IDEX CORP DE

Previous wording

IDEX is an applied solutions provider 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, 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

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

Current wording

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

Previous wording

The following is a discussion and analysis of the Company’s results of operations for the year ended December 31, 2023 compared with the year ended December 31, 2022. For the discussion related to the consolidated results of operations for the year ended December 31, 2022 compared with the year ended December 31, 2021, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the Securities and Exchange Commission (“SEC”) on February 23, 2023.

Current wording

The following is a discussion and analysis of the Company’s results of operations for the year ended December 31, 2024 compared with the year ended December 31, 2023. For the discussion related to the consolidated results of operations for the year ended December 31, 2023 compared with the year ended December 31, 2022, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 22, 2024.

Previous wording

•The decrease in organic net sales was attributed to the following:

Current wording

Net sales were relatively flat compared to the prior year, reflecting a 2% increase in acquisitions, net of divestitures, offset by a 2% decrease in organic net sales. The decrease in organic net sales was driven by lower volumes as a result of unfavorable market conditions, primarily in the Health & Science Technologies segment, partially offset by price capture across all segments.

Previous wording

Selling, general and administrative expenses increased primarily due to the $49.1 million impact from acquisitions, including amortization, net of divestitures, as well as increases in employee-related costs, which were largely offset by a decrease in variable compensation.

Current wording

Selling, general and administrative expenses increased primarily due to the $31.1 million impact from acquisitions, including amortization, net of divestitures, as well as higher employee-related costs and increased discretionary spending and transaction expenses.

Previous wording

Restructuring expenses and asset impairments decreased primarily due to an asset impairment charge of $16.8 million related to the exit of a COVID-19 testing application in 2022, partially offset by higher severance costs in 2023 incurred in conjunction with cost mitigation efforts as a result of current market conditions. See Note 14 in the Notes to the Consolidated Financial Statements for further detail.

Current wording

Restructuring expenses and asset impairments decreased primarily due to lower severance costs. Severance costs during both periods were incurred in conjunction with cost mitigation efforts as a result of market conditions.

Previous wording

In 2023, the Company completed the sale of Micropump for proceeds of $110.3 million, net of cash remitted, which resulted in a pre-tax gain of $93.8 million, and the sale of Novotema, SpA (“Novotema”) for proceeds of $8.3 million, net of cash remitted, which resulted in a loss of $9.1 million. In 2022, the Company completed the sale of Knight LLC (“Knight”) for proceeds of $49.4 million, net of cash remitted, which resulted in a pre-tax gain of $34.8 million.

Current wording

In 2024, the Company completed the sale of Alfa Valvole, Srl (“Alfa Valvole”) for proceeds of $45.1 million, net of cash remitted, resulting in a gain on the sale of $4.0 million, net of a release of cumulative foreign currency translation losses of $5.5 million. In 2023, the Company completed the sale of Micropump, Inc. (“Micropump”) for proceeds of $110.3 million, net of cash remitted, which resulted in a pre-tax gain of $93.8 million, and the sale of Novotema, SpA (“Novotema”) for proceeds of $8.3 million, net of cash remitted, which resulted in a loss of $9.1 million. For additional information, refer to Note 2, “Acquisitions and Divestitures,” in the Notes to Consolidated Financial Statements.

Previous wording

Other expense (income) - net was $5.2 million of expense in 2023 compared to $3.9 million of income in 2022. The increase in expense was primarily due to a $7.7 million credit loss reserve on an investment with a collaborative partner (see Note 3 in the Notes to Consolidated Financial Statements for further detail), higher foreign currency transaction losses and $2.7 million of gains on the sale of assets in 2022 that did not reoccur in 2023, partially offset by higher interest earned on cash balances and gains on the sale of trading securities in 2023.

Current wording

Other (income) expense – net was $2.6 million of income in 2024 compared to $5.2 million of expense in 2023. The change was primarily due to the absence of a $7.7 million credit loss reserve on an investment with a collaborative partner (see Note 3, “Collaborative Investments,” in the Notes to Consolidated Financial Statements for further detail) in 2023 that did not reoccur in 2024.

Previous wording

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

Current wording

In October 2021, members of the Organization for Economic Co-operation and Development (“OECD”) and G20 Inclusive Framework on Base Erosion and Profit Shifting agreed to a two-pillar solution to address the tax challenges associated with the digitalization of the economy. In December 2021, the OECD released the Pillar Two Model Rules (“Pillar Two”), which define the global minimum tax and call for the taxation of large corporations at a minimum rate of 15%. While it is uncertain whether the United States will enact legislation to adopt Pillar Two, certain countries in which we operate have enacted legislation, and other countries are in the process of introducing draft legislation to implement the minimum tax directive. Many aspects of Pillar Two became effective January 1, 2025; however, nearly all of the jurisdictions in which IDEX operates have an effective tax rate above the 15% threshold. The Company does not expect a material impact from the Pillar Two income tax rules. We are continuing to monitor legislative developments and evaluate financial results for changes in the expected impact.

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, please refer to Part I, Item 1,“Business”of this Annual Report on Form 10-K.

Current wording

The Company has three reportable segments: FMT, HST and FSDP. For a detailed description of the operations within each segment, please refer to Part I, Item 1,“Business”of this Annual Report on Form 10-K.

Previous wording

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

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

•Organic net sales were positively impacted by the following:

Current wording

•Organic net sales were positively impacted by price capture and targeted growth initiatives, which were offset by lower volumes, driven primarily by softness in agriculture and energy markets. Strength in municipal water markets was muted by softness in the semiconductor capital construction market within our water business.

Previous wording

•The increase in Adjusted EBITDA margin was primarily due to strong price/cost and favorable operational productivity, partially offset by higher employee-related costs.

Current wording

•Adjusted EBITDA margin decreased primarily due to higher employee-related costs, higher discretionary spending and unfavorable mix, partially offset by strong price/cost and favorable operational productivity, net of lower volume leverage.

Previous wording

(2)Acquisitions included Iridian acquired in May 2023 and STC acquired in December 2023. Divestitures included Micropump sold in August 2023 and Novotema sold in December 2023.

Current wording

(1)Acquisitions included Iridian Spectral Technologies acquired in May 2023, STC Material Solutions acquired in December 2023 and Mott acquired in September 2024. Divestitures included Micropump sold in August 2023 and Novotema sold in December 2023.

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

Previous wording

Operating working capital decreased $35.9 million to $668.9 million at December 31, 2023. Acquisitions, divestitures and foreign currency translation increased Operating working capital by $17.5 million during 2023. Apart from these items, reduced inventory levels were partly offset by lower levels of accounts payable, and strong price capture partially offset the impact of lower volume on receivables.

Current wording

Operating working capital increased $28.9 million to $697.8 million at December 31, 2024. Acquisitions, divestitures and foreign currency translation increased Operating working capital by $38.0 million during 2024. Apart from these items, receivables increased due to strong price capture, which more than offset the impact of lower volumes; inventories decreased with lower volumes and targeted actions to lower inventory levels; and accounts payable increased as a result of timing of payments for inventory purchases.

Previous wording

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.

Current wording

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. Free cash flow conversion is calculated as free cash flow divided by adjusted net income attributable to IDEX.

Previous wording

•Borrowings and related interest - See Note 7 in the Notes to Consolidated Financial Statements for further detail of the Company’s debt and timing of expected future principal payments.

Current wording

•Borrowings and related interest - See Note 7, “Borrowings,” in the Notes to Consolidated Financial Statements for further detail of the Company’s debt and timing of expected future principal payments.

Previous wording

•Rental payments under operating leases - See Note 9 in the Notes to Consolidated Financial Statements for further detail of our obligations and the timing of expected future payments.

Current wording

•Rental payments for leases - See Note 9, “Leases,” in the Notes to Consolidated Financial Statements for further detail of our obligations and the timing of expected future payments.

Previous wording

•Purchase obligations - The Company enters into purchase orders with vendors and other parties in the ordinary course of business. As of December 31, 2023, the Company’s purchase obligations, consisting primarily of inventory commitments, totaled approximately $265.6 million, of which $238.1 million is expected to be settled during 2024 and the remainder thereafter.

Current wording

•Purchase obligations - The Company enters into purchase orders with vendors and other parties in the ordinary course of business. As of December 31, 2024, the Company’s purchase obligations, consisting primarily of inventory commitments, totaled approximately $296.8 million, of which $271.1 million is expected to be settled during 2025 and the remainder thereafter.

Previous wording

•Pension and post-retirement medical benefit plans - See Note 17 in the Notes to Consolidated Financial Statements for further detail of our obligations and the timing of expected future payments.

Current wording

•Pension and post-retirement medical benefit plans - See Note 17, “Retirement Benefits,” in the Notes to Consolidated Financial Statements for further detail of our obligations and the timing of expected future payments.

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 $89.9 million and $68.0 million in 2023 and 2022, 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 $65.1 million and $89.9 million in 2024 and 2023, respectively.

Previous wording

The Company repurchased 124,600 shares at a cost of $24.2 million in 2023. The Company repurchased 795,423 shares at a cost of $148.1 million in 2022. As of December 31, 2023, 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 in the Notes to Consolidated Financial Statements.

Current wording

There were no share repurchases in 2024. The Company repurchased 124,600 shares at a cost of $24.2 million in 2023. As of December 31, 2024, the amount of share repurchase authorization remaining was $539.7 million. During February 2025, the Company repurchased a total of 256,159 shares at a cost of $50.0 million. For additional information regarding the Company’s share repurchase program, refer to Note 11, “Share Repurchases,” in the Notes to Consolidated Financial Statements.

Previous wording

The Company increased its quarterly cash dividend by 7% from $0.60 per common share in 2022 to $0.64 per common share in 2023. Total dividend payments to common shareholders were $190.7 million in 2023 compared with $177.4 million in 2022.

Current wording

The Company increased its quarterly cash dividend by 8% from $0.64 per common share in 2023 to $0.69 per common share in 2024. Total dividend payments to common shareholders were $205.3 million in 2024 compared with $190.7 million in 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 December 31, 2023, the Company was in compliance with both of these financial covenants, as the Company’s interest coverage ratio was 18.43 to 1 for covenant calculation purposes and the leverage ratio was 1.45 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. For a discussion of the Company’s Revolving Facility and Senior Notes as well as the associated covenants, refer to Note 7 in the Notes to Consolidated Financial Statements.

Current wording

The key financial covenants that the Company is required to maintain in connection with the Revolving 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 December 31, 2024, the Company was in compliance with both of these financial covenants, as the Company’s interest coverage ratio was 16.09 to 1 for covenant calculation purposes and the leverage ratio was 2.20 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 (each defined in Note 7, “Borrowings”); however, all are subject to cross-acceleration provisions. For a discussion of the Company’s Revolving Facility, Term Facility and Senior Notes as well as the associated covenants, refer to Note 7, “Borrowings,” in the Notes to Consolidated Financial Statements.

Previous wording

The Company had $10.5 million of letters of credit as of December 31, 2023, primarily issued as security for insurance and other performance obligations. Of the $10.5 million of letters of credit, only $3.4 million reduced the Company’s borrowing capacity under the Revolving Facility as of December 31, 2023.

Current wording

The Company had $38.1 million of letters of credit as of December 31, 2024, primarily issued as security for insurance and other performance obligations. Of the $38.1 million of letters of credit, only $2.8 million reduced the Company’s borrowing capacity under the Revolving Facility as of December 31, 2024. The Company has restricted cash of $18.1 million as of December 31, 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.

Previous wording

The Company believes that the application of the following accounting policy, which is important to its financial position and results of operations, requires significant judgments and estimates on the part of management. For a summary of the Company’s accounting policies, including the accounting policy discussed below, see Note 1 in the Notes to Consolidated Financial Statements.

Current wording

The Company believes that the application of the following accounting policy, which is important to its financial position and results of operations, requires significant judgments and estimates on the part of management. For a summary of the Company’s accounting policies, including the accounting policy discussed below, see Note 1, “Significant Accounting Policies,” in the Notes to Consolidated Financial Statements.

Previous wording

The key assumptions are updated every year for each reporting unit for the income and market approaches used to determine the fair value. Various assumptions are utilized including forecasted operating results, annual operating plans, strategic plans, economic projections, anticipated future cash flows, the weighted average cost of capital, market data and market multiples. The assumptions that have the most significant effect on the fair value calculations are the weighted average cost of capital, market multiples, forecasted EBITDA and terminal growth rates. The following assumption ranges were utilized by the Company in 2023 and 2022:

Current wording

The key assumptions are updated every year for each reporting unit for the income and market approaches used to determine the fair value. Various assumptions are utilized including forecasted operating results, annual operating plans, strategic plans, economic projections, anticipated future cash flows, the weighted average cost of capital, market data and market multiples. The assumptions that have the most significant effect on the fair value calculations are the weighted average cost of capital, market multiples, forecasted cash flows and terminal growth rates. The following assumption ranges were utilized by the Company in 2024 and 2023:

Previous wording

The Company’s acquisitions have generally included significant goodwill components and the Company expects to continue to make acquisitions. At December 31, 2023, goodwill and other indefinite-lived intangible assets totaled $2,929.2 million, or 50%, of the Company’s total assets.

Current wording

The Company’s acquisitions have generally included significant goodwill components and the Company expects to continue to make acquisitions. At December 31, 2024, goodwill and other indefinite-lived intangible assets totaled $3,342.6 million, or 50%, of the Company’s total assets.

Previous wording

See Note 6 in the Notes to Consolidated Financial Statements for further discussion on goodwill and indefinite-lived intangible assets.

Current wording

See Note 6, “Goodwill and Intangible Assets,” in the Notes to Consolidated Financial Statements for further discussion on goodwill and indefinite-lived intangible assets.

Previous wording

Set forth below are reconciliations of Organic net sales, Adjusted 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.

Current wording

Set forth below are reconciliations of Organic net sales, Adjusted gross profit, Adjusted gross margin, Adjusted net income attributable to IDEX, Adjusted diluted 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.

Previous wording

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.

Current wording

Management uses Adjusted EBITDA as its 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.

Previous wording

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.”

Current wording

This report also references free cash flow and free cash flow conversion. These non-GAAP measures are discussed and reconciled to their most directly comparable U.S. GAAP measure in the section above titled “Free Cash Flow.”

Previous wording

(2) The portion of sales attributable to foreign currency translation is calculated as the difference between (a) the period-to-period change in organic sales, and (b) the period-to-period change in organic sales after applying prior period foreign exchange rates to the current year period.

Current wording

(2) The portion of sales attributable to foreign currency translation is calculated as the difference between (a) the period-to-period change in organic net sales, and (b) the period-to-period change in organic net sales after applying prior period foreign exchange rates to the current year period.

Previous wording

(3)Change in Net sales includes the acceleration of previously deferred revenue of $17.9 million as a result of a customer’s decision to discontinue further investment in commercializing its COVID-19 testing application in 2022 that did not reoccur in 2023, the impact of which was excluded from Adjusted net sales. See Note 14 in the Notes to Consolidated Financial Statements for further detail.

Current wording

(3) The impact to Net sales represents the absence of the acceleration of previously deferred revenue of $17.9 million as a result of a customer’s decision to discontinue further investment in commercializing its COVID-19 testing application in 2022 that did not reoccur in 2023. See Note 14, “Restructuring Expenses and Asset Impairments,” in the Notes to Consolidated Financial Statements for further detail.

Previous wording

(4) Represents a reserve recorded on an investment with a collaborative partner. See Note 3 in the Notes to Consolidated Financial Statements for further detail.

Current wording

(4) Represents a reserve recorded on an investment with a collaborative partner. See Note 3, “Collaborative Investments,” in the Notes to Consolidated Financial Statements for further detail.