IDEX CORP DE

Liquidity

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

Mott was acquired during the third quarter of 2024 for cash consideration of $986.2 million, net of cash acquired of $3.1 million. The acquisition was funded using a combination of cash on hand of $211.9 million, borrowings under the Company’s Revolving Facility of $279.3 million, and the net proceeds from the issuance of the 4.950% Senior Notes of $495.0 million. For additional information regarding the borrowings under the Company’s Revolving Facility and the 4.950% Senior Notes, refer to Note 8, “Borrowings,” in the Notes to Condensed Consolidated Financial Statements.

Select key liquidity metrics at September 30, 2024 are as follows:

Operating Working Capital

Operating working capital, calculated as Receivables – net plus Inventories – net minus Trade accounts payable, is used by management as a measurement of operational results as well as the short-term liquidity of the Company. The following table details Operating working capital as of September 30, 2024 and December 31, 2023:

Operating working capital increased $84.0 million to $752.9 million at September 30, 2024. Acquisitions, divestitures and foreign currency translation increased Operating working capital by $64.0 million during the nine months ended September 30, 2024. Apart from these items, receivables increased due to strong price capture, which more than offset the impact of lower volumes; inventories increased to support planned production; and accounts payable increased as a result of higher inventory purchases and timing of payments.

Cash Flow Summary

The following table is derived from the Condensed Consolidated Statements of Cash Flows:

Operating Activities

Cash flows provided by operating activities decreased $20.2 million in the nine months ended September 30, 2024 as compared to the same prior year period primarily due to lower earnings in 2024 compared to the prior year and higher investments in operating working capital driven by higher inventory purchases to support planned production and increased receivables due to strong price capture, partially offset by lower cash payments including payments for taxes and variable compensation in 2024 compared to the prior year.

Investing Activities

Cash flows used in investing activities increased $901.8 million during the nine months ended September 30, 2024 as compared to the prior year period. The net impact of acquisitions and divestitures increased cash used in investing activities $939.4 million during the nine months ended September 30, 2024 as compared to the same prior year period, primarily related to the acquisition of Mott during the third quarter of 2024. This increase in cash outflows was partially offset by the absence of purchases of marketable securities from the prior year period and lower capital expenditures, which decreased cash used in investing activities by $24.6 million and $18.7 million, respectively, as compared to the prior year period. For additional information on the Company’s acquisition and divestitures, refer to Note 2, “Acquisitions and Divestitures,” in the Notes to Condensed Consolidated Financial Statements.

Financing Activities

Cash flows from financing activities increased $893.4 million during the nine months ended September 30, 2024 as compared to the prior year period, primarily due to $774.8 million of net proceeds in connection with the financing of the acquisition of Mott. Additionally, repayments of the Term Facility were $125.0 million lower during the nine months ended September 30, 2024 than in the prior year period. These increases in cash flows were partly offset by slightly higher dividends paid to shareholders, which increased $10.7 million in the nine months ended September 30, 2024 as compared to the prior year period.

Free Cash Flow

The Company believes free cash flow, a non-GAAP measure, is an important measure of performance because it provides a measurement of cash generated from operations that is available for payment obligations such as operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and postretirement funding requirements and quarterly dividend payments to holders of the Company’s common stock as well as for funding acquisitions and share repurchases. Free cash flow is calculated as cash flows provided by operating activities less capital expenditures.

The following table reconciles cash flows provided by operating activities to free cash flow:

Cash Requirements

Subsequent Borrowings Activity

During October 2024, the Company repaid$69.1 million of the $360.6 million outstanding under the Revolving Facility as well asthe remaining$25.0 million balance outstanding under the Term Facility at September 30, 2024.

Capital Expenditures

Capital expenditures generally include machinery and equipment that support growth and improved productivity, tooling, business system technology, replacement of equipment and investments in new facilities. The Company believes it has sufficient operating cash flows to continue to meet current obligations and invest in planned capital expenditures. Cash flows from operations were more than adequate to fund capital expenditures of $49.6 million and $68.3 million in the first nine months of 2024 and 2023, respectively.

Share Repurchases

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

Dividends

Total dividend payments to common shareholders were $153.0 million during the nine months ended September 30, 2024 compared with $142.3 million during the nine months ended September 30, 2023.

Covenants

The key financial covenants that the Company is required to maintain in connection with the Revolving Facility, the Term Facility, the 3.37% Senior Notes and the 5.13% Senior Notes, are a minimum interest coverage ratio of 3.0 to 1 and a maximum leverage ratio of 3.50 to 1. At September 30, 2024, the Company was in compliance with these financial covenants, as the Company’s interest coverage ratio was 18.19 to 1 for covenant calculation purposes and the leverage ratio was 2.39 to 1. There are no financial covenants relating to the 2.625% Senior Notes, the 3.00% Senior Notes and the 4.950% Senior Notes; however, all are subject to cross-acceleration provisions.

Credit Ratings

The Company’s credit ratings, which were independently developed by the following credit agencies, are detailed below:

•S&P Global Ratings reaffirmed the Company’s corporate credit rating of BBB (stable outlook) in September 2024.

•Moody’s Investors Service affirmed the Company’s corporate credit rating of Baa2 (stable outlook) in August 2024.

•Fitch Ratings reaffirmed the Company’s corporate credit rating of BBB+ (stable outlook) in June 2024.

Off-Balance Sheet Arrangements

The Company had $47.0 million of letters of credit as of September 30, 2024, primarily issued as security for insurance and other performance obligations. Of the $47.0 million of letters of credit, only $2.7 million reduced the Company’s borrowing capacity under the Revolving Facility as of September 30, 2024. The Company has restricted cash of $18.1 million as of September 30, 2024, which represents cash held as collateral for standby letters of credit issued by Mott and is required to keep the balance in a separate account for the duration of the letters of credit.

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

Critical Accounting Estimates

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

Non-GAAP Disclosures

Set forth below are reconciliations of Organic net sales, Adjusted gross profit, Adjusted gross margin, Adjusted net income attributable to IDEX, Adjusted diluted earnings per share (“EPS”) attributable to IDEX, Consolidated Adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and Consolidated Adjusted EBITDA margin to their respective most directly comparable U.S. GAAP measure. Management uses these metrics to measure performance of the Company since they exclude items that are not reflective of ongoing operations, as identified in the reconciliations below. Management also supplements its U.S. GAAP financial statements with adjusted information to provide investors with greater insight, transparency and a more comprehensive understanding of the information used by management in its financial and operational decision making.

Management uses Adjusted EBITDA as its principal measure of segment performance, and believes it is a useful indicator of the strength and performance of the Company and its segments’ ongoing business operations, as well as a way for investors to evaluate and compare operating performance and value companies within the Company’s industry. Management believes that Adjusted EBITDA margin is useful for the same reason as Adjusted EBITDA. The definition of Adjusted EBITDA used here may differ from that used by other companies.

This report also references free cash flow. This non-GAAP measure is discussed and reconciled to its most directly comparable GAAP measure in the section above titled “Free Cash Flow.”

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

All table footnotes can be found at the end of this Non-GAAP Disclosures section.

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

(2)Activity recorded in the three months ended September 30, 2024 represents the finalization of the gain on the sale of Alfa Valvole resulting in a $0.6 million downward adjustment during the third quarter of 2024.

(3) Represents a reserve on an investment with a collaborative partner recorded in Other expense (income) – net during the nine months ended September 30, 2023. During the fourth quarter of 2023, the Company converted the promissory note receivable from the collaborative partner to equity, resulting in a cost method investment with zero value.