filings.toolsItem 1. Financial Statements
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Item 1. Financial Statements
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
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
IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(unaudited)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Net income | $ | 139.8 | $ | 139.9 | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Pension and other postretirement adjustments, net of tax | 0.4 | 0.6 | |||||||||||||||||||||
| Cumulative translation adjustment | 36.6 | (19.5) | |||||||||||||||||||||
| Other comprehensive income (loss) | 37.0 | (18.9) | |||||||||||||||||||||
| Comprehensive income | 176.8 | 121.0 | |||||||||||||||||||||
| Comprehensive loss attributable to noncontrolling interest | — | — | |||||||||||||||||||||
| Comprehensive income attributable to IDEX | $ | 176.8 | $ | 121.0 |
See Notes to Condensed Consolidated Financial Statements
IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in millions)
(unaudited)
| Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock and Additional Paid-In Capital | Retained Earnings | Cumulative Translation Adjustment | Retirement Benefits Adjustment | Treasury Stock | Total Shareholders’ Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | 818.1 | $ | 3,531.7 | $ | (137.1) | $ | 10.9 | $ | (1,184.3) | $ | 3,039.3 | $ | 0.3 | $ | 3,039.6 | |||||||||||||||||||||||||||||||
| Net income | — | 139.8 | — | — | — | 139.8 | — | 139.8 | |||||||||||||||||||||||||||||||||||||||
| Cumulative translation adjustment | — | — | 36.6 | — | — | 36.6 | — | 36.6 | |||||||||||||||||||||||||||||||||||||||
| Net change in retirement obligations (net of tax of $0.2) | — | — | — | 0.4 | — | 0.4 | — | 0.4 | |||||||||||||||||||||||||||||||||||||||
| Issuance of 84,666 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $1.8) | — | — | — | — | 4.7 | 4.7 | — | 4.7 | |||||||||||||||||||||||||||||||||||||||
| Shares surrendered for tax withholding | — | — | — | — | (4.4) | (4.4) | — | (4.4) | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | 12.8 | — | — | — | — | 12.8 | — | 12.8 | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | 830.9 | $ | 3,671.5 | $ | (100.5) | $ | 11.3 | $ | (1,184.0) | $ | 3,229.2 | $ | 0.3 | $ | 3,229.5 | |||||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock and Additional Paid-In Capital | Retained Earnings | Cumulative Translation Adjustment | Retirement Benefits Adjustment | Treasury Stock | Total Shareholders’ Equity | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | 796.5 | $ | 3,126.5 | $ | (62.2) | $ | (7.4) | $ | (1,050.3) | $ | 2,803.1 | $ | — | $ | 2,803.1 | |||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | 140.0 | — | — | — | 140.0 | (0.1) | 139.9 | |||||||||||||||||||||||||||||||||||||||||||||
| Cumulative translation adjustment | — | — | (19.5) | — | — | (19.5) | — | (19.5) | |||||||||||||||||||||||||||||||||||||||||||||
| Net change in retirement obligations (net of tax of $0.2) | — | — | — | 0.6 | — | 0.6 | — | 0.6 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of 73,755 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $1.7) | — | — | — | — | 1.4 | 1.4 | — | 1.4 | |||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of 147,500 shares of common stock | — | — | — | — | (28.3) | (28.3) | — | (28.3) | |||||||||||||||||||||||||||||||||||||||||||||
| Shares surrendered for tax withholding | — | — | — | — | (4.9) | (4.9) | — | (4.9) | |||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | 6.6 | — | — | — | — | 6.6 | — | 6.6 | |||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | 803.1 | $ | 3,266.5 | $ | (81.7) | $ | (6.8) | $ | (1,082.1) | $ | 2,899.0 | $ | (0.1) | $ | 2,898.9 | |||||||||||||||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(unaudited)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net income | $ | 139.8 | $ | 139.9 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Gains on sales of assets | (0.2) | (2.7) | |||||||||
| Depreciation | 12.8 | 12.2 | |||||||||
| Amortization of intangible assets | 23.6 | 15.3 | |||||||||
| Amortization of debt issuance expenses | 0.4 | 0.4 | |||||||||
| Share-based compensation expense | 12.8 | 6.6 | |||||||||
| Deferred income taxes | (0.2) | 1.0 | |||||||||
| Changes in (net of the effect from acquisitions and foreign exchange): | |||||||||||
| Receivables | (0.7) | (49.0) | |||||||||
| Inventories | (23.3) | (50.2) | |||||||||
| Other current assets | (11.1) | (12.7) | |||||||||
| Trade accounts payable | 7.6 | 28.1 | |||||||||
| Deferred revenue | 10.2 | 6.4 | |||||||||
| Accrued expenses | (24.9) | (16.3) | |||||||||
| Other - net | 1.1 | 0.7 | |||||||||
| Net cash flows provided by operating activities | 147.9 | 79.7 | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchases of property, plant and equipment | (26.6) | (16.1) | |||||||||
| Acquisition of businesses, net of cash acquired | — | (114.7) | |||||||||
| Proceeds from disposal of fixed assets | 0.9 | 6.5 | |||||||||
| Purchase of marketable securities | (3.2) | — | |||||||||
| Other - net | (0.3) | (0.1) | |||||||||
| Net cash flows used in investing activities | (29.2) | (124.4) | |||||||||
| Cash flows from financing activities | |||||||||||
| Dividends paid | (45.5) | (41.4) | |||||||||
| Proceeds from stock option exercises | 4.7 | 1.4 | |||||||||
| Repurchases of common stock | — | (26.3) | |||||||||
| Shares surrendered for tax withholding | (4.4) | (4.9) | |||||||||
| Other - net | — | (0.1) | |||||||||
| Net cash flows used in financing activities | (45.2) | (71.3) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 7.0 | (6.2) | |||||||||
| Net increase (decrease) in cash and cash equivalents | 80.5 | (122.2) | |||||||||
| Cash and cash equivalents at beginning of year | 430.2 | 855.4 | |||||||||
| Cash and cash equivalents at end of period | $ | 510.7 | $ | 733.2 | |||||||
| Supplemental cash flow information | |||||||||||
| Cash paid for: | |||||||||||
| Interest | $ | 4.1 | $ | 0.4 | |||||||
| Income taxes | 20.7 | 15.4 | |||||||||
See Notes to Condensed Consolidated Financial Statements
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
1. Basis of Presentation and Significant Accounting Policies
The Condensed Consolidated Financial Statements of IDEX Corporation (“IDEX” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) applicable to interim financial information and the instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended. The statements are unaudited but include all adjustments, consisting only of recurring items, except as noted, that the Company considers necessary for a fair presentation of the information set forth herein. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the entire year.
The Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in this report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Recently Adopted Accounting Standards
In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which adds contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with revenue recognition guidance. The Company adopted this standard on a prospective basis for the annual and interim periods beginning January 1, 2023. The adoption of this standard did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
2. Acquisitions
All of the Company’s acquisitions of businesses have been accounted for under Accounting Standards Codification (“ASC”) 805, Business Combinations. Accordingly, the assets and liabilities of the acquired companies, after adjustments to reflect the fair values assigned to the assets and liabilities, have been included in the Company’s Condensed Consolidated Financial Statements from their respective dates of acquisition. The results of operations of Nexsight, LLC and its businesses Envirosight, WinCan, MyTana and Pipeline Renewal Technologies (“Nexsight”) (acquired February 28, 2022), KZ CO. (“KZValve”) (acquired May 2, 2022) and Muon B.V. and its subsidiaries (“Muon Group”) (acquired November 18, 2022) have been included in the Company’s Condensed Consolidated Financial Statements since the respective dates of acquisition. Supplemental pro forma information has not been provided as the acquisitions did not have a material impact on the Company’s Condensed Consolidated Financial Statements individually or in the aggregate.
2022 Acquisitions
Nexsight
On February 28, 2022, the Company acquired Nexsight in a partial stock and asset acquisition. Nexsight complements and creates synergies with the Company’s existing iPEK and ADS business units that design and create sewer crawlers, inspection and monitoring systems and software applications that allow teams to identify, anticipate and correct wastewater system issues remotely. Headquartered in Randolph, New Jersey, Nexsight operates in the Company’s Water reporting unit within the Fluid & Metering Technologies (“FMT”) segment. Nexsight was acquired for cash consideration of $112.5 million. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $54.7 million and $49.8 million, respectively. The goodwill is partially deductible for tax purposes.
The Company finalized the allocation of the purchase price for the Nexsight 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:
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| Total | |||||
| Current assets, net of cash acquired | $ | 16.6 | |||
| Property, plant and equipment | 2.0 | ||||
| Goodwill | 54.7 | ||||
| Intangible assets | 49.8 | ||||
| Other noncurrent assets | 4.3 | ||||
| Total assets acquired | 127.4 | ||||
| Current liabilities | (9.2) | ||||
| Deferred income taxes | (1.9) | ||||
| Other noncurrent liabilities | (3.8) | ||||
| Net assets acquired | $ | 112.5 |
Acquired intangible assets consist of trade names, customer relationships and software. 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:
| Total | Weighted Average Life | ||||||||||
| Trade names | $ | 13.5 | 15 | ||||||||
| Customer relationships | 31.5 | 10 | |||||||||
| Software | 4.8 | 5 | |||||||||
| Acquired intangible assets | $ | 49.8 |
KZValve
On May 2, 2022, the Company acquired KZValve in an asset acquisition. KZValve is a leading manufacturer of electric valves and controllers used primarily in agricultural applications. KZValve augments and expands IDEX’s agricultural portfolio, complementing Banjo’s current fluid management solutions for these applications. Headquartered in Greenwood, Nebraska, KZValve operates in the Company’s Agriculture reporting unit within the FMT segment. KZValve was acquired for cash consideration of $120.1 million. The entire purchase was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $56.4 million and $52.0 million, respectively. The goodwill is deductible for tax purposes.
The Company made a preliminary allocation of the purchase price for the KZValve 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. As the Company continues to obtain additional information about these assets and liabilities, and continues to integrate the newly acquired business, the Company 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 continue to make required adjustments to the purchase price allocation prior to the completion of the measurement period.
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:
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| Total | |||||
| Current assets, net of cash acquired | $ | 9.7 | |||
| Property, plant and equipment | 1.8 | ||||
| Goodwill | 56.4 | ||||
| Intangible assets | 52.0 | ||||
| Deferred income taxes | 0.2 | ||||
| Other noncurrent assets | 1.0 | ||||
| Total assets acquired | 121.1 | ||||
| Current liabilities | (1.0) | ||||
| Net assets acquired | $ | 120.1 |
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:
| Total | Weighted Average Life | ||||||||||
| Trade names | $ | 7.5 | 15 | ||||||||
| Customer relationships | 36.0 | 13 | |||||||||
| Unpatented technology | 8.5 | 10 | |||||||||
| Acquired intangible assets | $ | 52.0 |
Muon Group
On November 18, 2022, the Company acquired the stock of Muon Group. Muon Group manufactures highly precise flowpaths in a variety of materials that enable the movement of various liquids and gases in critical applications for medical, semiconductor, food processing, digital printing and filtration technologies. Muon Group maintains operations in Hapert, the Netherlands; Eerbeek, the Netherlands; Wijchen, the Netherlands; Dorset, United Kingdom and Pune, India and operates in the Company’s Scientific Fluidics & Optics reporting unit within the Health & Science Technologies (“HST”) segment. Muon Group was acquired for cash consideration of $713.0 million. The purchase price was funded with $342.6 million of cash on hand, $170.4 million of proceeds from the Company's Revolving Credit Facility and $200.0 million of proceeds from the Company's Term Facility. Goodwill and intangible assets recognized as part of this transaction were $393.0 million and $319.1 million, respectively. The goodwill is not deductible for tax purposes.
The Company made a preliminary allocation of the purchase price for the Muon Group 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. As the Company continues to obtain additional information about these assets and liabilities, including intangible asset appraisals, and continues to integrate the newly acquired business, the Company 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 continue to make required adjustments to the purchase price allocation prior to the completion of the measurement period.
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:
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| Total | |||||
| Current assets, net of cash acquired | $ | 52.5 | |||
| Property, plant and equipment | 59.1 | ||||
| Goodwill | 393.0 | ||||
| Intangible assets | 319.1 | ||||
| Other noncurrent assets | 9.6 | ||||
| Total assets acquired | 833.3 | ||||
| Current liabilities | (25.5) | ||||
| Deferred income taxes | (83.9) | ||||
| Other noncurrent liabilities | (10.9) | ||||
| Net assets acquired | $ | 713.0 |
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:
| Total | Weighted Average Life | ||||||||||
| Trade names | $ | 38.3 | 15 | ||||||||
| Customer relationships | 212.4 | 13 | |||||||||
| Unpatented technology | 68.4 | 11 | |||||||||
| Acquired intangible assets | $ | 319.1 |
The Company incurred $1.1 million and $0.9 million of acquisition-related costs during the three months ended March 31, 2023 and 2022, respectively. 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.
3. Business Segments
IDEX has three reportable business segments: Fluid & Metering Technologies (“FMT”), Health & Science Technologies (“HST”) and Fire & Safety/Diversified Products (“FSDP”).
The FMT segment designs, produces and distributes positive displacement pumps, valves, 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. FMT application-specific pump and metering solutions serve a diverse range of end markets, including industrial infrastructure (fossil fuels, refined and alternative fuels and water and wastewater), energy, chemical processing, agriculture, food and beverage, semiconductor, pulp and paper, automotive/transportation, plastics and resins, electronics and electrical, construction and mining, pharmaceutical and biopharmaceutical, machinery and numerous other specialty niche markets.
The HST segment designs, produces and distributes a wide range of precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems, micro-precision components, pneumatic components and sealing solutions, high performance molded and extruded sealing components, custom mechanical and shaft seals, engineered hygienic mixers and valves, biocompatible medical devices and implantables, air compressors and blowers, optical components and coatings, laboratory and commercial equipment, precision photonic solutions and precision gear and peristaltic pump technologies. HST serves a variety of end markets, including food and beverage, life sciences, analytical instruments, pharmaceutical and biopharmaceutical, industrial, semiconductor, digital printing, automotive/transportation, medical/dental, energy, cosmetics, marine, chemical, wastewater and water treatment, research and aerospace/defense markets.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
The FSDP 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 in the automotive, energy and industrial markets and precision equipment for dispensing, metering and mixing colorants and paints used in a variety of retail and commercial businesses in the paint and industrial markets around the world.
Information on the Company’s business segments is presented below based on the nature of the products and services offered. The Company uses Adjusted EBITDA as its principal measure of segment performance. Intersegment sales are accounted for at fair value as if the sales were to third parties.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Net sales | |||||||||||||||||||||||
| Fluid & Metering Technologies | |||||||||||||||||||||||
| External customers | $ | 321.1 | $ | 271.9 | |||||||||||||||||||
| Intersegment sales | 0.7 | 0.1 | |||||||||||||||||||||
| Total segment sales | 321.8 | 272.0 | |||||||||||||||||||||
| Health & Science Technologies | |||||||||||||||||||||||
| External customers | 350.3 | 314.6 | |||||||||||||||||||||
| Intersegment sales | 0.7 | 0.6 | |||||||||||||||||||||
| Total segment sales | 351.0 | 315.2 | |||||||||||||||||||||
| Fire & Safety/Diversified Products | |||||||||||||||||||||||
| External customers | 174.0 | 164.6 | |||||||||||||||||||||
| Intersegment sales | 0.4 | 0.1 | |||||||||||||||||||||
| Total segment sales | 174.4 | 164.7 | |||||||||||||||||||||
| Intersegment eliminations | (1.8) | (0.8) | |||||||||||||||||||||
| Net sales | $ | 845.4 | $ | 751.1 | |||||||||||||||||||
| ADJUSTED EBITDA | |||||||||||||||||||||||
| Fluid & Metering Technologies | $ | 106.2 | $ | 88.4 | |||||||||||||||||||
| Health & Science Technologies | 100.7 | 99.8 | |||||||||||||||||||||
| Fire & Safety/Diversified Products | 49.7 | 44.4 | |||||||||||||||||||||
| Segment Adjusted EBITDA | 256.6 | 232.6 | |||||||||||||||||||||
| Corporate and other | (26.8) | (17.9) | |||||||||||||||||||||
| Adjusted EBITDA | 229.8 | 214.7 | |||||||||||||||||||||
| - Interest expense | 13.1 | 9.5 | |||||||||||||||||||||
| - Depreciation | 12.8 | 12.2 | |||||||||||||||||||||
| - Amortization | 23.6 | 15.3 | |||||||||||||||||||||
| - Restructuring expenses and asset impairments | 0.5 | — | |||||||||||||||||||||
| + Gains on sales of asset | — | 2.7 | |||||||||||||||||||||
| Income before income taxes | $ | 179.8 | $ | 180.4 |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| March 31, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Fluid & Metering Technologies | $ | 1,720.9 | $ | 1,676.9 | |||||||
| Health & Science Technologies | 2,960.9 | 2,931.1 | |||||||||
| Fire & Safety/Diversified Products | 787.3 | 771.8 | |||||||||
| Corporate and other | 188.9 | 132.1 | |||||||||
| Total assets | $ | 5,658.0 | $ | 5,511.9 |
4. Revenue
Disaggregation of Revenue
The Company has a comprehensive offering of products, including technologies, built to customers’ specifications that are sold in niche markets throughout the world. The Company disaggregates its revenue from contracts with customers by reporting unit and geographical region for each segment as the Company believes it best depicts how the amount, nature, timing and uncertainty of its 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 revenue disaggregated by reporting unit and geographical region.
Revenue by reporting unit for the three months ended March 31, 2023 and 2022 was as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Pumps | $ | 105.1 | $ | 97.4 | |||||||||||||||||||
| Water | 94.1 | 64.4 | |||||||||||||||||||||
| Energy | 50.7 | 48.3 | |||||||||||||||||||||
| Agriculture | 38.6 | 32.3 | |||||||||||||||||||||
| Valves | 33.3 | 29.6 | |||||||||||||||||||||
| Intersegment elimination | (0.7) | (0.1) | |||||||||||||||||||||
| Fluid & Metering Technologies | 321.1 | 271.9 | |||||||||||||||||||||
| Scientific Fluidics & Optics | 178.6 | 141.2 | |||||||||||||||||||||
| Performance Pneumatic Technologies | 69.4 | 62.0 | |||||||||||||||||||||
| Sealing Solutions | 64.7 | 70.2 | |||||||||||||||||||||
| Material Processing Technologies | 27.7 | 33.7 | |||||||||||||||||||||
| Micropump | 10.6 | 8.1 | |||||||||||||||||||||
| Intersegment elimination | (0.7) | (0.6) | |||||||||||||||||||||
| Health & Science Technologies | 350.3 | 314.6 | |||||||||||||||||||||
| Fire & Safety | 106.2 | 95.7 | |||||||||||||||||||||
| Dispensing | 36.2 | 41.6 | |||||||||||||||||||||
| BAND-IT | 32.0 | 27.4 | |||||||||||||||||||||
| Intersegment elimination | (0.4) | (0.1) | |||||||||||||||||||||
| Fire & Safety/Diversified Products | 174.0 | 164.6 | |||||||||||||||||||||
| Net sales | $ | 845.4 | $ | 751.1 | |||||||||||||||||||
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
Revenue by geographical region for the three months ended March 31, 2023 and 2022 was as follows:
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| FMT | HST | FSDP | IDEX | ||||||||||||||||||||
| U.S. | $ | 176.8 | $ | 149.6 | $ | 89.4 | $ | 415.8 | |||||||||||||||
| North America, excluding U.S. | 19.4 | 5.2 | 8.5 | 33.1 | |||||||||||||||||||
| Europe | 59.2 | 120.9 | 44.7 | 224.8 | |||||||||||||||||||
| Asia | 45.1 | 66.6 | 23.4 | 135.1 | |||||||||||||||||||
| Other (1) | 21.3 | 8.7 | 8.4 | 38.4 | |||||||||||||||||||
| Intersegment elimination | (0.7) | (0.7) | (0.4) | (1.8) | |||||||||||||||||||
| Net sales | $ | 321.1 | $ | 350.3 | $ | 174.0 | $ | 845.4 |
| Three Months Ended March 31, 2022 | |||||||||||||||||||||||
| FMT | HST | FSDP | IDEX | ||||||||||||||||||||
| U.S. | $ | 150.0 | $ | 152.0 | $ | 76.5 | $ | 378.5 | |||||||||||||||
| North America, excluding U.S. | 17.3 | 7.5 | 10.9 | 35.7 | |||||||||||||||||||
| Europe | 48.7 | 91.3 | 45.0 | 185.0 | |||||||||||||||||||
| Asia | 36.5 | 58.8 | 23.4 | 118.7 | |||||||||||||||||||
| Other (1) | 19.5 | 5.6 | 8.9 | 34.0 | |||||||||||||||||||
| Intersegment elimination | (0.1) | (0.6) | (0.1) | (0.8) | |||||||||||||||||||
| Net sales | $ | 271.9 | $ | 314.6 | $ | 164.6 | $ | 751.1 |
(1) Other includes: South America, Middle East, Australia and Africa.
Performance Obligations
The Company’s performance obligations are satisfied either at a point in time or over time as work progresses. Revenue from products and services transferred to customers at a point in time approximated 96% of total revenues in both the three months ended March 31, 2023 and 2022. Revenue from products and services transferred to customers over time approximated 4% of total revenues in both the three months ended March 31, 2023 and 2022.
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 on the Condensed 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.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
The composition of customer receivables was as follows:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Billed receivables | $ | 428.5 | $ | 421.3 | |||||||
| Unbilled receivables | 10.2 | 10.0 | |||||||||
| Total customer receivables | $ | 438.7 | $ | 431.3 |
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 the Company expects to recognize the revenue. The current portion is included in Accrued expenses and the noncurrent portion is included in Other noncurrent liabilities on the Condensed Consolidated Balance Sheets. Advance payments and deposits represent contract liabilities and are recorded when customers remit contractual cash payments in advance of the Company satisfying performance obligations under contractual arrangements, including those with performance obligations satisfied over time. The Company generally receives advance payments from customers related to maintenance services which are recognized ratably over the service term. The Company also receives deposits from customers on certain orders which the Company recognizes as revenue at a point in time. 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:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Deferred revenue - current | $ | 55.4 | $ | 44.7 | |||||||
| Deferred revenue - noncurrent | 14.5 | 15.0 | |||||||||
| Total deferred revenue | $ | 69.9 | $ | 59.7 |
5. Earnings Per Common Share
Diluted earnings per common share (“EPS”) attributable to IDEX is computed by dividing Net income attributable to IDEX by the weighted average number of shares of common stock (basic) plus common stock equivalents (diluted) outstanding during the period. 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.
ASC 260, Earnings Per Share, concludes that all outstanding unvested share-based payment awards that contain rights to non-forfeitable 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, Diluted EPS attributable to IDEX 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:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Basic weighted average common shares outstanding | 75.6 | 76.1 | |||||||||||||||||||||
| Dilutive effect of stock options, restricted stock and performance share units | 0.3 | 0.3 | |||||||||||||||||||||
| Diluted weighted average common shares outstanding | 75.9 | 76.4 |
Options to purchase approximately 0.2 million and 0.5 million shares of common stock for the three months ended March 31, 2023 and 2022, respectively, were not included in the computation of Diluted EPS attributable to IDEX because the effect of their inclusion would have been antidilutive.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
6. Inventories
The components of inventories as of March 31, 2023 and December 31, 2022 were:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Raw materials and component parts | $ | 303.8 | $ | 301.2 | |||||||
| Work in process | 54.9 | 54.3 | |||||||||
| Finished goods | 138.9 | 115.4 | |||||||||
| Total inventories | $ | 497.6 | $ | 470.9 |
Inventories are stated at the lower of cost or net realizable value. Cost, which includes material, labor and overhead, is determined on a first in, first out basis.
7. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the three months ended March 31, 2023, by reportable business segment, were as follows:
| FMT | HST | FSDP | IDEX | ||||||||||||||||||||
| Goodwill | $ | 800.9 | $ | 1,644.8 | $ | 393.0 | $ | 2,838.7 | |||||||||||||||
| Accumulated goodwill impairment losses | (20.7) | (149.8) | (30.1) | (200.6) | |||||||||||||||||||
| Balance at January 1, 2023 | 780.2 | 1,495.0 | 362.9 | 2,638.1 | |||||||||||||||||||
| Foreign currency translation | 2.8 | 14.0 | 3.0 | 19.8 | |||||||||||||||||||
| Acquisition adjustments | (1.8) | 1.8 | — | — | |||||||||||||||||||
| Balance at March 31, 2023 | $ | 781.2 | $ | 1,510.8 | $ | 365.9 | $ | 2,657.9 |
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 the first three months of 2023, there were no events or circumstances that would have required an interim impairment test. Annually, on October 31, goodwill and other acquired intangible assets with indefinite lives are tested for impairment. Based on the results of the Company’s annual impairment test at October 31, 2022, all reporting units had fair values in excess of their carrying values.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset at March 31, 2023 and December 31, 2022:
| At March 31, 2023 | At December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | Weighted Average Life | Gross Carrying Amount | Accumulated Amortization | Net | |||||||||||||||||||||||||||||||||||
| Amortized intangible assets: | |||||||||||||||||||||||||||||||||||||||||
| Patents | $ | 2.9 | $ | (1.9) | $ | 1.0 | 12 | $ | 2.9 | $ | (1.8) | $ | 1.1 | ||||||||||||||||||||||||||||
| Trade names | 188.4 | (75.5) | 112.9 | 15 | 186.5 | (71.4) | 115.1 | ||||||||||||||||||||||||||||||||||
| Customer relationships | 774.7 | (196.6) | 578.1 | 13 | 772.2 | (184.9) | 587.3 | ||||||||||||||||||||||||||||||||||
| Unpatented technology | 206.1 | (59.3) | 146.8 | 12 | 207.1 | (57.8) | 149.3 | ||||||||||||||||||||||||||||||||||
| Software | 4.9 | (1.1) | 3.8 | 5 | 4.8 | (0.7) | 4.1 | ||||||||||||||||||||||||||||||||||
| Total amortized intangible assets | 1,177.0 | (334.4) | 842.6 | 1,173.5 | (316.6) | 856.9 | |||||||||||||||||||||||||||||||||||
| Indefinite-lived intangible assets: | |||||||||||||||||||||||||||||||||||||||||
| Banjo trade name | 62.1 | — | 62.1 | 62.1 | — | 62.1 | |||||||||||||||||||||||||||||||||||
| Akron Brass trade name | 28.8 | — | 28.8 | 28.8 | — | 28.8 | |||||||||||||||||||||||||||||||||||
| Total intangible assets | $ | 1,267.9 | $ | (334.4) | $ | 933.5 | $ | 1,264.4 | $ | (316.6) | $ | 947.8 |
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. Based on the results of the Company’s annual impairment test at October 31, 2022, these indefinite-lived intangible assets had fair values in excess of their carrying values. In the first three months of 2023, there were no events or circumstances that would have required an interim impairment test on these indefinite-lived intangible assets.
Amortization of intangible assets was $23.6 million and $15.3 million for the three months ended March 31, 2023 and 2022, respectively. Based on the intangible asset balances as of March 31, 2023, expected amortization expense for the remaining nine months of 2023 and for the years 2024 through 2027 is as follows:
| Maturity of Intangible Assets | Estimated Amortization | |||||||
| 2023 (excluding the three months ended March 31, 2023) | $ | 68.8 | ||||||
| 2024 | 87.6 | |||||||
| 2025 | 86.2 | |||||||
| 2026 | 84.5 | |||||||
| 2027 | 80.5 |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
8. Accrued Expenses
The components of accrued expenses as of March 31, 2023 and December 31, 2022 were:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Payroll and related items | $ | 79.2 | $ | 102.7 | |||||||
| Management incentive compensation | 6.0 | 26.4 | |||||||||
| Income taxes payable | 45.6 | 30.2 | |||||||||
| Insurance | 11.0 | 11.2 | |||||||||
| Warranty | 8.2 | 8.1 | |||||||||
| Deferred revenue | 55.4 | 44.7 | |||||||||
| Lease liability | 21.9 | 21.6 | |||||||||
| Restructuring | 1.3 | 1.4 | |||||||||
| Accrued interest | 14.0 | 5.5 | |||||||||
| Pension and retiree medical obligations | 3.3 | 3.3 | |||||||||
| Other | 30.0 | 34.0 | |||||||||
| Total accrued expenses | $ | 275.9 | $ | 289.1 |
9. Other Noncurrent Liabilities
The components of other noncurrent liabilities as of March 31, 2023 and December 31, 2022 were:
| March 31, 2023 | December 31, 2022 | ||||||||||
| Pension and retiree medical obligations | $ | 55.2 | $ | 55.1 | |||||||
| Transition tax payable | 9.1 | 9.1 | |||||||||
| Deferred revenue | 14.5 | 15.0 | |||||||||
| Lease liability | 99.3 | 96.6 | |||||||||
| Other | 20.5 | 20.0 | |||||||||
| Total other noncurrent liabilities | $ | 198.6 | $ | 195.8 |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
10. Borrowings
Borrowings at March 31, 2023 and December 31, 2022 consisted of the following:
| March 31, 2023 | December 31, 2022 | ||||||||||
| 3.20% Senior Notes, due June 2023(1) | $ | 100.0 | $ | 100.0 | |||||||
| 3.37% Senior Notes, due June 2025 | 100.0 | 100.0 | |||||||||
| 3.00% Senior Notes, due May 2030 | 500.0 | 500.0 | |||||||||
| 2.625% Senior Notes, due June 2031 | 500.0 | 500.0 | |||||||||
| $800.0 million Revolving Credit Facility, due November 2027(2) | 79.4 | 77.7 | |||||||||
| $200.0 million Term Facility, due November 2027(3) | 200.0 | 200.0 | |||||||||
| Other borrowings | 0.1 | 0.1 | |||||||||
| Total borrowings | 1,479.5 | 1,477.8 | |||||||||
| Less current portion | — | — | |||||||||
| Less deferred debt issuance costs | 7.6 | 7.9 | |||||||||
| Less unaccreted debt discount | 1.2 | 1.2 | |||||||||
| Long-term borrowings | $ | 1,470.7 | $ | 1,468.7 |
(1) As of March 31, 2023, the $100.0 million 3.20% Senior Notes, due in June 2023, have not been classified as Short-term borrowings on the Condensed Consolidated Balance Sheets as the Company has the ability and intent to either refinance or repay these Notes using the available borrowing capacity of the Revolving Credit Facility, due November 2027. As a result, the 3.20% Senior Notes remain classified as Long-term borrowings on the Condensed Consolidated Balance Sheets as of March 31, 2023.
(2) At March 31, 2023, there was $79.4 million outstanding under the Revolving Credit Facility with an interest rate of 3.32% and $7.5 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Credit Facility of approximately $713.1 million.
(3) The $200.0 million outstanding under the Term Facility bears an interest rate of 5.83%.
At March 31, 2023, the Company was in compliance with covenants contained in the credit agreement associated with the Revolving Credit Facility as well as other long-term debt agreements.
11. 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.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
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 March 31, 2023 and December 31, 2022:
| Basis of Fair Value Measurements | |||||||||||||||||||||||
| Balance at March 31, 2023 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Trading securities - mutual funds held in nonqualified SERP(1) | $ | 8.1 | $ | 8.1 | $ | — | $ | — | |||||||||||||||
| Available-for-sale securities - equities(2) | 3.2 | 3.2 | — | — | |||||||||||||||||||
| Basis of Fair Value Measurements | |||||||||||||||||||||||
| Balance at December 31, 2022 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Trading securities - mutual funds held in nonqualified SERP(1) | $ | 7.5 | $ | 7.5 | $ | — | $ | — | |||||||||||||||
(1) The Supplemental Executive Retirement Plan (“SERP”) investment assets are offset by a SERP liability which represents the Company’s obligation to distribute SERP funds to participants.
(2) At March 31, 2023, the securities are included in Other current assets on the Company’s Condensed Consolidated Balance Sheets and are available for overnight cash settlement, if necessary, to fund current operations.
There were no transfers of assets or liabilities between Level 1 and Level 2 during the three months ended March 31, 2023 or the year ended December 31, 2022.
The carrying values of the Company’s cash and cash equivalents, accounts receivable, marketable securities, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. At March 31, 2023 and December 31, 2022, the fair value of the outstanding indebtedness described in Note 10 based on quoted market prices and current market rates for debt with similar credit risk and maturity was approximately $1,347.8 million and $1,328.7 million, respectively, compared to the carrying value of $1,478.3 million and $1,476.6 million, respectively. 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 the Company’s rating.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
12. Leases
The Company leases certain office facilities, warehouses, manufacturing plants, equipment (which includes both office and plant equipment) and vehicles under operating leases and certain plant equipment under financing 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. The Company does not include renewal periods in any of the leases’ terms until the renewal is executed as they are generally not reasonably certain of being exercised. The Company does not have any material purchase options.
Certain of the Company’s lease agreements have rental payments that are adjusted periodically for inflation or that are based on usage. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Supplemental balance sheet information related to leases as of March 31, 2023 and December 31, 2022 was as follows:
| Balance Sheet Caption | March 31, 2023 | December 31, 2022 | |||||||||||||||
| Right-of-Use (“ROU”) Assets: | |||||||||||||||||
| Building ROU assets - net - operating | Other noncurrent assets | $ | 108.3 | $ | 104.4 | ||||||||||||
| Equipment ROU assets - net - operating | Other noncurrent assets | 5.2 | 5.6 | ||||||||||||||
| Equipment ROU assets - net - financing | Property, plant and equipment | 5.9 | 6.1 | ||||||||||||||
| Total ROU assets - net | $ | 119.4 | $ | 116.1 | |||||||||||||
| Lease Liabilities: | |||||||||||||||||
| Current lease liabilities | Accrued expenses | $ | 21.9 | $ | 21.6 | ||||||||||||
| Noncurrent lease liabilities | Other noncurrent liabilities | 99.3 | 96.6 | ||||||||||||||
| Total lease liabilities | $ | 121.2 | $ | 118.2 |
The components of lease cost for the three months ended March 31, 2023 and 2022 were as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Fixed lease cost (1) | $ | 8.2 | $ | 7.4 | |||||||||||||||||||
| Variable lease cost | 0.7 | 0.4 | |||||||||||||||||||||
| Total lease cost | $ | 8.9 | $ | 7.8 |
(1) Includes short-term leases, which are immaterial.
Supplemental cash flow information related to leases for the three months ended March 31, 2023 and 2022 was as follows:
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | 8.4 | $ | 7.4 | |||||||
| Right-of-use assets obtained in exchange for new lease liabilities | 9.0 | 8.3 |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
Other supplemental information related to leases as of March 31, 2023 and December 31, 2022 was as follows:
| Lease Term and Discount Rate | March 31, 2023 | December 31, 2022 | |||||||||||||||
| Weighted-average remaining lease term (years): | |||||||||||||||||
| Operating leases - building and equipment | 7.39 | 7.43 | |||||||||||||||
| Operating leases - vehicles | 2.20 | 2.14 | |||||||||||||||
| Financing leases - equipment | 2.26 | 2.05 | |||||||||||||||
| Weighted-average discount rate: | |||||||||||||||||
| Operating leases - building and equipment | 3.56 | % | 3.41 | % | |||||||||||||
| Operating leases - vehicles | 2.29 | % | 1.70 | % | |||||||||||||
| Financing leases - equipment | 4.16 | % | 4.48 | % |
The Company uses its incremental borrowing rate to determine the present value of the lease payments.
Total lease liabilities at March 31, 2023 have scheduled maturities as follows:
| Maturity of Lease Liabilities | Operating Leases | |||||||
| 2023 (excluding the three months ended March 31, 2023) | $ | 19.3 | ||||||
| 2024 | 19.7 | |||||||
| 2025 | 22.5 | |||||||
| 2026 | 17.8 | |||||||
| 2027 | 14.2 | |||||||
| Thereafter | 48.2 | |||||||
| Total lease payments | 141.7 | |||||||
| Less: Imputed interest | (20.5) | |||||||
| Present value of lease liabilities | $ | 121.2 |
13. Restructuring Expenses and Asset Impairments
From time to time, the Company incurs costs to facilitate long-term sustainable growth through cost reduction actions, consisting of employee reductions, facility rationalization and contract termination costs. These costs include severance costs, exit costs and asset impairments and are included in Restructuring expenses and asset impairments in the Condensed Consolidated Statements of Income. 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.
2023 Initiative
During the three months ended March 31, 2023, the Company incurred severance costs related to employee reductions.
Pre-tax restructuring expenses and asset impairments by segment for the three months ended March 31, 2023 were as follows:
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| Three Months Ended March 31, 2023 | ||||||||||||||||||||||||||
| Severance Costs | Exit Costs | Asset Impairments | Total | |||||||||||||||||||||||
| Fluid & Metering Technologies | $ | 0.1 | $ | — | $ | — | $ | 0.1 | ||||||||||||||||||
| Health & Science Technologies | 0.3 | — | — | 0.3 | ||||||||||||||||||||||
| Fire & Safety/Diversified Products | 0.1 | — | — | 0.1 | ||||||||||||||||||||||
| Corporate/Other | — | — | — | — | ||||||||||||||||||||||
| Restructuring expenses and asset impairments | $ | 0.5 | $ | — | $ | — | $ | 0.5 |
2022 Initiative
During the three months ended March 31, 2022, the Company incurred severance costs related to employee reductions.
Pre-tax restructuring expenses and asset impairments by segment for the three months ended March 31, 2022 were as follows:
| Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||
| Severance Costs | Exit Costs | Asset Impairments | Total | |||||||||||||||||||||||
| Fluid & Metering Technologies | $ | 0.3 | $ | — | $ | — | $ | 0.3 | ||||||||||||||||||
| Health & Science Technologies | 0.1 | — | — | 0.1 | ||||||||||||||||||||||
| Fire & Safety/Diversified Products | — | — | — | — | ||||||||||||||||||||||
| Corporate/Other | 0.2 | — | — | 0.2 | ||||||||||||||||||||||
| Restructuring expenses and asset impairments | $ | 0.6 | $ | — | $ | — | $ | 0.6 |
Restructuring accruals reflected in Accrued expenses in the Company’s Condensed Consolidated Balance Sheets are as follows:
| Restructuring Initiatives | |||||
| Balance at January 1, 2023 | $ | 1.4 | |||
| Restructuring expenses | 0.5 | ||||
| Payments, utilization and other | (0.6) | ||||
| Balance at March 31, 2023 | $ | 1.3 |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
14. Other Comprehensive Income (Loss)
The components of Other comprehensive income (loss) are as follows:
| Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||
| Pre-tax | Tax | Net of tax | Pre-tax | Tax | Net of tax | ||||||||||||||||||||||||||||||
| Cumulative translation adjustment | $ | 36.6 | $ | — | $ | 36.6 | $ | (19.5) | $ | — | $ | (19.5) | |||||||||||||||||||||||
| Pension and other postretirement adjustments | 0.6 | (0.2) | 0.4 | 0.8 | (0.2) | 0.6 | |||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | $ | 37.2 | $ | (0.2) | $ | 37.0 | $ | (18.7) | $ | (0.2) | $ | (18.9) |
The amounts reclassified from Accumulated other comprehensive loss to Net income during the three months ended March 31, 2023 and 2022 are as follows:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2023 | 2022 | Income Statement Caption | ||||||||||||||||||||||||
| Pension and other postretirement plans: | ||||||||||||||||||||||||||
| Amortization of service cost | $ | 0.6 | $ | 0.8 | Other (income) expense - net | |||||||||||||||||||||
| Total before tax | 0.6 | 0.8 | ||||||||||||||||||||||||
| Provision for income taxes | (0.2) | (0.2) | ||||||||||||||||||||||||
| Total net of tax | $ | 0.4 | $ | 0.6 |
15. Share Repurchases
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 authorization of the Board of Directors of $300.0 million on December 1, 2015. These authorizations have no expiration date. Repurchases under the program will be funded with future cash flow generation or borrowings available under the Revolving Credit Facility. There were no share repurchases during the three months ended March 31, 2023. During the three months ended March 31, 2022, the Company repurchased a total of 147,500 shares at a cost of $28.3 million, of which $2.0 million was settled in April 2022. As of March 31, 2023, the amount of share repurchase authorization remaining was $563.8 million.
16. Share-Based Compensation
The Company typically grants equity awards annually at its regularly scheduled first quarter meeting of the Board of Directors based on the recommendation from the Compensation Committee.
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. Classification of stock compensation cost within the Condensed Consolidated Statements of Income is consistent with the classification of cash compensation for the same employees.
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 was estimated on the date of the grant using the Black Scholes valuation model. Stock options generally 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 service period for certain retiree eligible participants is accelerated.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Weighted average fair value of grants | $60.80 | $41.66 | |||||||||||||||||||||
| Dividend yield | 1.06% | 1.14% | |||||||||||||||||||||
| Volatility | 27.19% | 25.15% | |||||||||||||||||||||
| Risk-free interest rate | 4.12% | 1.83% | |||||||||||||||||||||
| Expected life (in years) | 4.50 | 4.90 |
Total compensation cost for stock options is recorded in the Condensed Consolidated Statements of Income as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Cost of goods sold | $ | 0.3 | $ | 0.3 | |||||||||||||||||||
| Selling, general and administrative expenses(1) | 5.7 | 3.1 | |||||||||||||||||||||
| Total expense before income taxes | 6.0 | 3.4 | |||||||||||||||||||||
| Income tax benefit | (0.4) | (0.3) | |||||||||||||||||||||
| Total expense after income taxes | $ | 5.6 | $ | 3.1 |
(1) The three months ended March 31, 2023 includes an additional $2.4 million of accelerated stock compensation costs for retiree eligible participants as compared with the same period in 2022.
A summary of the Company’s stock option activity as of March 31, 2023 and changes during the three months ended March 31, 2023 are presented in the following table:
| Stock Options | Shares | Weighted Average Price | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||||||
| (Dollars in millions except weighted average price) | |||||||||||||||||||||||
| Outstanding at January 1, 2023 | 1,015,572 | $ | 161.45 | 6.94 | $ | 67.9 | |||||||||||||||||
| Granted | 208,305 | 225.71 | |||||||||||||||||||||
| Exercised | (33,460) | 141.19 | |||||||||||||||||||||
| Forfeited | (8,491) | 196.25 | |||||||||||||||||||||
| Outstanding at March 31, 2023 | 1,181,926 | $ | 173.10 | 7.28 | $ | 68.5 | |||||||||||||||||
| Vested and expected to vest as of March 31, 2023 | 1,130,292 | $ | 171.52 | 7.20 | $ | 67.3 | |||||||||||||||||
| Exercisable at March 31, 2023 | 639,677 | $ | 146.97 | 5.88 | $ | 53.8 |
As of March 31, 2023, there was $13.8 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.6 years.
Restricted Stock
Restricted stock awards generally cliff vest after three years for employees and non-employee directors. The service period for certain retiree eligible participants is accelerated. 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 March 31, 2023 and changes during the three months ended March 31, 2023 are presented in the following table:
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| Restricted Stock | Shares | Weighted-Average Grant Date Fair Value | |||||||||
| Unvested at January 1, 2023 | 104,382 | $ | 179.45 | ||||||||
| Granted | 25,595 | 225.73 | |||||||||
| Vested | (16,905) | 171.67 | |||||||||
| Forfeited | (3,430) | 204.03 | |||||||||
| Unvested at March 31, 2023 | 109,642 | $ | 190.69 |
Total compensation cost for restricted stock is recorded in the Condensed Consolidated Statements of Income as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Cost of goods sold | $ | 0.2 | $ | 0.2 | |||||||||||||||||||
| Selling, general and administrative expenses | 1.4 | 1.6 | |||||||||||||||||||||
| Total expense before income taxes | 1.6 | 1.8 | |||||||||||||||||||||
| Income tax benefit | (0.3) | (0.4) | |||||||||||||||||||||
| Total expense after income taxes | $ | 1.3 | $ | 1.4 |
As of March 31, 2023, there was $9.9 million of total unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 1.1 years.
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. The service period for certain retiree eligible participants is accelerated. 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 March 31, 2023 and changes during the three months ended March 31, 2023 are presented in the following table:
| Cash-Settled Restricted Stock | Shares | Weighted-Average Fair Value | |||||||||
| Unvested at January 1, 2023 | 57,356 | $ | 228.33 | ||||||||
| Granted | 19,755 | 225.66 | |||||||||
| Vested | (14,300) | 230.78 | |||||||||
| Forfeited | (1,265) | 231.03 | |||||||||
| Unvested at March 31, 2023 | 61,546 | $ | 231.03 |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
Total compensation cost for cash-settled restricted stock is recorded in the Condensed Consolidated Statements of Income as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Cost of goods sold | $ | 0.1 | $ | (0.1) | |||||||||||||||||||
| Selling, general and administrative expenses | 1.0 | 0.5 | |||||||||||||||||||||
| Total expense before income taxes | 1.1 | 0.4 | |||||||||||||||||||||
| Income tax benefit | — | — | |||||||||||||||||||||
| Total expense after income taxes | $ | 1.1 | $ | 0.4 |
As of March 31, 2023, there was $7.0 million of total unrecognized compensation cost related to cash-settled restricted shares that is expected to be recognized over a weighted-average period of 1.2 years.
Performance Share Units
Weighted average performance share unit fair values and assumptions for the period specified are disclosed below. The performance share units are market condition awards and have been assessed at fair value on the date of grant using a Monte Carlo simulation model.
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Weighted average fair value of grants | $308.18 | $235.54 | |||||||||
| Dividend yield | —% | —% | |||||||||
| Volatility | 27.00% | 28.09% | |||||||||
| Risk-free interest rate | 4.37% | 1.73% | |||||||||
| Expected life (in years) | 2.94 | 2.93 |
A summary of the Company’s performance share unit activity as of March 31, 2023 and changes during the three months ended March 31, 2023 are presented in the following table:
| Performance Share Units | Shares | Weighted-Average Grant Date Fair Value | |||||||||
| Unvested at January 1, 2023 | 70,915 | $ | 236.66 | ||||||||
| Granted | 28,030 | 308.18 | |||||||||
| Vested | (18,105) | 226.86 | |||||||||
| Forfeited | (1,725) | 261.13 | |||||||||
| Unvested at March 31, 2023 | 79,115 | $ | 264.89 |
On January 31, 2023, 18,105 performance share units vested. Based on the Company’s relative total shareholder return rank during the three year period ended January 31, 2023, the Company achieved a 173% payout factor and issued 31,334 common shares in February 2023 for awards that vested in 2023.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
Total compensation cost for performance share units is recorded in the Condensed Consolidated Statements of Income as follows:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Cost of goods sold | $ | — | $ | — | |||||||||||||||||||
| Selling, general and administrative expenses(1) | 5.2 | 1.3 | |||||||||||||||||||||
| Total expense before income taxes | 5.2 | 1.3 | |||||||||||||||||||||
| Income tax benefit | (0.1) | (0.1) | |||||||||||||||||||||
| Total expense after income taxes | $ | 5.1 | $ | 1.2 |
(1) The three months ended March 31, 2023 includes an additional $3.4 million of accelerated stock compensation costs for retiree eligible participants as compared with the same period in 2022.
As of March 31, 2023, there was $5.7 million of total unrecognized compensation cost related to performance share units that is expected to be recognized over a weighted-average period of 1.2 years.
17. 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 following tables provide the components of net periodic benefit cost for its major defined benefit plans and its other postretirement plans.
| Pension Benefits | |||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| U.S. | Non-U.S. | U.S. | Non-U.S. | ||||||||||||||||||||
| Service cost | $ | — | $ | 0.3 | $ | — | $ | 0.5 | |||||||||||||||
| Interest cost | 0.1 | 0.7 | 0.1 | 0.2 | |||||||||||||||||||
| Expected return on plan assets | (0.1) | (0.4) | (0.1) | (0.3) | |||||||||||||||||||
| Net amortization | 0.1 | (0.2) | 0.1 | 0.2 | |||||||||||||||||||
| Net periodic cost | $ | 0.1 | $ | 0.4 | $ | 0.1 | $ | 0.6 |
| Other Postretirement Benefits | |||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Service cost | $ | 0.1 | $ | 0.2 | |||||||||||||||||||
| Interest cost | 0.2 | 0.1 | |||||||||||||||||||||
| Net amortization | (0.2) | (0.1) | |||||||||||||||||||||
| Net periodic cost | $ | 0.1 | $ | 0.2 |
The Company expects to contribute approximately $3.9 million to its defined benefit plans and $1.1 million to its other post-retirement benefit plans in 2023. During the first three months of 2023, the Company contributed a total of $1.3 million to fund these plans.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
18. Legal Proceedings
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.
19. 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 22.4% during the same period in 2022.
20. Subsequent Events
On April 25, 2023, the Company entered into a definitive agreement to acquire Iridian Spectral Technologies ("Iridian") for cash consideration of 150.0 million Canadian dollars, subject to customary post-closing adjustments. With annual sales of 34 million Canadian dollars in 2022, Iridian is a leader in custom optical filter solutions serving the space, life science and telecommunications markets. Iridian complements and expands upon the solutions provided by our Scientific Fluidics & Optics businesses within the HST segment. The Company expects to close the transaction by the end of the second quarter of 2023, subject to customary closing conditions.
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