UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
Form 10-Q
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☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | March 31, 20222023 |
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from | to |
Commission file numberFile Number 1-10235
IDEX CORPORATION
(Exact Namename of Registrantregistrant as Specifiedspecified in its Charter)
charter)
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| Delaware | | 36-3555336 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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| 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:
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Title of Each Classeach class | | Trading Symbol(s) | | Name of Each Exchangeeach exchange on Which Registeredwhich 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”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☑ | | Accelerated filer ☐ | | Non-accelerated filer ☐ | | Smaller reporting company | ☐ |
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Emerging growth company | ☐ | | | | | | | |
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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 22, 2022: 76,005,607.21, 2023: 75,576,366.
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
IDEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share amounts)
(unaudited)
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
ASSETS | ASSETS | | | | ASSETS | | | |
Current assets | Current assets | | Current assets | |
Cash and cash equivalents | Cash and cash equivalents | $ | 733.2 | | | $ | 855.4 | | Cash and cash equivalents | $ | 510.7 | | | $ | 430.2 | |
Receivables, less allowance for doubtful accounts of $7.5 at March 31, 2022 and $7.2 at December 31, 2021 | 411.2 | | | 356.4 | | |
Receivables, less allowance for credit losses of $7.9 and $8.0, respectively | | Receivables, less allowance for credit losses of $7.9 and $8.0, respectively | 446.5 | | | 442.8 | |
Inventories | Inventories | 428.5 | | | 370.4 | | Inventories | 497.6 | | | 470.9 | |
Other current assets | Other current assets | 108.4 | | | 95.8 | | Other current assets | 69.7 | | | 55.4 | |
Total current assets | Total current assets | 1,681.3 | | | 1,678.0 | | Total current assets | 1,524.5 | | | 1,399.3 | |
Property, plant and equipment - net | 325.8 | | | 327.3 | | |
Property, plant and equipment, net of accumulated depreciation of $528.5 and $516.7, respectively | | Property, plant and equipment, net of accumulated depreciation of $528.5 and $516.7, respectively | 397.0 | | | 382.1 | |
Goodwill | Goodwill | 2,213.5 | | | 2,167.7 | | Goodwill | 2,657.9 | | | 2,638.1 | |
Intangible assets - net | Intangible assets - net | 629.2 | | | 597.3 | | Intangible assets - net | 933.5 | | | 947.8 | |
Other noncurrent assets | Other noncurrent assets | 149.9 | | | 146.9 | | Other noncurrent assets | 145.1 | | | 144.6 | |
Total assets | Total assets | $ | 4,999.7 | | | $ | 4,917.2 | | Total assets | $ | 5,658.0 | | | $ | 5,511.9 | |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | | | |
Current liabilities | Current liabilities | | Current liabilities | |
Trade accounts payable | Trade accounts payable | $ | 210.2 | | | $ | 178.8 | | Trade accounts payable | $ | 216.0 | | | $ | 208.9 | |
Accrued expenses | Accrued expenses | 258.1 | | | 259.8 | | Accrued expenses | 275.9 | | | 289.1 | |
| Dividends payable | Dividends payable | — | | | 41.4 | | Dividends payable | — | | | 45.6 | |
Total current liabilities | Total current liabilities | 468.3 | | | 480.0 | | Total current liabilities | 491.9 | | | 543.6 | |
Long-term borrowings | Long-term borrowings | 1,190.6 | | | 1,190.3 | | Long-term borrowings | 1,470.7 | | | 1,468.7 | |
Deferred income taxes | Deferred income taxes | 196.6 | | | 196.4 | | Deferred income taxes | 267.3 | | | 264.2 | |
Other noncurrent liabilities | Other noncurrent liabilities | 245.3 | | | 247.4 | | Other noncurrent liabilities | 198.6 | | | 195.8 | |
Total liabilities | Total liabilities | 2,100.8 | | | 2,114.1 | | Total liabilities | 2,428.5 | | | 2,472.3 | |
Commitments and contingencies | Commitments and contingencies | 0 | | 0 | Commitments and contingencies | | | |
Shareholders’ equity | Shareholders’ equity | | Shareholders’ equity | |
Preferred stock: | Preferred stock: | | Preferred stock: | |
Authorized: 5,000,000 shares, $.01 per share par value; Issued: None | Authorized: 5,000,000 shares, $.01 per share par value; Issued: None | — | | | — | | Authorized: 5,000,000 shares, $.01 per share par value; Issued: None | — | | | — | |
Common stock: | Common stock: | | Common stock: | |
Authorized: 150,000,000 shares, $.01 per share par value | Authorized: 150,000,000 shares, $.01 per share par value | | Authorized: 150,000,000 shares, $.01 per share par value | |
Issued: 90,070,399 shares at March 31, 2022 and 90,067,996 shares at December 31, 2021 | 0.9 | | | 0.9 | | |
Issued: 90,069,559 shares at March 31, 2023 and 90,064,988 shares at December 31, 2022 | | Issued: 90,069,559 shares at March 31, 2023 and 90,064,988 shares at December 31, 2022 | 0.9 | | | 0.9 | |
Additional paid-in capital | Additional paid-in capital | 802.2 | | | 795.6 | | Additional paid-in capital | 830.0 | | | 817.2 | |
Retained earnings | Retained earnings | 3,266.5 | | | 3,126.5 | | Retained earnings | 3,671.5 | | | 3,531.7 | |
Treasury stock at cost: 13,972,023 shares at March 31, 2022 and 13,872,555 shares at December 31, 2021 | (1,082.1) | | | (1,050.3) | | |
Treasury stock at cost: 14,386,036 shares at March 31, 2023 and 14,451,032 shares at December 31, 2022 | | Treasury stock at cost: 14,386,036 shares at March 31, 2023 and 14,451,032 shares at December 31, 2022 | (1,184.0) | | | (1,184.3) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (88.5) | | | (69.6) | | Accumulated other comprehensive loss | (89.2) | | | (126.2) | |
Total shareholders’ equity | Total shareholders’ equity | 2,899.0 | | | 2,803.1 | | Total shareholders’ equity | 3,229.2 | | | 3,039.3 | |
Noncontrolling interest | Noncontrolling interest | (0.1) | | | — | | Noncontrolling interest | 0.3 | | | 0.3 | |
Total equity | Total equity | 2,898.9 | | | 2,803.1 | | Total equity | 3,229.5 | | | 3,039.6 | |
Total liabilities and equity | Total liabilities and equity | $ | 4,999.7 | | | $ | 4,917.2 | | Total liabilities and equity | $ | 5,658.0 | | | $ | 5,511.9 | |
See Notes to Condensed Consolidated Financial Statements
IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(unaudited)
| | | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | | 2022 | | 2021 | | 2023 | | 2022 | |
Net sales | Net sales | | $ | 751.1 | | | $ | 652.0 | | Net sales | $ | 845.4 | | | $ | 751.1 | | |
Cost of sales | Cost of sales | | 408.6 | | | 359.4 | | Cost of sales | 462.9 | | | 408.6 | | |
Gross profit | Gross profit | | 342.5 | | | 292.6 | | Gross profit | 382.5 | | | 342.5 | | |
Selling, general and administrative expenses | Selling, general and administrative expenses | | 154.3 | | | 134.9 | | Selling, general and administrative expenses | 189.7 | | | 154.3 | | |
Restructuring expenses and asset impairments | Restructuring expenses and asset impairments | | 0.6 | | | 2.2 | | Restructuring expenses and asset impairments | 0.5 | | | 0.6 | | |
Operating income | Operating income | | 187.6 | | | 155.5 | | Operating income | 192.3 | | | 187.6 | | |
Other income - net | | (2.3) | | | (0.8) | | |
Other (income) expense - net | | Other (income) expense - net | (0.6) | | | (2.3) | | |
Interest expense | Interest expense | | 9.5 | | | 10.7 | | Interest expense | 13.1 | | | 9.5 | | |
Income before income taxes | Income before income taxes | | 180.4 | | | 145.6 | | Income before income taxes | 179.8 | | | 180.4 | | |
Provision for income taxes | Provision for income taxes | | 40.5 | | | 32.9 | | Provision for income taxes | 40.0 | | | 40.5 | | |
Net income | Net income | | 139.9 | | | 112.7 | | Net income | 139.8 | | | 139.9 | | |
Net loss attributable to noncontrolling interest | Net loss attributable to noncontrolling interest | | 0.1 | | | — | | Net loss attributable to noncontrolling interest | — | | | 0.1 | | |
Net income attributable to IDEX | Net income attributable to IDEX | | $ | 140.0 | | | $ | 112.7 | | Net income attributable to IDEX | $ | 139.8 | | | $ | 140.0 | | |
| Earnings per common share: | Earnings per common share: | | | Earnings per common share: | | |
Basic earnings per common share attributable to IDEX | Basic earnings per common share attributable to IDEX | | $ | 1.84 | | | $ | 1.48 | | Basic earnings per common share attributable to IDEX | $ | 1.85 | | | $ | 1.84 | | |
Diluted earnings per common share attributable to IDEX | Diluted earnings per common share attributable to IDEX | | $ | 1.83 | | | $ | 1.48 | | Diluted earnings per common share attributable to IDEX | $ | 1.84 | | | $ | 1.83 | | |
| Share data: | Share data: | | | Share data: | | |
Basic weighted average common shares outstanding | Basic weighted average common shares outstanding | | 76.1 | | | 75.9 | | Basic weighted average common shares outstanding | 75.6 | | | 76.1 | | |
Diluted weighted average common shares outstanding | Diluted weighted average common shares outstanding | | 76.4 | | | 76.3 | | Diluted weighted average common shares outstanding | 75.9 | | | 76.4 | | |
See Notes to Condensed Consolidated Financial Statements
IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(unaudited)
| | | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | | 2022 | | 2021 | | 2023 | | 2022 | |
Net income | Net income | | $ | 139.9 | | | $ | 112.7 | | Net income | $ | 139.8 | | | $ | 139.9 | | |
Other comprehensive loss: | | | |
Reclassification adjustments for derivatives, net of tax | | — | | | 0.7 | | |
Other comprehensive income (loss): | | Other comprehensive income (loss): | | |
Pension and other postretirement adjustments, net of tax | Pension and other postretirement adjustments, net of tax | | 0.6 | | | 0.8 | | Pension and other postretirement adjustments, net of tax | 0.4 | | | 0.6 | | |
Cumulative translation adjustment | Cumulative translation adjustment | | (19.5) | | | (48.5) | | Cumulative translation adjustment | 36.6 | | | (19.5) | | |
Other comprehensive loss | | (18.9) | | | (47.0) | | |
Other comprehensive income (loss) | | Other comprehensive income (loss) | 37.0 | | | (18.9) | | |
Comprehensive income | Comprehensive income | | 121.0 | | | 65.7 | | Comprehensive income | 176.8 | | | 121.0 | | |
Comprehensive loss attributable to noncontrolling interest | Comprehensive loss attributable to noncontrolling interest | | — | | | — | | Comprehensive loss attributable to noncontrolling interest | — | | | — | | |
Comprehensive income attributable to IDEX | Comprehensive income attributable to IDEX | | $ | 121.0 | | | $ | 65.7 | | Comprehensive income attributable to IDEX | $ | 176.8 | | | $ | 121.0 | | |
See Notes to Condensed Consolidated Financial Statements
IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in millions)
(unaudited)
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| | | | | Accumulated Other Comprehensive Loss | | | | | | | | |
| Common Stock and Additional Paid-In Capital | | Retained Earnings | | Cumulative Translation Adjustment | | Retirement Benefits Adjustment | | Treasury Stock | | Total Shareholders’ Equity | | Noncontrolling Interest | | Total Equity |
Balance, December 31, 2021 | $ | 796.5 | | | $ | 3,126.5 | | | $ | (62.2) | | | $ | (7.4) | | | $ | (1,050.3) | | | $ | 2,803.1 | | | $ | — | | | $ | 2,803.1 | |
Net income (loss) | — | | | 140.0 | | | — | | | — | | | — | | | 140.0 | | | (0.1) | | | 139.9 | |
Cumulative translation adjustment | — | | | — | | | (19.5) | | | — | | | — | | | (19.5) | | | — | | | (19.5) | |
Net change in retirement obligations (net of tax of $0.2) | — | | | — | | | — | | | 0.6 | | | — | | | 0.6 | | | — | | | 0.6 | |
Issuance of 73,755 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $1.7) | — | | | — | | | — | | | — | | | 1.4 | | | 1.4 | | | — | | | 1.4 | |
Repurchase of 147,500 shares of common stock | — | | | — | | | — | | | — | | | (28.3) | | | (28.3) | | | | | (28.3) | |
Shares surrendered for tax withholding | — | | | — | | | — | | | — | | | (4.9) | | | (4.9) | | | — | | | (4.9) | |
Share-based compensation | 6.6 | | | — | | | — | | | — | | | — | | | 6.6 | | | — | | | 6.6 | |
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Balance, March 31, 2022 | $ | 803.1 | | | $ | 3,266.5 | | | $ | (81.7) | | | $ | (6.8) | | | $ | (1,082.1) | | | $ | 2,899.0 | | | $ | (0.1) | | | $ | 2,898.9 | |
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| | | | | Accumulated Other Comprehensive Loss | | | | | | | | |
| Common Stock and Additional Paid-In Capital | | Retained Earnings | | Cumulative Translation Adjustment | | Retirement Benefits Adjustment | | Treasury Stock | | Total Shareholders’ Equity | | Noncontrolling Interest | | Total Equity |
Balance, December 31, 2022 | $ | 818.1 | | | $ | 3,531.7 | | | $ | (137.1) | | | $ | 10.9 | | | $ | (1,184.3) | | | $ | 3,039.3 | | | $ | 0.3 | | | $ | 3,039.6 | |
Net income | — | | | 139.8 | | | — | | | — | | | — | | | 139.8 | | | — | | | 139.8 | |
Cumulative translation adjustment | — | | | — | | | 36.6 | | | — | | | — | | | 36.6 | | | — | | | 36.6 | |
Net change in retirement obligations (net of tax of $0.2) | — | | | — | | | — | | | 0.4 | | | — | | | 0.4 | | | — | | | 0.4 | |
Issuance of 84,666 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $1.8) | — | | | — | | | — | | | — | | | 4.7 | | | 4.7 | | | — | | | 4.7 | |
Shares surrendered for tax withholding | — | | | — | | | — | | | — | | | (4.4) | | | (4.4) | | | — | | | (4.4) | |
Share-based compensation | 12.8 | | | — | | | — | | | — | | | — | | | 12.8 | | | — | | | 12.8 | |
Balance, March 31, 2023 | $ | 830.9 | | | $ | 3,671.5 | | | $ | (100.5) | | | $ | 11.3 | | | $ | (1,184.0) | | | $ | 3,229.2 | | | $ | 0.3 | | | $ | 3,229.5 | |
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| | | | | Accumulated Other Comprehensive Loss | | | | | | | | |
| Common Stock and Additional Paid-In Capital | | Retained Earnings | | Cumulative Translation Adjustment | | Retirement Benefits Adjustment | | Cumulative Unrealized Gain (Loss) on Derivatives | | Treasury Stock | | Total Shareholders’ Equity | | Noncontrolling Interest | | Total Equity |
Balance, December 31, 2020 | $ | 776.1 | | | $ | 2,841.5 | | | $ | 13.4 | | | $ | (24.4) | | | $ | (2.5) | | | $ | (1,063.9) | | | $ | 2,540.2 | | | $ | 0.1 | | | $ | 2,540.3 | |
Net income | — | | | 112.7 | | | — | | | — | | | — | | | — | | | 112.7 | | | — | | | 112.7 | |
Cumulative translation adjustment | — | | | — | | | (48.5) | | | — | | | — | | | — | | | (48.5) | | | — | | | (48.5) | |
Net change in retirement obligations (net of tax of $0.3) | — | | | — | | | — | | | 0.8 | | | — | | | — | | | 0.8 | | | — | | | 0.8 | |
Net change on derivatives designated as cash flow hedges (net of tax of $0.2) | — | | | — | | | — | | | — | | | 0.7 | | | — | | | 0.7 | | | — | | | 0.7 | |
Issuance of 106,122 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $1.9) | — | | | — | | | — | | | — | | | — | | | 3.2 | | | 3.2 | | | — | | | 3.2 | |
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Shares surrendered for tax withholding | — | | | — | | | — | | | — | | | — | | | (5.4) | | | (5.4) | | | — | | | (5.4) | |
Share-based compensation | 6.2 | | | — | | | — | | | — | | | — | | | — | | | 6.2 | | | — | | | 6.2 | |
Balance, March 31, 2021 | $ | 782.3 | | | $ | 2,954.2 | | | $ | (35.1) | | | $ | (23.6) | | | $ | (1.8) | | | $ | (1,066.1) | | | $ | 2,609.9 | | | $ | 0.1 | | | $ | 2,610.0 | |
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| | | | | Accumulated Other Comprehensive Loss | | | | | | | | |
| Common Stock and Additional Paid-In Capital | | Retained Earnings | | Cumulative Translation Adjustment | | Retirement Benefits Adjustment | | | | Treasury Stock | | Total Shareholders’ Equity | | Noncontrolling Interest | | Total Equity |
Balance, December 31, 2021 | $ | 796.5 | | | $ | 3,126.5 | | | $ | (62.2) | | | $ | (7.4) | | | | | $ | (1,050.3) | | | $ | 2,803.1 | | | $ | — | | | $ | 2,803.1 | |
Net income (loss) | — | | | 140.0 | | | — | | | — | | | | | — | | | 140.0 | | | (0.1) | | | 139.9 | |
Cumulative translation adjustment | — | | | — | | | (19.5) | | | — | | | | | — | | | (19.5) | | | — | | | (19.5) | |
Net change in retirement obligations (net of tax of $0.2) | — | | | — | | | — | | | 0.6 | | | | | — | | | 0.6 | | | — | | | 0.6 | |
Issuance of 73,755 shares of common stock from issuance of unvested shares, performance share units and exercise of stock options (net of tax of $1.7) | — | | | — | | | — | | | — | | | | | 1.4 | | | 1.4 | | | — | | | 1.4 | |
Repurchase of 147,500 shares of common stock | — | | | — | | | — | | | — | | | | | (28.3) | | | (28.3) | | | — | | | (28.3) | |
Shares surrendered for tax withholding | — | | | — | | | — | | | — | | | | | (4.9) | | | (4.9) | | | — | | | (4.9) | |
Share-based compensation | 6.6 | | | — | | | — | | | — | | | | | — | | | 6.6 | | | — | | | 6.6 | |
Balance, March 31, 2022 | $ | 803.1 | | | $ | 3,266.5 | | | $ | (81.7) | | | $ | (6.8) | | | | | $ | (1,082.1) | | | $ | 2,899.0 | | | $ | (0.1) | | | $ | 2,898.9 | |
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See Notes to Condensed Consolidated Financial Statements
IDEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(unaudited)
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Cash flows from operating activities | Cash flows from operating activities | | | | Cash flows from operating activities | | | |
Net income | Net income | $ | 139.9 | | | $ | 112.7 | | Net income | $ | 139.8 | | | $ | 139.9 | |
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Gain on sale of assets | (2.7) | | | — | | |
Asset impairments | — | | | 0.1 | | |
Depreciation and amortization | 12.2 | | | 10.6 | | |
Gains on sales of assets | | Gains on sales of assets | (0.2) | | | (2.7) | |
Depreciation | | Depreciation | 12.8 | | | 12.2 | |
Amortization of intangible assets | Amortization of intangible assets | 15.3 | | | 11.0 | | Amortization of intangible assets | 23.6 | | | 15.3 | |
Amortization of debt issuance expenses | Amortization of debt issuance expenses | 0.4 | | | 0.4 | | Amortization of debt issuance expenses | 0.4 | | | 0.4 | |
Share-based compensation expense | Share-based compensation expense | 6.6 | | | 6.2 | | Share-based compensation expense | 12.8 | | | 6.6 | |
Deferred income taxes | Deferred income taxes | 1.0 | | | 0.5 | | Deferred income taxes | (0.2) | | | 1.0 | |
Non-cash interest expense associated with forward starting swaps | — | | | 0.9 | | |
Changes in (net of the effect from acquisitions/divestitures and foreign exchange): | | |
Changes in (net of the effect from acquisitions and foreign exchange): | | Changes in (net of the effect from acquisitions and foreign exchange): | |
Receivables | Receivables | (49.0) | | | (46.3) | | Receivables | (0.7) | | | (49.0) | |
Inventories | Inventories | (50.2) | | | (7.5) | | Inventories | (23.3) | | | (50.2) | |
Other current assets | Other current assets | (12.7) | | | 3.3 | | Other current assets | (11.1) | | | (12.7) | |
Trade accounts payable | Trade accounts payable | 28.1 | | | 20.0 | | Trade accounts payable | 7.6 | | | 28.1 | |
Deferred revenue | Deferred revenue | 6.4 | | | 11.1 | | Deferred revenue | 10.2 | | | 6.4 | |
Accrued expenses | Accrued expenses | (16.3) | | | (11.1) | | Accrued expenses | (24.9) | | | (16.3) | |
Other - net | Other - net | 0.7 | | | (2.6) | | Other - net | 1.1 | | | 0.7 | |
Net cash flows provided by operating activities | Net cash flows provided by operating activities | 79.7 | | | 109.3 | | Net cash flows provided by operating activities | 147.9 | | | 79.7 | |
Cash flows from investing activities | Cash flows from investing activities | | Cash flows from investing activities | |
Purchases of property, plant and equipment | Purchases of property, plant and equipment | (16.1) | | | (14.6) | | Purchases of property, plant and equipment | (26.6) | | | (16.1) | |
Acquisition of businesses, net of cash acquired | Acquisition of businesses, net of cash acquired | (114.7) | | | (106.2) | | Acquisition of businesses, net of cash acquired | — | | | (114.7) | |
| Proceeds from disposal of fixed assets | Proceeds from disposal of fixed assets | 6.5 | | | 0.2 | | Proceeds from disposal of fixed assets | 0.9 | | | 6.5 | |
Purchase of marketable securities | | Purchase of marketable securities | (3.2) | | | — | |
Other - net | Other - net | (0.1) | | | 1.1 | | Other - net | (0.3) | | | (0.1) | |
Net cash flows used in investing activities | Net cash flows used in investing activities | (124.4) | | | (119.5) | | Net cash flows used in investing activities | (29.2) | | | (124.4) | |
Cash flows from financing activities | Cash flows from financing activities | | Cash flows from financing activities | |
| Dividends paid | Dividends paid | (41.4) | | | (38.1) | | Dividends paid | (45.5) | | | (41.4) | |
Proceeds from stock option exercises | Proceeds from stock option exercises | 1.4 | | | 3.2 | | Proceeds from stock option exercises | 4.7 | | | 1.4 | |
Repurchases of common stock | Repurchases of common stock | (26.3) | | | — | | Repurchases of common stock | — | | | (26.3) | |
Shares surrendered for tax withholding | Shares surrendered for tax withholding | (4.9) | | | (5.4) | | Shares surrendered for tax withholding | (4.4) | | | (4.9) | |
Other - net | Other - net | (0.1) | | | (0.1) | | Other - net | — | | | (0.1) | |
Net cash flows used in financing activities | Net cash flows used in financing activities | (71.3) | | | (40.4) | | Net cash flows used in financing activities | (45.2) | | | (71.3) | |
Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | (6.2) | | | (17.2) | | Effect of exchange rate changes on cash and cash equivalents | 7.0 | | | (6.2) | |
Net decrease in cash | (122.2) | | | (67.8) | | |
Net increase (decrease) in cash and cash equivalents | | Net increase (decrease) in cash and cash equivalents | 80.5 | | | (122.2) | |
Cash and cash equivalents at beginning of year | Cash and cash equivalents at beginning of year | 855.4 | | | 1,025.9 | | Cash and cash equivalents at beginning of year | 430.2 | | | 855.4 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $ | 733.2 | | | $ | 958.1 | | Cash and cash equivalents at end of period | $ | 510.7 | | | $ | 733.2 | |
| Supplemental cash flow information | Supplemental cash flow information | | Supplemental cash flow information | |
Cash paid for: | Cash paid for: | | Cash paid for: | |
Interest | Interest | $ | 0.4 | | | $ | 0.5 | | Interest | $ | 4.1 | | | $ | 0.4 | |
Income taxes | Income taxes | 15.4 | | | 18.3 | | Income taxes | 20.7 | | | 15.4 | |
|
See Notes to Condensed Consolidated Financial Statements
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
1. Basis of Presentation and Significant Accounting Policies
The Condensed Consolidated Financial Statements of IDEX Corporation (“IDEX” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) applicable to interim financial information and the instructions to Form 10-Q under the Securities Exchange Act of 1934, as amended. The statements are unaudited but include all adjustments, consisting only of recurring items, except as noted, that the Company considers necessary for a fair presentation of the information set forth herein. The results of operations for the three months ended March 31, 20222023 are not necessarily indicative of the results to be expected for the entire year.
The Condensed Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in this report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Recently IssuedAdopted Accounting Standards
In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations(Topic (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contractswith Customers, which adds contract assets and contract liabilities to the list of exceptions to the recognition and measurement principles that apply to business combinations and requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with revenue recognition guidance. ASU 2021-08 is effectiveThe Company adopted this standard on a prospective basis for the annual periods beginning after December 15, 2022 and interim periods therein. Early adoption is permitted. Entities should apply the ASU’s provisions prospectively to business combinations occurring on or after the effective date of the amendments.beginning January 1, 2023. The adoption of this standard isdid not expected to have a material impact on the Company’s Condensed Consolidated Financial Statements.
In November 2021, the FASB issued ASU 2021-10, Government Assistance(Accounting Standards Codification (“ASC”) 832): Disclosures by Business Entities about Government Assistance, which requires entities to provide certain annual disclosures when they (1) have received government assistance and (2) use a grant or contribution accounting model by analogy to other accounting guidance. ASU 2021-10 is effective for annual periods beginning after December 15, 2021. Early adoption is permitted, and entities may apply the ASU’s provisions prospectively or retrospectively. The adoption of this standard is not expected to have a material impact on the Company’s Condensed Consolidated Financial Statements.
2. Acquisitions
All of the Company’s acquisitions of businesses have been accounted for under ASCAccounting Standards Codification (“ASC”) 805, Business Combinations. Accordingly, the assets and liabilities of the acquired companies, after adjustments to reflect the fair values assigned to the assets and liabilities, have been included in the Company’s Condensed Consolidated Financial Statements from their respective dates of acquisition. The results of operations of ABEL Pumps, L.P.Nexsight, LLC and certain of its affiliatesbusinesses Envirosight, WinCan, MyTana and Pipeline Renewal Technologies (“ABEL”Nexsight”) (acquired February 28, 2022), KZ CO. (“KZValve”) (acquired May 2, 2022) and Airtech Group, Inc., US Valve CorporationMuon B.V. and related entitiesits subsidiaries (“Airtech”Muon Group”) (acquired November 18, 2022) have been included in the Company’s Condensed Consolidated Financial Statements since the respective dates of acquisition on March 10, 2021 and June 14, 2021, respectively.acquisition. Supplemental pro forma information has not been provided as the acquisitions did not have a material impact on the Company’s Condensed Consolidated Financial Statements individually or in the aggregate.
2022 AcquisitionAcquisitions
Nexsight
On February 28, 2022, the Company acquired Nexsight LLC and its businesses Envirosight, WinCan, MyTana and Pipeline Renewal Technologies (“Nexsight”) in a partial stock and asset acquisition. Nexsight complements and creates synergies with the Company’s existing iPEK and ADS business units that design and create sewer crawlers, inspection and monitoring systems and software applications that allow teams to identify, anticipate and correct wastewater system issues remotely. Headquartered in Randolph, New Jersey, Nexsight operates in the Company’s Water reporting unit within the Fluid & Metering Technologies (“FMT”) segment. Nexsight was acquired for cash consideration of $114.7$112.5 million. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $54.7 million and $49.8 million, respectively. The goodwill is partially deductible for tax purposes.
The Company finalized the allocation of the purchase price for the Nexsight acquisition as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy.
The final allocation of the purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, is as follows:
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| | | | | |
| Total |
Current assets, net of cash acquired | $ | 16.6 | |
Property, plant and equipment | 2.0 | |
Goodwill | 54.7 | |
Intangible assets | 49.8 | |
Other noncurrent assets | 4.3 | |
Total assets acquired | 127.4 | |
Current liabilities | (9.2) | |
Deferred income taxes | (1.9) | |
Other noncurrent liabilities | (3.8) | |
Net assets acquired | $ | 112.5 | |
Acquired intangible assets consist of trade names, customer relationships and software. The goodwill recorded for the acquisition reflects the strategic fit, revenue and earnings growth potential of this business.
The acquired intangible assets and weighted average amortization periods are as follows:
| | | | | | | | | | | |
| Total | | Weighted Average Life |
Trade names | $ | 13.5 | | | 15 |
Customer relationships | 31.5 | | | 10 |
Software | 4.8 | | | 5 |
Acquired intangible assets | $ | 49.8 | | | |
KZValve
On May 2, 2022, the Company acquired KZValve in an asset acquisition. KZValve is a leading manufacturer of electric valves and controllers used primarily in agricultural applications. KZValve augments and expands IDEX’s agricultural portfolio, complementing Banjo’s current fluid management solutions for these applications. Headquartered in Greenwood, Nebraska, KZValve operates in the Company’s Agriculture reporting unit within the FMT segment. KZValve was acquired for cash consideration of $120.1 million. The entire purchase price was funded with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $55.0$56.4 million and $49.8$52.0 million, respectively. The goodwill is partially deductible for tax purposes.
The Company made a preliminary allocation of the purchase price for the NexsightKZValve acquisition as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy. As the Company continues to obtain additional information about these assets and liabilities, including intangible asset appraisals, inventory valuation and accrued expenses, and continues to integrate the newly acquired business, the Company will refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company will continue to make required adjustments to the purchase price allocation prior to the completion of the measurement period.
The preliminary allocation of the purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, is as follows:
| | | | | |
| Total |
Current assets, net of cash acquired | $ | 18.3 | |
Property, plant and equipment | 2.0 | |
Goodwill | 55.0 | |
Intangible assets | 49.8 | |
Other noncurrent assets | 6.0 | |
Total assets acquired | 131.1 | |
Current liabilities | (10.5) | |
Deferred income taxes | (1.6) | |
Other noncurrent liabilities | (4.3) | |
Net assets acquired | $ | 114.7 | |
Acquired intangible assets consist of trade names, customer relationships and software. The goodwill recorded for the acquisition reflects the strategic fit, revenue and earnings growth potential of this business.
The acquired intangible assets and weighted average amortization periods are as follows:
| | | | | | | | | | | |
| Total | | Weighted Average Life |
Trade names | $ | 13.5 | | | 15 |
Customer relationships | 31.5 | | | 10 |
Software | 4.8 | | | 5 |
Acquired intangible assets | $ | 49.8 | | | |
The Company incurred $0.9 million of acquisition-related transaction costs during the three months ended March 31, 2022. These costs were recorded in Selling, general and administrative expenses and were related to completed transactions, pending transactions and potential transactions, including transactions that ultimately were not completed.
2021 Acquisitions
ABEL
On March 10, 2021, the Company acquired the stock of ABEL. ABEL designs and manufactures highly engineered reciprocating positive displacement pumps for a variety of end markets, including mining, marine, power, water, wastewater and other general industries. Headquartered in Büchen, Germany, with sales and service locations in Madrid, Spain, and subsequent to the acquisition, with operations in Mansfield, Ohio, ABEL operates in the Company’s Pumps reporting unit within the FMT segment. ABEL was acquired for cash consideration of $106.3 million. The entire purchase price was funded
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
with cash on hand. Goodwill and intangible assets recognized as part of this transaction were $42.7 million and $46.0 million, respectively. The goodwill is not deductible for tax purposes.
The Company finalized the allocation of the purchase price for the ABEL acquisition as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy.
The final allocation of the purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, is as follows:
| | | | | |
| Total |
Current assets, net of cash acquired | $ | 18.19.7 | |
Property, plant and equipment | 4.01.8 | |
Goodwill | 42.756.4 | |
Intangible assets | 46.052.0 | |
Deferred income taxes | 2.60.2 | |
Other noncurrent assets | 0.11.0 | |
Total assets acquired | 113.5121.1 | |
Current liabilities | (7.1)(1.0) | |
Other noncurrent liabilities | (0.1) |
| |
Net assets acquired | $ | 106.3120.1 | |
Acquired intangible assets consist of trade names, customer relationships and unpatented technology. The goodwill recorded for the acquisition reflects the strategic fit, revenue and earnings growth potential of this business.
The acquired intangible assets and weighted average amortization periods are as follows:
| | | | | | | | | | | |
| Total | | Weighted Average Life |
Trade names | $ | 9.0 | | | 15 |
Customer relationships | 30.0 | | | 13 |
Unpatented technology | 7.0 | | | 11 |
Acquired intangible assets | $ | 46.0 | | | |
Table of Contents | | | | | | | | | | | |
| Total | | Weighted Average Life |
Trade names | $ | 7.5 | | | 15 |
Customer relationships | 36.0 | | | 13 |
Unpatented technology | 8.5 | | | 10 |
Acquired intangible assets | $ | 52.0 | | | |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
AirtechMuon Group
On June 14, 2021,November 18, 2022, the Company acquired the stock of Airtech.Airtech designs andMuon Group. Muon Group manufactures a wide range of highly-engineered pressure technology products, including vacuum pumps, regenerative blowers, compressor systems and valves forhighly precise flowpaths in a variety of end markets, including alternative energy,materials that enable the movement of various liquids and gases in critical applications for medical, semiconductor, food processing, medical, packagingdigital printing and transportation. Headquartered in Rutherford, New Jersey, with primary manufacturingfiltration technologies. Muon Group maintains operations in Werneck, GermanyHapert, the Netherlands; Eerbeek, the Netherlands; Wijchen, the Netherlands; Dorset, United Kingdom and Shenzhen, China, AirtechPune, India and operates in the Company’s Performance Pneumatic TechnologiesScientific Fluidics & Optics reporting unit within the Health & Science Technologies (“HST”) segment. AirtechMuon Group was acquired for cash consideration of $471.0$713.0 million. The entire purchase price was funded with $342.6 million of cash on hand.hand, $170.4 million of proceeds from the Company's Revolving Credit Facility and $200.0 million of proceeds from the Company's Term Facility. Goodwill and intangible assets recognized as part of this transaction were $268.6$393.0 million and $202.3$319.1 million, respectively. The goodwill is not deductible for tax purposes.
The Company made a preliminary allocation of the purchase price for the AirtechMuon Group acquisition as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy. As the Company continues to obtain additional information about these assets and liabilities, including intangible asset appraisals, inventory valuation and accrued expenses, and continues to integrate the newly acquired business, the Company will refine the estimates of fair value and more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. The Company will continue to make required adjustments to the purchase price allocation prior to the completion of the measurement period.
The preliminary allocation of the purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, is as follows:
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| | | | | |
| Total |
Current assets, net of cash acquired | $ | 45.352.5 | |
Property, plant and equipment | 4.859.1 | |
Goodwill | 268.6393.0 | |
Intangible assets | 202.3319.1 | |
Other noncurrent assets | 10.19.6 | |
Total assets acquired | 531.1833.3 | |
Current liabilities | (11.1)(25.5) | |
Deferred income taxes | (40.6)(83.9) | |
Other noncurrent liabilities | $ | (8.4)(10.9) | |
Net assets acquired | $ | 471.0713.0 | |
Acquired intangible assets consist of trade names, customer relationships and unpatented technology. The goodwill recorded for the acquisition reflects the strategic fit, revenue and earnings growth potential of this business.
The acquired intangible assets and weighted average amortization periods are as follows:
| | | Total | | Weighted Average Life | | Total | | Weighted Average Life |
Trade names | Trade names | $ | 15.4 | | | 15 | Trade names | $ | 38.3 | | | 15 |
Customer relationships | Customer relationships | 162.9 | | | 13 | Customer relationships | 212.4 | | | 13 |
Unpatented technology | Unpatented technology | 24.0 | | | 11 | Unpatented technology | 68.4 | | | 11 |
Acquired intangible assets | Acquired intangible assets | $ | 202.3 | | | | Acquired intangible assets | $ | 319.1 | | | |
The Company incurred $1.4$1.1 million and $0.9 million of acquisition-related costs during the three months ended March 31, 2021.2023 and 2022, respectively. These costs were recorded in Selling, general and administrative expenses and were related to completed transactions, pending transactions and potential transactions, including transactions that ultimately were not completed. The Company also recorded a $0.7 million fair value inventory step-up charge associated with the completed 2021 acquisition of ABEL in Cost of sales during the three months ended March 31, 2021.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
3. Business Segments
IDEX has 3three reportable business segments: Fluid & Metering Technologies (“FMT”), Health & Science Technologies (“HST”) and Fire & Safety/Diversified Products (“FSDP”).
The FMT segment designs, produces and distributes positive displacement pumps, valves, small volume provers, flow meters, injectors and other fluid-handling pump modules and systems and provides flow monitoring and other services for the food, chemical, general industrial, water and wastewater, agriculture and energy industries. FMT application-specific pump and metering solutions serve a diverse range of end markets, including industrial infrastructure (fossil fuels, refined and alternative fuels and water and wastewater), energy, chemical processing, agriculture, food and beverage, semiconductor, pulp and paper, automotive/transportation, plastics and resins, electronics and electrical, construction and mining, pharmaceutical and biopharmaceutical, machinery and numerous other specialty niche markets.
The HST segment designs, produces and distributes a wide range of precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems, micro-precision components, pneumatic components and sealing solutions, high performance molded and extruded sealing components, custom mechanical and shaft seals, engineered hygienic mixers and valves, biocompatible medical devices and implantables, air compressors and blowers, optical components and coatings, laboratory and commercial equipment, precision photonic solutions and precision gear and peristaltic pump technologies. HST serves a variety of end markets, including food and beverage, life sciences, analytical instruments, pharmaceutical and biopharmaceutical, industrial, semiconductor, digital printing, automotive/transportation, medical/dental, energy, cosmetics, marine, chemical, wastewater and water treatment, life sciences, research and aerospace/defense markets.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
The FSDP segment designs, produces and developsdistributes firefighting pumps, valves and controls, rescue tools, lifting bags and other components and systems for the fire and rescue industry, engineered stainless steel banding and clamping devices used in a variety of industrial and commercial applications in the automotive, energy and industrial markets and precision equipment for dispensing, metering and mixing colorants and paints used in a variety of retail and commercial businesses in the paint and industrial markets around the world.
Information on the Company’s business segments is presented below based on the nature of the products and services offered. The Company evaluatesuses Adjusted EBITDA as its performance based on several factors,principal measure of which sales, operating income and operating margin are the primary financial measures.segment performance. Intersegment sales are accounted for at fair value as if the sales were to third parties.
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Net sales | | | | | | | |
Fluid & Metering Technologies | | | | | | | |
External customers | $ | 321.1 | | | $ | 271.9 | | | | | |
Intersegment sales | 0.7 | | | 0.1 | | | | | |
Total segment sales | 321.8 | | | 272.0 | | | | | |
Health & Science Technologies | | | | | | | |
External customers | 350.3 | | | 314.6 | | | | | |
Intersegment sales | 0.7 | | | 0.6 | | | | | |
Total segment sales | 351.0 | | | 315.2 | | | | | |
Fire & Safety/Diversified Products | | | | | | | |
External customers | 174.0 | | | 164.6 | | | | | |
Intersegment sales | 0.4 | | | 0.1 | | | | | |
Total segment sales | 174.4 | | | 164.7 | | | | | |
Intersegment eliminations | (1.8) | | | (0.8) | | | | | |
Net sales | $ | 845.4 | | | $ | 751.1 | | | | | |
ADJUSTED EBITDA | | | | | | | |
Fluid & Metering Technologies | $ | 106.2 | | | $ | 88.4 | | | | | |
Health & Science Technologies | 100.7 | | | 99.8 | | | | | |
Fire & Safety/Diversified Products | 49.7 | | | 44.4 | | | | | |
Segment Adjusted EBITDA | 256.6 | | | 232.6 | | | | | |
Corporate and other | (26.8) | | | (17.9) | | | | | |
Adjusted EBITDA | 229.8 | | | 214.7 | | | | | |
- Interest expense | 13.1 | | | 9.5 | | | | | |
- Depreciation | 12.8 | | | 12.2 | | | | | |
- Amortization | 23.6 | | | 15.3 | | | | | |
- Restructuring expenses and asset impairments | 0.5 | | | — | | | | | |
+ Gains on sales of asset | — | | | 2.7 | | | | | |
Income before income taxes | $ | 179.8 | | | $ | 180.4 | | | | | |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Net sales | | | | | | | |
Fluid & Metering Technologies | | | | | | | |
External customers | | | | | $ | 271.9 | | | $ | 243.0 | |
Intersegment sales | | | | | 0.1 | | | 0.3 | |
Total segment sales | | | | | 272.0 | | | 243.3 | |
Health & Science Technologies | | | | | | | |
External customers | | | | | 314.6 | | | 249.5 | |
Intersegment sales | | | | | 0.6 | | | 0.9 | |
Total segment sales | | | | | 315.2 | | | 250.4 | |
Fire & Safety/Diversified Products | | | | | | | |
External customers | | | | | 164.6 | | | 159.5 | |
Intersegment sales | | | | | 0.1 | | | — | |
Total segment sales | | | | | 164.7 | | | 159.5 | |
Intersegment elimination | | | | | (0.8) | | | (1.2) | |
Total net sales | | | | | $ | 751.1 | | | $ | 652.0 | |
Operating income (loss) (1) | | | | | | | |
Fluid & Metering Technologies | | | | | $ | 80.4 | | | $ | 62.9 | |
Health & Science Technologies | | | | | 83.6 | | | 66.6 | |
Fire & Safety/Diversified Products | | | | | 40.5 | | | 44.6 | |
Corporate office and other | | | | | (16.9) | | | (18.6) | |
Total operating income | | | | | $ | 187.6 | | | $ | 155.5 | |
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
ASSETS | | | |
Fluid & Metering Technologies | $ | 1,720.9 | | | $ | 1,676.9 | |
Health & Science Technologies | 2,960.9 | | | 2,931.1 | |
Fire & Safety/Diversified Products | 787.3 | | | 771.8 | |
Corporate and other | 188.9 | | | 132.1 | |
Total assets | $ | 5,658.0 | | | $ | 5,511.9 | |
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Assets | | | |
Fluid & Metering Technologies | $ | 1,635.6 | | | $ | 1,458.8 | |
Health & Science Technologies | 2,182.6 | | | 2,138.3 | |
Fire & Safety/Diversified Products | 905.2 | | | 892.5 | |
Corporate office and other | 276.3 | | | 427.6 | |
Total assets | $ | 4,999.7 | | | $ | 4,917.2 | |
(1) Segment operating income (loss) excludes net unallocated corporate operating expenses.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
4. Revenue
Disaggregation of Revenue
The Company has a comprehensive offering of products, including technologies, built to customers’ specifications that are sold in niche markets throughout the world. The Company disaggregates its revenue from contracts with customers by reporting unit and geographical region for each segment as the Company believes it best depicts how the amount, nature, timing and uncertainty of its revenue and cash flows are affected by economic factors. Revenue was attributed to geographical region based on the location of the customer. The following tables present revenue disaggregated by reporting unit and geographical region.
Revenue by reporting unit for the three months ended March 31, 20222023 and 20212022 was as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Pumps | | | | | $ | 97.4 | | | $ | 82.3 | |
Water(1) | | | | | 64.4 | | | 58.7 | |
Energy | | | | | 48.3 | | | 45.3 | |
Agriculture | | | | | 32.3 | | | 26.0 | |
Valves(1) | | | | | 29.6 | | | 31.0 | |
Intersegment elimination | | | | | (0.1) | | | (0.3) | |
Fluid & Metering Technologies | | | | | 271.9 | | | 243.0 | |
Scientific Fluidics & Optics | | | | | 141.2 | | | 114.4 | |
Sealing Solutions | | | | | 70.2 | | | 65.6 | |
Performance Pneumatic Technologies(2) | | | | | 62.0 | | | 32.9 | |
Material Processing Technologies | | | | | 33.7 | | | 29.9 | |
Micropump | | | | | 8.1 | | | 7.6 | |
Intersegment elimination | | | | | (0.6) | | | (0.9) | |
Health & Science Technologies | | | | | 314.6 | | | 249.5 | |
Fire & Safety | | | | | 95.7 | | | 96.8 | |
Dispensing | | | | | 41.6 | | | 36.9 | |
BAND-IT | | | | | 27.4 | | | 25.8 | |
Intersegment elimination | | | | | (0.1) | | | — | |
Fire & Safety/Diversified Products | | | | | 164.6 | | | 159.5 | |
Total net sales | | | | | $ | 751.1 | | | $ | 652.0 | |
(1) During the third quarter of 2021, the Company merged a business in the Water reporting unit with a business in the Valves reporting unit. Revenue for each reporting unit has been restated to reflect this change for the three months ended March 31, 2021.
(2) This reporting unit was previously named Gast and was renamed Performance Pneumatic Technologies upon the acquisition of Airtech on June 14, 2021. Prior to the acquisition date, amounts reflect only the Gast business. | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Pumps | $ | 105.1 | | | $ | 97.4 | | | | | |
Water | 94.1 | | | 64.4 | | | | | |
Energy | 50.7 | | | 48.3 | | | | | |
Agriculture | 38.6 | | | 32.3 | | | | | |
Valves | 33.3 | | | 29.6 | | | | | |
Intersegment elimination | (0.7) | | | (0.1) | | | | | |
Fluid & Metering Technologies | 321.1 | | | 271.9 | | | | | |
Scientific Fluidics & Optics | 178.6 | | | 141.2 | | | | | |
Performance Pneumatic Technologies | 69.4 | | | 62.0 | | | | | |
Sealing Solutions | 64.7 | | | 70.2 | | | | | |
Material Processing Technologies | 27.7 | | | 33.7 | | | | | |
Micropump | 10.6 | | | 8.1 | | | | | |
Intersegment elimination | (0.7) | | | (0.6) | | | | | |
Health & Science Technologies | 350.3 | | | 314.6 | | | | | |
Fire & Safety | 106.2 | | | 95.7 | | | | | |
Dispensing | 36.2 | | | 41.6 | | | | | |
BAND-IT | 32.0 | | | 27.4 | | | | | |
Intersegment elimination | (0.4) | | | (0.1) | | | | | |
Fire & Safety/Diversified Products | 174.0 | | | 164.6 | | | | | |
Net sales | $ | 845.4 | | | $ | 751.1 | | | | | |
| | | | | | | |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
Revenue by geographical region for the three months ended March 31, 20222023 and 20212022 was as follows:
| | | | Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2023 |
| | FMT | | HST | | FSDP | | IDEX | | FMT | | HST | | FSDP | | IDEX |
U.S. | U.S. | $ | 150.0 | | | $ | 152.0 | | | $ | 76.5 | | | $ | 378.5 | | U.S. | $ | 176.8 | | | $ | 149.6 | | | $ | 89.4 | | | $ | 415.8 | |
North America, excluding U.S. | North America, excluding U.S. | 17.3 | | | 7.5 | | | 10.9 | | | 35.7 | | North America, excluding U.S. | 19.4 | | | 5.2 | | | 8.5 | | | 33.1 | |
Europe | Europe | 48.7 | | | 91.3 | | | 45.0 | | | 185.0 | | Europe | 59.2 | | | 120.9 | | | 44.7 | | | 224.8 | |
Asia | Asia | 36.5 | | | 58.8 | | | 23.4 | | | 118.7 | | Asia | 45.1 | | | 66.6 | | | 23.4 | | | 135.1 | |
Other (1) | Other (1) | 19.5 | | | 5.6 | | | 8.9 | | | 34.0 | | Other (1) | 21.3 | | | 8.7 | | | 8.4 | | | 38.4 | |
Intersegment elimination | Intersegment elimination | (0.1) | | | (0.6) | | | (0.1) | | | (0.8) | | Intersegment elimination | (0.7) | | | (0.7) | | | (0.4) | | | (1.8) | |
Total net sales | $ | 271.9 | | | $ | 314.6 | | | $ | 164.6 | | | $ | 751.1 | | |
Net sales | | Net sales | $ | 321.1 | | | $ | 350.3 | | | $ | 174.0 | | | $ | 845.4 | |
| | | | Three Months Ended March 31, 2021 | | Three Months Ended March 31, 2022 |
| | FMT | | HST | | FSDP | | IDEX | | FMT | | HST | | FSDP | | IDEX |
U.S. | U.S. | $ | 131.0 | | | $ | 93.7 | | | $ | 75.5 | | | $ | 300.2 | | U.S. | $ | 150.0 | | | $ | 152.0 | | | $ | 76.5 | | | $ | 378.5 | |
North America, excluding U.S. | North America, excluding U.S. | 14.8 | | | 7.1 | | | 7.2 | | | 29.1 | | North America, excluding U.S. | 17.3 | | | 7.5 | | | 10.9 | | | 35.7 | |
Europe | Europe | 48.6 | | | 76.8 | | | 42.6 | | | 168.0 | | Europe | 48.7 | | | 91.3 | | | 45.0 | | | 185.0 | |
Asia | Asia | 33.7 | | | 67.7 | | | 26.9 | | | 128.3 | | Asia | 36.5 | | | 58.8 | | | 23.4 | | | 118.7 | |
Other (1) | Other (1) | 15.2 | | | 5.1 | | | 7.3 | | | 27.6 | | Other (1) | 19.5 | | | 5.6 | | | 8.9 | | | 34.0 | |
Intersegment elimination | Intersegment elimination | (0.3) | | | (0.9) | | | — | | | (1.2) | | Intersegment elimination | (0.1) | | | (0.6) | | | (0.1) | | | (0.8) | |
Total net sales | $ | 243.0 | | | $ | 249.5 | | | $ | 159.5 | | | $ | 652.0 | | |
Net sales | | Net sales | $ | 271.9 | | | $ | 314.6 | | | $ | 164.6 | | | $ | 751.1 | |
(1) Other includes: South America, Middle East, Australia and Africa.
Performance Obligations
The Company’s performance obligations are satisfied either at a point in time or over time as work progresses. Revenue from products and services transferred to customers at a point in time approximated 96% of total revenues in both the three months ended March 31, 20222023 and 2021.2022. Revenue from products and services transferred to customers over time approximated 4% of total revenues in both the three months ended March 31, 20222023 and 2021.2022.
Contract Balances
The timing of revenue recognition, billings and cash collections can result in customer receivables, advance payments or billings in excess of revenue recognized. Customer receivables include both amounts billed and currently due from customers as well as unbilled amounts (contract assets) and are included in Receivables on the Condensed Consolidated Balance Sheets. Amounts are billed in accordance with contractual terms or as work progresses. Unbilled amounts arise when the timing of billing differs from the timing of revenue recognized, such as when contract provisions require specific milestones to be met before a customer can be billed. Unbilled amounts primarily relate to performance obligations satisfied over time when the cost-to-costcost- to-cost method is utilized and the revenue recognized exceeds the amount billed to the customer as there is not yet a right to invoice in accordance with contractual terms. Unbilled amounts are recorded as a contract asset when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract.
The composition of Customer receivables was as follows:
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Billed receivables | $ | 397.3 | | | $ | 344.0 | |
Unbilled receivables | 10.1 | | | 10.9 | |
Total customer receivables | $ | 407.4 | | | $ | 354.9 | |
The composition of customer receivables was as follows: | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Billed receivables | $ | 428.5 | | | $ | 421.3 | |
Unbilled receivables | 10.2 | | | 10.0 | |
Total customer receivables | $ | 438.7 | | | $ | 431.3 | |
Advance payments, deposits and billings in excess of revenue recognized are included in Deferreddeferred revenue which is classified as current or noncurrent based on the timing of when the Company expects to recognize the revenue. The current portion is included in Accrued expenses and the noncurrent portion is included in Other noncurrent liabilities on the Condensed Consolidated Balance Sheets. Advance payments and deposits represent contract liabilities and are recorded when customers remit contractual cash payments in advance of the Company satisfying performance obligations under contractual arrangements, including those with performance obligations satisfied over time. The Company generally receives advance payments from customers related to maintenance services which are recognized ratably over the service term. The Company also receives deposits from customers on certain orders which the Company recognizes as revenue at a point in time. Billings in excess of revenue recognized represent contract liabilities and primarily relate to performance obligations satisfied over time when the cost-to-cost method is utilized and revenue cannot yet be recognized as the Company has not completed the corresponding performance obligation. Contract liabilities are derecognized when revenue is recognized and the performance obligation is satisfied.
The composition of Deferreddeferred revenue was as follows:
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Deferred revenue - current | Deferred revenue - current | $ | 59.8 | | | $ | 49.0 | | Deferred revenue - current | $ | 55.4 | | | $ | 44.7 | |
Deferred revenue - noncurrent | Deferred revenue - noncurrent | 30.8 | | | 32.2 | | Deferred revenue - noncurrent | 14.5 | | | 15.0 | |
Total deferred revenue | Total deferred revenue | $ | 90.6 | | | $ | 81.2 | | Total deferred revenue | $ | 69.9 | | | $ | 59.7 | |
5. Earnings Per Common Share
Diluted earnings per common share (“EPS”) attributable to IDEX is computed by dividing netNet income attributable to IDEX by the weighted average number of shares of common stock (basic) plus common stock equivalents (diluted) outstanding (diluted) during the period. Common stock equivalents consist of stock options, which have been included in the calculation of weighted average shares outstanding using the treasury stock method, restricted stock and performance share units.
ASC 260, Earnings Per Share, concludes that all outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common shareholders. If awards are considered participating securities, the Company is required to apply the two-class method of computing basic and diluted earnings per share. The Company has determined that its outstanding shares of restricted stock are participating securities. Accordingly, dilutedDiluted EPS attributable to IDEX was computed using the two-class method prescribed by ASC 260.
Basic weighted average shares outstanding reconciles to diluted weighted average shares outstanding as follows:
| | | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | | 2022 | | 2021 | | 2023 | | 2022 | |
Basic weighted average common shares outstanding | Basic weighted average common shares outstanding | | 76.1 | | | 75.9 | | Basic weighted average common shares outstanding | 75.6 | | | 76.1 | | |
Dilutive effect of stock options, restricted stock and performance share units | Dilutive effect of stock options, restricted stock and performance share units | | 0.3 | | | 0.4 | | Dilutive effect of stock options, restricted stock and performance share units | 0.3 | | | 0.3 | | |
Diluted weighted average common shares outstanding | Diluted weighted average common shares outstanding | | 76.4 | | | 76.3 | | Diluted weighted average common shares outstanding | 75.9 | | | 76.4 | | |
Options to purchase approximately 0.50.2 million and 0.30.5 million shares of common stock for the three months ended March 31, 20222023 and 2021,2022, respectively, were not included in the computation of dilutedDiluted EPS attributable to IDEX because the effect of their inclusion would have been antidilutive.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
6. Inventories
The components of inventories as of March 31, 20222023 and December 31, 20212022 were:
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Raw materials and component parts | Raw materials and component parts | $ | 262.8 | | | $ | 229.4 | | Raw materials and component parts | $ | 303.8 | | | $ | 301.2 | |
Work in process | Work in process | 53.0 | | | 47.4 | | Work in process | 54.9 | | | 54.3 | |
Finished goods | Finished goods | 112.7 | | | 93.6 | | Finished goods | 138.9 | | | 115.4 | |
Total inventories | Total inventories | $ | 428.5 | | | $ | 370.4 | | Total inventories | $ | 497.6 | | | $ | 470.9 | |
Inventories are stated at the lower of cost or net realizable value. Cost, which includes material, labor and overhead, is determined on a first in, first out basis.
7. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the three months ended March 31, 2022,2023, by reportable business segment, were as follows:
| | | FMT | | HST | | FSDP | | IDEX | | FMT | | HST | | FSDP | | IDEX |
Goodwill | Goodwill | $ | 701.7 | | | $ | 1,264.3 | | | $ | 402.3 | | | $ | 2,368.3 | | Goodwill | $ | 800.9 | | | $ | 1,644.8 | | | $ | 393.0 | | | $ | 2,838.7 | |
Accumulated goodwill impairment losses | Accumulated goodwill impairment losses | (20.7) | | | (149.8) | | | (30.1) | | | (200.6) | | Accumulated goodwill impairment losses | (20.7) | | | (149.8) | | | (30.1) | | | (200.6) | |
Balance at December 31, 2021 | 681.0 | | | 1,114.5 | | | 372.2 | | | 2,167.7 | | |
Balance at January 1, 2023 | | Balance at January 1, 2023 | 780.2 | | | 1,495.0 | | | 362.9 | | | 2,638.1 | |
Foreign currency translation | Foreign currency translation | (2.3) | | | (5.8) | | | (2.4) | | | (10.5) | | Foreign currency translation | 2.8 | | | 14.0 | | | 3.0 | | | 19.8 | |
Acquisitions | 55.0 | | | — | | | — | | | 55.0 | | |
Acquisition adjustments | Acquisition adjustments | 0.3 | | | 1.0 | | | — | | | 1.3 | | Acquisition adjustments | (1.8) | | | 1.8 | | | — | | | — | |
Balance at March 31, 2022 | $ | 734.0 | | | $ | 1,109.7 | | | $ | 369.8 | | | $ | 2,213.5 | | |
Balance at March 31, 2023 | | Balance at March 31, 2023 | $ | 781.2 | | | $ | 1,510.8 | | | $ | 365.9 | | | $ | 2,657.9 | |
ASC 350, Goodwill and Other Intangible Assets, requires that goodwill be tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. In the first three months of 2022,2023, there were no events or circumstances that would have required an interim impairment test. Annually, on October 31, goodwill and other acquired intangible assets with indefinite lives are tested for impairment. Based on the results of the Company’s annual impairment test at October 31, 2021,2022, all reporting units had fair values in excess of their carrying values.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
The following table provides the gross carrying value and accumulated amortization for each major class of intangible asset at March 31, 20222023 and December 31, 2021:2022:
| | | At March 31, 2022 | | | | At December 31, 2021 | | At March 31, 2023 | | | | At December 31, 2022 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net | | Weighted Average Life | | Gross Carrying Amount | | Accumulated Amortization | | Net | | Gross Carrying Amount | | Accumulated Amortization | | Net | | Weighted Average Life | | Gross Carrying Amount | | Accumulated Amortization | | Net |
Amortized intangible assets: | Amortized intangible assets: | | | | | | | | | | | | | | Amortized intangible assets: | | | | | | | | | | | | | |
Patents | Patents | $ | 3.2 | | | $ | (2.1) | | | $ | 1.1 | | | 10 | | $ | 3.2 | | | $ | (2.0) | | | $ | 1.2 | | Patents | $ | 2.9 | | | $ | (1.9) | | | $ | 1.0 | | | 12 | | $ | 2.9 | | | $ | (1.8) | | | $ | 1.1 | |
Trade names | Trade names | 153.6 | | | (74.7) | | | 78.9 | | | 15 | | 140.9 | | | (72.4) | | | 68.5 | | Trade names | 188.4 | | | (75.5) | | | 112.9 | | | 15 | | 186.5 | | | (71.4) | | | 115.1 | |
Customer relationships | Customer relationships | 524.6 | | | (152.6) | | | 372.0 | | | 13 | | 495.9 | | | (144.2) | | | 351.7 | | Customer relationships | 774.7 | | | (196.6) | | | 578.1 | | | 13 | | 772.2 | | | (184.9) | | | 587.3 | |
Unpatented technology | Unpatented technology | 143.0 | | | (61.5) | | | 81.5 | | | 13 | | 143.8 | | | (58.8) | | | 85.0 | | Unpatented technology | 206.1 | | | (59.3) | | | 146.8 | | | 12 | | 207.1 | | | (57.8) | | | 149.3 | |
Software | Software | 4.8 | | | — | | | 4.8 | | | 5 | | — | | | — | | | — | | Software | 4.9 | | | (1.1) | | | 3.8 | | | 5 | | 4.8 | | | (0.7) | | | 4.1 | |
Total amortized intangible assets | Total amortized intangible assets | 829.2 | | | (290.9) | | | 538.3 | | | 783.8 | | | (277.4) | | | 506.4 | | Total amortized intangible assets | 1,177.0 | | | (334.4) | | | 842.6 | | | 1,173.5 | | | (316.6) | | | 856.9 | |
Indefinite-lived intangible assets: | Indefinite-lived intangible assets: | | Indefinite-lived intangible assets: | |
Banjo trade name | Banjo trade name | 62.1 | | | — | | | 62.1 | | | 62.1 | | | — | | | 62.1 | | Banjo trade name | 62.1 | | | — | | | 62.1 | | | 62.1 | | | — | | | 62.1 | |
Akron Brass trade name | Akron Brass trade name | 28.8 | | | — | | | 28.8 | | | 28.8 | | | — | | | 28.8 | | Akron Brass trade name | 28.8 | | | — | | | 28.8 | | | 28.8 | | | — | | | 28.8 | |
Total intangible assets | Total intangible assets | $ | 920.1 | | | $ | (290.9) | | | $ | 629.2 | | | $ | 874.7 | | | $ | (277.4) | | | $ | 597.3 | | Total intangible assets | $ | 1,267.9 | | | $ | (334.4) | | | $ | 933.5 | | | $ | 1,264.4 | | | $ | (316.6) | | | $ | 947.8 | |
The Banjo trade name and the Akron Brass trade name are indefinite-lived intangible assets which are tested for impairment on an annual basis in accordance with ASC 350 or more frequently if events or changes in circumstances indicate that the assets might be impaired. Based on the results of the Company’s annual impairment test at October 31, 2021,2022, these indefinite-lived intangible assets had fair values in excess of their carrying values. In the first three months of 2022,2023, there were no events or circumstances that would have required an interim impairment test on these indefinite-lived intangible assets.
Amortization of intangible assets was $15.3$23.6 million and $11.0$15.3 million for the three months ended March 31, 20222023 and 2021,2022, respectively. Based on the intangible asset balances as of March 31, 2022,2023, expected amortization expense is expected to approximate $49.5 million for the remaining nine months of 2022, $62.9 million in 2023 $58.4 million inand for the years 2024 $56.8 million in 2025 and $54.9 million in 2026.through 2027 is as follows:
8. Accrued Expenses
The components of accrued expenses as of March 31, 2022 and December 31, 2021 were:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Payroll and related items | $ | 68.4 | | | $ | 91.5 | |
Management incentive compensation | 8.0 | | | 25.0 | |
Income taxes payable | 39.5 | | | 17.9 | |
Insurance | 11.7 | | | 11.0 | |
Warranty | 7.8 | | | 7.6 | |
Deferred revenue | 59.8 | | | 49.0 | |
Lease liability | 18.8 | | | 17.6 | |
Restructuring | 1.2 | | | 2.8 | |
Accrued interest | 12.2 | | | 3.6 | |
Pension and retiree medical obligations | 3.5 | | | 3.5 | |
Other | 27.2 | | | 30.3 | |
Total accrued expenses | $ | 258.1 | | | $ | 259.8 | |
| | | | | | | | |
Maturity of Intangible Assets | | Estimated Amortization |
2023 (excluding the three months ended March 31, 2023) | | $ | 68.8 | |
2024 | | 87.6 | |
2025 | | 86.2 | |
2026 | | 84.5 | |
2027 | | 80.5 | |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
8. Accrued Expenses
The components of accrued expenses as of March 31, 2023 and December 31, 2022 were:
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Payroll and related items | $ | 79.2 | | | $ | 102.7 | |
Management incentive compensation | 6.0 | | | 26.4 | |
Income taxes payable | 45.6 | | | 30.2 | |
Insurance | 11.0 | | | 11.2 | |
Warranty | 8.2 | | | 8.1 | |
Deferred revenue | 55.4 | | | 44.7 | |
Lease liability | 21.9 | | | 21.6 | |
Restructuring | 1.3 | | | 1.4 | |
Accrued interest | 14.0 | | | 5.5 | |
Pension and retiree medical obligations | 3.3 | | | 3.3 | |
Other | 30.0 | | | 34.0 | |
Total accrued expenses | $ | 275.9 | | | $ | 289.1 | |
9. Other Noncurrent Liabilities
The components of other noncurrent liabilities as of March 31, 20222023 and December 31, 20212022 were:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Pension and retiree medical obligations | $ | 82.4 | | | $ | 82.2 | |
Transition tax payable | 14.1 | | | 14.1 | |
| | | |
Deferred revenue | 30.8 | | | 32.2 | |
Lease liability | 96.6 | | | 93.4 | |
Other | 21.2 | | | 25.5 | |
Total other noncurrent liabilities | $ | 245.3 | | | $ | 247.4 | |
10. Borrowings | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Pension and retiree medical obligations | $ | 55.2 | | | $ | 55.1 | |
Transition tax payable | 9.1 | | | 9.1 | |
Deferred revenue | 14.5 | | | 15.0 | |
Lease liability | 99.3 | | | 96.6 | |
Other | 20.5 | | | 20.0 | |
Total other noncurrent liabilities | $ | 198.6 | | | $ | 195.8 | |
Borrowings at March 31, 2022 and December 31, 2021 consisted of the following:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| | | |
3.20% Senior Notes, due June 2023 | $ | 100.0 | | | $ | 100.0 | |
3.37% Senior Notes, due June 2025 | 100.0 | | | 100.0 | |
3.00% Senior Notes, due May 2030 | 500.0 | | | 500.0 | |
2.625% Senior Notes, due June 2031 | 500.0 | | | 500.0 | |
$800.0 million revolving credit facility, due May 2024 (“Revolving Facility”)(1) | — | | | — | |
Other borrowings | 0.1 | | | 0.1 | |
Total borrowings | 1,200.1 | | | 1,200.1 | |
| | | |
Less deferred debt issuance costs | 8.2 | | | 8.4 | |
Less unaccreted debt discount | 1.3 | | | 1.4 | |
Total long-term borrowings | $ | 1,190.6 | | | $ | 1,190.3 | |
(1) At March 31, 2022, there was no balance outstanding under the Revolving Facility and $7.1 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Facility at March 31, 2022 of approximately $792.9 million.
At March 31, 2022, the Company was in compliance with covenants contained in the credit agreement associated with the Revolving Facility as well as other long-term debt agreements.
Issuance of 2.625% Senior Notes in 2021
On May 28, 2021, the Company completed a public offering of $500.0 million in aggregate principal amount of 2.625% Senior Notes due June 2031 (the “2.625% Senior Notes”). The net proceeds from the offering were approximately $494.7 million, after deducting the issuance discount of $0.6 million, the underwriting commission of $3.3 million and offering expenses of $1.4 million. The net proceeds were used to redeem and repay the $350.0 million aggregate principal amount outstanding of its 4.20% Senior Notes due December 15, 2021 and a $6.7 million make-whole redemption premium, with the remaining balance used for general corporate purposes.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
10. Borrowings
Borrowings at March 31, 2023 and December 31, 2022 consisted of the following:
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| | | |
3.20% Senior Notes, due June 2023(1) | $ | 100.0 | | | $ | 100.0 | |
3.37% Senior Notes, due June 2025 | 100.0 | | | 100.0 | |
3.00% Senior Notes, due May 2030 | 500.0 | | | 500.0 | |
2.625% Senior Notes, due June 2031 | 500.0 | | | 500.0 | |
$800.0 million Revolving Credit Facility, due November 2027(2) | 79.4 | | | 77.7 | |
$200.0 million Term Facility, due November 2027(3) | 200.0 | | | 200.0 | |
Other borrowings | 0.1 | | | 0.1 | |
Total borrowings | 1,479.5 | | | 1,477.8 | |
Less current portion | — | | | — | |
Less deferred debt issuance costs | 7.6 | | | 7.9 | |
Less unaccreted debt discount | 1.2 | | | 1.2 | |
Long-term borrowings | $ | 1,470.7 | | | $ | 1,468.7 | |
(1) As of March 31, 2023, the $100.0 million 3.20% Senior Notes, due in June 2023, have not been classified as Short-term borrowings on the Condensed Consolidated Balance Sheets as the Company has the ability and intent to either refinance or repay these Notes using the available borrowing capacity of the Revolving Credit Facility, due November 2027. As a result, the 3.20% Senior Notes remain classified as Long-term borrowings on the Condensed Consolidated Balance Sheets as of March 31, 2023.
(2) At March 31, 2023, there was $79.4 million outstanding under the Revolving Credit Facility with an interest rate of 3.32% and $7.5 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Credit Facility of approximately $713.1 million.
(3) The $200.0 million outstanding under the Term Facility bears an interest rate of 5.83%.
At March 31, 2023, the Company was in compliance with covenants contained in the credit agreement associated with the Revolving Credit Facility as well as other long-term debt agreements.
11. Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
•Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
•Level 2: Inputs, other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
The following table summarizes the basis used to measure the Company’s financial assets (liabilities) at fair value on a recurring basis in the balance sheets at March 31, 20222023 and December 31, 2021:2022:
| | | Basis of Fair Value Measurements | | Basis of Fair Value Measurements |
| | Balance at March 31, 2022 | | Level 1 | | Level 2 | | Level 3 | | Balance at March 31, 2023 | | Level 1 | | Level 2 | | Level 3 |
Trading securities - mutual funds held in nonqualified SERP(1) | Trading securities - mutual funds held in nonqualified SERP(1) | $ | 10.2 | | | $ | 10.2 | | | $ | — | | | $ | — | | Trading securities - mutual funds held in nonqualified SERP(1) | $ | 8.1 | | | $ | 8.1 | | | $ | — | | | $ | — | |
Available-for-sale securities - equities(2) | Available-for-sale securities - equities(2) | 44.5 | | | 44.5 | | | — | | | — | | Available-for-sale securities - equities(2) | 3.2 | | | 3.2 | | | — | | | — | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Basis of Fair Value Measurements |
| Balance at December 31, 2021 | | Level 1 | | Level 2 | | Level 3 |
Trading securities - mutual funds held in nonqualified SERP(1) | $ | 11.6 | | | $ | 11.6 | | | $ | — | | | $ | — | |
Available-for-sale securities - equities(2) | 45.3 | | | 45.3 | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Basis of Fair Value Measurements |
| Balance at December 31, 2022 | | Level 1 | | Level 2 | | Level 3 |
Trading securities - mutual funds held in nonqualified SERP(1) | $ | 7.5 | | | $ | 7.5 | | | $ | — | | | $ | — | |
| | | | | | | |
(1) The Supplemental Executive Retirement Plan (“SERP”) investment assets are offset by a SERP liability which represents the Company’s obligation to distribute SERP funds to participants.
(2)At March 31, 2022 and December 31, 2021,2023, the securities are included in Other current assets on the Company’s Condensed Consolidated Balance Sheets and are available for overnight cash settlement, if necessary, to fund current operations.
There were no transfers of assets or liabilities between Level 1 and Level 2 during the three months ended March 31, 20222023 or the year ended December 31, 2021.2022.
The carrying values of the Company’s cash and cash equivalents, accounts receivable, marketable securities, accounts payable and accrued expenses approximate fair value because of the short termshort-term nature of these instruments. At March 31, 20222023 and December 31, 2021,2022, the fair value of the outstanding indebtedness described in Note 10 based on quoted market prices and current market rates for debt with similar credit risk and maturity was approximately $1,121.2$1,347.8 million and $1,219.9$1,328.7 million, respectively, compared to the carrying value of $1,198.8$1,478.3 million and $1,198.7$1,476.6 million, respectively. These fair value measurements are classified as Level 2 within the fair value hierarchy since they are determined based upon significant inputs observable in the market, including interest rates on recent financing transactions to entities with a credit rating similar to the Company’s rating.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
12. Leases
The Company leases certain office facilities, warehouses, manufacturing plants, equipment (which includes both office and plant equipment) and vehicles under operating leases and certain plant equipment under financing leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.
Certain leases include 1one or more options to renew. The exercise of lease renewal options is at the Company’s sole discretion. The Company does not include renewal periods in any of the leases’ terms until the renewal is executed as they are generally not reasonably certain of being exercised. The Company does not have any material purchase options.
Certain of the Company’s lease agreements have rental payments that are adjusted periodically for inflation or that are based on usage. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Supplemental balance sheet information related to leases as of March 31, 20222023 and December 31, 20212022 was as follows:
| | | | | | | | | | | | | | | | | |
| Balance Sheet Caption | | March 31, 2022 | | December 31, 2021 |
Operating leases: | | | | | |
Building right-of-use assets - net | Other noncurrent assets | | $ | 105.4 | | | $ | 101.0 | |
Equipment right-of-use assets - net | Other noncurrent assets | | 5.8 | | | 6.2 | |
Total right-of-use assets - net | | | $ | 111.2 | | | $ | 107.2 | |
Operating leases: | | | | | |
Current lease liabilities | Accrued expenses | | $ | 18.8 | | | $ | 17.6 | |
Noncurrent lease liabilities | Other noncurrent liabilities | | 96.6 | | | 93.4 | |
Total lease liabilities | | | $ | 115.4 | | | $ | 111.0 | |
| | | | | | | | | | | | | | | | | |
| Balance Sheet Caption | | March 31, 2023 | | December 31, 2022 |
Right-of-Use (“ROU”) Assets: | | | | | |
Building ROU assets - net - operating | Other noncurrent assets | | $ | 108.3 | | | $ | 104.4 | |
Equipment ROU assets - net - operating | Other noncurrent assets | | 5.2 | | | 5.6 | |
Equipment ROU assets - net - financing | Property, plant and equipment | | 5.9 | | | 6.1 | |
Total ROU assets - net | | | $ | 119.4 | | | $ | 116.1 | |
Lease Liabilities: | | | | | |
Current lease liabilities | Accrued expenses | | $ | 21.9 | | | $ | 21.6 | |
Noncurrent lease liabilities | Other noncurrent liabilities | | 99.3 | | | 96.6 | |
Total lease liabilities | | | $ | 121.2 | | | $ | 118.2 | |
The components of lease cost for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Operating lease cost (1) | | | | | $ | 7.4 | | | $ | 7.4 | |
Variable lease cost | | | | | 0.4 | | | 0.6 | |
Total lease expense | | | | | $ | 7.8 | | | $ | 8.0 | |
| | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Fixed lease cost (1) | $ | 8.2 | | | $ | 7.4 | | | | | |
Variable lease cost | 0.7 | | | 0.4 | | | | | |
Total lease cost | $ | 8.9 | | | $ | 7.8 | | | | | |
(1) Includes short-term leases, which are immaterial.
Supplemental cash flow information related to leases for the three months ended March 31, 20222023 and 20212022 was as follows:
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 7.4 | | | $ | 6.4 | |
Right-of-use assets obtained in exchange for new operating lease liabilities | 8.3 | | | 3.5 | |
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 |
Cash paid for amounts included in the measurement of lease liabilities | $ | 8.4 | | | $ | 7.4 | |
Right-of-use assets obtained in exchange for new lease liabilities | 9.0 | | | 8.3 | |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
Other supplemental information related to leases as of March 31, 20222023 and December 31, 20212022 was as follows:
| Lease Term and Discount Rate | Lease Term and Discount Rate | March 31, 2022 | | December 31, 2021 | | Lease Term and Discount Rate | March 31, 2023 | | December 31, 2022 | |
Weighted-average remaining lease term (years): | Weighted-average remaining lease term (years): | | | | | Weighted-average remaining lease term (years): | | | | |
Operating leases - building and equipment | Operating leases - building and equipment | 8.12 | | 8.50 | | Operating leases - building and equipment | 7.39 | | 7.43 | |
Operating leases - vehicles | Operating leases - vehicles | 2.25 | | 2.34 | | Operating leases - vehicles | 2.20 | | 2.14 | |
Financing leases - equipment | | Financing leases - equipment | 2.26 | | 2.05 | |
Weighted-average discount rate: | Weighted-average discount rate: | | | Weighted-average discount rate: | | |
Operating leases - building and equipment | Operating leases - building and equipment | 3.16 | % | | 3.27 | % | | Operating leases - building and equipment | 3.56 | % | | 3.41 | % | |
Operating leases - vehicles | Operating leases - vehicles | 1.02 | % | | 1.08 | % | | Operating leases - vehicles | 2.29 | % | | 1.70 | % | |
Financing leases - equipment | | Financing leases - equipment | 4.16 | % | | 4.48 | % | |
The Company uses its incremental borrowing rate to determine the present value of the lease payments.
Total lease liabilities at March 31, 20222023 have scheduled maturities as follows:
| Maturity of Lease Liabilities | Maturity of Lease Liabilities | | Operating Leases | Maturity of Lease Liabilities | | Operating Leases |
2022 (excluding the three months ended March 31, 2022) | | $ | 16.2 | | |
2023 | | 20.1 | | |
2023 (excluding the three months ended March 31, 2023) | | 2023 (excluding the three months ended March 31, 2023) | | $ | 19.3 | |
2024 | 2024 | | 17.3 | | 2024 | | 19.7 | |
2025 | 2025 | | 15.3 | | 2025 | | 22.5 | |
2026 | 2026 | | 13.3 | | 2026 | | 17.8 | |
2027 | | 2027 | | 14.2 | |
Thereafter | Thereafter | | 49.3 | | Thereafter | | 48.2 | |
Total lease payments | Total lease payments | | 131.5 | | Total lease payments | | 141.7 | |
Less: Imputed interest | Less: Imputed interest | | (16.1) | | Less: Imputed interest | | (20.5) | |
Present value of lease liabilities | Present value of lease liabilities | | $ | 115.4 | | Present value of lease liabilities | | $ | 121.2 | |
13. Restructuring Expenses and Asset Impairments
During the three months ended March 31, 2022 and 2021,From time to time, the Company incurred restructuring expenses and asset impairments of $0.6 million and $2.2 million, respectively. Theseincurs costs were incurred to facilitate long-term sustainable growth through cost reduction actions, consisting of employee reductions, facility rationalization and contract termination costs and asset impairments. Restructuringcosts. These costs include severance benefits,costs, exit costs and asset impairments and are included in Restructuring expenses and asset impairments in the Condensed Consolidated Statements of Income. Severance costs primarily consist of severance benefits through payroll continuation, COBRA subsidies, outplacement services, conditional separation costs and employer tax liabilities, while exit costs primarily consist of lease exit and contract termination costs.
2023 Initiative
During the three months ended March 31, 2023, the Company incurred severance costs related to employee reductions.
Pre-tax restructuring expenses and asset impairments by segment for the three months ended March 31, 2023 were as follows:
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | Three Months Ended March 31, 2023 |
| | Severance Costs | | Exit Costs | | Asset Impairments | | Total |
Fluid & Metering Technologies | | $ | 0.1 | | | $ | — | | | $ | — | | | $ | 0.1 | |
Health & Science Technologies | | 0.3 | | | — | | | — | | | 0.3 | |
Fire & Safety/Diversified Products | | 0.1 | | | — | | | — | | | 0.1 | |
Corporate/Other | | — | | | — | | | — | | | — | |
Restructuring expenses and asset impairments | | $ | 0.5 | | | $ | — | | | $ | — | | | $ | 0.5 | |
2022 Initiative
During the three months ended March 31, 2022, the Company incurred severance costs related to employee reductions.
Pre-tax restructuring expenses and asset impairments by segment for the three months ended March 31, 2022 were as follows:
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2022 |
| | Severance Costs | | Exit Costs | | Asset Impairment | | Total |
Fluid & Metering Technologies | | $ | 0.3 | | | $ | — | | | $ | — | | | $ | 0.3 | |
Health & Science Technologies | | 0.1 | | | — | | | — | | | 0.1 | |
Fire & Safety/Diversified Products | | — | | | — | | | — | | | — | |
Corporate/Other | | 0.2 | | | — | | | — | | | 0.2 | |
Total restructuring costs | | $ | 0.6 | | | $ | — | | | $ | — | | | $ | 0.6 | |
2021 Initiative
During the three months ended March 31, 2021, the Company incurred severance costs related to employee reductions. In addition, the Company consolidated certain facilities within the FMT segment, which resulted in an impairment charge of $0.1 million related to property, plant and equipment that was not relocated to the new location.
Pre-tax restructuring expenses and asset impairments by segment for the three months ended March 31, 2021 were as follows:
| | | | Three Months Ended March 31, 2021 | | Three Months Ended March 31, 2022 |
| | Severance Costs | | Exit Costs | | Asset Impairment | | Total | | Severance Costs | | Exit Costs | | Asset Impairments | | Total |
Fluid & Metering Technologies | Fluid & Metering Technologies | | $ | 0.8 | | | $ | — | | | $ | 0.1 | | | $ | 0.9 | | Fluid & Metering Technologies | | $ | 0.3 | | | $ | — | | | $ | — | | | $ | 0.3 | |
Health & Science Technologies | Health & Science Technologies | | 0.6 | | | — | | | — | | | 0.6 | | Health & Science Technologies | | 0.1 | | | — | | | — | | | 0.1 | |
Fire & Safety/Diversified Products | Fire & Safety/Diversified Products | | 0.1 | | | — | | | — | | | 0.1 | | Fire & Safety/Diversified Products | | — | | | — | | | — | | | — | |
Corporate/Other | Corporate/Other | | 0.6 | | | — | | | — | | | 0.6 | | Corporate/Other | | 0.2 | | | — | | | — | | | 0.2 | |
Total restructuring costs | | $ | 2.1 | | | $ | — | | | $ | 0.1 | | | $ | 2.2 | | |
Restructuring expenses and asset impairments | | Restructuring expenses and asset impairments | | $ | 0.6 | | | $ | — | | | $ | — | | | $ | 0.6 | |
Restructuring accruals reflected in Accrued expenses in the Company’s Condensed Consolidated Balance Sheets are as follows:
| | | | | |
| Restructuring Initiatives |
Balance at January 1, 20222023 | $ | 2.81.4 | |
Restructuring expenses | 0.60.5 | |
Payments, utilization and other | (2.2)(0.6) | |
Balance at March 31, 20222023 | $ | 1.21.3 | |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
14. Other Comprehensive Income (Loss) Income
The components of Other comprehensive income (loss) income are as follows:
| | | Three Months Ended March 31, 2022 | | Three Months Ended March 31, 2021 | | Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 |
| | Pre-tax | | Tax | | Net of tax | | Pre-tax | | Tax | | Net of tax | | Pre-tax | | Tax | | Net of tax | | Pre-tax | | Tax | | Net of tax |
Cumulative translation adjustment | Cumulative translation adjustment | $ | (19.5) | | | $ | — | | | $ | (19.5) | | | $ | (48.5) | | | $ | — | | | $ | (48.5) | | Cumulative translation adjustment | $ | 36.6 | | | $ | — | | | $ | 36.6 | | | $ | (19.5) | | | $ | — | | | $ | (19.5) | |
Pension and other postretirement adjustments | Pension and other postretirement adjustments | 0.8 | | | (0.2) | | | 0.6 | | | 1.1 | | | (0.3) | | | 0.8 | | Pension and other postretirement adjustments | 0.6 | | | (0.2) | | | 0.4 | | | 0.8 | | | (0.2) | | | 0.6 | |
Reclassification adjustments for derivatives | — | | | — | | | — | | | 0.9 | | | (0.2) | | | 0.7 | | |
Total other comprehensive (loss) income | $ | (18.7) | | | $ | (0.2) | | | $ | (18.9) | | | $ | (46.5) | | | $ | (0.5) | | | $ | (47.0) | | |
Total other comprehensive income (loss) | | Total other comprehensive income (loss) | $ | 37.2 | | | $ | (0.2) | | | $ | 37.0 | | | $ | (18.7) | | | $ | (0.2) | | | $ | (18.9) | |
The amounts reclassified from Accumulated other comprehensive loss to netNet income during the three months ended March 31, 20222023 and 20212022 are as follows:
| | | | Three Months Ended March 31, | | | Three Months Ended March 31, | | |
| | | 2022 | | 2021 | Income Statement Caption | | 2023 | | 2022 | | Income Statement Caption |
Pension and other postretirement plans: | Pension and other postretirement plans: | | | | | Pension and other postretirement plans: | | | | | |
Amortization of net (gain) loss | | $ | 0.8 | | | $ | 1.1 | | Other expense (income) - net | |
Amortization of service cost | | Amortization of service cost | $ | 0.6 | | | $ | 0.8 | | | Other (income) expense - net |
Total before tax | Total before tax | | 0.8 | | | 1.1 | | | Total before tax | 0.6 | | | 0.8 | | | |
Provision for income taxes | Provision for income taxes | | (0.2) | | | (0.3) | | | Provision for income taxes | (0.2) | | | (0.2) | | | |
Total net of tax | Total net of tax | | $ | 0.6 | | | $ | 0.8 | | | Total net of tax | $ | 0.4 | | | $ | 0.6 | | | |
Derivatives: | | | | | | |
Reclassification adjustments | | $ | — | | | $ | 0.9 | | Interest expense | |
Total before tax | | — | | | 0.9 | | | |
Provision for income taxes | | — | | | (0.2) | | | |
Total net of tax | | $ | — | | | $ | 0.7 | | | |
15. Share Repurchases
On March 17, 2020, the Company’s Board of Directors approved an increase of $500.0 million in the authorized level of repurchases of common stock. This approval is in addition to the prior repurchase authorization of the Board of Directors of $300.0 million on December 1, 2015. These authorizations have no expiration date. Repurchases under the program will be funded with future cash flow generation or borrowings available under the Revolving Credit Facility. There were no share repurchases during the three months ended March 31, 2023. During the three months ended March 31, 2022, the Company repurchased a total of 147,500 shares at a cost of $28.3 million, of which $2.0 million was settled in April 2022. There were no share repurchases during the three months ended March 31, 2021. As of March 31, 2022,2023, the amount of share repurchase authorization remaining was $683.7$563.8 million.
16. Share-Based Compensation
The Company typically grants equity awards annually at its regularly scheduled first quarter meeting of the Board of Directors based on the recommendation from the Compensation Committee.
The Company’s policy is to recognize compensation cost on a straight-line basis, assuming forfeitures, over the requisite service period for the entire award. Classification of stock compensation cost within the Condensed Consolidated Statements of Income is consistent with the classification of cash compensation for the same employees.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
Stock Options
Stock options granted under the Company’s plans are generally non-qualified and are granted with an exercise price equal to the market price of the Company’s stock on the date of grant. The fair value of each option grant was estimated on the date of the grant using the Black Scholes valuation model. Stock options generally vest ratably over four years, with vesting beginning one year from the date of grant, and generally expire 10 years from the date of grant. The service period for certain retiree eligible participants is accelerated. Weighted average option fair values and assumptions for the periods specified are disclosed below. The fair value of each option grant was estimated on the date of the grant using the Binomial lattice option pricing model (for options granted before March 2021) or the Black Scholes valuation model (for options granted after February 2021). The adoption of the Black Scholes model in 2021 was driven by a review of option exercise history, which more closely aligned with the methodology of the Black Scholes model.
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Weighted average fair value of grants | | | | | $41.66 | | $38.59 |
Dividend yield | | | | | 1.14% | | 1.01% |
Volatility | | | | | 25.15% | | 23.73% |
Risk-free interest rate | | | | | 1.83% | | 0.09% - 1.57% |
Expected life (in years) | | | | | 4.90 | | 5.74 |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Weighted average fair value of grants | $60.80 | | $41.66 | | | | |
Dividend yield | 1.06% | | 1.14% | | | | |
Volatility | 27.19% | | 25.15% | | | | |
Risk-free interest rate | 4.12% | | 1.83% | | | | |
Expected life (in years) | 4.50 | | 4.90 | | | | |
Total compensation cost for stock options is recorded in the Condensed Consolidated Statements of Income as follows:
| | | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | | 2022 | | 2021 | | 2023 | | 2022 | |
Cost of goods sold | Cost of goods sold | | $ | 0.3 | | | $ | 0.2 | | Cost of goods sold | $ | 0.3 | | | $ | 0.3 | | |
Selling, general and administrative expenses(1) | Selling, general and administrative expenses(1) | | 3.1 | | | 2.7 | | Selling, general and administrative expenses(1) | 5.7 | | | 3.1 | | |
Total expense before income taxes | Total expense before income taxes | | 3.4 | | | 2.9 | | Total expense before income taxes | 6.0 | | | 3.4 | | |
Income tax benefit | Income tax benefit | | (0.3) | | | (0.3) | | Income tax benefit | (0.4) | | | (0.3) | | |
Total expense after income taxes | Total expense after income taxes | | $ | 3.1 | | | $ | 2.6 | | Total expense after income taxes | $ | 5.6 | | | $ | 3.1 | | |
(1) The three months ended March 31, 2023 includes an additional $2.4 million of accelerated stock compensation costs for retiree eligible participants as compared with the same period in 2022.
A summary of the Company’s stock option activity as of March 31, 20222023 and changes during the three months ended March 31, 20222023 are presented in the following table:
| Stock Options | Stock Options | Shares | | Weighted Average Price | | Weighted-Average Remaining Contractual Term | | Aggregate Intrinsic Value | Stock Options | Shares | | Weighted Average Price | | Weighted-Average Remaining Contractual Term | | Aggregate Intrinsic Value |
| | (Dollars in millions except weighted average price) | | (Dollars in millions except weighted average price) |
Outstanding at January 1, 2022 | 1,008,586 | | | $ | 147.60 | | | 6.97 | | $ | 89.5 | | |
Outstanding at January 1, 2023 | | Outstanding at January 1, 2023 | 1,015,572 | | | $ | 161.45 | | | 6.94 | | $ | 67.9 | |
Granted | Granted | 263,985 | | | 189.37 | | | Granted | 208,305 | | | 225.71 | | |
Exercised | Exercised | (12,746) | | | 108.26 | | | Exercised | (33,460) | | | 141.19 | | |
Forfeited | Forfeited | (31,378) | | | 175.33 | | | Forfeited | (8,491) | | | 196.25 | | |
Outstanding at March 31, 2022 | 1,228,447 | | | $ | 156.28 | | | 7.40 | | $ | 45.3 | | |
Vested and expected to vest as of March 31, 2022 | 1,168,490 | | | $ | 154.60 | | | 7.30 | | $ | 45.0 | | |
Exercisable at March 31, 2022 | 622,233 | | | $ | 127.04 | | | 5.80 | | $ | 40.6 | | |
Outstanding at March 31, 2023 | | Outstanding at March 31, 2023 | 1,181,926 | | | $ | 173.10 | | | 7.28 | | $ | 68.5 | |
Vested and expected to vest as of March 31, 2023 | | Vested and expected to vest as of March 31, 2023 | 1,130,292 | | | $ | 171.52 | | | 7.20 | | $ | 67.3 | |
Exercisable at March 31, 2023 | | Exercisable at March 31, 2023 | 639,677 | | | $ | 146.97 | | | 5.88 | | $ | 53.8 | |
As of March 31, 2022,2023, there was $15.4$13.8 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.11.6 years.
Restricted Stock
Restricted stock awards generally cliff vest after three years for employees and non-employee directors. The service period for certain retiree eligible participants is accelerated. Unvested restricted stock carries dividend and voting rights and the sale of
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
the shares is restricted prior to the date of vesting. Dividends are paid on restricted stock awards and their fair value is equal to the market price of the Company’s stock at the date of the grant. A summary of the Company’s restricted stock activity as of March 31, 20222023 and changes during the three months ended March 31, 20222023 are presented in the following table:
| | | | | | | | | | | |
Restricted Stock | Shares | | Weighted-Average Grant Date Fair Value |
Unvested at January 1, 2022 | 107,475 | | | $ | 169.58 | |
Granted | 25,290 | | | 189.50 | |
Vested | (18,793) | | | 145.12 | |
Forfeited | (3,720) | | | 182.13 | |
Unvested at March 31, 2022 | 110,252 | | | $ | 177.89 | |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
| | | | | | | | | | | |
Restricted Stock | Shares | | Weighted-Average Grant Date Fair Value |
Unvested at January 1, 2023 | 104,382 | | | $ | 179.45 | |
Granted | 25,595 | | | 225.73 | |
Vested | (16,905) | | | 171.67 | |
Forfeited | (3,430) | | | 204.03 | |
Unvested at March 31, 2023 | 109,642 | | | $ | 190.69 | |
Total compensation cost for restricted stock is recorded in the Condensed Consolidated Statements of Income as follows:
| | | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | | 2022 | | 2021 | | 2023 | | 2022 | |
Cost of goods sold | Cost of goods sold | | $ | 0.2 | | | $ | 0.2 | | Cost of goods sold | $ | 0.2 | | | $ | 0.2 | | |
Selling, general and administrative expenses | Selling, general and administrative expenses | | 1.6 | | | 1.4 | | Selling, general and administrative expenses | 1.4 | | | 1.6 | | |
Total expense before income taxes | Total expense before income taxes | | 1.8 | | | 1.6 | | Total expense before income taxes | 1.6 | | | 1.8 | | |
Income tax benefit | Income tax benefit | | (0.4) | | | (0.3) | | Income tax benefit | (0.3) | | | (0.4) | | |
Total expense after income taxes | Total expense after income taxes | | $ | 1.4 | | | $ | 1.3 | | Total expense after income taxes | $ | 1.3 | | | $ | 1.4 | | |
As of March 31, 2022,2023, there was $8.6$9.9 million of total unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 1.1 years.
Cash-Settled Restricted Stock
The Company also maintains a cash-settled share basedshare-based compensation plan for certain employees. Cash-settled restricted stock awards generally cliff vest after three years. The service period for certain retiree eligible participants is accelerated. Cash-settled restricted stock awards are recorded at fair value on a quarterly basis using the market price of the Company’s stock on the last day of the quarter. Dividend equivalents are paid on certain cash-settled restricted stock awards. A summary of the Company’s unvested cash-settled restricted stock activity as of March 31, 20222023 and changes during the three months ended March 31, 20222023 are presented in the following table:
| Cash-Settled Restricted Stock | Cash-Settled Restricted Stock | Shares | | Weighted-Average Fair Value | Cash-Settled Restricted Stock | Shares | | Weighted-Average Fair Value |
Unvested at January 1, 2022 | 57,949 | | | $ | 236.32 | | |
Unvested at January 1, 2023 | | Unvested at January 1, 2023 | 57,356 | | | $ | 228.33 | |
Granted | Granted | 21,645 | | | 189.24 | | Granted | 19,755 | | | 225.66 | |
Vested | Vested | (17,724) | | | 192.27 | | Vested | (14,300) | | | 230.78 | |
Forfeited | Forfeited | (1,820) | | | 191.73 | | Forfeited | (1,265) | | | 231.03 | |
Unvested at March 31, 2022 | 60,050 | | | $ | 191.73 | | |
Unvested at March 31, 2023 | | Unvested at March 31, 2023 | 61,546 | | | $ | 231.03 | |
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
Total compensation cost for cash-settled restricted stock is recorded in the Condensed Consolidated Statements of Income as follows:
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Cost of goods sold | | | | | $ | (0.1) | | | $ | 0.2 | |
Selling, general and administrative expenses | | | | | 0.5 | | | 1.3 | |
Total expense before income taxes(1) | | | | | 0.4 | | | 1.5 | |
Income tax benefit | | | | | — | | | (0.1) | |
Total expense after income taxes | | | | | $ | 0.4 | | | $ | 1.4 | |
(1) The 2021 amount was previously included in Share-based compensation expense on the Condensed Consolidated Statements of Cash Flows. This amount has been reclassified to Accrued expenses and Other-net such that the amount presented in Share-based compensation expense on the Condensed Consolidated Statements of Cash Flows relates solely to non-cash awards for both periods presented. There was no change to the reported amount of net cash flows provided by operating activities for 2021 as a result of the reclassification. | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Cost of goods sold | $ | 0.1 | | | $ | (0.1) | | | | | |
Selling, general and administrative expenses | 1.0 | | | 0.5 | | | | | |
Total expense before income taxes | 1.1 | | | 0.4 | | | | | |
Income tax benefit | — | | | — | | | | | |
Total expense after income taxes | $ | 1.1 | | | $ | 0.4 | | | | | |
As of March 31, 2022,2023, there was $4.7$7.0 million of total unrecognized compensation cost related to cash-settled restricted shares that is expected to be recognized over a weighted-average period of 1.2 years.
Performance Share Units
Weighted average performance share unit fair values and assumptions for the period specified are disclosed below. The performance share units are market condition awards and have been assessed at fair value on the date of grant using a Monte Carlo simulation model.
| | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Weighted average fair value of grants | Weighted average fair value of grants | $235.54 | | $247.49 | Weighted average fair value of grants | $308.18 | | $235.54 |
Dividend yield | Dividend yield | —% | | —% | Dividend yield | —% | | —% |
Volatility | Volatility | 28.09% | | 28.6% | Volatility | 27.00% | | 28.09% |
Risk-free interest rate | Risk-free interest rate | 1.73% | | 0.33% | Risk-free interest rate | 4.37% | | 1.73% |
Expected life (in years) | Expected life (in years) | 2.93 | | 2.93 | Expected life (in years) | 2.94 | | 2.93 |
A summary of the Company’s performance share unit activity as of March 31, 20222023 and changes during the three months ended March 31, 20222023 are presented in the following table:
| Performance Share Units | Performance Share Units | Shares | | Weighted-Average Grant Date Fair Value | Performance Share Units | Shares | | Weighted-Average Grant Date Fair Value |
Unvested at January 1, 2022 | 52,025 | | | $ | 236.75 | | |
Unvested at January 1, 2023 | | Unvested at January 1, 2023 | 70,915 | | | $ | 236.66 | |
Granted | Granted | 31,370 | | | 235.54 | | Granted | 28,030 | | | 308.18 | |
Vested | Vested | — | | | 0 | Vested | (18,105) | | | 226.86 | |
Forfeited | Forfeited | (5,510) | | | 235.75 | | Forfeited | (1,725) | | | 261.13 | |
Unvested at March 31, 2022 | 77,885 | | | $ | 236.60 | | |
Unvested at March 31, 2023 | | Unvested at March 31, 2023 | 79,115 | | | $ | 264.89 | |
On DecemberJanuary 31, 2021, 29,8402023, 18,105 performance share units vested. Based on the Company’s relative total shareholder return rank during the three year period ended DecemberJanuary 31, 2021,2023, the Company achieved a 143%173% payout factor and issued 42,68831,334 common shares in February 20222023 for awards that vested in 2021.2023.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
Total compensation cost for performance share units is recorded in the Condensed Consolidated Statements of Income as follows:
| | | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | | 2022 | | 2021 | | 2023 | | 2022 | |
Cost of goods sold | Cost of goods sold | | $ | — | | | $ | — | | Cost of goods sold | $ | — | | | $ | — | | |
Selling, general and administrative expenses(1) | Selling, general and administrative expenses(1) | | 1.3 | | | 1.7 | | Selling, general and administrative expenses(1) | 5.2 | | | 1.3 | | |
Total expense before income taxes | Total expense before income taxes | | 1.3 | | | 1.7 | | Total expense before income taxes | 5.2 | | | 1.3 | | |
Income tax benefit | Income tax benefit | | (0.1) | | | — | | Income tax benefit | (0.1) | | | (0.1) | | |
Total expense after income taxes | Total expense after income taxes | | $ | 1.2 | | | $ | 1.7 | | Total expense after income taxes | $ | 5.1 | | | $ | 1.2 | | |
(1) The three months ended March 31, 2023 includes an additional $3.4 million of accelerated stock compensation costs for retiree eligible participants as compared with the same period in 2022.
As of March 31, 2022,2023, there was $8.8$5.7 million of total unrecognized compensation cost related to performance share units that is expected to be recognized over a weighted-average period of 0.91.2 years.
17. Retirement Benefits
The Company sponsors several qualified and nonqualified defined benefit and defined contribution pension plans as well as other post-retirement plans for its employees. The following tables provide the components of net periodic benefit cost for its major defined benefit plans and its other postretirement plans.
| | | | Pension Benefits | | Pension Benefits |
| | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | U.S. | | Non-U.S. | | U.S. | | Non-U.S. | | U.S. | | Non-U.S. | | U.S. | | Non-U.S. |
Service cost | Service cost | $ | — | | | $ | 0.5 | | | $ | — | | | $ | 0.5 | | Service cost | $ | — | | | $ | 0.3 | | | $ | — | | | $ | 0.5 | |
Interest cost | Interest cost | 0.1 | | | 0.2 | | | 0.1 | | | 0.2 | | Interest cost | 0.1 | | | 0.7 | | | 0.1 | | | 0.2 | |
Expected return on plan assets | Expected return on plan assets | (0.1) | | | (0.3) | | | (0.2) | | | (0.2) | | Expected return on plan assets | (0.1) | | | (0.4) | | | (0.1) | | | (0.3) | |
Net amortization | Net amortization | 0.1 | | | 0.2 | | | 0.1 | | | 0.5 | | Net amortization | 0.1 | | | (0.2) | | | 0.1 | | | 0.2 | |
Net periodic (benefit) cost | $ | 0.1 | | | $ | 0.6 | | | $ | — | | | $ | 1.0 | | |
Net periodic cost | | Net periodic cost | $ | 0.1 | | | $ | 0.4 | | | $ | 0.1 | | | $ | 0.6 | |
| | | | Other Postretirement Benefits | | Other Postretirement Benefits |
| | | Three Months Ended March 31, | | Three Months Ended March 31, | |
| | | 2022 | | 2021 | | 2023 | | 2022 | |
Service cost | Service cost | | $ | 0.2 | | | $ | 0.2 | | Service cost | $ | 0.1 | | | $ | 0.2 | | |
Interest cost | Interest cost | | 0.1 | | | 0.1 | | Interest cost | 0.2 | | | 0.1 | | |
Net amortization | Net amortization | | (0.1) | | | (0.2) | | Net amortization | (0.2) | | | (0.1) | | |
Net periodic cost | Net periodic cost | | $ | 0.2 | | | $ | 0.1 | | Net periodic cost | $ | 0.1 | | | $ | 0.2 | | |
The Company expects to contribute approximately $4.0$3.9 million to its defined benefit plans and $1.2$1.1 million to its other post-retirement benefit plans in 2022.2023. During the first three months of 2022,2023, the Company contributed a total of $1.3 million to fund these plans.
The IDEX Corporation Retirement Plan (“Plan”), a U.S. defined benefit plan, was terminated in May 2020. During the second quarter of 2021, the Company settled its remaining obligations under the Plan. As of March 31, 2022, the Company has $7.9 million of surplus assets from the Plan included in Other current assets on the Company’s Condensed Consolidated Balance Sheets that will be used to fund the Company’s other retirement benefit plans over the next twelve months.
IDEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share amounts)
(unaudited)
18. Legal Proceedings
The Company and certain of its subsidiaries are involved in pending and threatened legal, regulatory and other proceedings arising in the ordinary course of business. These proceedings may pertain to matters such as product liability or contract disputes, and may also involve governmental inquiries, inspections, audits or investigations relating to issues such as tax matters, intellectual property, environmental, health and safety issues, governmental regulations, employment and other matters. Although the results of such legal proceedings cannot be predicted with certainty, the Company believes that the ultimate disposition of these matters will not have a material adverse effect, individually or in the aggregate, on the Company’s business, financial condition, results of operations or cash flows.
19. Income Taxes
The Company’s provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes increaseddecreased to $40.5$40.0 million for the three months ended March 31, 20222023 from $32.9$40.5 million during the same period in 2021.2022. The effective tax rate of 22.4%22.2% for the three months ended March 31, 2022 decreased slightly compared2023 was relatively consistent with 22.6%22.4% during the same period in 2021 due to a mix of global pre-tax income across jurisdictions.2022.
20. Subsequent Events
On March 30, 2022,April 25, 2023, the Company entered into a definitive agreement to acquire KZ CO.Iridian Spectral Technologies ("KZValve"Iridian") for cash consideration of $120.0150.0 million Canadian dollars, subject to customary post-closing adjustments. KZValve, based in Greenwood, Nebraska, is a leading manufacturer of electric valves and controllers used primarily in agricultural applications. KZValve will augment and expand IDEX's agricultural portfolio, complementing Banjo's current fluid management solutions for these applications. With annual sales of approximately $28.034 million KZValve will be part ofCanadian dollars in 2022, Iridian is a leader in custom optical filter solutions serving the Company’s Agriculture reporting unitspace, life science and telecommunications markets. Iridian complements and expands upon the solutions provided by our Scientific Fluidics & Optics businesses within the FMTHST segment. The Company expects to close the transaction by the end of the second quarter of 2022,2023, subject to regulatory approval and customary closing conditions.
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 Company’s Condensed Consolidated Financial Statements and related notes in this quarterly report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. The Company’s actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under Item 1A, “Risk Factors” in the Company’s most recent annual report on Form 10-K and under the heading “Cautionary Statement Under the Private Securities Litigation Reform Act” discussed elsewhere in this quarterly report.
This discussion also includes certain non-GAAP financial measures that have been defined and reconciled to their most directly comparable measures that are in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP measuresGAAP”) later in this Item under the headings “Non-GAAP Disclosures” and “Free Cash Flow.” This discussion also includes Operating working capital, which has been defined later in this Item under the heading “Cash Flow Summary.“Liquidity and Capital Resources.” The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures prepared in accordance with U.S. GAAP. The financial results prepared in accordance with U.S. GAAP and the reconciliations from these results should be carefully evaluated.
Overview
IDEX is an applied solutions company specializing in the manufacture of fluid and metering technologies, health and science technologies and fire, safety and other diversified products built to customers’ specifications. IDEX’s products are sold in niche markets across a wide range of industries throughout the world. Accordingly, IDEX’s businesses are affected by levels of industrial activity and economic conditions in the U.S. and in other countries where it does business and by the relationship of the U.S. dollar to other currencies. Levels of capacity utilization and capital spending in certain industries and overall industrial activity are important factors that influence the demand for IDEX’s products.
During the three months ended March 31, 2022, the Company achieved a record quarter in sales, operating margin and earnings per share driven by robust demand and strong operating performance. Teams successfully navigated the challenging economic environment arising primarily from material availability and logistical challenges and also continued to deliver for customers. The Company expanded operating margin as its highly differentiated product portfolio enabled strong price capture amid inflation pressures and its focus on operational productivity yielded positive results. Finally, the Company deployed additional capital, both within its existing portfolio and with the acquisition of Nexsight to the IDEX family of businesses as well as through share repurchases.
Select key financial results for the three months ended March 31, 20222023 when compared to the same period in the prior year are as follows:
•Sales of $751.1$845.4 million increased 15%13%; organic sales (which excludes acquisitions/divestitures and foreign currency translation) were up 12%.
•Operating income of $187.6 million increased 21%. Adjusted operating income increased 18% to $187.6 million.
•Operating margin of 25.0% was up 110 basis points. Adjusted operating margin increased 70 basis points to 25.0%6%.
•Net income of $139.8 million was flat; Net income margin of 16.5% decreased 210 basis points.
•Diluted EPS attributable to IDEX of $140.0 millionof $1.84 increased 24%.$0.01, or 1%; Adjusted net incomediluted EPS attributable to IDEX of $2.09 increased 21% to $149.8 million.$0.13, or 7%.
•Adjusted EBITDA of $214.7$229.8 million was 29% increased 7%; Adjusted EBITDA margin of sales.
•Diluted EPS attributable to IDEX of $1.83 increased $0.35, or 24%. Adjusted EPS attributable to IDEX of $1.96 increased $0.34, or 21%27.2% decreased 140 basis points.
•Cash flows provided by operating activities of $79.7$147.9 million were downup 86% due to increaseslower investments in working capital partially offset by higher earnings.in 2023 as compared with 2022. Free cash flow of $63.6included higher capital expenditures and was $121.3 million, was 42%up 91%, and constituted 76% of adjusted net income attributable to IDEX.
Results of Operations
The following is a discussion and analysis of the Company’s results of operations for the three months ended March 31, 20222023 compared with the three months ended March 31, 2021.2022.
Performance for the Three Months Ended March 31, 2022 Compared with the Same Period in 2021 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Change | | |
(Dollars in millions, except per share amounts) | 2023 | | 2022 | | $ | | % / bps | | | | | | | | |
Net sales | $ | 845.4 | | $ | 751.1 | | $ | 94.3 | | | 13 | % | | | | | | | | |
Cost of sales | 462.9 | | 408.6 | | 54.3 | | | 13 | % | | | | | | | | |
Gross profit | 382.5 | | 342.5 | | 40.0 | | | 12 | % | | | | | | | | |
Gross margin | 45.2 | % | | 45.6 | % | | n/a | | (40) bps | | | | | | | | |
Selling, general and administrative expenses | 189.7 | | 154.3 | | 35.4 | | | 23 | % | | | | | | | | |
Restructuring expenses and asset impairments | 0.5 | | 0.6 | | (0.1) | | | (17 | %) | | | | | | | | |
Operating income | 192.3 | | 187.6 | | 4.7 | | | 3 | % | | | | | | | | |
Other (income) expense - net | (0.6) | | (2.3) | | 1.7 | | | (74 | %) | | | | | | | | |
Interest expense | 13.1 | | 9.5 | | 3.6 | | | 38 | % | | | | | | | | |
Income before income taxes | 179.8 | | 180.4 | | (0.6) | | | — | % | | | | | | | | |
Provision for income taxes | 40.0 | | 40.5 | | (0.5) | | | (1 | %) | | | | | | | | |
Effective tax rate | 22.2 | % | | 22.4 | % | | n/a | | (20) bps | | | | | | | | |
Net income attributable to IDEX | $ | 139.8 | | $ | 140.0 | | $ | (0.2) | | | — | % | | | | | | | | |
Diluted earnings per common share attributable to IDEX | $ | 1.84 | | $ | 1.83 | | $ | 0.01 | | | 1 | % | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | | Change | | |
(Dollars in millions, except per share amounts) | | | | | | | 2022 | | 2021 | | $ | | % / bps | | |
Net sales | | | | | | | $ | 751.1 | | | $ | 652.0 | | | $ | 99.1 | | | 15 | % | | |
Cost of sales | | | | | | | 408.6 | | | 359.4 | | | 49.2 | | | 14 | % | | |
Gross profit | | | | | | | 342.5 | | | 292.6 | | | 49.9 | | | 17 | % | | |
Gross margin | | | | | | | 45.6 | % | | 44.9 | % | | n/a | | 70 bps | | |
Selling, general and administrative expenses | | | | | | | 154.3 | | | 134.9 | | | 19.4 | | | 14 | % | | |
Restructuring expenses and asset impairments | | | | | | | 0.6 | | | 2.2 | | | (1.6) | | | (73 | %) | | |
Operating income | | | | | | | 187.6 | | | 155.5 | | | 32.1 | | | 21 | % | | |
Operating margin | | | | | | | 25.0 | % | | 23.9 | % | | n/a | | 110 bps | | |
Other income - net | | | | | | | (2.3) | | | (0.8) | | | (1.5) | | | 188 | % | | |
Interest expense | | | | | | | 9.5 | | | 10.7 | | | (1.2) | | | (11 | %) | | |
Income before income taxes | | | | | | | 180.4 | | | 145.6 | | | 34.8 | | | 24 | % | | |
Provision for income taxes | | | | | | | 40.5 | | | 32.9 | | | 7.6 | | | 23 | % | | |
Effective tax rate | | | | | | | 22.4 | % | | 22.6 | % | | n/a | | (20) bps | | |
Net income attributable to IDEX | | | | | | | $ | 140.0 | | | $ | 112.7 | | | $ | 27.3 | | | 24 | % | | |
Diluted earnings per common share attributable to IDEX | | | | | | | $ | 1.83 | | | $ | 1.48 | | | $ | 0.35 | | | 24 | % | | |
Net Sales
Sales for the three months ended March 31, 2023 increased 15%13%, reflecting a reflecting 6%a 12% increase in organic sales, a 5%9% increase from acquisitions (Airtech(Muon Group - June 2021November 2022, KZValve - May 2022 and ABELNexsight - March 2021) February 2022) net of divestitures (Knight - September 2022) and a 2% a 2% unfavorable impact from foreign currency translationtranslation. . Sales increased 26%10% domestically and 6%15% internationally, and sales to customers outside the U.S. were approximately 50%51% of total sales in the first quarter of 20222023 compared to 54%with 50% during the same period in 2021.2022.
Cost of Sales
Cost of sales for the three months ended March 31, 2023 increased due to acquisitions, net of divestitures, inflation, higher sales volume inflation and acquisitionsemployee-related costs and unfavorable mix, partially offset by a favorable impact from foreign currency translation.
Gross Profit and Gross Margin
. Both gross
Gross profit and grossGross margin increased primarily due to higher volume leveragewere both positively impacted by favorable productivity and strong operational productivity together with favorable price/cost, partially offset by higherunfavorable mix, largely centered in HST, and employee-related costs. Additionally, grossinflation. While acquisitions also positively impacted Gross profit, increased asthey resulted in a result of acquisitions.dilutive impact to overall Gross margin.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A) expenseexpenses s increased primarily due to higherthe impact from acquisitions, including amortization, increases in employee-related costs, amortization from acquisitions,which includes an additional $5.8 million of accelerated stock compensation costs for retiree eligible participants, and higher discretionary spending and resource investmentsboth as compared with the same period in 2021.2022.
Restructuring expenses and asset impairments decreased due to severance benefits and asset impairments related to the consolidation of certain facilities in 2021 that did not reoccur in 2022.Other (Income) Expense - Net
OperatingOther (income) expense - net was $0.6 million of income increased 21%, reflecting an 18% increase in organic operatingthe first quarter of 2023 compared to $2.3 million of income a 3% increase from acquisitions (Airtech - June 2021during the same period in 2022. The decrease was primarily due to $2.5 million of lower gains on the sale of assets and ABEL - March 2021) and a 2% favorable impact from lower restructuring costs, $1.7 million of higher foreign currency transaction losses as compared to the prior year period, partially offset by a 2% unfavorable impact from foreign currency translation. The increase in operating income is attributable to the operating margin drivers discussed below.
Operating margin increased 110 basis points, reflecting a 130 basis point increase in organic operating margin and a 30 basis point favorable impact from lower restructuring costs, partially offset by a 40 basis point decrease due to acquisitions primarily driven by higher amortization and a 10 basis point unfavorable impact from foreign currency translation. The increase in organic operating margin is primarily due to the gross margin drivers discussed above, partially offset by higher discretionary spending and resource investments.
Other income - net increased primarily due to higher$1.6 million of gains on asset sales, partially offset by a decrease trading securities and $0.6 million of higher interest income in the fair market value of marketable securities.
current year period.
Interest Expense
Interest expense decreased primarilyfor the three months ended March 31, 2023 increased compared to the same period in 2022 due to lower interest rates on the Company’s indebtedness, partially offset by an increaseborrowings incurred under the Revolving Credit Facility and the Term Facility in connection with the amount of debt outstanding compared with 2021.Muon Group acquisition in November 2022.
Income Taxes
The Company’s provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes increaseddecreased to $40.0 million compared withfor the three months ended March 31, 2023 from $40.5 million during the same period in 2021 primarily due to higher earnings while2022. The effective tax rate of 22.2% for the three months ended March 31, 2023 was relatively consistent with the effective tax rate slightly decreased compared withof 22.4% during the same period in 2021 due to the mix of global pre-tax income across jurisdictions.2022.
Results of Reportable Business Segments
The Company has three reportable segments: Fluid & Metering Technologies (“FMT”), Health & Science Technologies (“HST”) and Fire & Safety/Diversified Products (“FSDP”).
• For a detailed description of the operations within each segment, refer to Note 3 The FMT segment designs, produces and distributes positive displacement pumps, valves, small volume provers, flow meters, injectors and other fluid-handling pump modules and systems and provides flow monitoring and other services forin the food, chemical, general industrial, water and wastewater, agriculture and energy industries.
•Notes to Condensed Consolidated Financial StatementsThe HST segment designs, produces and distributes a wide range of precision fluidics, rotary lobe pumps, centrifugal and positive displacement pumps, roll compaction and drying systems, pneumatic components and sealing solutions, high performance molded and extruded sealing components, custom mechanical and shaft seals, engineered hygienic mixers and valves, biocompatible medical devices and implantables, air compressors and blowers, optical components and coatings, laboratory and commercial equipment, precision photonic solutions and precision gear and peristaltic pump technologies. HST serves a variety of end markets, including food and beverage, pharmaceutical and biopharmaceutical, cosmetics, marine, chemical, wastewater and water treatment, life sciences, research and defense markets.
•The FSDP segment designs, produces and distributes firefighting pumps, valves and controls, rescue tools, lifting bags, other components and systems for the fire and rescue industry, engineered stainless steel banding and clamping devices used in a variety of industrial and commercial applications and precision equipment for dispensing, metering and mixing colorants and paints used in a variety of retail and commercial businesses around the world..
Within its three reportable segments, the Company maintains 13 reporting units where the Company focuses on organic growth and strategic acquisitions. Management’s primary measurements of segment performance are sales, operatingadjusted earnings before interest, income taxes, depreciation and operatingamortization (“Adjusted EBITDA”) and Adjusted EBITDA margin. The table below illustrates the three reportable segments and the reporting units within each segment.
| | | | | | | | | | | | | | |
FMT | | HST | | FSDP |
| | | | |
Pumps | | Scientific Fluidics & Optics | | Fire & Safety |
Water | | Sealing Solutions | | Dispensing |
Energy | | Performance Pneumatic Technologies | | BAND-IT |
Valves | | Material Processing Technologies | | |
Agriculture | | Micropump | | |
The table below illustrates the percentages of the share of Net sales and operating incomeAdjusted EBITDA contributed by each segment on the basis of total segments (not total Company) for the three months ended March 31, 2022.2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2022 |
| | | | | | | | | FMT | | HST | | FSDP | | IDEX |
Sales | | | | | | | | | 36 | % | | 42 | % | | 22 | % | | 100 | % |
Operating Income(1) | | | | | | | | | 39 | % | | 41 | % | | 20 | % | | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2023 | | |
| FMT | | HST | | FSDP | | IDEX | | | | | | | | |
Net Sales | 38 | % | | 41 | % | | 21 | % | | 100 | % | | | | | | | | |
Adjusted EBITDA(1) | 42 | % | | 39 | % | | 19 | % | | 100 | % | | | | | | | | |
(1) Segment operating incomeAdjusted EBITDA excludes the impact of unallocated corporate operating expensescosts of $16.9$26.8 million for the three months ended March 31, 20222023.
.
Fluid & Metering Technologies Segment
| | | Three Months Ended March 31, | | Components of Change | | Three Months Ended March 31, | | Components of Change |
(Dollars in millions) | (Dollars in millions) | 2022 | | 2021 | | Change | | Organic | | Acq/Div(1) | | Restructuring | | Foreign Currency | | Total | (Dollars in millions) | 2023 | | 2022 | | Change | | Organic | | Acq/Div(1) | | Foreign Currency | | Total |
Net sales | Net sales | $ | 272.0 | | $ | 243.3 | | 12% | | 11% | | 2% | | — | | (1%) | | 12% | Net sales | $ | 321.8 | | $ | 272.0 | | 18% | | 9% | | 11% | | (2%) | | 18% |
Operating income | 80.4 | | 62.9 | | 28% | | 27% | | — | | 2% | | (1%) | | 28% | |
Operating margin | 29.5 | % | | 25.8 | % | | 370 bps | | 380 bps | | (40) bps | | 30 bps | | — | | 370 bps | |
Adjusted EBITDA | | Adjusted EBITDA | 106.2 | | 88.4 | | 20% | | 14% | | 8% | | (2%) | | 20% |
Adjusted EBITDA margin | | Adjusted EBITDA margin | 33.0 | % | | 32.5 | % | | 50 bps | | 150 bps | | (100) bps | | — | | 50 bps |
(1)Based on the timing of its acquisition, ABEL results for the first two months ofAcquisitions included KZValve in May 2022 are reflectedand Nexsight in the acquisitions/divestitures column.February 2022. Divestitures included Knight in September 2022.
•The change in organic sales was attributed to increases in the Pumps reporting unit due to strong demand in the industrial and energy markets, in the Agriculture reporting unit due to favorable commodity prices and global demand for crops and in the Water reporting unit due to strong demand in the municipal and industrial water markets as well as water saving growth projects.
•Sales increased 15%18% domestically and 9%19% internationally. Sales to customers outside the U.S. were approximately 45% of total segment sales in both the first quarter of 2022 compared with 46% during2023 and the same period in 2021.
•Operating margin of 29.5% increased 370 basis points compared with 25.8% during the same period in 2021. The change in operating margin was attributed to the following:
◦Organic operating margin increased 380 basis points due to higher volume leverage and strong operational productivity together with favorable price/cost, partially offset by increases in employee-related costs and resource investments. Additionally, the prior year period was unfavorably impacted by increases in inventory reserves associated with COVID-19 new product development opportunities not materializing and the fair value inventory step-up charge related to the ABEL acquisition.
◦Lower restructuring costs favorably impacted operating margin by 30 basis points.
◦Acquisitions negatively impacted operating margin by 40 basis points due to:
▪Incremental intangible asset amortization from the ABEL acquisition of $0.6 million, which negatively impacted operating margin by 20 basis points; and
▪The dilutive impact from the ABEL acquisition on overall FMT operating margin.
Health & Science Technologies Segment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Components of Change |
(Dollars in millions) | 2022 | | 2021 | | Change | | Organic | | Acq/Div(1) | | Restructuring | | Foreign Currency | | Total |
Net sales | $ | 315.2 | | $ | 250.4 | | 26% | | 16% | | 11% | | — | | (1%) | | 26% |
Operating income | 83.6 | | 66.6 | | 26% | | 19% | | 7% | | 1% | | (1%) | | 26% |
Operating margin | 26.5 | % | | 26.6 | % | | (10) bps | | 50 bps | | (80) bps | | 20 bps | | — | | | (10) bps |
(1) Acquisitions included Airtech in June 2021.
2022.
•The change in organic sales was attributed to increases in the Scientific Fluidics & Opticsfollowing:
◦Pumps reporting unit due to price capture and steady demand in the industrial market;
◦Water reporting unit due to strength in the municipal water market, price capture and backlog execution;
◦Valves reporting unit due to strong market demand across analytical instrumentation, life sciencein China and semiconductorthe Middle East; and
◦Energy reporting unit due to favorable demand in the mobile fuel markets as well as targeted growth initiatives tied to next generation sequencing and satellite broadband. Additionally,price capture.
These increases were partially offset by a decrease in the Sealing SolutionsAgriculture reporting unit were driven by strong demand indue to higher distribution inventory levels and bad weather delaying the semiconductor and industrial markets and increases in the Performance Pneumatics Technologies reporting unit were driven by strength in the industrial market.planting season.
•SalesAdjusted EBITDA margin of 33.0% increased 62% domestically and 4% internationally. Sales to customers outside the U.S. were approximately 52% of total segment sales in the first quarter of 202250 basis points compared with 63%32.5% during the same period in 2021.
•Operating margin of 26.5% decreased 10 basis points compared with 26.6% during the same period in 2021.2022. The change in operatingAdjusted EBITDA margin was attributed to the following:
◦Organic operatingAdjusted EBITDA margin increased 50150 basis points due to strong price/cost, favorable productivity and higher volume leverage, and favorable price/cost which were more thanpartially offset by increases in employee-related costs and discretionary spending.
◦Acquisitions negatively impacted Adjusted EBITDA margin by 100 basis points due to the dilutive impact of amortization relatedacquisitions on overall FMT Adjusted EBITDA margin.
Health & Science Technologies Segment
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Components of Change |
(Dollars in millions) | 2023 | | 2022 | | Change | | Organic | | Acq/Div(1) | | Foreign Currency | | Total |
Net sales | $ | 351.0 | | $ | 315.2 | | 11% | | 3% | | 11% | | (3%) | | 11% |
Adjusted EBITDA | 100.7 | | 99.8 | | 1% | | (7%) | | 10% | | (2%) | | 1% |
Adjusted EBITDA margin | 28.7 | % | | 31.7 | % | | (300) bps | | (330) bps | | 20 bps | | 10 bps | | (300) bps |
(1) Acquisitions included Muon Group in November 2022.
•Sales decreased 2% domestically and increased 23% internationally. Sales to Airtech as well as higher employee-related costs, discretionary spending and resource investments.customers outside the U.S. were approximately 57% of total segment sales in the first quarter of 2023 compared with 52% during the same period in 2022.
•The change in organic sales was attributed to increases in the following:
◦Lower restructuring costs favorably impacted operating marginPerformance Pneumatics Technologies reporting unit due to strong targeted growth performance tied to fuel cells and increased China ventilator sales; and
◦Scientific Fluidics & Optics reporting unit due to strong Next Gen Sequencing instrument demand, satellite broadband targeted growth initiatives and price capture, partially offset by 20 basis points.lower demand from Analytical Instrumentation and Life Science original equipment manufacturers due to customer inventory recalibration, softness in the semiconductor market and the non-repeat of revenues from a COVID-19 testing application in the prior year.
These increases were partially offset by decreases in the following:
◦Sealing Solutions reporting unit due to softness in the semiconductor market, partially offset by favorable demand in the automotive, mining and defense markets; and
◦Material Processing Technologies reporting unit due to customer-driven project delays in the pharma and food/nutrition markets.
•Adjusted EBITDA margin of Contents28.7% decreased 300 basis points compared with 31.7% during the same period in 2022. The change in Adjusted EBITDA margin was attributed to the following:
◦Organic Adjusted EBITDA margin decreased 330 basis points due to increases in employee-related costs, unfavorable mix and lower volume leverage, partially offset by favorable price/cost.
◦Acquisitions negativelypositively impacted operatingAdjusted EBITDA margin by 8020 basis points asdue to the contributionsaccretive impact of the Airtech business were more than offset by incremental intangible asset amortization of $3.9 million, which negativelyMuon Group on overall HST Adjusted EBITDA margin.
◦Foreign currency positively impacted operatingAdjusted EBITDA margin by 13010 basis points.
Fire & Safety/Diversified Products Segment
| | | Three Months Ended March 31, | | Components of Change | | Three Months Ended March 31, | | Components of Change |
(Dollars in millions) | (Dollars in millions) | 2022 | | 2021 | | Change | | Organic | | Acq/Div | | Restructuring | | Foreign Currency | | Total | (Dollars in millions) | 2023 | | 2022 | | Change | | Organic | | Acq/Div | | Foreign Currency | | Total |
Net sales | Net sales | $ | 164.7 | | $ | 159.5 | | 3% | | 5% | | — | | — | | (2%) | | 3% | Net sales | $ | 174.4 | | $ | 164.7 | | 6% | | 9% | | — | | (3%) | | 6% |
Operating income | 40.5 | | 44.6 | | (9%) | | (6) | | — | | — | | (3%) | | (9%) | |
Operating margin | 24.6 | % | | 27.9 | % | | (330) bps | | (320) bps | | — | | 10 bps | | (20) bps | | (330) bps | |
Adjusted EBITDA | | Adjusted EBITDA | 49.7 | | 44.4 | | 12% | | 15% | | — | | (3%) | | 12% |
Adjusted EBITDA margin | | Adjusted EBITDA margin | 28.5 | % | | 26.9 | % | | 160 bps | | 170 bps | | — | | (10) bps | | 160 bps |
•Sales increased 17% domestically and decreased 4% internationally. Sales to customers outside the U.S. were approximately 49% of total segment sales in the first quarter of 2023 compared with 54% during the same period in 2022.
•The change in organic sales was drivenattributed to increases in the following:
◦Fire & Safety reporting unit due to strong execution, price realization, share gain with Fire original equipment manufacturers and continued demand for rescue tools; and
◦BAND-IT reporting unit due to continued share gain in the automotive market as well as strong demand in the aerospace, industrial and energy markets.
These increases were partially offset by an increasea decrease in the Dispensing reporting unit due to North American project volume and strong demandtiming of projects in the paint market. Additionally, increases in the BAND-IT reporting unit were due to strong performance in the energyAmericas and industrial markets, as the automotive market continued to be challenged by supply-chain related customer delays.Asia.
•Sales increased 1% domestically and 5% internationally. Sales to customers outside the U.S. were approximately 54% of total segment sales in the first quarter of 2022 compared with 53% during the same period in 2021.
•OperatingAdjusted EBITDA margin of 24.6% decreased 33028.5% increased 160 basis points compared with 27.9% during the same period26.9% in 2021.2022. The change in organic operatingAdjusted EBITDA margin was attributed to the following:
◦Organic Adjusted EBITDA margin increased 170 basis points due to strong productivity, higher volume leverage and favorable price/cost, partially offset by increases in discretionary spending and employee-related costs and discretionary spending as well as compressed price/cost due to long-term original equipment manufacturer contracts, partially offsetunfavorable mix.
◦Foreign currency negatively impacted Adjusted EBITDA margin by higher volume.10 basis points.
Liquidity and Capital Resources
Liquidity
Although the COVID-19 pandemic (including the emergence of variant strains) has impacted and may continue to impact the Company’s operating cash flows, basedBased on management’s current expectations and currently available information, the Company believes current cash, cash from operations and cash available under the Revolving Credit Facility will be sufficient to meet its operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and postretirement funding requirements, share repurchases and quarterly dividend payments to holders of the Company’s common stock for the foreseeable future. Additionally, in the event that suitable businesses are available for acquisition upon acceptable terms, the Company may obtain all or a portion of the financing for these acquisitions through the incurrence of additional borrowings.
At March 31, 2022,2023, working capital was $1,213.0$1,032.6 million and the Company’s current ratio was 3.63.1 to 1. At March 31, 2022,2023, the Company’s cash and cash equivalents totaled $733.2$510.7 million, of which $467.7$392.7 million waswas held outside of the United States. As ofAt March 31, 2022,2023, there was no balance$79.4 million outstanding under the Revolving Credit Facility and $7.1$7.5 million of outstanding letters of credit, resulting in a net available borrowing capacity under the Revolving Credit Facility of $792.9$713.1 million. In addition, there was $200.0 million outstanding under the Term Facility. The Company believes that additional borrowings through various financing alternatives remain available, if required.
Cash Flow Summary
The following table is derived from the Condensed Consolidated Statements of Cash Flows:
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(In millions) | | 2022 | | 2021 |
Net cash flows provided by (used in): | | | | |
Operating activities | | $ | 79.7 | | | $ | 109.3 | |
Investing activities | | (124.4) | | | (119.5) | |
Financing activities | | (71.3) | | | (40.4) | |
Operating Activities
Cash flows provided by operating activities decreased $29.6 million to $79.7 million, primarily due to increases in working capital discussed below, partially offset by higher earnings. Working Capital
Operating working capital, calculated as accounts receivableReceivables plus inventoryInventories 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, 20222023 and December 31, 2021:2022:
| (In millions) | (In millions) | | March 31, 2022 | | December 31, 2021 | (In millions) | | March 31, 2023 | | December 31, 2022 |
Receivables - net | | $ | 411.2 | | | $ | 356.4 | | |
Receivables | | Receivables | | $ | 446.5 | | | $ | 442.8 | |
Inventories | Inventories | | 428.5 | | 370.4 | Inventories | | 497.6 | | 470.9 |
Less: Trade accounts payable | Less: Trade accounts payable | | 210.2 | | 178.8 | Less: Trade accounts payable | | (216.0) | | | (208.9) | |
Operating working capital | Operating working capital | | $ | 629.5 | | | $ | 548.0 | | Operating working capital | | $ | 728.1 | | | $ | 704.8 | |
Operating working capital increased $81.5$23.3 million to $629.5$728.1 million atduring the three months ended March 31, 2022, with acquisition, divestiture2023. Acquisitions and foreign currency translation impacts primarily driving a net $13.0contributed $6.9 million ofto the increase.increase in operating working capital. Excluding these impacts, accounts receivablethose items, Receivables increased $45.6$0.6 million as a result of higher volume; inventoriesvolume and price capture; Inventories increased $46.9$27.0 million to support production amid supply chain difficulties;planned production; and tradeTrade accounts payable increased $24.0$11.2 million due to higher inventory purchases.
InvestingCash Flow Summary
The following table is derived from the Condensed Consolidated Statements of Cash Flows:
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(In millions) | | 2023 | | 2022 |
Net cash flows provided by (used in): | | | | |
Operating activities | | $ | 147.9 | | | $ | 79.7 | |
Investing activities | | (29.2) | | | (124.4) | |
Financing activities | | (45.2) | | | (71.3) | |
Operating Activities
Cash flows provided by operating activities used in investing activitiesincreased $4.9$68.2 million to $124.4$147.9 million in the three months ended March 31, 2023 primarily due to higher cash outflows for acquisitionslower investments in working capital in 2023 as compared with 2022.
Investing Activities
Cash flows used in investing activities decreased $95.2 million to $29.2 million in the additionthree months ended March 31, 2023. The change is primarily due to the purchase of Nexsight in 2022, compared to ABEL in 2021 and for capital expenditures as the Company continues the expansion of its China and India facilities, partially offset by higher proceeds from asset sales.capital expenditures in the first quarter of 2023.
Financing Activities
Cash flows used in financing activities increased by $30.9decreased $26.1 million to $45.2 million in the three months ended March 31, 2023 from $71.3 million. During 2022,million in the Company repurchasedprior year period. The change is primarily due to the repurchase of 147,500 shares at a cost of $28.3 million in the first quarter of 2022, of which $2.0 million did not settle until April and paid $41.4 million in dividends. During 2021, the Company did not repurchase any shares and paid $38.1 million in dividends.2022.
Free Cash Flow
The Company believes free cash flow, a non-GAAP measure, is an important measure of performance because it provides a measurement of cash generated from operations that is available for payment obligations such as operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and postretirement funding requirements and quarterly dividend payments to holders of the Company’s common stock as well as for funding acquisitions.acquisitions and share repurchases. Free cash flow is calculated as cash flows provided by operating activities less capital expenditures.
The following table reconciles free cash flow to cash flows provided by operating activities:
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(Dollars in millions) | | 2022 | | 2021 |
Cash flows provided by operating activities | | $ | 79.7 | | | $ | 109.3 | |
Less: Capital expenditures | | (16.1) | | | (14.6) | |
Free cash flow | | $ | 63.6 | | | $ | 94.7 | |
Free cash flow as a percent of adjusted net income attributable to IDEX(1) | | 42.5 | % | | 76.7 | % |
(1) Free cash flow as a percent of adjusted net income attributable to IDEX now reflects the impact of excluding acquisition-related intangible asset amortization, net of related taxes, from adjusted net income attributable to IDEX. | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
(Dollars in millions) | | 2023 | | 2022 |
Cash flows provided by operating activities | | $ | 147.9 | | | $ | 79.7 | |
Less: capital expenditures | | (26.6) | | | (16.1) | |
Free cash flow | | $ | 121.3 | | | $ | 63.6 | |
Free cash flow as a percent of adjusted net income attributable to IDEX | | 76.5 | % | | 42.5 | % |
The decreaseincrease in free cash flow as compared to 20212022 is due to the increaseslower investments in working capital discussed above, which more thanin 2023 as compared with 2022, partially offset by higher earnings.capital expenditures.
Cash Requirements
Pending Acquisitions
On March 30, 2022,April 25, 2023, the Company entered into a definitive agreement to acquire KZValveIridian Spectral Technologies for cash consideration of $120.0150.0 million. Canadian dollars. The Company expects to close the transaction by the end of the second quarter of 2022,2023, subject to regulatory approval and customary closing conditions. Refer to Note 20 for further details.
Capital Expenditures
Capital expenditures are generally expenditures forinclude 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 $16.126.6 million and $14.6$16.1 million in the first quartersthree months of 20222023 and 2021,2022, respectively.The Company believes it has sufficient operating cash flow to continue to meet current obligations and invest in planned capital expenditures.
Debt Repayment
As of March 31, 2023, the Company has $100.0 million of 3.20% Senior Notes due June 2023. The Company expects to either refinance or repay the Notes using the available borrowing capacity of the Revolving Credit Facility, due November 2027.
Share Repurchases
During the three months ended March 31, 2022, the Company repurchased 147,500 shares at a cost of $28.3 million, of which $2.0 million did not settle until April. There were no share repurchases during the three months ended March 31, 2021.2023. As of March 31, 2022,2023, the amount of share repurchase authorization remaining was $683.7 million.$563.8 million. For additional information regarding the Company’s share repurchase program, refer to Note 15 in the Notes to Condensed Consolidated Financial Statements.
SubsequentDividends
Total dividend payments to common shareholders were $45.5 million during the three months ended March 31, 2022 and through April 22, 2022,2023 compared with $41.4 million during the Company has repurchased 60,362 shares at a cost of $11.7 million.three months ended March 31, 2022.
Covenants
There are twoThe key financial covenants that the Company is required to maintain in connection with the Revolving Credit Facility, the Term Facility, the 3.20% Senior Notes and the 3.37% Senior Notes, are a minimum interest coverage ratio of 3.0 to 1 and a maximum leverage ratio of 3.50 to 1. At March 31, 2022,2023, the Company was in compliance with both of these financial covenants, as the Company’s interest coverage ratio was 21.6822.48 to 1 for covenant calculation purposes and the leverage ratio was 1.461.55 to 1. There are no financial covenants relating to the 2.625% Senior Notes or the 3.00% Senior Notes; however, both are subject to cross-default provisions.
Credit Ratings
The Company’s credit ratings, which were independently developed by the following credit agencies, are detailed below:
•S&P Global Ratings affirmed the Company’s corporate credit rating of BBB (stable outlook) in June 2021.August 2022.
•Moody’s Investors Service affirmed the Company’s corporate credit rating of Baa2 (stable outlook) in December 2021.
•Fitch Ratings reaffirmed the Company’s corporate credit rating of BBB+ (stable outlook) in March 2022.April 2023.
Critical Accounting Estimates
As discussed in the Annual Report on Form 10-K for the year ended December 31, 2021,2022, the preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. There have been no changes to the Company’s critical accounting estimates described in the Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Non-GAAP Disclosures
Set forth below are reconciliations of each of Organic net sales, Adjusted gross profit (and adjusted gross margin), Adjusted operating income (and adjusted operating margin), Adjusted net income attributable to IDEX, Adjusted diluted earnings per share (“EPS”) attributable to IDEX, EarningsConsolidated Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and Consolidated Adjusted EBITDA margin to its respective most directly comparable U.S. GAAP measure. Management uses these metrics to measure performance of the Company since they exclude items that are not reflective of ongoing operations, such as fair value inventory step-up charges, restructuring expenses and asset impairments and gains on sales of assets. Adjusted net income attributable to IDEX and Adjusted diluted EPS attributable to IDEX also exclude acquisition-related intangible asset amortization.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. The reconciliation of segment EBITDA and Adjusted segment EBITDA to net income was performed on a consolidated basis due to the fact that the Company does not allocate consolidated interest expense or the consolidated provision for income taxes to its segments.
This report references organic sales, and organic operating income,a non-GAAP measures,measure, that excludeexcludes (1) the impact of foreign currency translation and (2) sales and operating income, respectively, from acquired or divested businesses during the first 12 months of ownership or prior to divestiture. The portion of sales and operating income attributable to foreign currency translation is calculated as the difference between (a) the period-to-period change in organic sales and organic operating
income, respectively, and (b) the period-to-period change in organic sales and organic operating income, respectively, after applying prior period foreign exchange rates to the current year period. Management believes that reporting organic sales and organic operating income provides useful information to investors by helping to identify underlying growth trends in the Company’s business and facilitating easier comparisons of the Company’s revenue and operating performance with prior and future periods and to its peers. The Company excludes the effect of foreign currency translation from organic sales and organic operating income because foreign currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. The Company excludes the effect of acquisitions and divestitures because they can obscure underlying business trends and make comparisons of long-term performance difficult due to the varying nature, size and number of transactions from period to period and between the Company and its peers.
Given the acquisitive nature of the Company, which results in a higher level of amortization expense from recently acquired businesses, management uses EBITDA as an internal operating metric to provide another representation of the businesses’ performance across the Company’s three segments and for enterprise valuation purposes. Management believes that EBITDA is useful to investors as an indicator of the strength and performance of the Company and a way to evaluate and compare operating performance and value companies within the Company’s industry. Management believes that EBITDA margin is useful for the same reason as EBITDA. EBITDA is also used to calculate certain financial covenants such as EBITDA interest coverage, which is EBITDA divided by consolidated interest expense. In addition, this report presents Adjusted EBITDA, which is EBITDA adjusted for items that are not reflective of ongoing operations, as discussed above and Adjusted EBITDA interest coverage, which is Adjusted EBITDA divided by consolidated interest expense. Management believes that Adjusted EBITDA is useful as a performance indicator of ongoing operations. The Company believes that Adjusted EBITDA is also useful to some investors as an indicator of the strength and performance of the Company and its segments’ ongoing business operations and a way to evaluate and compare operating performance and value companies within the Company’s industry. Management believes that Adjusted EBITDA margin is useful for the same reason as Adjusted EBITDA. The definition of Adjusted EBITDA used here may differ from that used by other companies.
This report also references free cash flow. This non-GAAP measure is discussed and reconciled to its most directly comparable U.S. GAAP measure in the section above titled “Cash Flow Summary.“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 recalculateprecisely. 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, 2022 |
| FMT | | HST | | FSDP | | IDEX |
Change in net sales | 12 | % | | 26 | % | | 3 | % | | 15 | % |
- Net impact from acquisitions/divestitures | 2 | % | | 11 | % | | — | % | | 5 | % |
- Impact from foreign currency | (1 | %) | | (1 | %) | | (2 | %) | | (2 | %) |
Change in organic net sales | 11 | % | | 16 | % | | 5 | % | | 12 | % |
| | | | | | | | | | | | | | | |
2. Reconciliations of Reported-to-Adjusted Gross Profit and Margin | | | | | | |
| | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Gross profit | | | | | $ | 342.5 | | $ | 292.6 |
+ Fair value inventory step-up charge | | | | | — | | 0.7 |
Adjusted gross profit | | | | | $ | 342.5 | | $ | 293.3 |
| | | | | | | |
Net sales | | | | | $ | 751.1 | | $ | 652.0 |
| | | | | | | |
Gross margin | | | | | 45.6 | % | | 44.9 | % |
Adjusted gross margin | | | | | 45.6 | % | | 45.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
1. Reconciliations of the Change in Net Sales to Organic Net Sales | | | | | | | |
| | | | | | | |
| Three Months Ended March 31, 2023 |
| FMT | | HST | | FSDP | | IDEX |
Change in net sales | 18 | % | | 11 | % | | 6 | % | | 13 | % |
- Net impact from acquisitions/divestitures | 11 | % | | 11 | % | | — | % | | 9 | % |
- Impact from foreign currency | (2 | %) | | (3 | %) | | (3 | %) | | (2 | %) |
Change in organic net sales | 9 | % | | 3 | % | | 9 | % | | 6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
3. Reconciliations Reported-to-Adjusted Operating Income and Margin |
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| FMT | | HST | | FSDP | | Corporate | | IDEX | | FMT | | HST | | FSDP | | Corporate | | IDEX |
Reported operating income (loss) | $ | 80.4 | | $ | 83.6 | | $ | 40.5 | | $ | (16.9) | | | $ | 187.6 | | $ | 62.9 | | $ | 66.6 | | $ | 44.6 | | $ | (18.6) | | $ | 155.5 |
+ Restructuring expenses and asset impairments | — | | — | | — | | — | | | — | | 0.9 | | 0.6 | | 0.1 | | 0.6 | | 2.2 |
+ Fair value inventory step-up charge | — | | — | | — | | — | | — | | 0.7 | | — | | — | | — | | 0.7 |
| | | | | | | | | | | | | | | | | | | |
Adjusted operating income (loss) | $ | 80.4 | | $ | 83.6 | | $ | 40.5 | | $ | (16.9) | | $ | 187.6 | | $ | 64.5 | | $ | 67.2 | | $ | 44.7 | | $ | (18.0) | | $ | 158.4 |
| | | | | | | | | | | | | | | | | | | |
Net sales (eliminations) | $ | 272.0 | | $ | 315.2 | | $ | 164.7 | | $ | (0.8) | | $ | 751.1 | | $ | 243.3 | | $ | 250.4 | | $ | 159.5 | | $ | (1.2) | | $ | 652.0 |
| | | | | | | | | | | | | | | | | | | |
Reported operating margin | 29.5 | % | | 26.5 | % | | 24.6 | % | | n/m | | 25.0 | % | | 25.8 | % | | 26.6 | % | | 27.9 | % | | n/m | | 23.9 | % |
Adjusted operating margin | 29.5 | % | | 26.5 | % | | 24.6 | % | | n/m | | 25.0 | % | | 26.5 | % | | 26.9 | % | | 28.0 | % | | n/m | | 24.3 | % |
| | | | | | | | | | | | | | |
2. Reconciliations of Reported-to-Adjusted Net Income and Diluted EPS (in millions, except per share amounts) |
| | | | |
| | Three Months Ended March 31, |
| | 2023 | | 2022 |
Reported net income attributable to IDEX | | $ | 139.8 | | | $ | 140.0 | |
+ Restructuring expenses and asset impairments | | 0.5 | | | — | |
+ Tax impact on restructuring expenses and asset impairments | | (0.1) | | | — | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
- Gains on sales of assets | | — | | | (2.7) | |
+ Tax impact on gains on sales of assets | | — | | | 0.6 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
+ Acquisition-related intangible asset amortization | | 23.6 | | | 15.3 | |
+ Tax impact on acquisition-related intangible asset amortization | | (5.2) | | | (3.4) | |
Adjusted net income attributable to IDEX | | $ | 158.6 | | | $ | 149.8 | |
| | 4. Reconciliations of Reported-to-Adjusted Net Income and Diluted EPS | | | |
| | | | Three Months Ended March 31, | |
| | | 2022 | | 2021 | | Three Months Ended March 31, |
Reported net income attributable to IDEX | | $ | 140.0 | | | $ | 112.7 | | |
| | | 2023 | | 2022 |
Reported diluted EPS attributable to IDEX | | Reported diluted EPS attributable to IDEX | | $ | 1.84 | | | $ | 1.83 | |
+ Restructuring expenses and asset impairments | + Restructuring expenses and asset impairments | | — | | | 2.2 | | + Restructuring expenses and asset impairments | | 0.01 | | | — | |
+ Tax impact on restructuring expenses and asset impairments | + Tax impact on restructuring expenses and asset impairments | | — | | | (0.5) | | + Tax impact on restructuring expenses and asset impairments | | — | | | — | |
+ Fair value inventory step-up charge | | — | | | 0.7 | | |
+ Tax impact on fair value inventory step-up charge | | — | | | (0.2) | | |
| - Gains on sales of assets | - Gains on sales of assets | | (2.7) | | | — | | - Gains on sales of assets | | — | | | (0.03) | |
+ Tax impact on gains on sales of assets | + Tax impact on gains on sales of assets | | 0.6 | | | — | | + Tax impact on gains on sales of assets | | — | | | 0.01 | |
| + Acquisition-related intangible asset amortization | + Acquisition-related intangible asset amortization | | 15.3 | | | 11.0 | | + Acquisition-related intangible asset amortization | | 0.31 | | | 0.20 | |
+ Tax impact on acquisition-related intangible asset amortization | + Tax impact on acquisition-related intangible asset amortization | | (3.4) | | | (2.5) | | + Tax impact on acquisition-related intangible asset amortization | | (0.07) | | | (0.05) | |
Adjusted net income attributable to IDEX | | $ | 149.8 | | | $ | 123.4 | | |
Adjusted diluted EPS attributable to IDEX | | Adjusted diluted EPS attributable to IDEX | | $ | 2.09 | | | $ | 1.96 | |
| Diluted weighted average shares outstanding | | Diluted weighted average shares outstanding | | 75.9 | | | 76.4 | |
| | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Reported diluted EPS attributable to IDEX | | | | | $ | 1.83 | | | $ | 1.48 | |
+ Restructuring expenses and asset impairments | | | | | — | | | 0.03 | |
+ Tax impact on restructuring expenses and asset impairments | | | | | — | | | (0.01) | |
+ Fair value inventory step-up charge | | | | | — | | | 0.01 | |
+ Tax impact on fair value inventory step-up charge | | | | | — | | | — | |
- Gains on sales of assets | | | | | (0.03) | | | — | |
+ Tax impact on gains on sales of assets | | | | | 0.01 | | | — | |
+ Acquisition-related intangible asset amortization | | | | | 0.20 | | | 0.14 | |
+ Tax impact on acquisition-related intangible asset amortization | | | | | (0.05) | | | (0.03) | |
Adjusted diluted EPS attributable to IDEX | | | | | $ | 1.96 | | | $ | 1.62 | |
| | | | | | | |
Diluted weighted average shares outstanding | | | | | 76.4 | | | 76.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
5. Reconciliations of EBITDA to Net Income | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| FMT | | HST | | FSDP | | Corporate | | IDEX | | FMT | | HST | | FSDP | | Corporate | | IDEX |
Reported operating income (loss) | $ | 80.4 | | $ | 83.6 | | $ | 40.5 | | $ | (16.9) | | $ | 187.6 | | $ | 62.9 | | $ | 66.6 | | $ | 44.6 | | $ | (18.6) | | $ | 155.5 |
+ Other income (expense), net | 1.6 | | 0.2 | | 1.6 | | (1.1) | | 2.3 | | — | | 0.4 | | 0.3 | | 0.1 | | 0.8 |
+ Depreciation and amortization | 7.6 | | 16.0 | | 3.8 | | 0.1 | | 27.5 | | 7.1 | | 10.5 | | 3.9 | | 0.1 | | 21.6 |
EBITDA | 89.6 | | 99.8 | 1.0 | 45.9 | 2.0 | (17.9) | | 217.4 | | 70.0 | | 77.5 | | 48.8 | | (18.4) | | 177.9 |
- Interest expense | | | | | | | | | 9.5 | | | | | | | | | | 10.7 |
- Provision for income taxes | | | | | | | | | 40.5 | | | | | | | | | | 32.9 |
- Depreciation and amortization | | | | | | | | | 27.5 | | | | | | | | | | 21.6 |
Reported net income | | | | | | | | | $ | 139.9 | | | | | | | | | | $ | 112.7 |
| | | | | | | | | | | | | | | | | | | |
Net sales (eliminations) | $ | 272.0 | | $ | 315.2 | | $ | 164.7 | | $ | (0.8) | | $ | 751.1 | | $ | 243.3 | | $ | 250.4 | | $ | 159.5 | | $ | (1.2) | | $ | 652.0 |
| | | | | | | | | | | | | | | | | | | |
Reported operating margin | 29.5 | % | | 26.5 | % | | 24.6 | % | | n/m | | 25.0 | % | | 25.8 | % | | 26.6 | % | | 27.9 | % | | n/m | | 23.9 | % |
EBITDA margin | 32.9 | % | | 31.7 | % | | 27.9 | % | | n/m | | 28.9 | % | | 28.7 | % | | 31.0 | % | | 30.5 | % | | n/m | | 27.3 | % |
EBITDA interest coverage | | | | | | | | | 22.9 | | | | | | | | | | 16.5 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
3. Reconciliations of Net Income to Adjusted EBITDA (dollars in millions) |
| | | | | | | | | |
| Three Months Ended March 31, 2023 |
| FMT | | HST | | FSDP | | Corporate | | IDEX |
Reported net income | $ | — | | $ | — | | $ | — | | $ | — | | $ | 139.8 |
+ Provision for income taxes | — | | — | | — | | — | | 40.0 |
+ Interest expense | — | | — | | — | | — | | 13.1 |
- Other income (expense) - net | — | | — | | — | | — | | 0.6 |
Operating income (loss) | 96.5 | | 77.5 | | 46.0 | | (27.7) | | 192.3 |
+ Other income (expense) - net | 0.5 | | (0.3) | | (0.2) | | 0.6 | | 0.6 |
+ Depreciation | 3.1 | | 7.3 | | 2.1 | | 0.3 | | 12.8 |
+ Amortization | 6.0 | | 15.9 | | 1.7 | | — | | 23.6 |
+ Restructuring expenses and asset impairments | 0.1 | | 0.3 | | 0.1 | | — | | 0.5 |
Adjusted EBITDA | $ | 106.2 | | $ | 100.7 | | $ | 49.7 | | $ | (26.8) | | $ | 229.8 |
| | | | | | | | | |
Net sales (eliminations) | $ | 321.8 | | $ | 351.0 | | $ | 174.4 | | $ | (1.8) | | $ | 845.4 |
| | | | | | | | | |
Net income margin | | | | | | | | | 16.5 | % |
Adjusted EBITDA margin | 33.0 | % | | 28.7 | % | | 28.5 | % | | n/m | | 27.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
6. Reconciliations of EBITDA to Adjusted EBITDA | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| FMT | | HST | | FSDP | | Corporate | | IDEX | | FMT | | HST | | FSDP | | Corporate | | IDEX |
EBITDA(1) | $ | 89.6 | | $ | 99.8 | | $ | 45.9 | | $ | (17.9) | | $ | 217.4 | | $ | 70.0 | | $ | 77.5 | | $ | 48.8 | | $ | (18.4) | | $ | 177.9 |
+ Restructuring expenses and asset impairments | — | | — | | — | | — | | — | | 0.9 | | 0.6 | | 0.1 | | 0.6 | | 2.2 |
+ Fair value inventory step-up charge | — | | — | | — | | — | | — | | 0.7 | | — | | — | | — | | 0.7 |
- Gains on sales of assets | (1.2) | | — | | (1.5) | | — | | (2.7) | | — | | — | | — | | — | | — |
Adjusted EBITDA | $ | 88.4 | | $ | 99.8 | | $ | 44.4 | | $ | (17.9) | | $ | 214.7 | | $ | 71.6 | | $ | 78.1 | | $ | 48.9 | | $ | (17.8) | | $ | 180.8 |
| | | | | | | | | | | | | | | | | | | |
Adjusted EBITDA margin | 32.5 | % | | 31.7 | % | | 26.9 | % | | n/m | | 28.6 | % | | 29.4 | % | | 31.2 | % | | 30.6 | % | | n/m | | 27.7 | % |
Adjusted EBITDA interest coverage | | | | | | | | | 22.6 | | | | | | | | | | 16.8 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| FMT | | HST | | FSDP | | Corporate | | IDEX |
Reported net income | $ | — | | $ | — | | $ | — | | $ | — | | $ | 139.9 |
+ Provision for income taxes | — | | — | | — | | — | | 40.5 |
+ Interest expense | — | | — | | — | | — | | 9.5 |
- Other income (expense) - net | — | | — | | — | | — | | 2.3 |
Operating income (loss) | 80.4 | 0.0 | 83.6 | | 40.5 | | (16.9) | | 187.6 |
+ Other income (expense) - net | 1.6 | | 0.2 | | 1.6 | | (1.1) | | 2.3 |
+ Depreciation | 3.9 | | 6.1 | | 2.1 | | 0.1 | | 12.2 |
+ Amortization | 3.7 | | 9.9 | | 1.7 | | — | | 15.3 |
- Gains on sales of asset | (1.2) | | — | | (1.5) | | — | | (2.7) |
Adjusted EBITDA | $ | 88.4 | | $ | 99.8 | | $ | 44.4 | | $ | (17.9) | | $ | 214.7 |
| | | | | | | | | |
Net sales (eliminations) | $ | 272.0 | | $ | 315.2 | | $ | 164.7 | | $ | (0.8) | | $ | 751.1 |
| | | | | | | | | |
Net income margin | | | | | | | | | 18.6 | % |
Adjusted EBITDA margin | 32.5 | % | | 31.7 | % | | 26.9 | % | | n/m | | 28.6 | % |
(1)
EBITDA, a non-GAAP financial measure, is reconciled to net income, its most directly comparable U.S. GAAP financial measure, immediately above in Table 5.
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 expected organic sales growth and expected earnings per share, and the assumptions underlying these expectations, plant and equipment capacity for future growth and the anticipated timing and effects of planned facility expansion, the duration of supply chain challenges, anticipated future acquisition behavior, and capital deployment, availability of cash and financing alternatives, the anticipated timingintent to refinance or repay the Company’s 3.20% Senior Notes due June 2023 using the available borrowing capacity of the closingRevolving Credit Facility, the completion of pending transactions (including the Company's acquisition of KZValveIridian) and the anticipated benefits of the Company’s recent acquisitions, including the acquisitions of Airtech, Nexsight, KZValve and KZValve,Muon Group and are indicated by words or phrases such as “anticipates,” “estimates,” “plans,” “guidance,” “expects,” “projects,” “forecasts,” “should,” “could,” “will,” “management believes,” “the Company believes,” “the Company intends” and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this report.
The risks and uncertainties include, but are not limited to, the following: the impact of health epidemics and pandemics, including the COVID-19 pandemic, and the impact of related governmental actions, on the Company’s ability to operate its business and facilities, on its customers, on supply chains and on the U.S. and global economy generally; economic and political consequences resulting from terrorist attacks and wars, including Russia’s invasion of Ukraine and the global response to this invasion, which, along with the ongoing effects of the COVID-19 pandemic, could have an adverse impact on the Company’s business by creating disruptions in the global supply chain and by potentially having an adverse impact on the global economy; levels of industrial activity and economic conditions in the U.S. and other countries around the world;world, including uncertainties in the financial markets and adverse developments affecting the financial services industry; pricing pressures, including inflation and rising interest rates, and other competitive factors and levels of capital spending in certain industries, all of which could have a material impact on order rates and the Company’s results; the impact of health epidemics and pandemics and terrorist attacks and wars, including the ongoing conflict between Russia and Ukraine, which could have an adverse impact on the Company's business by creating disruptions in the global supply chain and by potentially having an adverse impact on the global economy; the Company’s ability to make acquisitions and to integrate and operate acquired businesses on a profitable basis; the relationship of the U.S. dollar to other currencies and its impact on pricing and cost competitiveness; political and economic conditions in foreign countries in which the Company operates; developments with respect to trade policy and tariffs; interest rates; capacity utilization and the effect this has on costs; labor markets; supply chain backlogs, including risks affecting component availability, labor inefficiencies and freight logistical challenges; market conditions and material costs; risks related to environmental, social and corporate governance issues, including those related to climate change and sustainability; and developments with respect to contingencies, such as litigation and environmental matters.
Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” section included in the Company’s most recent annual report on Form 10-K and the Company’s subsequent quarterly reports filed with the Securities and Exchange Commission (“SEC”) and the other risks discussed in the Company’s filings with the SEC. The forward-looking statements included here are only made as of the date of this report, and management undertakes no obligation to publicly update them to reflect subsequent events or circumstances, except as may be required by law. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented here.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to market risk associated with changes in foreign currency exchange rates and interest rates as well as inflationary factors. The Company may, from time to time, enter into foreign currency forward contracts and interest rate swaps on its debt when it believes there is a financial advantage in doing so. A treasury risk management policy, adopted by the Board of Directors, describes the procedures and controls over derivative financial and commodity instruments, including foreign currency forward contracts and interest rate swaps. Under the policy, the Company does not use financial or commodity derivative instruments for trading purposes and the use of these instruments is subject to strict approvals by senior officers. Typically, the use of derivative instruments is limited to foreign currency forward contracts and interest rate swaps on the Company’s outstanding long-term debt. As of March 31, 2022,2023, the Company did not have any derivative instruments outstanding.
Foreign Currency Exchange Rates
The Company’s foreign currency exchange rate risk is limited principally to the Euro, Swiss Franc, British Pound, Canadian Dollar, Indian Rupee, Chinese Renminbi, Swedish Krona and Swedish Krona.Brazilian Real. The Company manages its foreign exchange risk principally through invoicing customers in the same currency as the source of products. Foreign currency transaction gains and losses are reported within Other income(income) expense - net in the Condensed Consolidated Statements of Operations.Income.
Interest Rate Fluctuations
The Company does not have significanthas interest rate exposure due to all$279.4 million of the $1,200.1$1,479.5 million of debt outstanding as ofat March 31, 20222023 being fixedfloating rate debt. The Company’s Revolving Credit Facility bearsand Term Facility both bear interest at either an alternate base rate or adjusted LIBORTerm SOFR (or appropriate alternative currency reference rates) plus, in each case, an applicable margin.margin based on the lower of the Company’s senior, unsecured, long-term debt rating or the Company’s applicable leverage ratio. At March 31, 2022,2023, there was no balance$79.4 million outstanding under the Revolving Facility.Credit Facility with an interest rate of 3.32% and $200.0 million outstanding under the Term Facility with an interest rate of 5.83%.
Inflation Risk
We sourceThe Company sources a wide variety of materials and components from a network of global suppliers. While such materials are typically available from numerous suppliers, they are subject to price fluctuations, which could have a negative impact on ourthe Company’s results. We seekThe Company seeks to minimize the effects of inflation and changing prices through price increases to maintain reasonable gross margins.
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 March 31, 2022.2023.
There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are party to legal proceedings arising in the ordinary course of business as described in Note 18 in Part I, Item 1, “Legal Proceedings,” and such disclosure is incorporated by reference into this Item 1, “Legal Proceedings.”
The Company’s threshold for disclosing material environmental legal proceedings involving a government authority where potential monetary sanctions are involved is $1.0 million.
In addition, the Company and six of its subsidiaries are presently named as defendants in a number of lawsuits claiming various asbestos-related personal injuries, allegedly as a result of exposure to products manufactured with components that contained asbestos. These components were acquired from third party suppliers and were not manufactured by the Company or any of the defendant subsidiaries. To date, the majority of the Company’s settlements and legal costs, except for costs of coordination, administration, insurance investigation and a portion of defense costs, have been covered in full by insurance, subject to applicable deductibles. However, the Company cannot predict whether and to what extent insurance will be available to continue to cover these settlements and legal costs, or how insurers may respond to claims that are tendered to them. Asbestos-related claims have been filed in jurisdictions throughout the United States and the United Kingdom. Most of the claims resolved to date have been dismissed without payment. The balance of the claims have been settled for various immaterial amounts. Only one case has been tried, resulting in a verdict for the Company’s business unit. No provision has been made in the financial statements of the Company, other than for insurance deductibles in the ordinary course, and the Company does not currently believe the asbestos-related claims will have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.
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, 2021.2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about the Company’s purchases of its common stockThere were no share repurchases during the quarterthree months ended March 31, 2022:
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Period | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | | Approximate Dollar Value that May Yet be Purchased Under the Plans or Programs(1) |
January 1, 2022 to January 31, 2022 | — | | | $ | — | | | — | | | $ | 712,001,005 | |
February 1, 2022 to February 28, 2022 | 40,000 | | | 189.23 | | | 40,000 | | | 704,431,750 | |
March 1, 2022 to March 31, 2022 | 107,500 | | | 192.41 | | | 107,500 | | | 683,747,520 | |
Total | 147,500 | | | $ | 191.55 | | | 147,500 | | | $ | 683,747,520 | |
(1)On2023. As of March 17, 2020,31, 2023, the Company’s Boardamount 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 priorshare repurchase authorization of the Board of Directors of $300.0 million on December 1, 2015. These authorizations have no expiration date.remaining was $563.8 million.
Item 6. Exhibits.Exhibits
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Exhibit Number | | Description |
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10.1*,** | | |
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31.1* | | |
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31.2* | | |
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32.1* | | |
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32.2* | | |
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101* | | The following financial information from IDEX Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 20222023 formatted in Inline eXtensible Business Reporting Language (iXBRL) includes: (i) the Cover Page, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Income, (iv) the Condensed Consolidated Statements of Comprehensive Income, (v) the Condensed Consolidated Statements of Equity, (vi) the Condensed Consolidated Statements of Cash Flows, and (vii) Notes to the Condensed Consolidated Financial Statements. |
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104* | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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* Filed herewith. |
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** Management contract or compensatory plan or agreement. |
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.
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| IDEX Corporation |
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| By: | /s/ WILLIAM K. GROGAN |
| | William K. Grogan |
| | Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
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| By: | /s/ ALLISON S. LAUSAS |
| | Allison S. Lausas |
| | Vice President and Chief Accounting Officer (Principal Accounting Officer) |
Date: April 27, 20222023