IDEX(IEX) - 2024 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements The company's unaudited condensed consolidated financial statements for Q1 2024 show key performance metrics Condensed Consolidated Statements of Income Net sales and net income declined in Q1 2024 compared to the prior-year period Q1 2024 vs Q1 2023 Income Statement Highlights | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net sales | $800.5 million | $845.4 million | | Gross profit | $357.4 million | $382.5 million | | Operating income | $161.2 million | $192.3 million | | Net income attributable to IDEX | $121.4 million | $139.8 million | | Diluted EPS attributable to IDEX | $1.60 | $1.84 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income significantly decreased due to a negative cumulative translation adjustment Q1 2024 vs Q1 2023 Comprehensive Income | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net income | $121.3 million | $139.8 million | | Other comprehensive (loss) income | $(64.4) million | $37.0 million | | Comprehensive income attributable to IDEX | $57.0 million | $176.8 million | Condensed Consolidated Balance Sheets Total assets slightly increased while total liabilities decreased as of March 31, 2024 Balance Sheet Summary | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $1,554.5 million | $1,446.3 million | | Total assets | $5,889.4 million | $5,865.2 million | | Total current liabilities | $460.6 million | $500.3 million | | Total liabilities | $2,271.1 million | $2,324.0 million | | Total shareholders' equity | $3,618.6 million | $3,541.4 million | Condensed Consolidated Statements of Equity Total equity increased, driven by net income but partially offset by translation adjustments - Total equity increased to $3,618.3 million at March 31, 2024, from $3,541.2 million at December 31, 2023[22] - This change was primarily due to net income of $121.3 million, offset by a negative cumulative translation adjustment of $64.3 million[22] Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased, contributing to a higher cash balance at the end of Q1 2024 Q1 2024 vs Q1 2023 Cash Flow Summary | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $156.6 million | $147.9 million | | Net cash used in investing activities | $(20.0) million | $(29.2) million | | Net cash used in financing activities | $(41.0) million | $(45.2) million | | Net increase in cash | $82.0 million | $80.5 million | | Cash and cash equivalents at end of period | $616.3 million | $510.7 million | Notes to Condensed Consolidated Financial Statements This section details accounting policies, acquisitions, segment performance, and other financial data Note 2. Acquisitions The company details two acquisitions from 2023 within the Health & Science Technologies segment - On May 19, 2023, the Company acquired Iridian Spectral Technologies for $109.8 million in cash, recognizing $52.7 million in goodwill and $45.6 million in intangible assets[31] - On December 14, 2023, the Company acquired STC Material Solutions for $200.4 million in cash, recognizing $104.5 million in goodwill and $92.3 million in intangible assets[33] - In Q1 2024, the company recorded a $2.5 million fair value inventory step-up charge in Cost of Sales related to the 2023 acquisition of STC[37] Note 3. Business Segments The company reports performance across its three segments: FMT, HST, and FSDP Segment Performance - Three Months Ended March 31 | Segment | Net Sales 2024 | Net Sales 2023 | Adjusted EBITDA 2024 | Adjusted EBITDA 2023 | | :--- | :--- | :--- | :--- | :--- | | Fluid & Metering Technologies | $313.7 M | $321.8 M | $105.4 M | $106.2 M | | Health & Science Technologies | $310.1 M | $351.0 M | $81.4 M | $100.7 M | | Fire & Safety/Diversified Products | $178.0 M | $174.4 M | $51.4 M | $49.7 M | Note 4. Revenue Revenue is disaggregated by geography, with the U.S, Europe, and Asia as the top three markets Revenue by Geographical Region (Q1 2024) | Region | Net Sales (in millions) | | :--- | :--- | | U.S. | $397.6 | | Europe | $207.9 | | Asia | $131.1 | | North America (ex-U.S.) | $29.3 | | Other | $35.9 | - Revenue from products and services transferred at a point in time constituted approximately 95% of total revenue for the first quarters of both 2024 and 2023[46] Note 7. Goodwill and Intangible Assets Goodwill decreased due to foreign currency translation, and no impairment was recorded in Q1 2024 - The carrying amount of goodwill decreased by $35.3 million in Q1 2024, from $2,838.3 million to $2,803.0 million, mainly due to a $35.8 million negative impact from foreign currency translation[55] - No impairment of goodwill or indefinite-lived intangible assets was recorded as of the last annual test on October 31, 2023, and no interim impairment test was required during Q1 2024[55][56] Estimated Future Amortization Expense | Period | Estimated Amortization (in millions) | | :--- | :--- | | Remainder of 2024 | $72.5 | | 2025 | $95.3 | | 2026 | $93.7 | | 2027 | $90.4 | | 2028 | $87.3 | Note 8. Borrowings Total borrowings remained stable, and the company maintained significant available borrowing capacity - As of March 31, 2024, total borrowings were $1,330.9 million, and the company had approximately $717.8 million in available borrowing capacity under its Revolving Facility[58] Note 11. Share Repurchases No shares were repurchased during the first quarter of 2024 - No share repurchases were made in the first three months of 2024, with $539.7 million remaining under the repurchase program authorization as of March 31, 2024[66] Note 12. Share-Based Compensation Share-based compensation expense slightly increased compared to the prior-year period Share-Based Compensation Expense (Pre-tax) | Award Type | Q1 2024 Expense | Q1 2023 Expense | | :--- | :--- | :--- | | Stock options | $5.4 million | $6.0 million | | Restricted stock | $2.0 million | $1.6 million | | Cash-settled restricted stock | $1.9 million | $1.1 million | | Performance share units | $5.1 million | $5.2 million | | Total | $14.4 million | $13.9 million | Note 15. Income Taxes The effective tax rate decreased in Q1 2024 due to a discrete tax benefit Income Tax Provision and Effective Rate | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Provision for income taxes | $33.2 million | $40.0 million | | Effective tax rate | 21.5% | 22.2% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 5% decrease in net sales and a 9% decrease in Adjusted EBITDA for Q1 2024 Overview The company faced market softness in Q1 2024, resulting in lower sales but strong free cash flow Q1 2024 Financial Highlights vs. Q1 2023 | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $800.5 M | $845.4 M | (5%) | | Change in organic net sales | | | (6%) | | Net income attributable to IDEX | $121.4 M | $139.8 M | (13%) | | Adjusted EBITDA | $208.3 M | $229.8 M | (9%) | | Diluted EPS attributable to IDEX | $1.60 | $1.84 | (13%) | | Adjusted diluted EPS | $1.88 | $2.09 | (10%) | | Free cash flow | $136.6 M | $121.3 M | 13% | Results of Operations Net sales decreased 5% year-over-year due to a 6% organic decline from lower volumes - Q1 2024 net sales decreased 5% YoY, reflecting a 6% organic sales decline from lower volumes, particularly in Health & Science Technologies, partially offset by a 1% increase from acquisitions and price capture[91] - Gross profit and margin decreased due to lower volume leverage and higher employee-related costs, partially offset by strong price/cost dynamics and operational productivity[92] - The effective tax rate decreased to 21.5% from 22.2% in the prior year, primarily due to benefits from finalizing tax impacts of a previous legal entity restructuring[97] Results of Reportable Business Segments The HST segment saw a significant sales decline, while FSDP grew and FMT saw a modest decline Segment Contribution (Q1 2024) | Segment | % of Net Sales | % of Adjusted EBITDA | | :--- | :--- | :--- | | FMT | 39% | 44% | | HST | 39% | 34% | | FSDP | 22% | 22% | Fluid & Metering Technologies Segment FMT segment net sales decreased by 3% organically, but Adjusted EBITDA margin expanded - Organic net sales were negatively impacted by lower volumes in industrial markets, partially offset by price capture[106] Health & Science Technologies Segment HST segment sales declined 13% organically due to lower volumes from market slowness and inventory recalibration - Organic net sales were negatively impacted by lower volumes in analytical instrumentation, life sciences, and semiconductor markets, largely due to inventory recalibration and market slowness[104] - Organic Adjusted EBITDA margin decreased due to lower volume leverage, higher employee-related costs, and unfavorable mix, despite favorable productivity and strong price/cost[105] Fire & Safety/Diversified Products Segment FSDP segment net sales grew 2% organically, driven by price capture with flat volumes - Organic net sales were positively impacted by price capture across all markets, with volumes remaining flat period over period[110] Liquidity and Capital Resources The company maintains a strong liquidity position with significant cash reserves and available credit Key Liquidity Metrics (March 31, 2024) | Metric | Value | | :--- | :--- | | Working capital | $1,093.9 million | | Current ratio | 3.4 to 1 | | Cash and cash equivalents | $616.3 million | | Revolving Facility availability | $717.8 million | - Operating working capital increased by $9.2 million to $678.1 million at March 31, 2024, driven by higher receivables and inventories[110][111] - The company was in compliance with its key financial covenants, with an interest coverage ratio of 18.48 to 1 (vs minimum 3.0 to 1) and a leverage ratio of 1.49 to 1 (vs maximum 3.50 to 1)[121] Free Cash Flow Free cash flow increased due to higher operating cash flow and lower capital expenditures Free Cash Flow Reconciliation | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Cash flows from operating activities | $156.6 M | $147.9 M | | Less: capital expenditures | $20.0 M | $26.6 M | | Free cash flow | $136.6 M | $121.3 M | Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the market risks disclosed in the 2023 Annual Report - There were no material changes in market risks from those disclosed in the 2023 Annual Report on Form 10-K[136] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024 - Based on an evaluation as of March 31, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[138] - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[139] Part II. Other Information Item 1. Legal Proceedings The company is involved in ordinary legal proceedings, including asbestos-related lawsuits not expected to be material - The company and its subsidiaries are defendants in several asbestos-related personal injury lawsuits, which management does not currently believe will have a material adverse effect on the company's financial position or results[143] Item 1A. Risk Factors There have been no material changes to the risk factors disclosed in the 2023 Annual Report - There were no material changes in risk factors from those disclosed in the 2023 Annual Report on Form 10-K[144] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No common stock was repurchased in Q1 2024, with $539.7 million remaining under the authorization Share Repurchase Activity (Q1 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining Under Plans | | :--- | :--- | :--- | :--- | | Jan 2024 | 0 | $— | $539,689,117 | | Feb 2024 | 0 | $— | $539,689,117 | | Mar 2024 | 0 | $— | $539,689,117 | | Total | 0 | $— | $539,689,117 | Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading plans in Q1 2024 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the quarter ended March 31, 2024[146] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including required certifications