1 percent acquisition and +2 percent foreign currency translation).

Gross margin of 43.8 percent was down 20 basis points compared with the prior year period primarily due to lower volume and business mix, partially offset by price capture.

Operating income of $139.0 million resulted in an operating margin of 22.6 percent, up 50 basis points compared to the prior year period due to price capture and cost savings, partially offset by lower volume and business mix. Excluding $5.0 million of restructuring expenses and asset impairments, adjusted operating income was $144.0 million with an adjusted operating margin of 23.4 percent, up 10 basis points compared to the adjusted prior year period. Adjusted operating income drove adjusted EBITDA of $167.2 million which was 27 percent of sales and covered interest expense by over 15 times.

Provision for income taxes of $28.8 million resulted in an ETR of 22.2 percent, which was higher than the prior year period ETR of 20.6 percent primarily due to the revaluation of foreign deferred income tax balances necessitated by changes in foreign tax rates.

Net income was $101.1 million which resulted in EPS of $1.32, up 6 cents, or 5 percent, from the prior year period EPS. Excluding restructuring expenses and asset impairments, adjusted EPS of $1.37 increased 4 cents, or 3 percent, from the prior year period adjusted EPS.

Cash from operations of $161.4 million was up 7 percent from the prior year period and was 160 percent of net income. Cash from operations led to free cash flow of $149.3 million, which was up 9 percent compared to the prior year period and was 142 percent of adjusted net income.

Fourth Quarter 2020 Segment Highlights

Fluid & Metering Technologies

• Sales of $229.6 million reflected a 1 percent increase compared to the fourth quarter of 2019 (-4 percent organic, +3 percent acquisition and +2 percent foreign currency translation).
• Operating income of $58.9 million resulted in an operating margin of 25.7 percent, a 150 basis point decrease compared to the prior year period primarily due to lower volume, business mix, higher restructuring expenses and asset impairments and the dilutive impact on margins from the Flow MD acquisition, partially offset by price capture and cost savings. Excluding $3.1 million of restructuring expenses and asset impairments, adjusted operating income was $62.0 million with an adjusted operating margin of 27.0 percent, a 100 basis point decrease compared to the adjusted prior year period.
• EBITDA of $66.3 million resulted in an EBITDA margin of 28.9 percent. Excluding $3.1 million of restructuring expenses and asset impairments, adjusted EBITDA of $69.4 million resulted in an adjusted EBITDA margin of 30.2 percent, a 30 basis point decrease compared to the adjusted prior year period.

Health & Science Technologies

• Sales of $235.9 million reflected a 4 percent increase compared to the fourth quarter of 2019 (+2 percent organic and +2 percent foreign currency translation).
• Operating income of $55.8 million resulted in an operating margin of 23.7 percent, a 210 basis point increase compared to the prior year period primarily due to price capture, higher volume and cost savings in the current year period as well as the asset impairments in the prior year period. Excluding $0.6 million of restructuring expenses and asset impairments, adjusted operating income was $56.4 million with an adjusted operating margin of 23.9 percent, a 110 basis point increase compared to the adjusted prior year period.
• EBITDA of $66.7 million resulted in an EBITDA margin of 28.3 percent. Excluding $0.6 million of restructuring expenses and asset impairments, adjusted EBITDA of $67.3 million resulted in an adjusted EBITDA margin of 28.5 percent, a 150 basis point increase compared to the adjusted prior year period.

Fire & Safety/Diversified Products

• Sales of $150.6 million reflected a 1 percent decrease compared to the fourth quarter of 2019 (-3 percent organic and +2 percent foreign currency translation).
• Operating income of $40.2 million resulted in an operating margin of 26.7 percent, an 80 basis point increase compared to the prior year period primarily due to price capture and cost savings, partially offset by lower volume. Excluding $0.6 million of restructuring expenses and asset impairments, adjusted operating income was $40.8 million with an adjusted operating margin of 27.1 percent, a 90 basis point increase compared to the adjusted prior year period.
• EBITDA of $43.8 million resulted in an EBITDA margin of 29.1 percent. Excluding $0.6 million of restructuring expenses and asset impairments, adjusted EBITDA of $44.4 million resulted in an adjusted EBITDA margin of 29.5 percent, a 130 basis point increase compared to the adjusted prior year period.

For the fourth quarter of 2020, Fluid & Metering Technologies contributed 37 percent of sales, 38 percent of operating income and 37 percent of EBITDA; Health & Science Technologies accounted for 38 percent of sales, 36 percent of operating income and 38 percent of EBITDA; and Fire & Safety/Diversified Products represented 25 percent of sales, 26 percent of operating income and 25 percent of EBITDA.

Corporate Costs

Corporate costs decreased to $63.9 million in 2020 compared to $69.2 million in 2019 as a result of lower discretionary spending and lower stock compensation costs due to the departure of our former Chief Executive Officer, partially offset by increased funding of the IDEX Foundation and higher acquisition costs.

Corporate costs increased to $15.3 million in the fourth quarter of 2020 from $14.2 million in the fourth quarter of 2019 primarily as a result of higher variable compensation costs, higher acquisition costs and increased funding of the IDEX Foundation, partially offset by lower stock compensation costs due to the departure of our former Chief Executive Officer.

Acquisition

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. With annual sales of approximately $34 million, 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.

Restructuring Expenses and Asset Impairments

The Company recorded $5.0 million and $11.8 million of restructuring expenses and asset impairments in the fourth quarter and full year 2020, respectively, to facilitate long-term, sustainable growth through cost reduction actions, primarily consisting of employee reductions, facility rationalization and impairment charges. The fourth quarter and full year 2020 included $3.1 million of impairment charges primarily related to the consolidation of certain facilities in the Fluid & Metering Technologies segment.

COVID-19 Impact

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

Non-U.S. GAAP Measures of Financial Performance

The Company supplements certain U.S. GAAP financial performance metrics with non-U.S. GAAP financial performance metrics. Management believes these non-U.S. GAAP financial performance metrics provide investors with greater insight, transparency and a more comprehensive understanding of the financial information used by management in its financial and operational decision making because certain of these adjusted metrics exclude items not reflective of ongoing operations, such as restructuring expenses and asset impairments, fair value inventory step-up charges and the loss on early debt redemption. Reconciliations of non-U.S. GAAP financial performance metrics to their most comparable U.S. GAAP financial performance metrics are defined and presented below and should not be considered a substitute for, nor superior to, the financial data prepared in accordance with U.S. GAAP. There were no adjustments to U.S. GAAP financial performance metrics other than the items noted below.

• Organic orders and sales are calculated excluding amounts from acquired or divested businesses during the first twelve months of ownership or prior to divestiture and the impact of foreign currency translation.
• Adjusted gross profit is calculated as gross profit plus fair value inventory step-up charges.
• Adjusted gross margin is calculated as adjusted gross profit divided by net sales.
• Adjusted operating income is calculated as operating income plus fair value inventory step-up charges plus restructuring expenses and asset impairments.
• Adjusted operating margin is calculated as adjusted operating income divided by net sales.
• Adjusted net income is calculated as net income plus fair value inventory step-up charges plus restructuring expenses and asset impairments plus the loss on early debt redemption, net of the statutory tax expense or benefit.
• Adjusted EPS is calculated as adjusted net income divided by the diluted weighted average shares outstanding.
• EBITDA is calculated as net income plus interest expense plus provision for income taxes plus depreciation and amortization. We reconcile EBITDA to net income on a consolidated basis as we do not allocate consolidated interest expense or consolidated provision for income taxes to our segments.
• Adjusted EBITDA is calculated as EBITDA plus fair value inventory step-up charges plus restructuring expenses and asset impairments plus the loss on early debt redemption.
• Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net sales.
• Free cash flow is calculated as cash flow from operating activities less capital expenditures

Table 1: Reconciliations of the Change in Net Sales to Organic Net Sales

Table 2: Reconciliations of Reported-to-Adjusted Gross Profit and Margin (dollars in thousands)

Table 3: Reconciliations of Reported-to-Adjusted Operating Income and Margin (dollars in thousands)

Table 4: Reconciliations of Reported-to-Adjusted Net Income and EPS (in thousands, except EPS)

Table 5: Reconciliations of EBITDA to Net Income (dollars in thousands)

Table 6: Reconciliations of EBITDA to Adjusted EBITDA (dollars in thousands)

(1) EBITDA, a non-GAAP financial measure, is reconciled to net income, its most directly comparable GAAP financial measure, immediately above in Table 5.

Table 7: Reconciliations of Cash Flows from Operating Activities to Free Cash Flow (in thousands)

Conference Call to be Broadcast over the Internet

IDEX will broadcast its fourth quarter earnings conference call over the Internet on Thursday, February 4, 2021 at 9:30 a.m. CT. Chief Executive Officer and President Eric Ashleman and Senior Vice President and Chief Financial Officer William Grogan will discuss the Company’s recent financial performance and respond to questions from the financial analyst community. IDEX invites interested investors to listen to the call and view the accompanying slide presentation, which will be carried live on its website at www.idexcorp.com. Those who wish to participate should log on several minutes before the discussion begins. After clicking on the presentation icon, investors should follow the instructions to ensure their systems are set up to hear the event and view the presentation slides, or download the correct applications at no charge. Investors will also be able to hear a replay of the call by dialing 877.660.6853 (or 201.612.7415 for international participants) using the ID #13712088.

Forward-Looking Statements

This news release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements may relate to, among other things, the Company’s expected organic sales growth, the expected timing and anticipated benefits of the Company’s acquisition of Abel Pumps, L.P. and certain of its affiliates, and the anticipated continuing effects of the coronavirus pandemic, including with respect to the Company's sales, improvements in the Company’s end markets, facility closures, supply chains and access to capital, capital expenditures, acquisitions, cost reductions, cash flow, revenues, earnings, market conditions, global economies and operating improvements, and are indicated by words or phrases such as “anticipates,” “estimates,” “plans,” “expects,” “projects,” “forecasts,” “should,” “could,” “will,” “management believes,” “the Company believes,” “the Company intends” and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this news release. The risks and uncertainties include, but are not limited to, the following: the duration of the coronavirus pandemic and the continuing effects of the coronavirus pandemic on our ability to operate our business and facilities, on our customers, on supply chains and on the U.S. and global economy generally; economic and political consequences resulting from terrorist attacks and wars; levels of industrial activity and economic conditions in the U.S. and other countries around the world; pricing pressures and other competitive factors and levels of capital spending in certain industries, all of which could have a material impact on order rates and the Company's results, particularly in light of the low levels of order backlogs it typically maintains; the Company's ability to make acquisitions and to integrate and operate acquired businesses on a profitable basis; the relationship of the U.S. dollar to other currencies and its impact on pricing and cost competitiveness; political and economic conditions in foreign countries in which the Company operates; developments with respect to trade policy and tariffs; interest rates; capacity utilization and the effect this has on costs; labor markets; market conditions and material costs; and developments with respect to contingencies, such as litigation and environmental matters. Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” section included in the Company’s most recent annual report on Form 10-K and the Company's subsequent quarterly reports filed with the SEC as well as the other risks discussed in the Company’s filings with the SEC. The forward-looking statements included here are only made as of the date of this news release, and management undertakes no obligation to publicly update them to reflect subsequent events or circumstances, except as may be required by law. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented here.

About IDEX

IDEX (NYSE: IEX) is a company that has undoubtedly touched your life in some way. In fact, IDEX businesses make thousands of products that are mission-critical components in everyday activities. Chances are the car you’re driving has a BAND-IT® clamp holding your side airbag safely in place. If you were ever in a car accident, a Hurst Jaws of Life® rescue tool may have saved your life. If you or a family member is battling cancer, your doctor may have tested your DNA in a quest to find the best targeted medicine for you. It’s likely your DNA test was run on equipment that contains components made by our growing IDEX Health & Science team. Founded in 1988 with three small, entrepreneurial manufacturing companies, we’re proud to say that we now call 40 diverse businesses around the world part of the IDEX family. With 7,000 employees and manufacturing operations in more than 20 countries, IDEX is a high-performing, global $2+ billion company committed to making trusted solutions that improve lives. IDEX shares are traded on the New York Stock Exchange under the symbol “IEX”.

For further information on IDEX Corporation and its business units, visit the company’s website at www.idexcorp.com.

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