IDEX CORP /DE/ - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-----------------------------

FORM 10-Q

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED MARCH 31, 2003

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ________ TO _________
COMMISSION FILE NUMBER 1-10235

IDEX CORPORATION
(Exact Name of Registrant as Specified in its Charter)

DELAWARE 36-3555336
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

630 DUNDEE ROAD, NORTHBROOK, ILLINOIS 60062
(Address of principal executive offices) (Zip Code)

Registrant's telephone number: (847) 498-7070

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 [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes [X] No [ ]

Number of shares of common stock of IDEX Corporation outstanding as of
April 30, 2003: 32,494,719 (net of treasury shares).

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

IDEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

MARCH 31, DECEMBER 31,
----------- -----------
2003 2002
----------- -----------
(UNAUDITED)

ASSETS
Current assets
Cash and cash equivalents .......................................... $ 7,772 $ 6,952
Receivables - net .................................................. 107,353 101,494
Inventories ........................................................ 106,257 105,580
Other current assets ............................................... 10,004 7,234
--------- ---------
Total current assets ............................................. 231,386 221,260
Property, plant and equipment - net .................................... 144,373 148,246
Goodwill - net ......................................................... 532,821 530,663
Intangible assets - net ................................................ 19,301 19,377
Other noncurrent assets ................................................ 11,473 11,504
--------- ---------
Total assets ..................................................... $ 939,354 $ 931,050
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable ............................................. $ 54,915 $ 61,153
Dividends payable .................................................. 4,552 4,548
Accrued expenses ................................................... 43,111 42,631
--------- ---------
Total current liabilities ........................................ 102,578 108,332
Long-term debt ......................................................... 238,156 241,051
Other noncurrent liabilities ........................................... 78,613 74,876
--------- ---------
Total liabilities ................................................ 419,347 424,259

Shareholders' equity
Common stock, par value $.01 per share
Shares issued and outstanding: 2003 - 32,570,184; 2002 - 32,536,166 326 325
Additional paid-in capital ........................................ 183,383 182,538
Retained earnings ................................................. 339,776 331,635
Minimum pension liability adjustment .............................. (10,571) (10,571)
Accumulated translation adjustment ................................ 12,995 9,240
Treasury stock, at cost: 2003 and 2002 - 59,350 ................... (1,946) (1,946)
Unearned compensation on restricted stock ......................... (3,956) (4,430)
--------- ---------
Total shareholders' equity ....................................... 520,007 506,791
--------- ---------
Total liabilities and shareholders' equity ....................... $ 939,354 $ 931,050
========= =========

See Notes to Consolidated Financial Statements.

1

IDEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
2003 2002
-------- --------

Net sales ............................................. $195,498 $174,936
Cost of sales ......................................... 121,195 109,511
-------- --------
Gross profit .......................................... 74,303 65,425
Selling, general and administrative expenses .......... 50,902 42,919
-------- --------
Operating income ...................................... 23,401 22,506
Other income - net .................................... 20 203
-------- --------
Income before interest expense and income taxes ....... 23,421 22,709
Interest expense ...................................... 3,739 4,670
-------- --------
Income before income taxes ............................ 19,682 18,039
Provision for income taxes ............................ 6,987 6,494
-------- --------
Net income ............................................ $ 12,695 $ 11,545
======== ========

Basic earnings per common share ....................... .39 .38
======== ========
Diluted earnings per common share ..................... .39 .37
======== ========

Share data:
Basic weighted average common shares outstanding ...... 32,291 30,513
======== ========
Diluted weighted average common shares outstanding .... 32,805 31,544
======== ========

See Notes to Consolidated Financial Statements.

2

IDEX CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED SHAREHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)

COMMON UNEARNED
STOCK & MINIMUM COMPENSATION
ADDITIONAL PENSION ACCUMULATED ON TOTAL
PAID-IN RETAINED LIABILITY TRANSLATION TREASURY RESTRICTED SHAREHOLDERS'
CAPITAL EARNINGS ADJUSTMENT ADJUSTMENT STOCK STOCK EQUITY
---------- -------- ---------- ----------- --------- ------------ ------------

Balance, December 31, 2002 .......... $ 182,863 $ 331,635 $ (10,571) $ 9,240 $ (1,946) $ (4,430) $ 506,791
Net income .......................... 12,695 12,695
Other comprehensive income
Unrealized translation adjustment .. 3,755 3,755
----- ------
Other comprehensive income .... 3,755 3,755
------ ----- ------
Comprehensive income .......... 12,695 3,755 16,450
------ ----- ------
Issuance of 34,018 shares of
common stock from exercise of
stock options and deferred
compensation plans................. 846 846
Amortization of restricted stock .... 474 474
Cash dividends declared - $.14 per
common share outstanding ........... (4,554) (4,554)
--------- --------- --------- -------- -------- --------- ---------
Balance, March 31, 2003 ............. $ 183,709 $ 339,776 $ (10,571) $ 12,995 $ (1,946) $ (3,956) $ 520,007
========= ========= ========= ======== ======== ========= =========

See Notes to Consolidated Financial Statements.

3

IDEX CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------
2003 2002
-------- ---------

Cash flows from operating activities
Net income .................................................................................... $ 12,695 $ 11,545
Adjustments to reconcile to net cash provided by operations:
Depreciation and amortization ............................................................. 7,282 7,039
Amortization of intangibles ............................................................... 154 192
Amortization of unearned compensation ..................................................... 474 474
Amortization of debt issuance expenses .................................................... 145 145
Deferred income taxes ..................................................................... 1,402 250
Changes in:
Receivables - net ...................................................................... (8,533) (2,973)
Inventories ............................................................................ (2,525) 2,991
Trade accounts payable ................................................................. 4,006 4,978
Accrued expenses ....................................................................... 479 373
Other - net ............................................................................... 1,281 (1,222)
-------- --------
Net cash flows from operating activities ................................................. 16,860 23,792

Cash flows from investing activities
Additions to property, plant and equipment ................................................ (3,792) (4,385)
Proceeds from fixed asset disposals ....................................................... 15 55
Disposition of product line ............................................................... 3,022 --
Acquisition of businesses ................................................................. (8,000) --
-------- --------
Net cash flows from investing activities ................................................ (8,755) (4,330)

Cash flows from financing activities
Borrowings under credit facilities for acquisitions ....................................... 8,000 --
Net repayments under credit facilities .................................................... (6,432) (13,133)
Repayments (borrowings) of other long-term debt ........................................... (2,268) 1,134
Decrease in accrued interest .............................................................. (2,582) (2,891)
Dividends paid ............................................................................ (4,551) (4,303)
Proceeds from stock option exercises ...................................................... 548 1,480
-------- --------
Net cash flows from financing activities ................................................ (7,285) (17,713)
-------- --------
Net increase in cash .......................................................................... 820 1,749
Cash and cash equivalents at beginning of year ................................................ 6,952 4,972
-------- --------
Cash and cash equivalents at end of period .................................................... $ 7,772 $ 6,721
======== ========

SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for:
Interest .................................................................................... $ 6,176 $ 7,705
Income taxes ................................................................................ 947 2,027

See Notes to Consolidated Financial Statements.

4

IDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

1. BUSINESS SEGMENTS

Information on IDEX's business segments is presented below, based on the
nature of products and services offered. IDEX evaluates performance based on
several factors, of which operating income is the primary financial measure.
Intersegment sales are accounted for at fair value as if the sales were to third
parties.

FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------
2003 2002
--------- ---------

Net sales
Pump Products:
External customers ............ $ 110,212 $ 101,482
Intersegment sales ............ 792 691
--------- ---------
Total group sales ........... 111,004 102,173
--------- ---------
Dispensing Equipment:
External customers ............ 39,282 33,090
Intersegment sales ............ -- --
--------- ---------
Total group sales ........... 39,282 33,090
--------- ---------
Other Engineered Products:
External customers ............ 46,004 40,364
Intersegment sales ............ -- --
--------- ---------
Total group sales ........... 46,004 40,364
--------- ---------
Intersegment elimination ........ (792) (691)
--------- ---------
Total net sales ............. $ 195,498 $ 174,936
========= =========

Operating income
Pump Products ................... $ 15,675 $ 16,418
Dispensing Equipment ............ 4,852 4,139
Other Engineered Products ....... 7,150 5,655
Corporate office and other ...... (4,276) (3,706)
--------- ---------
Total operating income ..... $ 23,401 $ 22,506
========= =========

2. RESTRUCTURING CHARGE

IDEX took actions in 2001 and 2002 to downsize operations to lower its cost
structure. These steps were necessary to appropriately size the Company's
production capacity and administrative support levels to match the declining
levels of demand for a broad range of products. A rollforward of the remaining
restructuring accrual related to the restructuring plans from December 31, 2002
to March 31, 2003 is included below:

EMPLOYEE IDLE FACILITY
TERMINATION COSTS
COSTS AND OTHER TOTAL
----------- ------------- ---------

Balance January 1, 2003 ...... $ 394 $ 86 $ 480
Payments ..................... (16) (26) (42)
----- ----- -----
Balance March 31, 2003 ....... $ 378 $ 60 $ 438
===== ===== =====

5

IDEX CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

3. EARNINGS PER COMMON SHARE

Earnings per common share (EPS) are computed by dividing net income by the
weighted average number of shares of common stock (basic) plus common stock
equivalents 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, unvested
restricted shares, and shares issuable in connection with certain deferred
compensation agreements (DCUs). Basic weighted average shares reconciles to
diluted weighted average shares as follows:

FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------
2003 2002
-------- -------

Basic weighted average common shares outstanding .......................... 32,291 30,513
Dilutive effect of stock options, unvested restricted shares, and DCUs .... 514 1,031
------ ------
Diluted weighted average common shares outstanding ........................ 32,805 31,544
====== ======

4. INVENTORIES

The components of inventories as of March 31, 2003, and December 31, 2002,
were:

Those inventories which were carried on a LIFO basis amounted to $92,838
and $91,743 at March 31, 2003, and December 31, 2002, respectively. The impact
on earnings of using the LIFO method is not material.

5. COMMON AND PREFERRED STOCK

The Company had five million shares of preferred stock authorized but
unissued at March 31, 2003, and December 31, 2002.

6. STOCK OPTIONS

The Company has stock option plans for outside directors, executives and
certain key employees. These options are accounted for using the intrinsic value
method and, accordingly, no compensation cost has been recognized. Had
compensation cost been determined using the fair value method, the Company's pro
forma net income and earnings per share would have been as follows:

6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

HISTORICAL OVERVIEW AND OUTLOOK

We sell a broad range of pump products, dispensing equipment and other
engineered products to a diverse customer base in the United States and other
countries around the world. Accordingly, our businesses are affected by levels
of industrial activity and economic conditions in the U.S. and in other
countries where our products are sold, and by the relationship of the U.S.
dollar to other currencies. Among the factors that influence the demand for our
products are interest rates, levels of capacity utilization and capital spending
in certain industries and overall industrial activity.

We have a history of achieving above-average operating margins. Our
operating margins have exceeded the average for the companies that comprise the
Value Line Corporate Index (VLCI) every year since 1988. IDEX views the VLCI
operating performance statistics as a proxy for an average industrial company.
Our operating margins are influenced by, among other things, utilization of
facilities as sales volumes change and inclusion of newly acquired businesses.
The operating margins of newly acquired businesses typically have been lower
than the average of our base businesses and, prior to 2002, those margins were
further reduced by amortization of goodwill and trademark assets. In accordance
with new accounting rules, we discontinued amortizing intangible assets with
indefinite lives as of January 1, 2002. Instead, these intangible assets are
reviewed periodically for impairment.

For the three months ended March 31, 2003, we reported higher orders,
sales, operating income, net income and diluted earnings per share as compared
with the first quarter of last year.

The following forward-looking statements are qualified by the cautionary
statement under the Private Securities Litigation Reform Act set forth below. We
are encouraged by the orders, sales and earnings improvements achieved in the
first quarter versus both the preceding and year-ago quarters. This quarter
represented the second consecutive period our base businesses showed
year-over-year quarterly sales growth. The last time this occurred was in the
third quarter of 2000. As a short-cycle business, our financial performance
depends on the current pace of incoming orders, and we have very limited
visibility of future business conditions. However, we believe IDEX is well
positioned for earnings improvements as the economy strengthens. This is based
on our lower cost structures resulting from restructuring actions; our
operational excellence initiatives of Kaizen and Lean Manufacturing, Six Sigma,
global sourcing and eBusiness; and using our strong cash flow to cut debt and
interest expense. In addition, we continue to pursue acquisitions to drive the
Company's longer term profitable growth.

CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT

The "Historical Overview and Outlook" and the "Liquidity and Capital
Resources" sections of this management's discussion and analysis of our
operations contain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act
of 1934, as amended. These statements may relate to, among other things, capital
expenditures, cost reductions, cash flow, and operating improvements and are
indicated by words or phrases such as "anticipate," "estimate," "plans,"
"expects," "projects," "should," "will," "management believes," "the Company
believes," "we believe," "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 filing. The risks and uncertainties include, but are not limited to, the
following: economic and political consequences resulting from the September 11,
2001 terrorist attacks and the war with Iraq; levels of industrial activity and
economic conditions in the U.S. and other countries around the world, pricing
pressures and other competitive factors, and levels of capital spending in
certain industries - all of which could have a material impact on order rates
and our results, particularly in light of the low levels of order backlogs we
typically maintain; our 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 we operate;
interest rates; capacity utilization and the effect this has on costs; labor
markets; market conditions and material costs; and developments with respect to
contingencies, such as litigation and environmental matters. The forward-looking
statements included here are only made as of the date of this report, and we
undertake no obligation to publicly update them to reflect subsequent events or
circumstances. Investors are cautioned not to rely unduly on forward-looking
statements when evaluating the information presented here.

7

RESULTS OF OPERATIONS

For purposes of this discussion and analysis section, reference is made to
the table on the following page and the Company's Statements of Consolidated
Operations included in the Financial Statements section. IDEX consists of three
reporting groups: Pump Products, Dispensing Equipment and Other Engineered
Products.

PERFORMANCE IN THE THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THE SAME PERIOD
OF 2002

For the three months ended March 31, 2003, orders, sales and profits were
higher than the comparable first quarter of last year. New orders for the latest
three months totaled $206.1 million, 12% higher than the same period last year.
Excluding the impact of the Halox (April 2002), Rheodyne (July 2002) and
Wrightech (October 2002) acquisitions and foreign currency translation, orders
were 3% higher than in the first quarter of 2002. During the first three months
of this year, unfilled order backlogs increased $10.6 million and, at quarter
end, IDEX had a typical order backlog of slightly over one month's sales.

Sales in the first quarter were $195.5 million, a 12% improvement from
last year's first quarter as acquisitions accounted for a 4% sales improvement,
foreign currency translation added another 5% and base business shipments were
up 3%. Domestic sales were unchanged while international sales - net of foreign
currency translation - were 7% higher. Sales to international customers were 45%
of the total, up from 40% last year.

For the quarter, the Pump Products Group contributed 57% of both sales and
operating income, the Dispensing Equipment Group accounted for 20% of sales and
17% of operating income, and the Other Engineered Products Group represented 23%
of sales and 26% of operating income.

Pump Products Group sales of $111.0 million for the three months ended
March 31, 2003, were $8.8 million, or 9%, higher than the prior year mainly due
to the acquisition of Rheodyne. Compared with the first quarter last year,
acquisitions accounted for a 6% sales improvement, foreign currency translation
added 2% and base business shipments were up 1% as demand in the chemical
processing and industrial end markets remained soft. In the first quarter of
2003, domestic sales increased by 1% and international sales increased by 23%.
Excluding acquisitions and foreign currency translation, U.S. sales volume
decreased by 4% while international sales increased 9%. Sales to customers
outside the U.S. increased to 39% of total group sales in the 2003 period from
34% in 2002.

Dispensing Equipment Group sales of $39.3 million increased $6.2 million,
or 19%, in the first quarter of 2003 compared with last year's first quarter.
This increase was attributed to favorable foreign currency translation of 13%
and a 6% increase in base business volume as demand for color formulation
equipment in Europe strengthened. In the first quarter of 2003, domestic sales
increased by 2% and international sales increased by 25%. Excluding the
favorable foreign currency translation effect, international sales volume
increased by 3%. Sales to customers outside the U.S. were 59% of total group
sales in the 2003 quarter, compared with 54% in 2002.

Other Engineered Products Group sales of $46.0 million increased by $5.6
million, or 14%, in the first quarter of 2003 compared with 2002, as business
volume was up 7%, particularly for fire and rescue products, and foreign
currency added another 7%. In the first quarter of 2003, domestic sales
increased by 6%, while international sales increased by 25%. Excluding foreign
currency, international sales increased 9% from the comparable period of last
year. Sales to customers outside the U.S. were 46% of total group sales in 2003,
up from 42% in 2002.

8

IDEX CORPORATION AND SUBSIDIARIES
COMPANY AND BUSINESS GROUP FINANCIAL INFORMATION
(IN THOUSANDS)
(UNAUDITED)

FOR THE THREE MONTHS
ENDED MARCH 31,
----------------------
2003(1) 2002
-------- --------

Pump Products Group
Net sales ............................ $111,004 $102,173
Operating income (2) ................. 15,675 16,418
Operating margin ..................... 14.1% 16.1%
Depreciation and amortization ........ $ 4,432 $ 4,297
Capital expenditures ................. 2,339 1,945
Dispensing Equipment Group
Net sales ............................ $ 39,282 $ 33,090
Operating income (2) ................. 4,852 4,139
Operating margin ..................... 12.4% 12.5%
Depreciation and amortization ........ $ 1,574 $ 1,595
Capital expenditures ................. 414 916
Other Engineered Products Group
Net sales ............................ $ 46,004 $ 40,364
Operating income (2) ................. 7,150 5,655
Operating margin ..................... 15.5% 14.0%
Depreciation and amortization ........ $ 1,300 $ 1,265
Capital expenditures ................. 1,008 1,460
Company
Net sales ............................ $195,498 $174,936
Operating income (2) ................. 23,401 22,506
Operating margin ..................... 12.0% 12.9%
Depreciation and amortization (3) .... $ 7,911 $ 7,705
Capital expenditures ................. 3,792 4,385

(1) Includes acquisition of Halox Technologies, Inc. (April 2002), Rheodyne,
L.P. (July 2002) and Wrightech (October 2002) in the Pump Products Group.

(2) Group operating income excludes unallocated corporate operating expenses.

(3) Excludes amortization of debt issuance expenses.

9

Gross profit of $74.3 million in the first quarter of 2003 increased by
$8.9 million, or 14%, from 2002. Gross profit as a percent of sales was 38.0% in
2003 and increased from 37.4% in 2002. The improved gross margins primarily
reflected lower material costs from our global sourcing activities.

Operating income increased by $.9 million, or 4%, to $23.4 million in 2003
from $22.5 million in 2002, primarily reflecting the higher sales volume and
gross margins discussed above partially offset by increased selling, general and
administrative expenses (SG&A). First quarter operating margins were 12.0%
compared with 12.9% in the prior year period and 12.1% in the fourth quarter of
2002. The margin decrease over last year was primarily due to an unfavorable mix
of sales (away from higher margin Pump sales) and an increase in SG&A, partially
offset by an improvement in gross margins.

SG&A increased to $50.9 million in 2003 from $42.9 million in 2002, and as
a percent of sales were 26.0%, up from 24.5% in 2002. Approximately a quarter of
the $8.0 million increase was attributable to costs associated with the sale of
a non-material product line, final resolution of the previously mentioned patent
infringement litigation, and higher than normal adjustments to estimates and
accruals for one of IDEX's foreign subsidiaries. The other portion of the
increase reflected the cumulative impact of acquisitions made in 2002,
deliberate reinvestment in the businesses to drive organic growth, and cost
inflation including pension and insurance expenses.

In the Pump Products Group, operating income of $15.7 million and
operating margins of 14.1% in 2003 was down from the $16.4 million and 16.1%
recorded in 2002. Operating income for the Dispensing Equipment Group of $4.9
million and operating margins of 12.4% in 2003 was comparable with the $4.1
million and 12.5% in 2002. Operating income in the Other Engineered Products
Group of $7.2 million and operating margins of 15.5% in 2003 increased from $5.7
million and 14.0% achieved in 2002.

Other income declined to essentially zero in the first quarter of 2003
from $.2 million of income during the same period last year.

Interest expense decreased to $3.7 million in the first quarter of 2003
from $4.7 million in 2002. This reduction was principally attributable to
significantly lower debt levels this year due to debt paydowns from operating
cash flow and a lower interest rate environment.

The provision for income taxes increased slightly to $7.0 million in 2003
from $6.5 million in 2002. The effective tax rate decreased to 35.5% in 2003
from 36.0% in 2002.

Net income for the current quarter was $12.7 million, 10% higher than the
$11.5 million earned in the first quarter of 2002. Diluted earnings per share in
the first quarter of 2003 of $.39 increased $.02 compared with the first quarter
of 2002.

10

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2003, working capital was $128.8 million and our current
ratio was 2.3 to 1. Free cash flow (Net Cash Flows from Operating Activities of
$16.9 million less Additions to Property, Plant and Equipment of $3.8 million)
decreased by $6.3 million to $13.1 million in the first quarter of 2003 compared
with the prior year, reflecting an improvement in first quarter sales activity
and the related increase in accounts receivable and inventory to support a
higher business volume. Compared with a year ago, both days' sales in
receivables and inventory turns showed improvement.

Cash flows from operating activities decreased $6.9 million, or 29%, to
$16.9 million in 2003 mainly due to less favorable working capital changes from
last year caused by a 12% rise in sales volume in the first quarter of 2003
compared with the first quarter 2002.

Cash flow provided from operations was more than adequate to fund capital
expenditures of $3.8 million and $4.4 million in the first three months of 2003
and 2002, respectively. Capital expenditures were generally for machinery and
equipment which improved productivity and tooling to support IDEX's global
sourcing initiatives; although a portion was for business system technology and
repair and replacement of equipment and facilities. Management believes that
IDEX has ample capacity in its plant and equipment to meet expected needs for
future growth in the intermediate term.

In February 2003, an $8.0 million payment of deferred consideration was
made in respect of the Rheodyne acquisition, which was consumated in July 2002.

At March 31, 2003, the maximum amount available under our multi-currency
bank revolving credit facility (Credit Facility) was $300.0 million, of which
$50.0 million was borrowed. The Credit Facility contains a covenant that limits
total debt outstanding to three times operating cash flow, as defined in the
agreement. Our total debt outstanding was $238.2 million at March 31, 2003, and
based on the covenant we were limited to $396 million of total debt outstanding.
Interest is payable quarterly on the outstanding balance at the agent bank's
reference rate or at LIBOR plus an applicable margin and a utilization fee if
the total borrowings exceed certain levels. The applicable margin is based on
the credit rating of our 6.875% senior notes due February 15, 2008, and can
range from 25 basis points to 100 basis points. The utilization fee can range
from zero to 25 basis points. On March 27, 2003, Standard & Poor's upgraded its
corporate credit and senior unsecured debt ratings on IDEX to BBB from BBB-. As
a result of this change, at March 31, 2003, the applicable margin was 57.5 basis
points and the utilization fee was zero. We pay an annual fee of 17.5 basis
points on the total Credit Facility.

In December 2001, we, and certain of our subsidiaries, entered into a
one-year agreement with a financial institution, under which we collateralized
certain receivables for borrowings (Receivables Facility). This agreement was
renewed in December 2002 for another year. The Receivables Facility provides for
borrowings of up to $50.0 million, depending upon the level of eligible
receivables. At March 31, 2003, $20.0 million was borrowed and included in
long-term debt at an interest rate of approximately 2.7% per annum.

We also have a $30.0 million demand line of credit (Short-Term Facility),
which expires May 24, 2003. Borrowings under the Short-Term Facility are at
LIBOR plus the applicable margin in effect under the Credit Facility. At March
31, 2003, $9.0 million was borrowed under this facility at an interest rate of
1.95%.

We believe the Company will generate sufficient cash flow from operations
for the next twelve months and in the long term to meet its operating
requirements, interest on all borrowings, any authorized share repurchases,
restructuring expenses, planned capital expenditures, and annual dividend
payments to holders of common stock. Since we began operations in January 1988
and through March 31, 2003, we have borrowed approximately $892 million under
our various credit agreements to complete 22 acquisitions. During this same
period we generated, principally from operations, cash flow of $819 million to
reduce indebtedness. In the event that suitable businesses are available for
acquisition upon terms acceptable to the Board of Directors, we may obtain all
or a portion of the financing for the acquisitions through the incurrence of
additional long-term debt.

11

Our contractual obligations and commercial commitments include rental
payments under operating leases, payments under capital leases, and other
long-term obligations arising in the ordinary course of business. We have no
off-balance sheet arrangements or material long-term purchase obligations. There
are no identifiable events or uncertainties, including the lowering of our
credit rating, that would accelerate payment or maturity of any of these
commitments or obligations.

CRITICAL ACCOUNTING ESTIMATES

We believe that the application of the following accounting policies,
which are important to our financial position and results of operations,
requires significant judgments and estimates on the part of management. For a
summary of all of our accounting policies, including the accounting policies
discussed below, see Note 1 of the Notes to the Consolidated Financial
Statements in our 2002 Annual Report on Form 10-K.

Noncurrent assets - The Company evaluates the recoverability of certain
noncurrent assets utilizing various estimation processes. In particular, the
recoverability of March 31, 2003 balances for goodwill and intangible assets of
$532.8 million and $19.3 million, respectively, are subject to estimation
processes, which depend on the accuracy of underlying assumptions, including
future operating results. The Company evaluates the recoverability of each of
these assets based on estimated business values and estimated future cash flows
(derived from estimated earnings and cash flow multiples). The recoverability of
these assets depends on the reasonableness of these assumptions and how they
compare with the eventual operating performance of the specific businesses to
which the assets are attributed. To the extent actual business values or cash
flows differ from those estimated amounts, the recoverability of these
noncurrent assets could be affected.

Income taxes - Deferred taxes are recognized for the future tax effects of
temporary differences between financial and income tax reporting using tax rates
in effect for the years in which the differences are expected to reverse.
Federal income taxes are provided on that portion of the income of foreign
subsidiaries that is expected to be remitted to the United States and be
taxable. The management of the Company, along with third-party advisors,
periodically estimates the Company's probable tax obligations using historical
experience in tax jurisdictions and informed judgments.

Contingencies and litigation - We are currently involved in certain legal and
regulatory proceedings and, as required and where it is reasonably possible to
do so, have accrued our estimates of the probable costs for the resolution of
these matters. These estimates have been developed in consultation with outside
counsel and are based upon an analysis of potential results, assuming a
combination of litigation and settlement strategies. It is possible, however,
that future operating results for any particular quarterly or annual period
could be materially affected by changes in our assumptions or the effectiveness
of our strategies related to these proceedings.

Defined benefit retirement plans - The plan obligations and related assets of
defined benefit retirement plans are presented in Note 14 of the Notes to the
Consolidated Financial Statements in the 2002 Annual Report on Form 10-K. Plan
assets, which consist primarily of marketable equity and debt instruments, are
valued using market quotations. Plan obligations and the annual pension expense
are determined by consulting actuaries using a number of assumptions. Key
assumptions in measuring the plan obligations include the discount rate at which
the obligation could be effectively settled and the anticipated rate of future
salary increases. Key assumptions in the determination of the annual pension
expense include the discount rate, the rate of salary increases and the
estimated future return on plan assets. To the extent actual amounts differ from
these assumptions and estimated amounts, results could be adversely affected.

REGISTRATION STATEMENT FILINGS FOR COMMON STOCK OFFERINGS

In March 2002, we filed a registration statement on Form S-3 with the
Securities and Exchange Commission covering the secondary offering of 2,939,199
shares of common stock owned by IDEX Associates, L.P. In April 2002, that
registration statement was amended to also include the secondary offering of
560,801 shares of IDEX common stock owned by KKR Associates, L.P., and the
primary offering of 1,500,000 shares of IDEX common stock. Also in April 2002,
we announced the pricing of this public offering at $36 per common share.
Subsequently, the overallotment option was exercised by the underwriter for the
sale of an additional 750,000 secondary shares owned by KKR Associates, L.P.,
bringing the total offering to 5,750,000 shares. The $50.8 million of net
proceeds

12

we received was used to repay debt under the Credit Facility. This
increased the amount available for borrowing under the facility, which we will
continue to use for general corporate purposes, including acquisitions.

In September 2002, we filed a registration statement on Form S-3 with the
Securities and Exchange Commission covering the secondary offering of 1,350,000
shares of IDEX common stock owned by KKR Associates, L.P. This offering,
completed in January 2003, did not increase the number of IDEX shares
outstanding, and the Company did not receive any proceeds from the offering.

The secondary shares covered by both of these registration statements had
been owned by KKR Associates, L.P. and IDEX Associates, L.P. since IDEX was
formed in January 1988.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are subject to market risk associated with changes in interest rates
and foreign currency exchange rates. Interest rate exposure is limited to the
$238.2 million of total debt outstanding at March 31, 2003. Approximately 36% of
the debt is priced at interest rates that float with the market. A 50 basis
point movement in the interest rate on the floating rate debt would result in an
approximate $.4 million annualized increase or decrease in interest expense and
cash flows. The remaining debt is fixed rate debt. We will, from time to time,
enter into interest rate swaps on our debt when we believe there is a financial
advantage for 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 interest rate swaps. Under the policy, we
do not use derivative financial or commodity 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 interest
rate swaps on the Company's outstanding long-term debt.

Our foreign currency exchange rate risk is limited principally to the euro
and British pound. We manage our foreign exchange risk principally through
invoicing our customers in the same currency as the source of our products.

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. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.

Within 90 days prior to the date of this report, 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 the Company's
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. 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.

There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect the internal controls
subsequent to the date the Company completed its evaluation.

13

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

IDEX and six of its subsidiaries have been 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. Such components were acquired from third party suppliers, and were not
manufactured by any of the subsidiaries. To date, all 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. However, the Company cannot predict whether and to what extent
insurance will be available to continue to cover such settlements and legal
costs, or how insurers may respond to claims that are tendered to them.

Claims have been filed in California, Illinois, Michigan, Mississippi, New
Jersey, New York, Ohio, Pennsylvania and Washington. A few claims have been
settled for minimal amounts and some have been dismissed without payment. None
have been tried.

No provision has been made in the financial statements of the Company, and
IDEX does not currently believe the asbestos-related claims will have a material
adverse effect on the Company's business or financial position.

IDEX is also party to various other legal proceedings arising in the
ordinary course of business, none of which are expected to have a material
adverse effect on its business, financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Company held its Annual Shareholders' Meeting on Tuesday, March 25,
2003 and voted on three matters. The first matter was the election of one
director to serve a three-year term on the Board of Directors of IDEX
Corporation. The following person received a majority of votes cast for Class II
directors.

Director For Withheld
-------- --- ---------

Michael T. Tokarz 22,593,099 1,102,089

In addition to the Class II director named above, the following directors'
terms also continued after the March 25, 2003 Annual Shareholders' Meeting.

Bradley J. Bell Neil A. Springer
Gregory B. Kenny Dennis K. Williams
Paul E. Raether

Secondly, shareholders voted on the third amendment to the 1996 Stock
Option Plan for Non-Officer Key Employees. The proposal received a majority of
votes cast, specifically as follows:

Affirmative votes 20,366,049
Negative votes 3,263,743
Abstentions 65,396

Thirdly, shareholders voted on a proposal to appoint Deloitte & Touche LLP
as auditors. The proposal received a majority of the votes cast as follows:

Affirmative votes 21,534,510
Negative votes 2,156,078
Abstentions 4,600

14

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits:

The exhibits listed in the accompanying "Exhibit Index" are
filed as part of this report.

(b) Reports on Form 8-K:

A report under Item 5 dated January 8, 2003

A report under Item 5 dated March 25, 2003

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.

IDEX CORPORATION

May 13, 2003 /s/ WAYNE P. SAYATOVIC
-----------------------------------
Wayne P. Sayatovic
Senior Vice President -
Finance and Chief Financial Officer

15

CERTIFICATIONS

I, Dennis K. Williams, certify that:

1. I have reviewed this quarterly report on Form 10-Q of IDEX Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and

c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

May 13, 2003 /s/ DENNIS K. WILLIAMS
----------------------------------
Dennis K. Williams
Chairman, President and Chief
Executive Officer

16

I, Wayne P. Sayatovic, certify that:

1. I have reviewed this quarterly report on Form 10-Q of IDEX Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and

c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

May 13, 2003 /s/ WAYNE P. SAYATOVIC
----------------------------------
Wayne P. Sayatovic
Senior Vice President - Finance
and Chief Financial Officer

17

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

3.1 Restated Certificate of Incorporation of IDEX Corporation (formerly
HI, Inc.) (incorporated by reference to Exhibit No. 3.1 to the
Registration Statement on Form S-1 of IDEX, et al., Registration No.
33-21205, as filed on April 21, 1988)

3.1(a) Amendment to Restated Certificate of Incorporation of IDEX Corporation
(formerly HI, Inc.), (incorporated by reference to Exhibit No. 3.1(a)
to the Quarterly Report of IDEX on Form 10-Q for the quarter ended
March 31, 1996, Commission File No. 1-10235)

3.2 Amended and Restated By-Laws of IDEX Corporation (incorporated by
reference to Exhibit No. 3.2 to Post-Effective Amendment No. 2 to the
Registration Statement on Form S-1 of IDEX, et al., Registration No.
33-21205, as filed on July 17, 1989)

3.2(a) Amended and Restated Article III, Section 13 of the Amended and
Restated By-Laws of IDEX Corporation (incorporated by reference to
Exhibit No. 3.2(a) to Post-Effective Amendment No. 3 to the
Registration Statement on Form S-1 of IDEX, et al., Registration No.
33-21205, as filed on February 12, 1990)

4.1 Restated Certificate of Incorporation and By-Laws of IDEX Corporation
(filed as Exhibits No. 3.1 through 3.2 (a))

4.2 Indenture, dated as of February 23, 1998, between IDEX Corporation,
and Norwest Bank Minnesota, National Association, as Trustee, relating
to the 6-7/8% Senior Notes of IDEX Corporation due February 15, 2008
(incorporated by reference to Exhibit No. 4.1 to the Current Report of
IDEX on Form 8-K dated February 23, 1998, Commission File No. 1-10235)

4.3 Specimen Senior Note of IDEX Corporation (incorporated by reference to
Exhibit No. 4.1 to the Current Report of IDEX on Form 8-K dated
February 23, 1998, Commission File No. 1-10235)

4.4 Specimen Certificate of Common Stock of IDEX Corporation (incorporated
by reference to Exhibit No. 4.3 to the Registration Statement on Form
S-2 of IDEX, et al., Registration No. 33-42208, as filed on September
16, 1991)

4.5 Credit Agreement, dated as of June 8, 2001, among IDEX Corporation,
Bank of America N.A. as Agent and Issuing Bank, and the Other
Financial Institutions Party Hereto (incorporated by reference to
Exhibit No. 4.5 to the Quarterly Report of IDEX on Form 10-Q for the
quarter ended June 30, 2001, Commission File No. 1-10235)

4.6 Credit Lyonnais Uncommitted Line of Credit, dated as of December 3,
2001 (incorporated by reference to Exhibit 4.6 to the Annual Report of
IDEX on Form 10-K for the year ended December 31, 2001, Commission
File No. 1-10235)

4.6(a) Amendment No. 1 dated as of November 22, 2002 to the Credit Lyonnais
Uncommitted Line of Credit Agreement dated December 3, 2001
(incorporated by reference to Exhibit 4.6 (a) to the Annual Report of
IDEX on Form 10-K for the year ended December 31, 2002, Commission
File No. 1-10235)

4.7 Receivables Purchase Agreement dated as of December 20, 2001 among
IDEX Receivables Corporation, as Seller, IDEX Corporation, as
Servicer, Falcon Asset Securitization Corporation, the Several
Financial Institutions from Time to Time Party Hereto, and Bank One,
NA (Main Office Chicago), as Agent (incorporated by reference to
Exhibit 4.7 to the Annual Report of IDEX on Form 10-K for the year
ended December 31, 2001, Commission File No. 1-10235)

4.7(a) Amended and Restated Fee Letter dated as of December 18, 2002 of the
Receivables Purchase Agreement dated as of December 20, 2001
(incorporated by reference to Exhibit 4.7 (a) to the Annual Report of
IDEX on Form 10-K for the year ended December 31, 2002, Commission
File No. 1-10235)

4.8** Form of Shareholder Purchase and Sale Agreement of IDEX Corporation
(incorporated by reference to Exhibit No. 10.24 to Amendment No. 1 to
the Registration Statement on Form S-1 of IDEX, et al, Registration
No. 33-28317, as filed on June 1, 1989)

18

4.9 Registration Rights Agreement, dated January 22, 1988, among IDEX, KKR
Associates, L.P. and IDEX Associates, L.P., relating to the Common
Stock (incorporated by reference to Exhibit No. 10.8 to the
Registration Statement on Form S-1 of IDEX Corporation, et al.,
Registration No. 33-21205, as filed on April 21, 1988)

4.9(a) Amendment to Registration Rights Agreement, dated as of September 13,
2002, among IDEX and KKR Associates, L.P. (incorporated by reference
to Exhibit No. 10.3 to the Registration Statement on Form S-3 of IDEX,
Registration No. 333-99591, as filed on September 13, 2002)

10.1 Third Amended and Restated 1996 Stock Option Plan for Non-Officer Key
Employees of IDEX Corporation dated January 9, 2003 (incorporated by
reference to Exhibit 4.1 to the Registration Statement on Form S-8 of
IDEX, Registration No. 333-104768, as filed on April 25, 2003)

*10.2** Revised and Restated IDEX Management Incentive Compensation Plan for
Key Employees effective January 1, 2003

*99.1 Certification pursuant to Section 1350 of Chapter 63 of Title 18 of
the United States Code ***

*99.2 Certification pursuant to Section 1350 of Chapter 63 of Title 18 of
the United States Code ***

- ----------

* Filed herewith

** Management contract or compensatory plan or agreement

*** Exhibit being "furnished", not filed, and thus not incorporated by
reference into any 1933 Act registration statement

19