AGM 2021

May 12, 2021

Good morning, ladies and gentlemen. It's 9 a. M. And we will now call our Annual Meeting of Stockholders to order. I am Bill Cook, Chairman of the Board of IDEX Corporation. I previously served as Chairman, President and CEO of Donaldson Company before my retirement. I will serve as Chairman of this meeting. I'd like to take this opportunity to welcome you and let you know that we appreciate you joining us this morning. We are having a virtual meeting again this year due to the continuing public health impact of the COVID-nineteen pandemic and to support the health and well-being of our management team and stockholders. The agenda for today's meeting is posted on the web portal and will follow the order of that agenda. As is our custom, we will conduct the business portion of our meeting first and answer questions at the end. Before proceeding further, it's my pleasure to introduce you to the company's other independent directors at today's meeting. Mark Beck, Co Founder and Chief Executive Officer, BSQUARED Precision Mark Boothman, Retired Executive Vice President and Chief Financial Officer, Kimberly Clark Corporation Carl Christensen, Chief Executive Officer and Chairman of the Board, Ultra Industrial Motion Lakeisha Guenter, Vice President and General Manager of IoT Global and Strategic Engagement, Microsoft Corporation Katrina Helmcamp, President and Chief Executive Officer, Cardus Corporation Ernie Mrozek, Retired Vice Chairman and Chief Financial Officer of the ServiceMaster Company David Perry, Retired Vice Chairman, Illinois Tool Works Tony Satterwhite, Vice Chairman, Cummins and CJ Warner, President and Chief Executive Officer of Renewable Energy Group. Denise Cade, our Senior Vice President and General Counsel and Corporate Secretary is with us today and will act as the secretary at this meeting. Other executive officers present today are Eric Aschleman, Chief Executive Officer and President and also a Director Bill Grogan, Senior Vice President and Chief Financial Officer Melissa Flores, Senior Vice President and Chief Human Resources Officer Daniel Salya, Senior Vice President, Corporate Development and Mike Yates, Vice President and Chief Accounting Officer. The company's independent registered public accounting firm, Deloitte Touche LLP, represented by Eric Grundmann, the client service partner responsible for our account. Mr. Grundmann will be available during the Q and A period to answer appropriate questions. Finally, the company has appointed Broadridge Financial Services to act as Inspector of Election for this meeting. Peter Sablick from Broadridge is with us and has taken the oath of Inspector of Election. We will now proceed with the formal business portion of the meeting. Will the secretary please present the certified list of stockholders and proof of proper notice of this meeting and advise whether or not we have a quorum for the meeting. Mr. Chairman, I have with me the certified list of stockholders of the company as of the close of business on March 15, 2021, the record date for voting at this meeting. I also have a certificate as to the mailing of the required notice to such stockholders. These documents will be filed with the records of the meeting. As of today, 70,912,000 shares of common stock, representing approximately 93% of the total outstanding shares as of the close of business on the record date are represented at this meeting in person or by proxy. There is a form, Mr. Chairman. Thank you. We have 3 items of business today, 3 management proposals. Each of these proposals is described in detail in the proxy statement, which was made available to stockholders in connection with the meeting. Please note that we will give stockholders an opportunity to comment on the proposals themselves after all proposals have been presented. First, you will vote on the election of 3 Class II directors, each to serve a term of 3 years. The 3 individuals the Board has nominated for election are Mark Boothman, Lakeisha Gunther and myself. Biographical and other information about the nominees and about the Class 1 and Class 3 directors whose terms expire in future years is set forth in the proxy statement made available to stockholders in connection with the meeting. 2nd, you will vote on a non binding resolution to approve the compensation of the company's named executive officers. And third, we will vote to ratify the appointment of Deloitte Touche LLP as the company's independent registered public accounting firm for 2021. The Board of Directors recommends that stockholders vote for each of the Class II directors and for proposals 23. We will now open the meeting to comments and questions on the 3 items of business. If you have a question or if you wish to comment on any of the 3 proposals, please submit your comment or question through the web portal. I'll pause for a few seconds to allow you time to do that. Mr. Secretary, do we have any comments or questions? Mr. Chairman, we do not have any comments or questions. Thank you. We will now proceed to a vote on the proposals. Any stockholder who has not yet voted or wishes to change a vote already cast may do so by clicking on the voting button on the web portal and following the instructions there. If you've already submitted a proxy and do not wish to change your vote, you do not need to take any further action. I'll pause a few seconds to allow any voting that's needed. Now that the stockholders have had the opportunity to vote, I declare the polls close. Ms. Secretary, do you have the preliminary results of the voting from the Judge of Elections? Yes, Mr. Chairman. The preliminary results of the voting indicate that each of the director nominees has been elected and that the proposals to approve the compensation of the company's named executive officers and to ratify the appointment of Deloitte and Touche as the company's independent registered public accounting firm for 2021 have been approved. As Secretary, I will file the results of the voting with the minutes of this meeting. Final voting results will be reported in a current report on Form 8 ks to be filed with the Securities and Exchange Commission within 4 business days after the date of this meeting. Thank you. CJ Warner's retirement from the Board of Directors is effective today. On behalf of her fellow Board members and the management team, I'd like to take this opportunity to express our gratitude for her invaluable insights and contributions during her Board service over the past 8 years, including her leadership as Chair of our Nominating and Governance Committee and as a member of our Compensation Committee. Thank you, CJ. This concludes the formal portion of our annual stockholders meeting. There being no further business to come before this meeting, declare the annual meeting is hereby concluded. Now Eric Ashelman, our Chief Executive Officer and President will give a brief presentation followed by a Q and A session. I'd like to remind you that some of the statements made at this meeting will be considered may be considered forward looking and are subject to certain risks and uncertainties as described in our filings with the SEC. Eric, please proceed. Thank you, Bill. Turning to Slide 2 and our agenda. First, I'll cover the highlights of our 2020 financial performance. All businesses faced unprecedented challenges last year, but the teams across IDEX delivered outstanding relative performance in a way that best exemplifies our purpose, our values and our operating methodology. I'll cover some of the important work in the next few slides as we work even harder to build a solid cultural foundation. This element more than any other helped sustain us last year in those tough months of Q2 and Q3. Finally, I'll close with a view of our long term performance. Our track record of outperformance is a testament to all the components that make IDEXX a great company. We're blessed with a strong well positioned businesses led by great teams who focus on the most critical problems and opportunities of our customers. All of that is made better by an evolving culture that is meeting the challenges of a very dynamic world. Turning to slide 3. As we entered 2020, we talked about the general industrial slowdown that we were seeing and what a flat to down 2% to 5% world look like for IDEXX. We have proactively taken strategic actions to address these factors. We then faced the onset of the COVID-nineteen pandemic and we responded to it with purpose. We continue to innovate with our customers during a challenging year, focusing on the critical innovation we need to support our long term strategy as well as producing new products to help the fight against the pandemic. It was that customer focus, strong execution and our ability to react quickly to unpredictable events that helped us deliver relatively strong performance in 2020, a true testament to our resiliency. Commercially, our organic orders were down 18% in the quarter at the economic trough of the pandemic. I'm proud to say that our businesses recovered quickly driving year over year organic orders back to positive 7% by the 4th quarter. In fact, due to rapid sequential improvements, we were able to exit the year down only 3% in reported orders compared to 2019. While sales were down 6% for the year, the actions that we took proactively to mitigate the impact of the volume decline protected net income. Our focus on discretionary cost control, structural actions and productivity initiatives during the pandemic were critical to maintain our best in class profitability and free cash flow. Liquidity was a primary focus of our management strategy as the pandemic hit, and I'm happy to say that we were able to drive record free cash flow in 2020. Ultimately, our urgency, execution and resiliency during a challenging 2020 supports our commitment for continued outstanding shareholder returns. Moving to slide 4. Our mission values and the IDEXX difference continue to be the essence of what sets us apart and allows us to achieve outstanding results even through the sorts of challenges we faced in 2020. Through the pandemic, we have never lived our mission of trusted solutions, improving lives more fully. We supported essential businesses from manufacturers of ventilators to the companies that cracked the COVID-nineteen genetic code and developed the vaccines we have today. Yidex difference, a simple business framework, has become fully ingrained into our culture over the last 3 years. We know that when we build and support great teams focused via eightytwenty on critical problems and opportunities within our end markets, we consistently win for our customers, our shareholders, our employees and the communities where we live and work. I'll turn now to a few comments about important work within our culture. I'm on slide 5. We are working very hard to move the needle with respect to diversity, equity and inclusion at IDEXX. It's important to spend a little time on the why behind these actions. It's a powerful rationale and really quite simple. 1st, our values are authentic. We formalized them carefully almost 10 years ago through series of bottoms up interviews across all organizational levels, geographies and business types. Diversity supported by an environment where everyone is invited in to be their is recognized as an essential element of who we are. 2nd, the IDEX difference begins with the power of great teams and talent. That doesn't work for us, but talented individuals are in any way excluded from full participation in our story. Finally, we win by solving very difficult customer problems through rapid innovation and iteration. That only works if the widest perspectives are brought to the table and encouraged to lean forward. The work here is difficult. We're thoughtful as we plan our next steps. The rationale as to why we're doing it is easy. Turning to slide 6. I want to touch on our continued strong performance within employee engagement. Among our manufacturing sector peers, IDEXX is now in the top quartile of all companies when measured against our 3 key indicators: employee engagement, manager effectiveness and performance enablement. Now we begin the work of moving from very good to great. This will be more difficult in the near term as our teams adjust from a difficult but simplified environment with COVID-nineteen to a complex and dynamic environment within a recovering global economy. We accept the challenge and we'll continue the strong work. I'm on slide 7. This past year was a challenging one for the IDEXX Foundation, which is the cornerstone of our philanthropy and a vibrant foundation gives grants to support our local communities, that is typically paired with in person hands on volunteer work by our IDEXX teams. As you can imagine, those group volunteer events had to come to a screeching halt in March 2020. Still, the foundation rallied to address food insecurity within our communities. IDEXX business units applied for $170,000 in grants for local food pantries, easing hunger for countless families. Some teams have found creative ways to volunteer outdoors, masked and socially distance. We are eager to get our hands dirty again as the pandemic eases and it becomes safe for our teams to get out there and help. Turning to capital deployment on Slide 8. A critical component of the IDEX business model is a disciplined and balanced approach to capital deployment. We move the levers a bit up or down as near term conditions warrant, but always with an eye on choices that drive the best long term value creation for shareholders. To that end, each component of our capital deployment strategy plays a part. The company has continued to maintain a full funnel of M and A opportunities and we've recently allocated some of our most talented resources towards focused strategy and business development roles. Additionally, we have invested in external expertise to expand our ability to identify, assess, win and successfully integrate new companies. We believe that inorganic growth will continue to be a part of the IDEX story, while continuing our commitment to meeting our financial benchmarks for return on capital. In addition to actively investing in both organic and inorganic growth opportunities, IDEXX is committed to returning money to our shareholders. Our businesses continue to generate free cash flow well in excess of net income, allowing us to regularly increase our dividend and look opportunistically to engage in share buybacks when market prices dictate. At a minimum, we look to offset share dilution with buybacks and we'll continue our practice of returning money to shareholders as part of our disciplined capital deployment philosophy. I'll close now on Slide 9. IDEXX continues to be a premier industrial organization that has created significant shareholder value over time, nicely outperforming the S and P 500 over the last 10 years. We have a durable business model that is built on a foundation of great businesses linked together with a distinctive culture and unique operating model. This combination drives leadership positions in the diverse markets we serve with differentiated economics based on the value we bring to our customers. We are proud of our efforts in 2020. We made it through the tough times and are well positioned to capitalize on the momentum within global early recovery. With that, I would like to thank our employees and stakeholders for their contribution, support and interest in IDEXX. We all adapted well to the shift to virtual meetings, but I truly look forward to the great days ahead when we can see each other again in person. Thank you. Thanks, Eric. We'll now open the meeting to stockholder comments and questions. Please submit your comments or questions through the web portal and I'll pause for 10 seconds to allow you to do that. Ms. Secretary, do we have any comments or questions? Mr. Chairman, we do not have any comments or questions. Thank you. Once again, I'd like to express our appreciation to all of you, our stockholders, our directors, our officers and our employees for your support during the past year and for your presence at our virtual meeting today. Thank you and goodbye.