IDEX 10-Q 2024-03-31

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, 2024

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 19, 2024: 75,695,352.

TABLE OF CONTENTS

Part I. Financial Information
Item 1.			Financial Statements			1
			Condensed Consolidated Statements of Income			1
			Condensed Consolidated Statements of Comprehensive Income			2
			Condensed Consolidated Balance Sheets			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			8
			Note 4. Revenue			10
			Note 5. Earnings Per Common Share			12
			Note 6. Balance Sheet Components			13
			Note 7. Goodwill and Intangible Assets			13
			Note 8. Borrowings			15
			Note 9. Fair Value Measurements			15
			Note 10. Accumulated Other Comprehensive Loss			17
			Note 11. Share Repurchases			17
			Note 12. Share-Based Compensation			17
			Note 13. Retirement Benefits			21
			Note 14. Commitments and Contingencies			21
			Note 15. Income Taxes			22
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			34
Item 4.			Controls and Procedures			34
Part II. Other Information
Item 1.			Legal Proceedings			35
Item 1A.			Risk Factors			35
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 5.			Other Information			35
Item 6.			Exhibits			36
Signatures						37

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, the Company’s full year 2024 focus and the assumptions underlying these expectations, plant and equipment capacity for future growth, planned production, anticipated future acquisition behavior and capital deployment, inventory recalibration and future order stabilization and lead time, expectations regarding market sector contraction, recovery, stabilization or growth, availability and sufficiency of cash and financing alternatives and the anticipated benefits of the Company’s recent acquisitions, 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; pricing pressures, including inflation and rising interest rates, and other competitive factors and levels of capital spending in certain industries; the impact of catastrophic weather events, natural disasters and public health threats; economic and political consequences resulting from terrorist attacks and wars; the Company’s ability to make acquisitions and to integrate and operate acquired businesses on a profitable basis; cybersecurity incidents; 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 conditions; 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.

PART I. FINANCIAL INFORMATION

IDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(unaudited)

									Three Months Ended March 31,
															2024						2023
Net sales															$	800.5					$	845.4
Cost of sales															443.1						462.9
Gross profit															357.4						382.5
Selling, general and administrative expenses															195.1						189.7
Restructuring expenses and asset impairments															1.1						0.5
Operating income															161.2						192.3
Other (income) expense - net															(2.7)						(0.6)
Interest expense - net															9.4						13.1
Income before income taxes															154.5						179.8
Provision for income taxes															33.2						40.0
Net income															121.3						139.8
Net loss attributable to noncontrolling interest															0.1						—
Net income attributable to IDEX															$	121.4					$	139.8
Earnings per common share:
Basic earnings per common share attributable to IDEX															$	1.60					$	1.85
Diluted earnings per common share attributable to IDEX															$	1.60					$	1.84
Share data:
Basic weighted average common shares outstanding															75.7						75.6
Diluted weighted average common shares outstanding															75.9						75.9

See Notes to Condensed Consolidated Financial Statements

IDEX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(unaudited)

									Three Months Ended March 31,
															2024						2023
Net income															$	121.3					$	139.8
Other comprehensive (loss) income:
Pension and other postretirement adjustments, net of tax															(0.1)						0.4
Cumulative translation adjustment															(64.3)						36.6
Other comprehensive (loss) income															(64.4)						37.0
Comprehensive income															56.9						176.8
Comprehensive loss attributable to noncontrolling interest															0.1						—
Comprehensive income attributable to IDEX															$	57.0					$	176.8

See Notes to Condensed Consolidated Financial Statements

IDEX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except per share amounts)

(unaudited)

			March 31, 2024						December 31, 2023
ASSETS
Current assets
Cash and cash equivalents			$	616.3					$	534.3
Receivables - net			437.9						427.8
Inventories - net			426.0						420.8
Other current assets			74.3						63.4
Total current assets			1,554.5						1,446.3
Property, plant and equipment - net of accumulated depreciation of $556.1 and $545.7, respectively			428.2						430.3
Goodwill			2,803.0						2,838.3
Intangible assets - net			969.1						1,011.8
Other noncurrent assets			134.6						138.5
Total assets			$	5,889.4					$	5,865.2
LIABILITIES AND EQUITY
Current liabilities
Trade accounts payable			$	185.8					$	179.7
Accrued expenses			274.1						271.5
Current portion of long-term borrowings			0.7						0.6
Dividends payable			—						48.5
Total current liabilities			460.6						500.3
Long-term borrowings - net			1,322.9						1,325.1
Deferred income taxes			286.0						291.9
Other noncurrent liabilities			201.6						206.7
Total liabilities			2,271.1						2,324.0
Commitments and contingencies (Note 14)
Shareholders’ equity
Preferred stock:
Authorized: 5.0 million shares, $.01 per share par value; Issued: None			—						—
Common stock:
Authorized: 150.0 million shares, $.01 per share par value
Issued: 90.1 million shares at March 31, 2024 and 90.1 million shares at December 31, 2023			0.9						0.9
Treasury stock at cost: 14.2 million shares at March 31, 2024 and 14.3 million shares at December 31, 2023			(1,179.3)						(1,187.0)
Additional paid-in capital			851.5						839.0
Retained earnings			4,055.7						3,934.3
Accumulated other comprehensive loss			(110.2)						(45.8)
Total shareholders’ equity			3,618.6						3,541.4
Noncontrolling interest			(0.3)

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The following discussion and analysis should be read in conjunction with the 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 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 includes certain non-GAAP financial measures that have been defined and reconciled to the most directly comparable financial measure prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) under the headings “Non-GAAP Disclosures” and “Free Cash Flow.” This discussion also includes Operating working capital, which has been defined 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 provider specializing in the manufacturing 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, as well as 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.

First Quarter Highlights

Select key financial results for the three months ended March 31, 2024 when compared to the same period in the prior year are as follows:

			Three Months Ended March 31,
(Dollars in millions, except per share amounts)			2024						2023						% / bps Change
Net sales			$	800.5					$	845.4					(5%)
Change in organic net sales*															(6%)
Gross profit			357.4						382.5						(7%)
Adjusted gross profit*			359.9						382.5						(6%)
Net income attributable to IDEX			121.4						139.8						(13%)
Adjusted net income attributable to IDEX*			143.2						158.6						(10%)
Adjusted EBITDA*			208.3						229.8						(9%)
Diluted EPS attributable to IDEX			1.60						1.84						(13%)
Adjusted diluted EPS attributable to IDEX*			1.88						2.09						(10%)
Cash flows from operating activities			156.6						147.9						6%
Free cash flow*			136.6						121.3						13%
Gross margin			44.6%						45.2%						(60) bps
Adjusted gross margin*			45.0%						45.2%						(20) bps
Net income margin			15.2%						16.5%						(130) bps
Adjusted EBITDA margin*			26.0%						27.2%						(120) bps

*These are non-GAAP measures. See the definitions of these non-GAAP measures and reconciliations to their most directly comparable GAAP financial measures under the headings “Non-GAAP Disclosures” and “Free Cash Flow.”

During the three months ended March 31, 2024, the Company delivered a solid operating performance. While some market softness carried over from 2023, largely within the Company’s Health & Science Technologies segment, resulting in lower sales volumes, the Company realized strong price/cost across its segments. Strong cash flow from operating activities of $156.6 million, an increase of 6% compared to the same prior year period, resulted in free cash flow of $136.6 million during the quarter.

Results of Operations

The following is a discussion and analysis of the Company’s results of operations for the three months ended March 31, 2024 compared with the three months ended March 31, 2023.

									Three Months Ended March 31,
(Dollars in millions, except per share amounts)																					2024						2023						% / bps Change
Net sales																					$	800.5					$	845.4					(5		%)
Cost of sales																					443.1						462.9						(4		%)
Gross profit																					357.4						382.5						(7		%)
Gross margin																					44.6		%				45.2		%				(60) bps
Selling, general and administrative expenses																					195.1						189.7						3		%
Restructuring expenses and asset impairments																					1.1						0.5						120		%
Operating income																					161.2						192.3						(16		%)
Other (income) expense - net																					(2.7)						(0.6)						350		%
Interest expense - net																					9.4						13.1						(28		%)
Income before income taxes																					154.5						179.8						(14		%)
Provision for income taxes																					33.2						40.0						(17		%)
Effective tax rate																					21.5		%				22.2		%				(70) bps
Net income attributable to IDEX																					$	121.4					$	139.8					(13		%)
Diluted earnings per common share attributable to IDEX																					$	1.60					$	1.84					(13		%)

Net Sales

Net sales for the three months ended March 31, 2024 decreased 5% as compared to the same prior year period reflecting a 6% decrease in organic net sales, partially offset by a 1% increase in acquisitions, net of divestitures. The decrease in organic net sales was driven by lower volumes, largely as a result of market conditions in the Health & Science Technologies businesses, partially offset by price capture across all segments. In the three months ended March 31, 2024, net sales decreased 4% domestically and 6% internationally, and sales to customers outside the U.S. were approximately 50% of total sales in the first quarter of both 2024 and 2023.

Gross Profit and Gross Margin

Gross profit and Gross margin for the three months ended March 31, 2024 decreased primarily due to lower volume leverage and higher employee-related costs, partially offset by strong price/cost and favorable operational productivity.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended March 31, 2024 increased primarily due to the $3.5 million impact from acquisitions, including amortization, net of divestitures.

Restructuring Expenses and Asset Impairments

Restructuring expenses and asset impairments increased in the three months ended March 31, 2024 primarily due to higher severance costs, which were incurred in conjunction with cost mitigation efforts as a result of market conditions, compared with the same period in 2023.

Other (Income) Expense - Net

Other (income) expense - net increased to $2.7 million of income in the first quarter of 2024 compared to $0.6 million of income during the same period in 2023. The increase was primarily due to higher foreign currency transaction gains during the current year period.

Interest Expense - Net

Interest expense - net for the three months ended March 31, 2024 decreased compared to the same period in 2023 due to a decrease in the amount of debt outstanding and higher interest earned on cash balances in 2024, partially offset by increases in interest rates on outstanding debt, which increased interest expense by approximately $0.8 million.

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 $33.2 million for the three months ended March 31, 2024 from $40.0 million during the same period in 2023. The effective tax rate decreased to 21.5% for the three months ended March 31, 2024 from 22.2% during the same period in 2023 primarily due to benefits related to the finalization of tax impacts with taxing authorities of a previously recorded legal entity restructuring.

In October 2021, members of the Organization for Economic Co-operation and Development (“OECD”) and G20 Inclusive Framework on Base Erosion and Profit Shifting agreed to a two-pillar solution to address the tax challenges associated with the digitalization of the economy. In December 2021, the OECD released the Pillar Two Model Rules (“Pillar Two”), which define the global minimum tax and call for the taxation of large corporations at a minimum rate of 15%. Although it is uncertain when and how the rules will be fully enacted into law, based on our initial assessment, nearly all of the jurisdictions in which the Company operates have an effective tax rate above the 15% threshold. Therefore, the Company does not expect a material impact from the Pillar Two income tax rules.

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, “Business Segments,” in the Notes to Condensed Consolidated Financial Statements. Management’s primary measurements of segment performance are Net sales, adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and Adjusted EBITDA margin.

The table below illustrates 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, 2024.

									Three Months Ended March 31, 2024
																											FMT						HST						FSDP						IDEX
Net sales																											39		%				39		%				22		%				100		%
Adjusted EBITDA(1)																											44		%				34		%				22		%				100		%

(1) Segment Adjusted EBITDA excludes the impact of unallocated corporate costs of $29.9 million for the three months ended March 31, 2024.

Fluid & Metering Technologies Segment

			Three Months Ended March 31,																		Components of Change
(Dollars in millions)			2024						2023						Change						Organic						Acq/Div						Foreign Currency						Total
Domestic sales			$	172.6					$	176.8					(2%)
International sales			141.1						145.0						(3%)
Net sales			$	313.7					$	321.8					(3%)						(3%)						—						—						(3%)
Adjusted EBITDA			105.4						106.2						(1%)						(1%)						—						—						(1%)
Adjusted EBITDA margin			33.6		%				33.0		%				60 bps						60 bps						—						—						60 bps

• Organic net sales for the three months ended March 31, 2024 were negatively impacted by lower volumes, primarily in the industrial markets, largely driven by non-repeat of projects from the prior year and greater reduction of backlog in the prior year. This decrease was partially offset by price capture across all markets.

• Organic Adjusted EBITDA margin for the three months ended March 31, 2024 increased primarily due to favorable operational productivity and strong price/cost, partially offset by lower volume leverage, unfavorable mix, higher employee-related costs and higher discretionary spending.

Health & Science Technologies Segment

			Three Months Ended March 31,																		Components of Change
(Dollars in millions)			2024						2023						Change						Organic						Acq/Div**(1)**						Foreign Currency						Total
Domestic sales			$	138.9					$	149.6					(7%)
International sales			171.2						201.4						(15%)
Net sales			$	310.1					$	351.0					(12%)						(13%)						1%						—						(12%)
Adjusted EBITDA			81.4						100.7						(19%)						(22%)						3%						—						(19%)
Adjusted EBITDA margin			26.2		%				28.7		%				(250) bps						(310) bps						60 bps						—						(250) bps

(1) Acquisitions included Iridian Spectral Technologies acquired in May 2023 and STC Material Solutions acquired in December 2023. Divestitures included Micropump, Inc. sold in August 2023 and Novotema, SpA sold in December 2023.

• Organic net sales for the three months ended March 31, 2024 were negatively impacted by lower volumes, primarily in the analytical instrumentation, life sciences and semiconductor markets, largely driven by inventory recalibration and the carryover of market slowness from 2023. This decrease was partially offset by price capture across all markets.

• Organic Adjusted EBITDA margin for the three months ended March 31, 2024 decreased primarily due to lower volume leverage, higher employee-related costs and unfavorable mix, partially offset by favorable operational productivity, lower discretionary spending and strong price/cost.

Fire & Safety/Diversified Products Segment

			Three Months Ended March 31,																		Components of Change
(Dollars in millions)			2024						2023						Change						Organic						Acq/Div						Foreign Currency						Total
Domestic sales			$	86.1					$	89.4					(4%)
International sales			91.9						85.0						8%
Net sales			$	178.0					$	174.4					2%						2%						—						—						2%
Adjusted EBITDA			51.4						49.7						3%						3%						—						—						3%
Adjusted EBITDA margin			28.9		%				28.5		%				40 bps						40 bps						—						—						40 bps

• Organic net sales for the three months ended March 31, 2024 were positively impacted by price capture across all markets. Volumes were flat period over period.

• Organic Adjusted EBITDA margin for the three months ended March 31, 2024 increased primarily due to strong price/cost and lower discretionary spending, partially offset by higher employee-related costs.

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 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.

Select key liquidity metrics at March 31, 2024 are as follows:

(In millions)						March 31, 2024
Working capital						$	1,093.9
Current ratio						3.4 to 1
Cash and cash equivalents						$	616.3
Cash held outside of the United States						475.0
Revolving Facility capacity						$	800.0
Borrowings						78.8
Letters of credit						3.4
Revolving Facility availability						$	717.8

The Company believes that additional borrowings through various financing alternatives remain available, if required.

Operating Working Capital

Operating working capital, calculated as Receivables - net plus Inventories - net 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, 2024 and December 31, 2023:

(In millions)						March 31, 2024						December 31, 2023						Change						Organic Change
Receivables - net						$	437.9					$	427.8					$	10.1					$	13.9
Inventories - net						426.0						420.8						5.2						9.4
Less: Trade accounts payable						185.8						179.7						6.1						8.2
Operating working capital						$	678.1					$	668.9					$	9.2					$	15.1

Operating working capital increased $9.2 million to $678.1 million at March 31, 2024. Acquisitions and foreign currency translation decreased Operating working capital by $5.9 million during the first quarter of 2024. Apart from these items, receivables increased due to strong price capture, which more than offset the impact of lower volumes; inventories increased to support planned production; and accounts payable increased as a result of 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)						2024						2023
Net cash flows provided by (used in):
Operating activities						$	156.6					$	147.9
Investing activities						(20.0)						(29.2)
Financing activities						(41.0)						(45.2)

Operating Activities

Cash flows provided by operating activities increased $8.7 million to $156.6 million in the three months ended March 31, 2024 primarily due to lower cash payments for variable compensation in 2024 compared to the prior year, partially offset by lower earnings in 2024 compared to the prior year.

Investing Activities

Cash flows used in investing activities decreased during the three months ended March 31, 2024 primarily due to the lower capital expenditures of $20.0 million in 2024 as compared with $26.6 million in the three months ended March 31, 2023.

Financing Activities

Cash flows used in financing activities primarily consisted of dividends of $48.5 million and $45.5 million paid to common shareholders during the three months ended March 31, 2024 and March 31, 2023, respectively.

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 cash flows provided by operating activities to free cash flow:

						Three Months Ended March 31,
(Dollars in millions)						2024						2023
Cash flows provided by operating activities						$	156.6					$	147.9
Less: capital expenditures						20.0						26.6
Free cash flow						$	136.6					$	121.3
Free cash flow as a percent of adjusted net income attributable to IDEX						95.4		%				76.5		%

The increase in free cash flow for the three months ended March 31, 2024 as compared to 2023 is due to lower cash payments for variable compensation in 2024 as discussed above and lower capital expenditures in 2024 compared with the three months ended March 31, 2023.

Cash Requirements

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 $20.0 million and $26.6 million in the first three months of 2024 and 2023, respectively.

Share Repurchases

There were no share repurchases during the three months ended March 31, 2024 and 2023. As of March 31, 2024, the amount of share repurchase authorization remaining was $539.7 million. For additional information regarding the Company’s share repurchase program, refer to Note 11, “Share Repurchases,” in the Notes to Condensed Consolidated Financial Statements.

Dividends

Total dividend payments to common shareholders were $48.5 million during the three months ended March 31, 2024 compared with $45.5 million during the three months ended March 31, 2023.

Covenants

The key financial covenants that the Company is required to maintain in connection with the Revolving Facility, the Term Facility, the 3.37% Senior Notes and the 5.13% 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, 2024, the Company was in compliance with these financial covenants, as the Company’s interest coverage ratio was 18.48 to 1 for covenant calculation purposes and the leverage ratio was 1.49 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 reaffirmed the Company’s corporate credit rating of BBB (stable outlook) in August 2023.

• 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.

Off-Balance Sheet Arrangements

The Company had $21.4 million of letters of credit as of March 31, 2024, primarily issued as security for insurance and other performance obligations. Of the $21.4 million of letters of credit, only $3.4 million reduced the Company’s borrowing capacity under the Revolving Facility as of March 31, 2024.

Except as disclosed above, the Company has no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on the Company’s consolidated financial condition, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Estimates

As discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Non-GAAP Disclosures

Set forth below are reconciliations of Organic net sales, Adjusted gross profit, Adjusted gross margin, 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 their 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.

Management uses Adjusted EBITDA as its principal measure of segment performance, and believes it is a useful indicator of the strength and performance of the Company and its segments’ ongoing business operations, as well as a way for investors 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 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, 2024
			FMT						HST						FSDP						IDEX
Change in net sales			(3		%)				(12		%)				2		%				(5		%)
Less:
Net impact from acquisitions/divestitures(1)			—		%				1		%				—		%				1		%
Impact from foreign currency			—		%				—		%				—		%				—		%
Change in organic net sales			(3		%)				(13		%)				2		%				(6		%)

(1) Represents the sales from acquired or divested businesses during the first 12 months of ownership or prior to divestiture.

2. Reconciliations of Reported-to-Adjusted Gross Profit and Gross Margin (dollars in millions)
									Three Months Ended March 31,
															2024						2023
Gross profit															$	357.4					$	382.5
Fair value inventory step-up charges															2.5						—
Adjusted gross profit															$	359.9					$	382.5
Net sales															$	800.5					$	845.4
Gross margin															44.6		%				45.2		%
Adjusted gross margin															45.0		%				45.2		%

3. Reconciliations of Reported-to-Adjusted Net Income Attributable to IDEX and Diluted EPS Attributable to IDEX (in millions, except for share amounts)
									Three Months Ended March 31,
															2024						2023
Reported net income attributable to IDEX															$	121.4					$	139.8
Fair value inventory step-up charges															2.5						—
Tax impact on fair value inventory step-up charges															(0.5)						—
Restructuring expenses and asset impairments															1.1						0.5
Tax impact on restructuring expenses and asset impairments															(0.3)						(0.1)
Acquisition-related intangible asset amortization															24.6						23.6
Tax impact on acquisition-related intangible asset amortization															(5.6)						(5.2)
Adjusted net income attributable to IDEX															$	143.2					$	158.6
Reported diluted EPS attributable to IDEX															$	1.60					$	1.84
Fair value inventory step-up charges															0.03						—
Tax impact on fair value inventory step-up charges															(0.01)						—
Restructuring expenses and asset impairments															0.01						0.01
Tax impact on restructuring expenses and asset impairments															—						—
Acquisition-related intangible asset amortization															0.32						0.31
Tax impact on acquisition-related intangible asset amortization															(0.07)						(0.07)
Adjusted diluted EPS attributable to IDEX															$	1.88					$	2.09
Diluted weighted average shares outstanding															75.9						75.9

4. Reconciliations of Net Income to Adjusted EBITDA (dollars in millions)
			Three Months Ended March 31,
			2024																														2023
			FMT						HST						FSDP						Corporate						IDEX						FMT						HST						FSDP						Corporate						IDEX
Reported net income			$	—					$	—					$	—					$	—					$	121.3					$	—					$	—					$	—					$	—					$	139.8
Provision for income taxes			—						—						—						—						33.2						—						—						—						—						40.0
Interest expense - net			—						—						—						—						9.4						—						—						—						—						13.1
Other (income) expense - net			—						—						—						—						(2.7)						—						—						—						—						(0.6)
Operating income (loss)			94.8						49.2						47.7						(30.5)						161.2						96.5						77.5						46.0						(27.7)						192.3
Other income (expense) - net			0.5						2.1						(0.2)						0.3						2.7						0.5						(0.3)						(0.2)						0.6						0.6
Depreciation			4.3						9.4						2.3						0.2						16.2						3.1						7.3						2.1						0.3						12.8
Amortization			5.3						17.7						1.6						—						24.6						6.0						15.9						1.7						—						23.6
Fair value inventory step-up charges			—						2.5						—						—						2.5						—						—						—						—						—
Restructuring expenses and asset impairments			0.5						0.5						—						0.1						1.1						0.1						0.3						0.1						—						0.5
Adjusted EBITDA			$	105.4					$	81.4					$	51.4					$	(29.9)					$	208.3					$	106.2					$	100.7					$	49.7					$	(26.8)					$	229.8
Net sales (eliminations)			$	313.7					$	310.1					$	178.0					$	(1.3)					$	800.5					$	321.8					$	351.0					$	174.4					$	(1.8)					$	845.4
Net income margin																											15.2		%																												16.5		%
Adjusted EBITDA margin			33.6		%				26.2		%				28.9		%				n/m						26.0		%				33.0		%				28.7		%				28.5		%				n/m						27.2		%