IDEX 10-Q 2023-03-31

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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Form 10-Q

☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended			March 31, 2023

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from			to

Commission File Number 1-10235

IDEX CORPORATION

(Exact name of registrant as specified in its charter)

			Delaware															36-3555336
			(State or other jurisdiction of incorporation or organization)															(I.R.S. Employer Identification No.)
			3100 Sanders Road,			Suite 301,			Northbrook,			Illinois						60062
			(Address of principal executive offices)															(Zip Code)

Registrant’s telephone number, including area code: (847) 498-7070

Securities registered pursuant to Section 12(b) of the Act:

Title of each class						Trading Symbol(s)						Name of each exchange on which registered
Common Stock, par value $.01 per share						IEX						New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☑						Accelerated filer ☐						Non-accelerated filer ☐						Smaller reporting company			☐
Emerging growth company			☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Number of shares of common stock of IDEX Corporation outstanding as of April 21, 2023: 75,576,366.

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TABLE OF CONTENTS

Part I. Financial Information
Item 1.			Financial Statements			1
			Condensed Consolidated Balance Sheets			1
			Condensed Consolidated Statements of Income			2
			Condensed Consolidated Statements of Comprehensive Income			3
			Condensed Consolidated Statements of Equity			4
			Condensed Consolidated Statements of Cash Flows			5
			Notes to Condensed Consolidated Financial Statements			6
			Note 1. Basis of Presentation and Significant Accounting Policies			6
			Note 2. Acquisitions			6
			Note 3. Business Segments			9
			Note 4. Revenue			11
			Note 5. Earnings Per Common Share			13
			Note 6. Inventories			14
			Note 7. Goodwill and Intangible Assets			14
			Note 8. Accrued Expenses			16
			Note 9. Other Noncurrent Liabilities			16
			Note 10. Borrowings			17
			Note 11. Fair Value Measurements			17
			Note 12. Leases			19
			Note 13. Restructuring Expenses and Asset Impairments			20
			Note 14. Other Comprehensive Income (Loss)			22
			Note 15. Share Repurchases			22
			Note 16. Share-Based Compensation			22
			Note 17. Retirement Benefits			26
			Note 18. Legal Proceedings			27
			Note 19. Income Taxes			27
			Note 20. Subsequent Events			27
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			39
Item 4.			Controls and Procedures			40
Part II. Other Information
Item 1.			Legal Proceedings			41
Item 1A.			Risk Factors			41
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			41
Item 6.			Exhibits			42
Signatures						43

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PART I. FINANCIAL INFORMATION

IDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts)

(unaudited)

			March 31, 2023						December 31, 2022
ASSETS
Current assets
Cash and cash equivalents			$	510.7					$	430.2
Receivables, less allowance for credit losses of $7.9 and $8.0, respectively			446.5						442.8
Inventories			497.6						470.9
Other current assets			69.7						55.4
Total current assets			1,524.5						1,399.3
Property, plant and equipment, net of accumulated depreciation of $528.5 and $516.7, respectively			397.0						382.1
Goodwill			2,657.9						2,638.1
Intangible assets - net			933.5						947.8
Other noncurrent assets			145.1						144.6
Total assets			$	5,658.0					$	5,511.9
LIABILITIES AND EQUITY
Current liabilities
Trade accounts payable			$	216.0					$	208.9
Accrued expenses			275.9						289.1
Dividends payable			—						45.6
Total current liabilities			491.9						543.6
Long-term borrowings			1,470.7						1,468.7
Deferred income taxes			267.3						264.2
Other noncurrent liabilities			198.6						195.8
Total liabilities			2,428.5						2,472.3
Commitments and contingencies
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: 90,069,559 shares at March 31, 2023 and 90,064,988 shares at December 31, 2022			0.9						0.9
Additional paid-in capital			830.0						817.2
Retained earnings			3,671.5						3,531.7
Treasury stock at cost: 14,386,036 shares at March 31, 2023 and 14,451,032 shares at December 31, 2022			(1,184.0)						(1,184.3)
Accumulated other comprehensive loss			(89.2)						(126.2)
Total shareholders’ equity			3,229.2						3,039.3
Noncontrolling interest			0.3						0.3
Total equity			3,229.5						3,039.6
Total liabilities and equity			$	5,658.0					$	5,511.9

See Notes to Condensed Consolidated Financial Statements

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IDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(unaudited)

			Three Months Ended March 31,
			2023						2022
Net sales			$	845.4					$	751.1
Cost of sales			462.9						408.6
Gross profit			382.5						342.5
Selling, general and administrative expenses			189.7						154.3
Restructuring expenses and asset impairments			0.5						0.6
Operating income			192.3						187.6
Other (income) expense - net			(0.6)						(2.3)
Interest expense			13.1						9.5
Income before income taxes			179.8						180.4
Provision for income taxes			40.0						40.5
Net income			139.8						139.9
Net loss attributable to noncontrolling interest			—						0.1
Net income attributable to IDEX			$	139.8					$	140.0
Earnings per common share:
Basic earnings per common share attributable to IDEX			$	1.85					$	1.84
Diluted earnings per common share attributable to IDEX			$	1.84					$	1.83
Share data:
Basic weighted average common shares outstanding			75.6						76.1
Diluted weighted average common shares outstanding			75.9						76.4

See Notes to Condensed Consolidated Financial Statements

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IDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(unaudited)

			Three Months Ended March 31,
			2023

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The following discussion and analysis should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and related notes in this quarterly report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. The Company’s actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Item 1A, “Risk Factors” in the Company’s most recent annual report on Form 10-K and under the heading “Cautionary Statement Under the Private Securities Litigation Reform Act” discussed elsewhere in this quarterly report.

This discussion also includes certain non-GAAP financial measures that have been defined and reconciled to their most directly comparable measures that are in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) later in this Item under the headings “Non-GAAP Disclosures” and “Free Cash Flow.” This discussion also includes Operating working capital, which has been defined later in this Item under the heading “Liquidity and Capital Resources.” The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures prepared in accordance with U.S. GAAP. The financial results prepared in accordance with U.S. GAAP and the reconciliations from these results should be carefully evaluated.

Overview

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

Select key financial results for the three months ended March 31, 2023 when compared to the same period in the prior year are as follows:

• Sales of $845.4 million increased 13%; organic sales were up 6%.

• Net income of $139.8 million was flat; Net income margin of 16.5% decreased 210 basis points.

• Diluted EPS attributable to IDEX of $1.84 increased $0.01, or 1%; Adjusted diluted EPS attributable to IDEX of $2.09 increased $0.13, or 7%.

• Adjusted EBITDA of $229.8 million increased 7%; Adjusted EBITDA margin of 27.2% decreased 140 basis points.

• Cash flows provided by operating activities of $147.9 million were up 86% due to lower investments in working capital in 2023 as compared with 2022. Free cash flow included higher capital expenditures and was $121.3 million, up 91%, and constituted 76% of adjusted net income attributable to IDEX.

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Results of Operations

The following is a discussion and analysis of the Company’s results of operations for the three months ended March 31, 2023 compared with the three months ended March 31, 2022.

			Three Months Ended March 31,												Change
(Dollars in millions, except per share amounts)			2023						2022						$						% / bps
Net sales			$	845.4					$	751.1					$	94.3					13		%
Cost of sales			462.9						408.6						54.3						13		%
Gross profit			382.5						342.5						40.0						12		%
Gross margin			45.2		%				45.6		%				n/a						(40) bps
Selling, general and administrative expenses			189.7						154.3						35.4						23		%
Restructuring expenses and asset impairments			0.5						0.6						(0.1)						(17		%)
Operating income			192.3						187.6						4.7						3		%
Other (income) expense - net			(0.6)						(2.3)						1.7						(74		%)
Interest expense			13.1						9.5						3.6						38		%
Income before income taxes			179.8						180.4						(0.6)						—		%
Provision for income taxes			40.0						40.5						(0.5)						(1		%)
Effective tax rate			22.2		%				22.4		%				n/a						(20) bps
Net income attributable to IDEX			$	139.8					$	140.0					$	(0.2)					—		%
Diluted earnings per common share attributable to IDEX			$	1.84					$	1.83					$	0.01					1		%

Net Sales

Sales for the three months ended March 31, 2023 increased 13%, reflecting a 6% increase in organic sales, a 9% increase from acquisitions (Muon Group - November 2022, KZValve - May 2022 and Nexsight - February 2022) net of divestitures (Knight - September 2022) and a 2% unfavorable impact from foreign currency translation. Sales increased 10% domestically and 15% internationally, and sales to customers outside the U.S. were approximately 51% of total sales in the first quarter of 2023 compared with 50% during the same period in 2022.

Cost of Sales

Cost of sales for the three months ended March 31, 2023 increased due to acquisitions, net of divestitures, inflation, higher sales volume and employee-related costs and unfavorable mix, partially offset by a favorable impact from foreign currency translation.

Gross Profit and Gross Margin

Gross profit and Gross margin were both positively impacted by favorable productivity and price/cost, partially offset by unfavorable mix, largely centered in HST, and employee-related inflation. While acquisitions also positively impacted Gross profit, they resulted in a dilutive impact to overall Gross margin.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased primarily due to the impact from acquisitions, including amortization, increases in employee-related costs, which includes an additional $5.8 million of accelerated stock compensation costs for retiree eligible participants, and higher discretionary spending both as compared with the same period in 2022.

Other (Income) Expense - Net

Other (income) expense - net was $0.6 million of income in the first quarter of 2023 compared to $2.3 million of income during the same period in 2022. The decrease was primarily due to $2.5 million of lower gains on the sale of assets and $1.7 million of higher foreign currency transaction losses as compared to the prior year period, partially offset by $1.6 million of gains on trading securities and $0.6 million of higher interest income in the current year period.

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Interest Expense

Interest expense for the three months ended March 31, 2023 increased compared to the same period in 2022 due to the borrowings incurred under the Revolving Credit Facility and the Term Facility in connection with the Muon Group acquisition in November 2022.

Income Taxes

The Company’s provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes decreased to $40.0 million for the three months ended March 31, 2023 from $40.5 million during the same period in 2022. The effective tax rate of 22.2% for the three months ended March 31, 2023 was relatively consistent with the effective tax rate of 22.4% during the same period in 2022.

Results of Reportable Business Segments

The Company has three reportable segments: Fluid & Metering Technologies (“FMT”), Health & Science Technologies (“HST”) and Fire & Safety/Diversified Products (“FSDP”). For a detailed description of the operations within each segment, refer to Note 3 in the Notes to Condensed Consolidated Financial Statements.

Within its three reportable segments, the Company maintains 13 reporting units where the Company focuses on organic growth and strategic acquisitions. Management’s primary measurements of segment performance are sales, adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and Adjusted EBITDA margin.

FMT						HST						FSDP
Pumps						Scientific Fluidics & Optics						Fire & Safety
Water						Sealing Solutions						Dispensing
Energy						Performance Pneumatic Technologies						BAND-IT
Valves						Material Processing Technologies
Agriculture						Micropump

The table below illustrates the percentages of the share of Net sales and Adjusted EBITDA contributed by each segment on the basis of total segments (not total Company) for the three months ended March 31, 2023.

			Three Months Ended March 31, 2023
			FMT						HST						FSDP						IDEX
Net Sales			38		%				41		%				21		%				100		%
Adjusted EBITDA(1)			42		%				39		%				19		%				100		%

(1) Segment Adjusted EBITDA excludes the impact of unallocated corporate costs of $26.8 million for the three months ended March 31, 2023.

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Fluid & Metering Technologies Segment

			Three Months Ended March 31,																		Components of Change
(Dollars in millions)			2023						2022						Change						Organic						Acq/Div**(1)**						Foreign Currency						Total
Net sales			$	321.8					$	272.0					18%						9%						11%						(2%)						18%
Adjusted EBITDA			106.2						88.4						20%						14%						8%						(2%)						20%
Adjusted EBITDA margin			33.0		%				32.5		%				50 bps						150 bps						(100) bps						—						50 bps

(1) Acquisitions included KZValve in May 2022 and Nexsight in February 2022. Divestitures included Knight in September 2022.

• Sales increased 18% domestically and 19% internationally. Sales to customers outside the U.S. were approximately 45% of total segment sales in both the first quarter of 2023 and the same period in 2022.

• The change in organic sales was attributed to increases in the following:

◦Pumps reporting unit due to price capture and steady demand in the industrial market;

◦Water reporting unit due to strength in the municipal water market, price capture and backlog execution;

◦Valves reporting unit due to strong demand in China and the Middle East; and

◦Energy reporting unit due to favorable demand in the mobile fuel markets as well as price capture.

These increases were partially offset by a decrease in the Agriculture reporting unit due to higher distribution inventory levels and bad weather delaying the planting season.

• Adjusted EBITDA margin of 33.0% increased 50 basis points compared with 32.5% during the same period in 2022. The change in Adjusted EBITDA margin was attributed to the following:

◦Organic Adjusted EBITDA margin increased 150 basis points due to strong price/cost, favorable productivity and higher volume leverage, partially offset by increases in employee-related costs and discretionary spending.

◦Acquisitions negatively impacted Adjusted EBITDA margin by 100 basis points due to the dilutive impact of acquisitions on overall FMT Adjusted EBITDA margin.

Health & Science Technologies Segment

			Three Months Ended March 31,																		Components of Change
(Dollars in millions)			2023						2022						Change						Organic						Acq/Div**(1)**						Foreign Currency						Total
Net sales			$	351.0					$	315.2					11%						3%						11%						(3%)						11%
Adjusted EBITDA			100.7						99.8						1%						(7%)						10%						(2%)						1%
Adjusted EBITDA margin			28.7		%				31.7		%				(300) bps						(330) bps						20 bps						10 bps						(300) bps

(1) Acquisitions included Muon Group in November 2022.

• Sales decreased 2% domestically and increased 23% internationally. Sales to customers outside the U.S. were approximately 57% of total segment sales in the first quarter of 2023 compared with 52% during the same period in 2022.

• The change in organic sales was attributed to increases in the following:

◦Performance Pneumatics Technologies reporting unit due to strong targeted growth performance tied to fuel cells and increased China ventilator sales; and

◦Scientific Fluidics & Optics reporting unit due to strong Next Gen Sequencing instrument demand, satellite broadband targeted growth initiatives and price capture, partially offset by lower demand from Analytical Instrumentation and Life Science original equipment manufacturers due to customer inventory recalibration, softness in the semiconductor market and the non-repeat of revenues from a COVID-19 testing application in the prior year.

These increases were partially offset by decreases in the following:

◦Sealing Solutions reporting unit due to softness in the semiconductor market, partially offset by favorable demand in the automotive, mining and defense markets; and

◦Material Processing Technologies reporting unit due to customer-driven project delays in the pharma and food/nutrition markets.

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• Adjusted EBITDA margin of 28.7% decreased 300 basis points compared with 31.7% during the same period in 2022. The change in Adjusted EBITDA margin was attributed to the following:

◦Organic Adjusted EBITDA margin decreased 330 basis points due to increases in employee-related costs, unfavorable mix and lower volume leverage, partially offset by favorable price/cost.

◦Acquisitions positively impacted Adjusted EBITDA margin by 20 basis points due to the accretive impact of Muon Group on overall HST Adjusted EBITDA margin.

◦Foreign currency positively impacted Adjusted EBITDA margin by 10 basis points.

Fire & Safety/Diversified Products Segment

			Three Months Ended March 31,																		Components of Change
(Dollars in millions)			2023						2022						Change						Organic						Acq/Div						Foreign Currency						Total
Net sales			$	174.4					$	164.7					6%						9%						—						(3%)						6%
Adjusted EBITDA			49.7						44.4						12%						15%						—						(3%)						12%
Adjusted EBITDA margin			28.5		%				26.9		%				160 bps						170 bps						—						(10) bps						160 bps

• Sales increased 17% domestically and decreased 4% internationally. Sales to customers outside the U.S. were approximately 49% of total segment sales in the first quarter of 2023 compared with 54% during the same period in 2022.

• The change in organic sales was attributed to increases in the following:

◦Fire & Safety reporting unit due to strong execution, price realization, share gain with Fire original equipment manufacturers and continued demand for rescue tools; and

◦BAND-IT reporting unit due to continued share gain in the automotive market as well as strong demand in the aerospace, industrial and energy markets.

These increases were partially offset by a decrease in the Dispensing reporting unit due to timing of projects in the Americas and Asia.

• Adjusted EBITDA margin of 28.5% increased 160 basis points compared with 26.9% in 2022. The change in Adjusted EBITDA margin was attributed to the following:

◦Organic Adjusted EBITDA margin increased 170 basis points due to strong productivity, higher volume leverage and favorable price/cost, partially offset by increases in discretionary spending and employee-related costs as well as unfavorable mix.

◦Foreign currency negatively impacted Adjusted EBITDA margin by 10 basis points.

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Liquidity and Capital Resources

Liquidity

Based on management’s current expectations and currently available information, the Company believes current cash, cash from operations and cash available under the Revolving Credit Facility will be sufficient to meet its operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and postretirement funding requirements, share repurchases and quarterly dividend payments to holders of the Company’s common stock for the foreseeable future. Additionally, in the event that suitable businesses are available for acquisition upon acceptable terms, the Company may obtain all or a portion of the financing for these acquisitions through the incurrence of additional borrowings.

At March 31, 2023, working capital was $1,032.6 million and the Company’s current ratio was 3.1 to 1. At March 31, 2023, the Company’s cash and cash equivalents totaled $510.7 million, of which $392.7 million was held outside of the United States. At March 31, 2023, there was $79.4 million outstanding under the Revolving Credit Facility and $7.5 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Credit Facility of $713.1 million. In addition, there was $200.0 million outstanding under the Term Facility. The Company believes that additional borrowings through various financing alternatives remain available, if required.

Operating Working Capital

Operating working capital, calculated as Receivables plus Inventories minus Trade accounts payable, is used by management as a measurement of operational results as well as the short-term liquidity of the Company. The following table details operating working capital as of March 31, 2023 and December 31, 2022:

(In millions)						March 31, 2023						December 31, 2022
Receivables						$	446.5					$	442.8
Inventories						497.6						470.9
Less: Trade accounts payable						(216.0)						(208.9)
Operating working capital						$	728.1					$	704.8

Operating working capital increased $23.3 million to $728.1 million during the three months ended March 31, 2023. Acquisitions and foreign currency translation contributed $6.9 million to the increase in operating working capital. Excluding those items, Receivables increased $0.6 million as a result of higher volume and price capture; Inventories increased $27.0 million to support planned production; and Trade accounts payable increased $11.2 million due to higher inventory purchases.

Cash Flow Summary

The following table is derived from the Condensed Consolidated Statements of Cash Flows:

						Three Months Ended March 31,
(In millions)						2023						2022
Net cash flows provided by (used in):
Operating activities						$	147.9					$	79.7
Investing activities						(29.2)						(124.4)
Financing activities						(45.2)						(71.3)

Operating Activities

Cash flows provided by operating activities increased $68.2 million to $147.9 million in the three months ended March 31, 2023 primarily due to lower investments in working capital in 2023 as compared with 2022.

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Investing Activities

Cash flows used in investing activities decreased $95.2 million to $29.2 million in the three months ended March 31, 2023. The change is primarily due to the purchase of Nexsight in 2022, partially offset by higher capital expenditures in the first quarter of 2023.

Financing Activities

Cash flows used in financing activities decreased $26.1 million to $45.2 million in the three months ended March 31, 2023 from $71.3 million in the prior year period. The change is primarily due to the repurchase of 147,500 shares at a cost of $28.3 million in the first quarter of 2022, of which $2.0 million did not settle until April 2022.

Free Cash Flow

The Company believes free cash flow, a non-GAAP measure, is an important measure of performance because it provides a measurement of cash generated from operations that is available for payment obligations such as operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and postretirement funding requirements and quarterly dividend payments to holders of the Company’s common stock as well as for funding acquisitions and share repurchases. Free cash flow is calculated as cash flows provided by operating activities less capital expenditures.

The following table reconciles free cash flow to cash flows provided by operating activities:

						Three Months Ended March 31,
(Dollars in millions)						2023						2022
Cash flows provided by operating activities						$	147.9					$	79.7
Less: capital expenditures						(26.6)						(16.1)
Free cash flow						$	121.3					$	63.6
Free cash flow as a percent of adjusted net income attributable to IDEX						76.5		%				42.5		%

The increase in free cash flow as compared to 2022 is due to lower investments in working capital in 2023 as compared with 2022, partially offset by higher capital expenditures.

Cash Requirements

Pending Acquisitions

On April 25, 2023, the Company entered into a definitive agreement to acquire Iridian Spectral Technologies for cash consideration of 150.0 million Canadian dollars. The Company expects to close the transaction by the end of the second quarter of 2023, subject to customary closing conditions. Refer to Note 20 for further details.

Capital Expenditures

Capital expenditures generally include machinery and equipment that support growth and improved productivity, tooling, business system technology, replacement of equipment and investments in new facilities. The Company believes it has sufficient operating cash flows to continue to meet current obligations and invest in planned capital expenditures. Cash flows from operations were more than adequate to fund capital expenditures of $26.6 million and $16.1 million in the first three months of 2023 and 2022, respectively.

Debt Repayment

As of March 31, 2023, the Company has $100.0 million of 3.20% Senior Notes due June 2023. The Company expects to either refinance or repay the Notes using the available borrowing capacity of the Revolving Credit Facility, due November 2027.

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Share Repurchases

There were no share repurchases during the three months ended March 31, 2023. As of March 31, 2023, the amount of share repurchase authorization remaining was $563.8 million. For additional information regarding the Company’s share repurchase program, refer to Note 15 in the Notes to Condensed Consolidated Financial Statements.

Dividends

Total dividend payments to common shareholders were $45.5 million during the three months ended March 31, 2023 compared with $41.4 million during the three months ended March 31, 2022.

Covenants

The key financial covenants that the Company is required to maintain in connection with the Revolving Credit Facility, the Term Facility, the 3.20% Senior Notes and the 3.37% Senior Notes, are a minimum interest coverage ratio of 3.0 to 1 and a maximum leverage ratio of 3.50 to 1. At March 31, 2023, the Company was in compliance with these financial covenants, as the Company’s interest coverage ratio was 22.48 to 1 for covenant calculation purposes and the leverage ratio was 1.55 to 1. There are no financial covenants relating to the 2.625% Senior Notes or the 3.00% Senior Notes; however, both are subject to cross-default provisions.

Credit Ratings

The Company’s credit ratings, which were independently developed by the following credit agencies, are detailed below:

• S&P Global Ratings affirmed the Company’s corporate credit rating of BBB (stable outlook) in August 2022.

• Moody’s Investors Service affirmed the Company’s corporate credit rating of Baa2 (stable outlook) in December 2021.

• Fitch Ratings reaffirmed the Company’s corporate credit rating of BBB+ (stable outlook) in April 2023.

Critical Accounting Estimates

As discussed in the Annual Report on Form 10-K for the year ended December 31, 2022, the preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amount 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. There have been no changes to the Company’s critical accounting estimates described in the Annual Report on Form 10-K for the year ended December 31, 2022.

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Non-GAAP Disclosures

Set forth below are reconciliations of each of Organic net sales, Adjusted net income attributable to IDEX, Adjusted diluted earnings per share (“EPS”) attributable to IDEX, Consolidated Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and Consolidated Adjusted EBITDA margin to its respective most directly comparable U.S. GAAP measure. Management uses these metrics to measure performance of the Company since they exclude items that are not reflective of ongoing operations, as identified in the reconciliations below. Management also supplements its U.S. GAAP financial statements with adjusted information to provide investors with greater insight, transparency and a more comprehensive understanding of the information used by management in its financial and operational decision making.

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

Management believes that Adjusted EBITDA, which is EBITDA adjusted for items that are not reflective of ongoing operations, is useful as a performance indicator of ongoing operations. The Company believes that Adjusted EBITDA is useful to investors as an indicator of the strength and performance of the Company and its segments’ ongoing business operations and a way to evaluate and compare operating performance and value companies within the Company’s industry. Management believes that Adjusted EBITDA margin is useful for the same reason as Adjusted EBITDA. The definition of Adjusted EBITDA used here may differ from that used by other companies.

This report also references free cash flow. This non-GAAP measure is discussed and reconciled to its most directly comparable U.S. GAAP measure in the section above titled “Free Cash Flow.”

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures prepared in accordance with U.S. GAAP. Due to rounding, numbers presented throughout this and other documents may not add up or recalculate precisely. The financial results prepared in accordance with U.S. GAAP and the reconciliations from these results should be carefully evaluated.

1. Reconciliations of the Change in Net Sales to Organic Net Sales
			Three Months Ended March 31, 2023
			FMT						HST						FSDP						IDEX
Change in net sales			18		%				11		%				6		%				13		%
- Net impact from acquisitions/divestitures			11		%				11		%				—		%				9		%
- Impact from foreign currency			(2		%)				(3		%)				(3		%)				(2		%)
Change in organic net sales			9		%				3		%				9		%				6		%

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2. Reconciliations of Reported-to-Adjusted Net Income and Diluted EPS (in millions, except per share amounts)
						Three Months Ended March 31,
						2023						2022
Reported net income attributable to IDEX						$	139.8					$	140.0
+ Restructuring expenses and asset impairments						0.5						—
+ Tax impact on restructuring expenses and asset impairments						(0.1)						—
- Gains on sales of assets						—						(2.7)
+ Tax impact on gains on sales of assets						—						0.6
+ Acquisition-related intangible asset amortization						23.6						15.3
+ Tax impact on acquisition-related intangible asset amortization						(5.2)						(3.4)
Adjusted net income attributable to IDEX						$	158.6					$	149.8

						Three Months Ended March 31,
						2023						2022
Reported diluted EPS attributable to IDEX						$	1.84					$	1.83
+ Restructuring expenses and asset impairments						0.01						—
+ Tax impact on restructuring expenses and asset impairments						—						—
- Gains on sales of assets						—						(0.03)
+ Tax impact on gains on sales of assets						—						0.01
+ Acquisition-related intangible asset amortization						0.31						0.20
+ Tax impact on acquisition-related intangible asset amortization						(0.07)						(0.05)
Adjusted diluted EPS attributable to IDEX						$	2.09					$	1.96
Diluted weighted average shares outstanding						75.9						76.4

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3. Reconciliations of Net Income to Adjusted EBITDA (dollars in millions)
			Three Months Ended March 31, 2023
			FMT						HST						FSDP						Corporate						IDEX
Reported net income			$	—					$	—					$	—					$	—					$	139.8
+ Provision for income taxes			—						—						—						—						40.0
+ Interest expense			—						—						—						—						13.1
- Other income (expense) - net			—						—						—						—						0.6
Operating income (loss)			96.5						77.5						46.0						(27.7)						192.3
+ Other income (expense) - net			0.5						(0.3)						(0.2)						0.6						0.6
+ Depreciation			3.1						7.3						2.1						0.3						12.8
+ Amortization			6.0						15.9						1.7						—						23.6
+ Restructuring expenses and asset impairments			0.1						0.3						0.1						—						0.5
Adjusted EBITDA			$	106.2					$	100.7					$	49.7					$	(26.8)					$	229.8
Net sales (eliminations)			$	321.8					$	351.0					$	174.4					$	(1.8)					$	845.4
Net income margin																											16.5		%
Adjusted EBITDA margin			33.0		%				28.7		%				28.5		%				n/m						27.2		%

			Three Months Ended March 31, 2022
			FMT						HST						FSDP						Corporate						IDEX
Reported net income			$	—					$	—					$	—					$	—					$	139.9
+ Provision for income taxes			—						—						—						—						40.5
+ Interest expense			—						—						—						—						9.5
- Other income (expense) - net			—						—						—						—						2.3
Operating income (loss)			80.4			0.0			83.6						40.5						(16.9)						187.6
+ Other income (expense) - net			1.6						0.2						1.6						(1.1)						2.3
+ Depreciation			3.9						6.1						2.1						0.1						12.2
+ Amortization			3.7						9.9						1.7						—						15.3
- Gains on sales of asset			(1.2)						—						(1.5)						—						(2.7)
Adjusted EBITDA			$	88.4					$	99.8					$	44.4					$	(17.9)					$	214.7
Net sales (eliminations)			$	272.0					$	315.2					$	164.7					$	(0.8)					$	751.1
Net income margin																											18.6		%
Adjusted EBITDA margin			32.5		%				31.7		%				26.9		%				n/m						28.6		%

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Cautionary Statement Under the Private Securities Litigation Reform Act

This quarterly report on Form 10-Q, including the “Overview,” “Results of Operations” and “Liquidity and Capital Resources” sections of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, 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, anticipated future acquisition behavior, availability of cash and financing alternatives, the intent to refinance or repay the Company’s 3.20% Senior Notes due June 2023 using the available borrowing capacity of the Revolving Credit Facility, the completion of pending transactions (including the acquisition of Iridian) and the anticipated benefits of the Company’s recent acquisitions, including the acquisitions of Nexsight, KZValve and Muon Group and are indicated by words or phrases such as “anticipates,” “estimates,” “plans,” “guidance,” “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 report.

The risks and uncertainties include, but are not limited to, the following: levels of industrial activity and economic conditions in the U.S. and other countries around the world, including uncertainties in the financial markets and adverse developments affecting the financial services industry; pricing pressures, including inflation and rising interest rates, 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; the impact of health epidemics and pandemics and terrorist attacks and wars, including the ongoing conflict between Russia and Ukraine, which could have an adverse impact on the Company's business by creating disruptions in the global supply chain and by potentially having an adverse impact on the global economy; 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; supply chain backlogs, including risks affecting component availability, labor inefficiencies and freight logistical challenges; market conditions and material costs; risks related to environmental, social and corporate governance issues, including those related to climate change and sustainability; 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 Securities and Exchange Commission (“SEC”) and 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 report, 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.

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The Company is subject to market risk associated with changes in foreign currency exchange rates and interest rates as well as inflationary factors. The Company may, from time to time, enter into foreign currency forward contracts and interest rate swaps on its debt when it believes there is a financial advantage in doing so. A treasury risk management policy, adopted by the Board of Directors, describes the procedures and controls over derivative financial and commodity instruments, including foreign currency forward contracts and interest rate swaps. Under the policy, the Company does not use financial or commodity derivative instruments for trading purposes and the use of these instruments is subject to strict approvals by senior officers. Typically, the use of derivative instruments is limited to foreign currency forward contracts and interest rate swaps on the Company’s outstanding long-term debt. As of March 31, 2023, the Company did not have any derivative instruments outstanding.

Foreign Currency Exchange Rates

The Company’s foreign currency exchange rate risk is limited principally to the Euro, Swiss Franc, British Pound, Canadian Dollar, Indian Rupee, Chinese Renminbi, Swedish Krona and Brazilian Real. The Company manages its foreign exchange risk principally through invoicing customers in the same currency as the source of products. Foreign currency transaction gains and losses are reported within Other (income) expense - net in the Condensed Consolidated Statements of Income.

Interest Rate Fluctuations

The Company has interest rate exposure due to $279.4 million of the $1,479.5 million debt outstanding at March 31, 2023 being floating rate debt. The Company’s Revolving Credit Facility and Term Facility both bear interest at either an alternate base rate or adjusted Term SOFR (or appropriate alternative currency reference rates) plus, in each case, an applicable margin based on the lower of the Company’s senior, unsecured, long-term debt rating or the Company’s applicable leverage ratio. At March 31, 2023, there was $79.4 million outstanding under the Revolving Credit Facility with an interest rate of 3.32% and $200.0 million outstanding under the Term Facility with an interest rate of 5.83%.

Inflation Risk

The Company sources a wide variety of materials and components from a network of global suppliers. While materials are typically available from numerous suppliers, they are subject to price fluctuations, which could have a negative impact on the Company’s results. The Company seeks to minimize the effects of inflation and changing prices through price increases to maintain reasonable gross margins.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2023.

There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries are party to legal proceedings arising in the ordinary course of business as described in Note 18 in Part I, Item 1, “Legal Proceedings,” and such disclosure is incorporated by reference into this Item 1, “Legal Proceedings.”

The Company’s threshold for disclosing material environmental legal proceedings involving a government authority where potential monetary sanctions are involved is $1.0 million.

In addition, the Company and six of its subsidiaries are presently named as defendants in a number of lawsuits claiming various asbestos-related personal injuries, allegedly as a result of exposure to products manufactured with components that contained asbestos. These components were acquired from third party suppliers and were not manufactured by the Company or any of the defendant subsidiaries. To date, the majority of the Company’s settlements and legal costs, except for costs of coordination, administration, insurance investigation and a portion of defense costs, have been covered in full by insurance, subject to applicable deductibles. However, the Company cannot predict whether and to what extent insurance will be available to continue to cover these settlements and legal costs, or how insurers may respond to claims that are tendered to them. Asbestos-related claims have been filed in jurisdictions throughout the United States and the United Kingdom. Most of the claims resolved to date have been dismissed without payment. The balance of the claims have been settled for various immaterial amounts. Only one case has been tried, resulting in a verdict for the Company’s business unit. No provision has been made in the financial statements of the Company, other than for insurance deductibles in the ordinary course, and the Company does not currently believe the asbestos-related claims will have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

There have been no material changes with respect to risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no share repurchases during the three months ended March 31, 2023. As of March 31, 2023, the amount of share repurchase authorization remaining was $563.8 million.

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Exhibit Number						Description
31.1*						Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes Oxley Act of 2002
31.2*						Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1*						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.2*						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
101*						The following financial information from IDEX Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 formatted in Inline eXtensible Business Reporting Language (iXBRL) includes: (i) the Cover Page, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Income, (iv) the Condensed Consolidated Statements of Comprehensive Income, (v) the Condensed Consolidated Statements of Equity, (vi) the Condensed Consolidated Statements of Cash Flows, and (vii) Notes to the Condensed Consolidated Financial Statements.
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			IDEX Corporation
			By:			/s/ WILLIAM K. GROGAN
						William K. Grogan
						Senior Vice President and Chief Financial Officer (Principal Financial Officer)
			By:			/s/ ALLISON S. LAUSAS
						Allison S. Lausas
						Vice President and Chief Accounting Officer (Principal Accounting Officer)

Date: April 27, 2023