IDEX CORP DE

Previous wording

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

Current wording

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

Previous wording

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

Current wording

The following is a discussion and analysis of the Company’s results of operations for the three and six months ended June 30, 2024 compared with the three and six months ended June 30, 2023.

Previous wording

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

Current wording

Net sales for both the three and six months ended June 30, 2024 decreased 5% as compared to the same prior year periods. Organic net sales for the same periods decreased 4% and 5%, respectively, as a result of lower volumes, largely as a result of market conditions in the Health & Science Technologies businesses, partially offset by price capture across all segments.

Previous wording

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

Current wording

Selling, general and administrative expenses for the three and six months ended June 30, 2024 increased primarily due to the $2.1 million and $5.6 million impact from acquisitions, net of divestitures, including amortization, respectively, as well as increased professional services and discretionary spending as compared to the same prior year periods.

Previous wording

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

Current wording

Restructuring expenses and asset impairments decreased in the three and six months ended June 30, 2024 primarily due to lower severance costs compared with the same periods in 2023. Severance costs were incurred in conjunction with cost mitigation efforts as a result of market conditions.

Previous wording

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

Current wording

Interest expense – net for thethree and six months ended June 30, 2024 decreased compared to the same periods in 2023 due to a decrease in the amount of debt outstanding andhigher interest earned on cash balances in 2024, partially offset by increases in interest rates on outstanding debt, which increased interest expense by approximately $0.6 million and $1.4 million for the three and six months ended June 30, 2024, respectively.

Previous wording

The Company’s provision for income taxes is based upon estimated annual tax rates for the year applied to federal, state and foreign income. The provision for income taxes decreased to $33.2 million for the three months ended March 31, 2024 from $40.0 million during the same period in 2023. The effective tax rate decreased to 21.5% for the three months ended March 31, 2024 from 22.2% during the same period in 2023 primarily due to benefits related to the finalization of tax impacts with taxing authorities of a previously recorded legal entity restructuring.

Current wording

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 effective tax rate was 21.2% and 21.4% for the three and six months ended June 30, 2024, respectively, as compared to 22.4% and 22.3% during the same periods in 2023, respectively. The decrease in effective tax rate during the three and six months ended June 30, 2024 was primarily due to benefits realized in the second quarter of 2024 related to the finalization of prior years’ research and development tax incentives with taxing authorities in a foreign jurisdiction. The decrease in the effective tax rate during the six months ended June 30, 2024 also reflected the finalization of tax impacts of a previously recorded legal entity restructuring.

Previous wording

The Company has three reportable segments: Fluid & Metering Technologies (“FMT”), Health & Science Technologies (“HST”) and Fire & Safety/Diversified Products (“FSDP”). For a detailed description of the operations within each segment, refer to Note 3, “Business Segments,”in the Notes to Condensed Consolidated Financial Statements. Management’s primary measurements of segment performance are Net sales, adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and Adjusted EBITDA margin.

Current wording

The Company has three reportable segments: Fluid & Metering Technologies (“FMT”), Health & Science Technologies (“HST”) and Fire & Safety/Diversified Products (“FSDP”). For a detailed description of the operations within each segment, refer to Note 13, “Business Segments and Geographic Information,”in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Management’s measurements of segment performance are Net sales, adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and Adjusted EBITDA margin.

Previous wording

The table below illustrates the share of Net sales and Adjusted EBITDA contributed by each segment on the basis of total segments (not total Company) for the three months ended March 31, 2024.

Current wording

The table below illustrates the share of Net sales and Adjusted EBITDA contributed by each segment on the basis of total segments (not total Company) for the three and six months ended June 30, 2024.

Previous wording

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

Current wording

(1) Segment Adjusted EBITDA excludes the impact of unallocated corporate costs of $21.5 million and $51.4 million for the three and six months ended June 30, 2024, respectively.

Previous wording

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

Current wording

•Adjusted EBITDA margin for the three and six months ended June 30, 2024 decreased primarily due to higher discretionary spending, lower volume leverage and higher employee-related costs, partially offset by strong price/cost and favorable operational productivity. The six months ended June 30, 2024 were also negatively impacted by unfavorable mix.

Previous wording

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

Current wording

•Organic net sales for the three and six months ended June 30, 2024 were negatively impacted by lower volumes driven by continued broad based market softness, which began in the second half of 2023. This decrease was partially offset by price capture.

Previous wording

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

Current wording

•Excluding the net accretive impact of acquisitions and divestitures, Adjusted EBITDA margin for the three and six months ended June 30, 2024 decreased primarily due to lower volume leverage, unfavorable mix and higher employee-related costs, partially offset by favorable operational productivity, strong price/cost and lower discretionary spending.

Previous wording

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

Current wording

•Organic net sales for the three and six months ended June 30, 2024 were positively impacted by price capture across all markets, which more than offset the impact of slightly lower volumes as compared to the same prior year periods.

Previous wording

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

Current wording

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

Previous wording

Operating working capital increased $9.2 million to $678.1 million at March 31, 2024. Acquisitions and foreign currency translation decreased Operating working capital by $5.9 million during the first quarter of 2024. Apart from these items, receivables increased due to strong price capture, which more than offset the impact of lower volumes; inventories increased to support planned production; and accounts payable increased as a result of higher inventory purchases.

Current wording

Operating working capital increased $12.8 million to $681.7 million at June 30, 2024. Acquisitions, divestitures and foreign currency translation decreased Operating working capital by $19.6 million during the six months ended June 30, 2024. Apart from these items, receivables increased due to strong price capture, which more than offset the impact of lower volumes and inventories increased to support planned production.

Previous wording

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

Current wording

Cash flows provided by operating activities increased $1.1 million to $290.2 million in the six months ended June 30, 2024 primarily due to lower cash payments including payments for variable compensation and lower tax payments in 2024 compared to the prior year, largely offset by lower earnings in 2024 compared to the prior year and higher investments in working capital driven by higher inventory purchases to support planned production and increased receivables due to strong price capture.

Previous wording

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

Current wording

Cash flows used in financing activities primarily consisted of dividends of $100.7 million and $93.9 million paid to common shareholders during the six months ended June 30, 2024 and 2023, respectively. Additionally, the Company repaid $25.0 million of the $50.0 million previously outstanding under the Term Facility during the six months ended June 30, 2024.

Previous wording

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

Current wording

The increase in free cash flow for the six months ended June 30, 2024 as compared to 2023 is primarily due to lower capital expenditures in 2024 compared with the six months ended June 30, 2023.

Previous wording

Capital expenditures generally include machinery and equipment that support growth and improved productivity, tooling, business system technology, replacement of equipment and investments in new facilities. The Company believes it has sufficient operating cash flows to continue to meet current obligations and invest in planned capital expenditures. Cash flows from operations were more than adequate to fund capital expenditures of $20.0 million and $26.6 million in the first three months of 2024 and 2023, respectively.

Current wording

Capital expenditures generally include machinery and equipment that support growth and improved productivity, tooling, business system technology, replacement of equipment and investments in new facilities. The Company believes it has sufficient operating cash flows to continue to meet current obligations and invest in planned capital expenditures. Cash flows from operations were more than adequate to fund capital expenditures of $35.9 million and $48.2 million in the first six months of 2024 and 2023, respectively.

Previous wording

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

Current wording

There were no share repurchases during the six months ended June 30, 2024. During the six months ended June 30, 2023, the Company repurchased 5,400 shares at a cost of $1.1 million, of which $0.1 million was settled in July 2023. As of June 30, 2024, the amount of share repurchase authorization remaining was $539.7 million. For additional information regarding the Company’s share repurchase program, refer to Note 11, “Share Repurchases,” in the Notes to Condensed Consolidated Financial Statements.

Previous wording

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

Current wording

Total dividend payments to common shareholders were $100.7 million during the six months ended June 30, 2024 compared with $93.9 million during the six months ended June 30, 2023.

Previous wording

The key financial covenants that the Company is required to maintain in connection with the Revolving Facility, the Term Facility, the 3.37% Senior Notes and the 5.13% Senior Notes, are a minimum interest coverage ratio of 3.0 to 1 and a maximum leverage ratio of 3.50 to 1. At March 31, 2024, the Company was in compliance with these financial covenants, as the Company’s interest coverage ratio was 18.48 to 1 for covenant calculation purposes and the leverage ratio was 1.49 to 1. There are no financial covenants relating to the 2.625% Senior Notes or the 3.00% Senior Notes; however, both are subject to cross-default provisions.

Current wording

The key financial covenants that the Company is required to maintain in connection with the Revolving Facility, the Term Facility, the 3.37% Senior Notes and the 5.13% Senior Notes, are a minimum interest coverage ratio of 3.0 to 1 and a maximum leverage ratio of 3.50 to 1. At June 30, 2024, the Company was in compliance with these financial covenants, as the Company’s interest coverage ratio was 18.73 to 1 for covenant calculation purposes and the leverage ratio was 1.50 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.

Previous wording

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

Current wording

The Company had $21.2 million of letters of credit as of June 30, 2024, primarily issued as security for insurance and other performance obligations. Of the $21.2 million of letters of credit, only $2.7 million reduced the Company’s borrowing capacity under the Revolving Facility as of June 30, 2024.

Previous wording

As discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. There have been no changes to the Company’s critical accounting estimates described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

There have been no changes to the Company’s critical accounting estimates described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

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

Current wording

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