filings.toolsIDEX 10-Q 2024-09-30
Filed 2024-10-30. 8 sections, 180K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||||
| For the quarterly period ended | September 30, 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 October 25, 2024: 75,723,308.
TABLE OF CONTENTS
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 business strategy, outlook 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, 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
Item 1. Financial Statements
IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net sales | $ | 798.2 | $ | 793.4 | $ | 2,405.9 | $ | 2,485.0 | |||||||||||||||
| Cost of sales | 444.3 | 443.8 | 1,327.8 | 1,374.9 | |||||||||||||||||||
| Gross profit | 353.9 | 349.6 | 1,078.1 | 1,110.1 | |||||||||||||||||||
| Selling, general and administrative expenses | 182.9 | 165.9 | 560.8 | 529.9 | |||||||||||||||||||
| Restructuring expenses and asset impairments | 3.0 | 4.1 | 5.4 | 8.2 | |||||||||||||||||||
| Operating income | 168.0 | 179.6 | 511.9 | 572.0 | |||||||||||||||||||
| Gain on sale of business | 0.6 | (93.8) | (4.0) | (93.8) | |||||||||||||||||||
| Other expense (income) – net | 2.7 | (2.1) | — | 5.6 | |||||||||||||||||||
| Interest expense – net | 10.3 | 13.7 | 27.8 | 40.1 | |||||||||||||||||||
| Income before income taxes | 154.4 | 261.8 | 488.1 | 620.1 | |||||||||||||||||||
| Provision for income taxes | 35.5 | 52.8 | 106.7 | 132.8 | |||||||||||||||||||
| Net income | 118.9 | 209.0 | 381.4 | 487.3 | |||||||||||||||||||
| Net loss attributable to noncontrolling interest | 0.2 | 0.1 | 0.4 | 0.2 | |||||||||||||||||||
| Net income attributable to IDEX | $ | 119.1 | $ | 209.1 | $ | 381.8 | $ | 487.5 | |||||||||||||||
| Earnings per common share: | |||||||||||||||||||||||
| Basic earnings per common share attributable to IDEX | $ | 1.57 | $ | 2.76 | $ | 5.03 | $ | 6.44 | |||||||||||||||
| Diluted earnings per common share attributable to IDEX | $ | 1.57 | $ | 2.75 | $ | 5.02 | $ | 6.42 | |||||||||||||||
| Share data: | |||||||||||||||||||||||
| Basic weighted average common shares outstanding | 75.7 | 75.6 | 75.7 | 75.6 | |||||||||||||||||||
| Diluted weighted average common shares outstanding | 75.9 | 75.9 | 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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net income | $ | 118.9 | $ | 209.0 | $ | 381.4 | $ | 487.3 | |||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Pension and other postretirement adjustments, net of tax of $0.1, $—, $0.2 and $0.2, respectively | (0.1) | (0.3) | (0.4) | (0.8) | |||||||||||||||||||
| Cumulative translation adjustment | 91.8 | (58.1) | 21.5 | (19.2) | |||||||||||||||||||
| Other comprehensive income (loss), net of tax | 91.7 | (58.4) | 21.1 | (20.0) | |||||||||||||||||||
| Comprehensive income | 210.6 | 150.6 | 402.5 | 467.3 | |||||||||||||||||||
| Comprehensive loss attributable to noncontrolling interest | 0.2 | 0.1 | 0.4 | 0.2 | |||||||||||||||||||
| Comprehensive income attributable to IDEX | $ | 210.8 | $ | 150.7 | $ | 402.9 | $ | 467.5 |
See Notes to Condensed Consolidated Financial Statements
IDEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
(unaudited)
| September 30, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | 633.2 | $ | 534.3 | |||||||
| Receivables – net | 475.1 | 427.8 | |||||||||
| Inventories – net | 488.2 | 420.8 | |||||||||
| Other current assets | 81.3 | 63.4 | |||||||||
| Total current assets | 1,677.8 | 1,446.3 | |||||||||
| Property, plant and equipment – net of accumulated depreciation of $595.7 and $545.7 at September 30, 2024 and December 31, 2023, respectively | 468.6 | 430.3 | |||||||||
| Goodwill | 3,316.0 | 2,838.3 | |||||||||
| Intangible assets – net | 1,349.4 | 1,011.8 | |||||||||
| Other noncurrent assets | 155.7 | 138.5 | |||||||||
| Total assets | $ | 6,967.5 | $ | 5,865.2 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities | |||||||||||
| Trade accounts payable | $ | 210.4 | $ | 179.7 | |||||||
| Accrued expenses | 301.2 | 271.5 | |||||||||
| Current portion of long-term borrowings | 0.6 | 0.6 | |||||||||
| Dividends payable | 52.4 | 48.5 | |||||||||
| Total current liabilities | 564.6 | 500.3 | |||||||||
| Long-term borrowings – net | 2,075.1 | 1,325.1 | |||||||||
| Deferred income taxes | 301.3 | 291.9 | |||||||||
| Other noncurrent liabilities | 208.2 | 206.7 | |||||||||
| Total liabilities | 3,149.2 | 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 both September 30, 2024 and December 31, 2023 | 0.9 | 0.9 | |||||||||
| Treasury stock at cost: 14.2 million shares at September 30, 2024 and 14.3 million shares at December 31, 2023 | (1,176.5) | (1,187.0) | |||||||||
| Additional paid-in capital | 859.9 | 839.0 | |||||||||
| Retained earnings | 4,159.3 | 3,934.3 | |||||||||
| Accumulated other comprehensive loss | (24.7) | (45.8) | |||||||||
| Total shareholders’ equity | 3,81 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 markets and overall industrial activity are important factors that influence the demand for IDEX’s products.
Third Quarter Highlights
Select key financial results for the three months ended September 30, 2024 when compared to the same period in the prior year are as follows:
| Three Months Ended September 30, | |||||||||||||||||
| (Dollars in millions, except per share amounts) | 2024 | 2023 | % / bps Change | ||||||||||||||
| Net sales | $ | 798.2 | $ | 793.4 | 1% | ||||||||||||
| Change in organic net sales* | —% | ||||||||||||||||
| Gross profit | 353.9 | 349.6 | 1% | ||||||||||||||
| Adjusted gross profit* | 356.0 | 350.8 | 1% | ||||||||||||||
| Net income attributable to IDEX | 119.1 | 209.1 | (43%) | ||||||||||||||
| Adjusted net income attributable to IDEX* | 144.1 | 160.6 | (10%) | ||||||||||||||
| Adjusted EBITDA* | 214.3 | 225.5 | (5%) | ||||||||||||||
| Diluted EPS attributable to IDEX | 1.57 | 2.75 | (43%) | ||||||||||||||
| Adjusted diluted EPS attributable to IDEX* | 1.90 | 2.12 | (10%) | ||||||||||||||
| Cash flows from operating activities | 205.3 | 226.6 | (9)% | ||||||||||||||
| Free cash flow* | 191.6 | 206.5 | (7)% | ||||||||||||||
| Gross margin | 44.3% | 44.1% | 20 bps | ||||||||||||||
| Adjusted gross margin* | 44.6% | 44.2% | 40 bps | ||||||||||||||
| Net income margin | 14.9% | 26.3% | (1,140) bps | ||||||||||||||
| Adjusted EBITDA margin* | 26.9% | 28.4% | (150) 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 September 30, 2024, the Company delivered solid operating performance, despite continued challenging market headwinds. Market softness, largely within the Health & Science Technologies segment, resulted in lower sales volumes, which were partly offset by price/cost and productivity across all segments. On September 5, 2024, the Company completed the previously-announced acquisition of Mott Corporation and its subsidiaries (“Mott”), expanding the Company’s applied material science technology capabilities in high-value end markets. For additional information, refer to Note 2, “Acquisitions and Divestitures” in the Notes to Condensed Consolidated Financial Statements and the “Liquidity and Capital Resources” section of this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
The following is a discussion and analysis of the Company’s results of operations for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | 2024 | 2023 | % / bps Change | 2024 | 2023 | % / bps Change | |||||||||||||||||||||||||||||
| Net sales | $ | 798.2 | $ | 793.4 | 1 | % | $ | 2,405.9 | $ | 2,485.0 | (3 | %) | |||||||||||||||||||||||
| Cost of sales | 444.3 | 443.8 | — | % | 1,327.8 | 1,374.9 | (3 | %) | |||||||||||||||||||||||||||
| Gross profit | 353.9 | 349.6 | 1 | % | 1,078.1 | 1,110.1 | (3 | %) | |||||||||||||||||||||||||||
| Gross margin | 44.3 | % | 44.1 | % | 20 bps | 44.8 | % | 44.7 | % | 10 bps | |||||||||||||||||||||||||
| Selling, general and administrative expenses | 182.9 | 165.9 | 10 | % | 560.8 | 529.9 | 6 | % | |||||||||||||||||||||||||||
| Restructuring expenses and asset impairments | 3.0 | 4.1 | (27 | %) | 5.4 | 8.2 | (34 | %) | |||||||||||||||||||||||||||
| Operating income | 168.0 | 179.6 | (6 | %) | 511.9 | 572.0 | (11 | %) | |||||||||||||||||||||||||||
| Gain on sale of business(1) | 0.6 | (93.8) | (101 | %) | (4.0) | (93.8) | (96 | %) | |||||||||||||||||||||||||||
| Other expense (income) – net | 2.7 | (2.1) | (229 | %) | — | 5.6 | (100 | %) | |||||||||||||||||||||||||||
| Interest expense – net | 10.3 | 13.7 | (25 | %) | 27.8 | 40.1 | (31 | %) | |||||||||||||||||||||||||||
| Income before income taxes | 154.4 | 261.8 | (41 | %) | 488.1 | 620.1 | (21 | %) | |||||||||||||||||||||||||||
| Provision for income taxes | 35.5 | 52.8 | (33 | %) | 106.7 | 132.8 | (20 | %) | |||||||||||||||||||||||||||
| Effective tax rate | 22.9 | % | 20.2 | % | 270 bps | 21.9 | % | 21.4 | % | 50 bps | |||||||||||||||||||||||||
| Net income attributable to IDEX | $ | 119.1 | $ | 209.1 | (43 | %) | $ | 381.8 | $ | 487.5 | (22 | %) | |||||||||||||||||||||||
| Diluted earnings per common share attributable to IDEX | $ | 1.57 | $ | 2.75 | (43 | %) | $ | 5.02 | $ | 6.42 | (22 | %) |
(1)Activity recorded during the three months ended September 30, 2024 represents the finalization of the gain on the sale of Alfa Valvole, Srl resulting in a $0.6 million downward adjustment during the third quarter of 2024.
Net Sales
Net sales for the three and nine months ended September 30, 2024 increased 1% and decreased 3%, respectively, as compared to the same prior year periods. Organic net sales for the three and nine months ended September 30, 2024 were flat and decreased 3%, respectively, which reflected lower volumes, largely as a result of continued unfavorable market conditions in the Health & Science Technologies businesses. Price capture across all segments offset lower volumes during the three months ended September 30, 2024, but only partially offset lower volumes for the nine months ended September 30, 2024.
In the three months ended September 30, 2024, net sales decreased 1% domestically and increased 2% internationally. In the nine months ended September 30, 2024, net sales decreased 3% domestically and 3% internationally. Sales to customers outside the U.S. were approximately 50% of total sales in each of the three and nine months ended September 30, 2024 and 2023.
Gross Profit and Gross Margin
Gross profit and gross margin for the three and nine months ended September 30, 2024 were positively impacted by strong price/cost and favorable operational productivity and were negatively impacted by higher employee-related costs, unfavorable mix and lower volume leverage. Gross profit and gross margin for the nine months ended September 30, 2024 were both favorably impacted by lower discretionary spending.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three and nine months ended September 30, 2024 increased primarily due to the $5.6 million and $11.4 million impact from acquisitions, net of divestitures, including amortization, respectively, as well as higher employee-related costs and increased discretionary spending and transaction expenses as compared to the same prior year periods.
Restructuring Expenses and Asset Impairments
Restructuring expenses and asset impairments decreased in the three and nine months ended September 30, 2024 primarily due to lower severance costs compared with the same prior year periods. Severance costs during all periods were incurred in conjunction with cost mitigation efforts as a result of market conditions.
Gain on Sale of Business
During the nine months ended September 30, 2024, the Company completed the sale of Alfa Valvole, Srl (“Alfa Valvole”) for proceeds of $45.1 million, net of cash remitted, resulting in an initial gain on the sale of $4.6 million, net of a release of cumulative foreign currency translation losses of $5.5 million. During the three months ended September 30, 2024, the gain on the sale of Alfa Valvole was finalized, resulting in a downward adjustment to the gain on sale of $0.6 million for a final gain on sale of $4.0 million. During the three and nine months ended September 30, 2023, the Company completed the sale of Micropump, Inc. (“Micropump”) for proceeds of $110.3 million, net of cash remitted, resulting in a pre-tax gain on the sale of $93.8 million. For additional information regarding the divestitures of Alfa Valvole and Micropump, refer to Note 2, “Acquisitions and Divestitures,” in the Notes to Condensed Consolidated Financial Statements.
Other Expense (Income) – Net
Other expense (income) – net decreased in the three months ended September 30, 2024 primarily due to the unfavorable impact of foreign currency transactions as compared to the same prior year periods. Other expense (income) – net for the nine months ended September 30, 2024 benefited from the absence of a $7.7 million credit loss reserve on a note receivable from a collaborative partner that did not reoccur during 2024.
Interest Expense – Net
Interest expense – net for the three and nine months ended September 30, 2024 decreased compared to the same periods in 2023 due to higher interest earned on cash balances in 2024, which increased approximately $3.2 million and $7.0 million, respectively. This benefit was offset by incremental interest expense during the three months ended September 30, 2024 due to a net increase in debt outstanding throughout the period, while the nine months ended September 30, 2024 was further favorably impacted by lower interest expense due to a net decrease in debt outstanding through the period, primarily on the Term Facility.
Income Taxes
The effective tax rate was 22.9% and 21.9% for the three and nine months ended September 30, 2024, respectively, as compared to 20.2% and 21.4% during the same periods in 2023, respectively. One-time discrete tax benefits lowered the effective tax rates during nine months ended September 30, 2024 and both the three and nine months ended September 30, 2023. The three months ended September 30, 2024 did not benefit from these one-time items. For additional information, refer to Note 15, “Income Taxes,” in the Notes to Condensed Consolidated Financial Statements.
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 the Company’s 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 13, “Business Segments and Geographic Information,” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Management’s 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 and nine months ended September 30, 2024.
| Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| FMT | HST | FSDP | Total | FMT | HST | FSDP | Total | ||||||||||||||||||||||||||||||||||||||||
| Net sales as a percent of total | 38 | % | 39 | % | 23 | % | 100 | % | 39 | % | 38 | % | 23 | % | 100 | % | |||||||||||||||||||||||||||||||
| Adjusted EBITDA(1) | 42 | % | 35 | % | 23 | % | 100 | % | 43 | % | 35 | % | 22 | % | 100 | % |
(1) Segment Adjusted EBITDA excludes the impact of unallocated corporate costs of $21.5 million and $72.9 million for the three and nine months ended September 30, 2024, respectively.
Fluid & Metering Technologies Segment
| Three Months Ended September 30, | Components of Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | Change | Organic | Acq/Div**(1)** | Foreign Currency | Total | ||||||||||||||||||||||||||||||||||
| Domestic sales | $ | 168.5 | $ | 168.4 | —% | ||||||||||||||||||||||||||||||||||||
| International sales | 132.3 | 132.7 | —% | ||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 300.8 | $ | 301.1 | —% | 2% | (3%) | 1% | — | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | 98.5 | 103.6 | (5%) | (3%) | (2%) | — | (5%) | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA margin | 32.8 | % | 34.4 | % | (160) bps | (170) bps | 10 bps | — | (160) bps |
| Nine Months Ended September 30, | Components of Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | Change | Organic | Acq/Div**(1)** | Foreign Currency | Total | ||||||||||||||||||||||||||||||||||
| Domestic sales | $ | 522.3 | $ | 525.9 | (1%) | ||||||||||||||||||||||||||||||||||||
| International sales | 411.6 | 422.1 | (2%) | ||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 933.9 | $ | 948.0 | (1%) | —% | (1%) | —% | (1%) | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | 311.6 | 323.9 | (4%) | (3%) | (1%) | —% | (4%) | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA margin | 33.4 | % | 34.2 | % | (80) bps | (80) bps | — | — | (80) bps |
(1) Divestitures included Alfa Valvole, sold in June 2024.
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Organic net sales were positively impacted by price capture during the three and nine months ended September 30, 2024. Volumes were relatively flat during the three months ended September 20,2024 as improvement in the industrial market and strength in water were offset by both a down agriculture cycle and softness in the energy market. During the nine months ended September 30, 2024, lower volumes, driven primarily by softness in agriculture, partially offset the benefit of price capture.
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Excluding the accretive impact of divestitures, Adjusted EBITDA margin for the three and nine months ended September 30, 2024 decreased primarily due to higher employee-related costs, higher discretionary spending and unfavorable mix, partially offset by price/cost. The nine months ended September 30, 2024 were also negatively impacted by lower volumes, which were more than offset by favorable operational productivity.
Health & Science Technologies Segment
| Three Months Ended September 30, | Components of Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | Change | Organic | Acq/Div**(1)** | Foreign Currency | Total | ||||||||||||||||||||||||||||||||||
| Domestic sales | $ | 139.9 | $ | 139.2 | 1% | ||||||||||||||||||||||||||||||||||||
| International sales | 171.1 | 174.0 | (2%) | ||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 311.0 | $ | 313.2 | (1%) | (5%) | 4% | — | (1%) | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | 82.6 | 84.4 | (2%) | (8%) | 6% | — | (2%) | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA margin | 26.5 | % | 26.9 | % | (40) bps | (90) bps | 50 bps | — | (40) bps |
| Nine Months Ended September 30, | Components of Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | Change | Organic | Acq/Div**(1)** | Foreign Currency | Total | ||||||||||||||||||||||||||||||||||
| Domestic sales | $ | 420.6 | $ | 437.3 | (4%) | ||||||||||||||||||||||||||||||||||||
| International sales | 504.3 | 566.4 | (11%) | ||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 924.9 | $ | 1,003.7 | (8%) | (10%) | 2% | — | (8%) | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | 248.2 | 278.8 | (11%) | (14%) | 3% | — | (11%) | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA margin | 26.8 | % | 27.8 | % | (100) bps | (150) bps | 50 bps | — | (100) bps |
(1) Acquisitions included Iridian Spectral Technologies acquired in May 2023, STC Material Solutions acquired in December 2023 and Mott acquired in September 2024. Divestitures included Micropump sold in August 2023 and Novotema, SpA sold in December 2023.
-
Organic net sales for the three and nine months ended September 30, 2024 were negatively impacted by lower volumes driven by continued broad based market softness in 2024. This decrease was partially offset by price capture.
-
Excluding the net accretive impact of acquisitions and divestitures, Adjusted EBITDA margin for the three and nine months ended September 30, 2024 decreased primarily due to lower volume, higher employee-related costs and unfavorable mix, partially offset by price/cost, favorable operational productivity and lower discretionary spending.
Fire & Safety/Diversified Products Segment
| Three Months Ended September 30, | Components of Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | Change | Organic | Acq/Div | Foreign Currency | Total | ||||||||||||||||||||||||||||||||||
| Domestic sales | $ | 88.9 | $ | 94.4 | (6%) | ||||||||||||||||||||||||||||||||||||
| International sales | 99.1 | 86.2 | 15% | ||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 188.0 | $ | 180.6 | 4% | 4% | — | — | 4% | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | 54.7 | 52.8 | 4% | 4% | — | — | 4% | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA margin | 29.1 | % | 29.3 | % | (20) bps | (20) bps | — | — | (20) bps |
| Nine Months Ended September 30, | Components of Change | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2024 | 2023 | Change | Organic | Acq/Div | Foreign Currency | Total | ||||||||||||||||||||||||||||||||||
| Domestic sales | $ | 259.5 | $ | 280.5 | (7%) | ||||||||||||||||||||||||||||||||||||
| International sales | 291.9 | 259.3 | 13% | ||||||||||||||||||||||||||||||||||||||
| Net sales | $ | 551.4 | $ | 539.8 | 2% | 2% | — | — | 2% | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | 159.9 | 157.0 | 2% | 2% | — | — | 2% | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA margin | 29.0 | % | 29.1 | % | (10) bps | (10) bps | — | — | (10) bps |
- Organic net sales for the three and nine months ended September 30, 2024 were positively impacted by price capture as compared to the same prior year periods. Key growth initiatives and strength in the aerospace market more than offset the cyclical nature of project sales in our North American dispensing business during the three months ended
September 30, 2024, resulting in higher volumes. Volumes were relatively flat during the nine months ended September 30, 2024 as growth initiatives were mostly offset by lower North American dispensing volumes.
- Adjusted EBITDA margin decreased slightly for the three and nine months ended September 30, 2024. Positive price/cost offset higher employee related costs during both periods. Additionally, unfavorable mix negatively impacted the three months ended September 30, 2024.
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 cash requirements, including 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. The Company believes that additional borrowings through various financing alternatives remain available, if required.
Mott was acquired during the third quarter of 2024 for cash consideration of $986.2 million, net of cash acquired of $3.1 million. The acquisition was funded using a combination of cash on hand of $211.9 million, borrowings under the Company’s Revolving Facility of $279.3 million, and the net proceeds from the issuance of the 4.950% Senior Notes of $495.0 million. For additional information regarding the borrowings under the Company’s Revolving Facility and the 4.950% Senior Notes, refer to Note 8, “Borrowings,” in the Notes to Condensed Consolidated Financial Statements.
Select key liquidity metrics at September 30, 2024 are as follows:
| (In millions) | September 30, 2024 | |||||||
| Working capital | $ | 1,113.2 | ||||||
| Current ratio | 3 to 1 | |||||||
| Cash and cash equivalents | $ | 633.2 | ||||||
| Cash held outside of the United States | 498.2 | |||||||
| Revolving Facility capacity | $ | 800.0 | ||||||
| Borrowings | 360.6 | |||||||
| Letters of credit | 2.7 | |||||||
| Revolving Facility availability | $ | 436.7 |
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 September 30, 2024 and December 31, 2023:
| (In millions) | September 30, 2024 | December 31, 2023 | Change | Organic Change | ||||||||||||||||||||||
| Receivables – net | $ | 475.1 | $ | 427.8 | $ | 47.3 | $ | 14.7 | ||||||||||||||||||
| Inventories – net | 488.2 | 420.8 | 67.4 | 21.4 | ||||||||||||||||||||||
| Less: Trade accounts payable | 210.4 | 179.7 | 30.7 | 16.1 | ||||||||||||||||||||||
| Operating working capital | $ | 752.9 | $ | 668.9 | $ | 84.0 | $ | 20.0 |
Operating working capital increased $84.0 million to $752.9 million at September 30, 2024. Acquisitions, divestitures and foreign currency translation increased Operating working capital by $64.0 million during the nine months ended September 30, 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 and timing of payments.
Cash Flow Summary
The following table is derived from the Condensed Consolidated Statements of Cash Flows:
| Nine Months Ended September 30, | ||||||||||||||||||||
| (In millions) | 2024 | 2023 | Change | |||||||||||||||||
| Net cash flows provided by (used in): | ||||||||||||||||||||
| Operating activities | $ | 495.5 | $ | 515.7 | $ | (20.2) | ||||||||||||||
| Investing activities | (991.8) | (90.0) | (901.8) | |||||||||||||||||
| Financing activities | 606.7 | (286.7) | 893.4 |
Operating Activities
Cash flows provided by operating activities decreased $20.2 million in the nine months ended September 30, 2024 as compared to the same prior year period primarily due to lower earnings in 2024 compared to the prior year and higher investments in operating working capital driven by higher inventory purchases to support planned production and increased receivables due to strong price capture, partially offset by lower cash payments including payments for taxes and variable compensation in 2024 compared to the prior year.
Investing Activities
Cash flows used in investing activities increased $901.8 million during the nine months ended September 30, 2024 as compared to the prior year period. The net impact of acquisitions and divestitures increased cash used in investing activities $939.4 million during the nine months ended September 30, 2024 as compared to the same prior year period, primarily related to the acquisition of Mott during the third quarter of 2024. This increase in cash outflows was partially offset by the absence of purchases of marketable securities from the prior year period and lower capital expenditures, which decreased cash used in investing activities by $24.6 million and $18.7 million, respectively, as compared to the prior year period. For additional information on the Company’s acquisition and divestitures, refer to Note 2, “Acquisitions and Divestitures,” in the Notes to Condensed Consolidated Financial Statements.
Financing Activities
Cash flows from financing activities increased $893.4 million during the nine months ended September 30, 2024 as compared to the prior year period, primarily due to $774.8 million of net proceeds in connection with the financing of the acquisition of Mott. Additionally, repayments of the Term Facility were $125.0 million lower during the nine months ended September 30, 2024 than in the prior year period. These increases in cash flows were partly offset by slightly higher dividends paid to shareholders, which increased $10.7 million in the nine months ended September 30, 2024 as compared to the prior year period.
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:
| Nine Months Ended September 30, | ||||||||||||||
| (Dollars in millions) | 2024 | 2023 | ||||||||||||
| Cash flows provided by operating activities | $ | 495.5 | $ | 515.7 | ||||||||||
| Less: capital expenditures | 49.6 | 68.3 | ||||||||||||
| Free cash flow | $ | 445.9 | $ | 447.4 | ||||||||||
Cash Requirements
Subsequent Borrowings Activity
During October 2024, the Company repaid $69.1 million of the $360.6 million outstanding under the Revolving Facility as well as the remaining $25.0 million balance outstanding under the Term Facility at September 30, 2024.
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 $49.6 million and $68.3 million in the first nine months of 2024 and 2023, respectively.
Share Repurchases
There were no share repurchases during the nine months ended September 30, 2024. During the nine months ended September 30, 2023, the Company repurchased 5,400 shares at a cost of $1.1 million. As of September 30, 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 $153.0 million during the nine months ended September 30, 2024 compared with $142.3 million during the nine months ended September 30, 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 September 30, 2024, the Company was in compliance with these financial covenants, as the Company’s interest coverage ratio was 18.19 to 1 for covenant calculation purposes and the leverage ratio was 2.39 to 1. There are no financial covenants relating to the 2.625% Senior Notes, the 3.00% Senior Notes and the 4.950% Senior Notes; however, all are subject to cross-acceleration provisions.
Credit Ratings
The Company’s credit ratings, which were independently developed by the following credit agencies, are detailed below:
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S&P Global Ratings reaffirmed the Company’s corporate credit rating of BBB (stable outlook) in September 2024.
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Moody’s Investors Service affirmed the Company’s corporate credit rating of Baa2 (stable outlook) in August 2024.
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Fitch Ratings reaffirmed the Company’s corporate credit rating of BBB+ (stable outlook) in June 2024.
Off-Balance Sheet Arrangements
The Company had $47.0 million of letters of credit as of September 30, 2024, primarily issued as security for insurance and other performance obligations. Of the $47.0 million of letters of credit, only $2.7 million reduced the Company’s borrowing capacity under the Revolving Facility as of September 30, 2024. The Company has restricted cash of $18.1 million as of September 30, 2024, which represents cash held as collateral for standby letters of credit issued by Mott and is required to keep the balance in a separate account for the duration of the letters of credit.
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
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 recalculate precisely. The financial results prepared in accordance with U.S. GAAP and the reconciliations from these results should be carefully evaluated.
All table footnotes can be found at the end of this Non-GAAP Disclosures section.
| 1. Reconciliations of the Change in Net Sales to Organic Net Sales | |||||||||||||||||||||||
| FMT | HST | FSDP | IDEX | ||||||||||||||||||||
| Three Months Ended September 30, 2024 | |||||||||||||||||||||||
| Change in net sales | — | % | (1 | %) | 4 | % | 1 | % | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Net impact from acquisitions/divestitures(1) | (3 | %) | 4 | % | — | % | 1 | % | |||||||||||||||
| Impact from foreign currency | 1 | % | — | % | — | % | — | % | |||||||||||||||
| Change in organic net sales | 2 | % | (5 | %) | 4 | % | — | % | |||||||||||||||
| Nine Months Ended September 30, 2024 | |||||||||||||||||||||||
| Change in net sales | (1 | %) | (8 | %) | 2 | % | (3 | %) | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Net impact from acquisitions/divestitures(1) | (1 | %) | 2 | % | — | % | — | % | |||||||||||||||
| Impact from foreign currency | — | % | — | % | — | % | — | % | |||||||||||||||
| Change in organic net sales | — | % | (10 | %) | 2 | % | (3 | %) |
| 2. Reconciliations of Reported-to-Adjusted Gross Profit and Gross Margin (dollars in millions) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Gross profit | $ | 353.9 | $ | 349.6 | $ | 1,078.1 | $ | 1,110.1 | |||||||||||||||
| Fair value inventory step-up charges | 2.1 | 1.2 | 4.6 | 1.2 | |||||||||||||||||||
| Adjusted gross profit | $ | 356.0 | $ | 350.8 | $ | 1,082.7 | $ | 1,111.3 | |||||||||||||||
| Net sales | $ | 798.2 | $ | 793.4 | $ | 2,405.9 | $ | 2,485.0 | |||||||||||||||
| Gross margin | 44.3 | % | 44.1 | % | 44.8 | % | 44.7 | % | |||||||||||||||
| Adjusted gross margin | 44.6 | % | 44.2 | % | 45.0 | % | 44.7 | % |
| 3. Reconciliations of Reported-to-Adjusted Net Income Attributable to IDEX and Diluted EPS Attributable to IDEX (in millions, except for per share amounts) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Reported net income attributable to IDEX | $ | 119.1 | $ | 209.1 | $ | 381.8 | $ | 487.5 | |||||||||||||||
| Fair value inventory step-up charges | 2.1 | 1.2 | 4.6 | 1.2 | |||||||||||||||||||
| Tax impact on fair value inventory step-up charges | (0.5) | (0.3) | (1.0) | (0.3) | |||||||||||||||||||
| Restructuring expenses and asset impairments | 3.0 | 4.1 | 5.4 | 8.2 | |||||||||||||||||||
| Tax impact on restructuring expenses and asset impairments | (0.7) | (0.9) | (1.3) | (1.8) | |||||||||||||||||||
| Gain on sale of business(2) | 0.6 | (93.8) | (4.0) | (93.8) | |||||||||||||||||||
| Tax impact on gain of sale of business | — | 22.7 | — | 22.7 | |||||||||||||||||||
| Credit loss on note receivable from collaborative partner(3) | — | — | — | 7.7 | |||||||||||||||||||
| Tax impact on credit loss on note receivable from collaborative partner | — | — | — | (1.6) | |||||||||||||||||||
| Acquisition-related intangible asset amortization | 26.5 | 23.8 | 75.0 | 70.6 | |||||||||||||||||||
| Tax impact on acquisition-related intangible asset amortization | (6.0) | (5.3) | (17.1) | (15.8) | |||||||||||||||||||
| Adjusted net income attributable to IDEX | $ | 144.1 | $ | 160.6 | $ | 443.4 | $ | 484.6 | |||||||||||||||
| Reported diluted EPS attributable to IDEX | $ | 1.57 | $ | 2.75 | $ | 5.02 | $ | 6.42 | |||||||||||||||
| Fair value inventory step-up charges | 0.03 | 0.02 | 0.06 | 0.02 | |||||||||||||||||||
| Tax impact on fair value inventory step-up charges | — | — | (0.01) | — | |||||||||||||||||||
| Restructuring expenses and asset impairments | 0.04 | 0.06 | 0.07 | 0.11 | |||||||||||||||||||
| Tax impact on restructuring expenses and asset impairments | (0.01) | (0.01) | (0.02) | (0.03) | |||||||||||||||||||
| Gain on sale of business(2) | 0.01 | (1.24) | (0.05) | (1.24) | |||||||||||||||||||
| Tax impact on gain of sale of business | — | 0.30 | — | 0.30 | |||||||||||||||||||
| Credit loss on note receivable from collaborative partner(3) | — | — | — | 0.10 | |||||||||||||||||||
| Tax impact on credit loss on note receivable from collaborative partner | — | — | — | (0.02) | |||||||||||||||||||
| Acquisition-related intangible asset amortization | 0.35 | 0.31 | 0.99 | 0.93 | |||||||||||||||||||
| Tax impact on acquisition-related intangible asset amortization | (0.09) | (0.07) | (0.22) | (0.21) | |||||||||||||||||||
| Adjusted diluted EPS attributable to IDEX | $ | 1.90 | $ | 2.12 | $ | 5.84 | $ | 6.38 | |||||||||||||||
| Diluted weighted average shares outstanding | 75.9 | 75.9 | 75.9 | 75.9 |
| 4. Reconciliations of Net Income to Adjusted EBITDA (dollars in millions) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Reported net income | $ | 118.9 | $ | 209.0 | $ | 381.4 | $ | 487.3 | |||||||||||||||
| Provision for income taxes | 35.5 | 52.8 | 106.7 | 132.8 | |||||||||||||||||||
| Interest expense – net | 10.3 | 13.7 | 27.8 | 40.1 | |||||||||||||||||||
| Gain on sale of business(2) | 0.6 | (93.8) | (4.0) | (93.8) | |||||||||||||||||||
| Depreciation | 17.4 | 14.7 | 49.9 | 41.9 | |||||||||||||||||||
| Amortization | 26.5 | 23.8 | 75.0 | 70.6 | |||||||||||||||||||
| Fair value inventory step-up charges | 2.1 | 1.2 | 4.6 | 1.2 | |||||||||||||||||||
| Restructuring expenses and asset impairments | 3.0 | 4.1 | 5.4 | 8.2 | |||||||||||||||||||
| Credit loss on note receivable from collaborative partner(3) | — | — | — | 7.7 | |||||||||||||||||||
| Adjusted EBITDA | $ | 214.3 | $ | 225.5 | $ | 646.8 | $ | 696.0 | |||||||||||||||
| Adjusted EBITDA Components | |||||||||||||||||||||||
| FMT | $ | 98.5 | $ | 103.6 | $ | 311.6 | $ | 323.9 | |||||||||||||||
| HST | 82.6 | 84.4 | 248.2 | 278.8 | |||||||||||||||||||
| FSDP | 54.7 | 52.8 | 159.9 | 157.0 | |||||||||||||||||||
| Corporate and other | (21.5) | (15.3) | (72.9) | (63.7) | |||||||||||||||||||
| Total Adjusted EBITDA | $ | 214.3 | $ | 225.5 | $ | 646.8 | $ | 696.0 | |||||||||||||||
| Net sales | $ | 798.2 | $ | 793.4 | $ | 2,405.9 | $ | 2,485.0 | |||||||||||||||
| Net income margin | 14.9 | % | 26.3 | % | 15.9 | % | 19.6 | % | |||||||||||||||
| Adjusted EBITDA margin | 26.9 | % | 28.4 | % | 26.9 | % | 28.0 | % |
(1) Represents the sales from acquired or divested businesses during the first 12 months of ownership or prior to divestiture.
(2) Activity recorded in the three months ended September 30, 2024 represents the finalization of the gain on the sale of Alfa Valvole resulting in a $0.6 million downward adjustment during the third quarter of 2024.
(3) Represents a reserve on an investment with a collaborative partner recorded in Other expense (income) – net during the nine months ended September 30, 2023. During the fourth quarter of 2023, the Company converted the promissory note receivable from the collaborative partner to equity, resulting in a cost method investment with zero value.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes with respect to market risks disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2024.
There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are party to legal proceedings arising in the ordinary course of business as described in Note 14 in Part I, Item 1, “Commitments and Contingencies,” in the Notes to Condensed Consolidated Financial Statements and such disclosure is incorporated by reference into this Item 1. “Legal Proceedings.”
The Company’s threshold for disclosing material environmental legal proceedings involving a government authority where potential monetary sanctions are involved is $1.0 million.
In addition, the Company and six of its subsidiaries are presently named as defendants in a number of lawsuits claiming various asbestos-related personal injuries, allegedly as a result of exposure to products manufactured with components that contained asbestos. These components were acquired from third party suppliers and were not manufactured by the Company or any of the defendant subsidiaries. To date, the majority of the Company’s settlements and legal costs, except for costs of coordination, administration, insurance investigation and a portion of defense costs, have been covered in full by insurance, subject to applicable deductibles. However, the Company cannot predict whether and to what extent insurance will be available to continue to cover these settlements and legal costs, or how insurers may respond to claims that are tendered to them. Asbestos-related claims have been filed in jurisdictions throughout the United States and the United Kingdom. Most of the claims resolved to date have been dismissed without payment. The balance of the claims have been settled for various immaterial amounts. Only one case has been tried, resulting in a verdict for the Company’s business unit. No provision has been made in the financial statements of the Company, other than for insurance deductibles in the ordinary course, and the Company does not currently believe the asbestos-related claims will have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.
Item 1A. Risk Factors
There have been no material changes with respect to risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about the Company’s purchases of its common stock during the quarter ended September 30, 2024:
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value that May Yet be Purchased Under the Plans or Programs**(1)** | |||||||||||||||||||
| July 1, 2024 to July 31, 2024 | — | $ | — | — | $ | 539,689,117 | |||||||||||||||||
| August 1, 2024 to August 31, 2024 | — | — | — | 539,689,117 | |||||||||||||||||||
| September 1, 2024 to September 30, 2024 | — | — | — | 539,689,117 | |||||||||||||||||||
| Total | — | $ | — | — | $ | 539,689,117 |
(1)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.
Item 5. Other Information
During the quarter ended September 30, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended.
Item 6. Exhibits
| Exhibit Number | Description | |||||||
| 4.1 | Fifth Supplemental Indenture, dated as of August 21, 2024, between the Company and Computershare Trust Company, N.A., as successor to Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit No. 4.2 to the Current Report of IDEX Corporation on Form 8-K filed August 21, 2024). | |||||||
| 4.2 | Form of 4.950% Senior Note due 2029 (included as Exhibit A in Exhibit 4.1 hereto). | |||||||
| 31.1* | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes Oxley Act of 2002 | |||||||
| 31.2* | Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes Oxley Act of 2002 | |||||||
| 32.1* | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 | |||||||
| 32.2* | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 | |||||||
| 101* | The following financial information from IDEX Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 formatted in Inline eXtensible Business Reporting Language (iXBRL) includes: (i) the Cover Page, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Balance Sheets, (v) the Condensed Consolidated Statements of Equity, (vi) the Condensed Consolidated Statements of Cash Flows, and (vii) Notes to Condensed Consolidated Financial Statements. | |||||||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
| * Filed herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| IDEX Corporation | ||||||||
| By: | /s/ ABHISHEK KHANDELWAL | |||||||
| Abhishek Khandelwal | ||||||||
| Senior Vice President and Chief Financial Officer |
Date: October 30, 2024