AMETEK INC/ - 10-K Annual Report

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

FORM 10-K
(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

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 1-12981
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AMETEK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 14-1682544
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

37 NORTH VALLEY ROAD, PAOLI, PA 19301
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(610) 647-2121

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

NONE

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. [X] YES [ ] NO

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN RULE 12b-2 OF THE ACT). [X] YES [ ] NO

INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 28, 2003, was $1,065,748,567.

The number of shares of common stock outstanding as of February 28, 2003,
was 33,096,514.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the Proxy Statement for
the Annual Meeting of Stockholders to be held on May 20, 2003.
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AMETEK, INC.

2002 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS

1

PART I

ITEM 1. BUSINESS

GENERAL DEVELOPMENT OF BUSINESS

AMETEK, Inc. ("AMETEK" or the "Company") is incorporated in Delaware. Its
predecessor was originally incorporated in Delaware in 1930 under the name of
American Machine and Metals, Inc. The Company maintains its principal executive
offices in suburban Philadelphia, PA at 37 North Valley Road, Paoli, PA 19301.
AMETEK is a leading global manufacturer of electronic instruments and electric
motors with operations in North America, Europe, Asia, and South America. The
Company is listed on the New York Stock Exchange (symbol: AME). AMETEK is a
component of the S&P MidCap 400 and the Russell 2000 indices. More than
one-third of 2002 sales were to international markets.

The Company's annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and all amendments to those reports filed or
furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 are
made available free of charge on the Company's Internet website at
www.ametek.com as soon as practicable after such material is electronically
filed with or furnished to the Securities and Exchange Commission.

PRODUCTS AND SERVICES

The Company markets its products worldwide through two operating groups,
the Electronic Instruments Group ("EIG") and the Electromechanical Group
("EMG"). EIG builds technologically advanced monitoring, testing, and
calibration instruments and display devices for the process, power, aerospace
and industrial markets. The Company believes that EMG is the world's largest
manufacturer of air-moving electric motors for vacuum cleaners and other floor
care products and is a prominent producer of brushless air-moving motors for
aerospace, mass-transit, medical and office product markets. EMG also produces
specialty metals for automotive, consumer, electronics, telecommunications and
other markets and offers switches for motive and stationary power systems. The
Company continues to grow through acquisitions primarily focused on niche
markets in instrumentation, technical motors and specialty metals.

COMPETITIVE STRENGTHS

Management believes that the Company has several significant competitive
advantages that assist it in sustaining and enhancing its market positions. Its
principal strengths include:

Significant Market Share. AMETEK maintains significant share in many of
its targeted niche markets because of its ability to produce and deliver
high-quality products at competitive prices. In EIG, the Company maintains
significant market positions in many niche segments within the aerospace, power,
process and industrial instrumentation markets. In EMG, the Company believes it
is the largest manufacturer of air-moving electric motors for the global floor
care market. It also believes that its significant market share along with its
new and expanded low-cost motor manufacturing plants allows it to capitalize on
new market opportunities and expand its electromechanical product lines.

Technological and Development Capabilities. AMETEK believes it has certain
technological advantages over its competitors that allow it to develop
innovative products and maintain leading market positions. Historically, the
Company has grown by extending its technical expertise into the manufacture of
customized products for its customers as well as through acquisitions. EIG
competes primarily on the basis of product innovation in several highly
specialized instrumentation markets, including process measurement, heavy-
vehicle dashboard and aerospace instruments. An example of EIG's ability to take
a technical innovation developed for one market into a related market was the
leveraging of its core competency in jet engine temperature sensors in
developing similar products for power generation applications, particularly
land-based gas turbines. AMETEK's established reputation for technological
innovation, service and reliability also has led to several successful strategic
alliances. EMG focuses on low-cost design and manufacturing, while enhancing
motor-blower performance through advances in power, efficiency, lighter weight
and quieter

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operation. The Company believes that EMG's leadership in motor technology has
allowed it to develop a range of product features for its motors and
motor-blowers that continues to create new market opportunities for its
products.

Efficient and Low-Cost Manufacturing Operations. The Company's strong
competitive position provides it with a significant advantage in growing the
global market share of many of its businesses. AMETEK has motor manufacturing
plants in China, the Czech Republic, Mexico and Brazil to lower costs and
achieve strategic proximity to its customers, furthering its ability to increase
international sales and market share. Certain of the Company's electronic
instrument businesses are also relocating manufacturing operations to low-cost
locales. Furthermore, strategic acquisitions and joint ventures in Europe, North
America and Asia have resulted in additional cost savings and synergies through
the consolidation of operations, product lines and distribution channels that
benefit both operating groups.

Experienced Management Team. Another key component of AMETEK's success is
the strength of its management team and its commitment to the performance of the
Company. AMETEK's senior management has extensive experience averaging more than
20 years with the Company, and is financially committed to the Company's success
through Company-established stock ownership guidelines based on a set of salary
multiples.

BUSINESS STRATEGY

AMETEK's objectives are to increase the Company's earnings growth and
financial returns through a combination of operational and financial strategies.
Those operational strategies include business acquisitions and cost-reduction
programs designed to achieve double-digit annual percentage growth in earnings
per share and a superior return on total capital. To support those operational
objectives, financial initiatives have been, or may be, undertaken, including
public debt or equity issuance, bank debt refinancing, local-source financing in
certain foreign countries, accounts receivable securitization and share
repurchases. AMETEK's commitment to earnings growth is reflected in its
continued implementation of cost-reduction programs designed to offset the
impact of a difficult economic environment and achieve the Company's long-term
best-cost objectives.

AMETEK's Corporate Growth Plan consists of four key strategies:

Strategic Acquisitions and Alliances. The Company continues to pursue
strategic acquisitions, both domestically and internationally, to expand and
strengthen its product lines, improve its market share positions and increase
earnings through sales growth and operational efficiencies at the acquired
businesses. Since the beginning of 2000, to the date of this report, the Company
has completed seven acquisitions with annualized sales totaling nearly $350
million (see "Recent Acquisitions"). Those acquisitions have enhanced AMETEK's
position in analytical instrumentation, technical motors, electromechanical
products and electrical power instruments and systems. Through these and prior
acquisitions, the Company's management team has gained considerable experience
in successfully acquiring and integrating new businesses. The Company intends to
continue to pursue strategic acquisitions, both domestically and
internationally, to expand and strengthen its product lines, improve its market
share positions and increase earnings through sales growth and operational
efficiencies at the acquired companies.

Global and Market Expansion. AMETEK's largest international presence is in
Europe, where it has operations in Denmark, Italy, Germany, the Czech Republic,
the United Kingdom, France and the Netherlands. These operations provide design
and engineering capability, product line breadth, enhanced European distribution
channels, and low-cost production for both electronic instruments and
electromechanical devices. AMETEK has a leading market position in European
floor care motors and a significant presence in many of its instrument
businesses. It has grown sales in Latin America and Asia by building and
expanding low-cost electric motor and instrument plants in Reynosa, Mexico, and
motor manufacturing plants in Sao Paulo, Brazil and Shanghai, China. It also
continues to achieve geographic expansion and increased market expansion in Asia
through joint ventures in China, Taiwan, Japan and Korea and a direct sales and
marketing presence in Singapore, Japan, China and Hong Kong.

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New Product Development. Through its new product development efforts,
AMETEK seeks to improve its existing market positions and enter complementary
markets. In EIG, it applies concurrent engineering to develop specialized
products for the markets in which it competes. In 2002, EIG was selected by a
major customer to provide an engine sensor suite for the new jet engine that
powers the Airbus A380 super jumbo airliner, which is expected to be the largest
and most advanced commercial aircraft when it enters service in 2006.

Among the new products launched by EIG in 2002 is the ProLine(TM)Series of
process mass spectrometers -- compact, affordable bench-top instruments that
provide real-time process monitoring and control. The ProLine(TM)mass
spectrometer is ideal for a wide range of process gas analysis applications in
the semiconductor, pharmaceutical, food, bulk gas and other process industries.
EIG also launched the Next Generation Instrumentation (NGI(TM)) dashboard system
for heavy trucks, construction/agricultural equipment and other vehicles. The
NGI(TM) system of fully digital, multiplexed, heavy-duty dashboard gauges
provides a reliable, expandable and cost-effective alternative to traditional
analog instruments. The NGI-based system already has been selected by Daimler
Chrysler for the dashboard on the Freightliner 2004 Century Class ST -- its most
technologically advanced truck line.

EMG achieved and maintains its position as a leader in air-moving motor
technology by continually introducing new motors and motor-blowers that set
industry standards for efficiency and performance. In 2002, EMG broadened its
global floor care product line by offering additional INFIN-A-TEK(TM)blowers
that combine the performance of a series universal motor with certain advantages
of a brushless motor. It also offered new low-noise, higher-efficiency ACUSTEK
Plus(TM) commercial and ADVANTEK(TM)household vacuum motors. In advanced
brushless DC motors and motor-blowers, it introduced an expanded line of
MINIJAMMER(R) blowers that incorporate an integrated digital pressure sensor. In
specialty metals, it offered new stainless steel flake for protective paints and
coatings and high-purity alloy strip for superconductor applications.

Operational Excellence. Operational Excellence is AMETEK's keystone
strategy for improving profit margins and strengthening the Company's
competitive position across its businesses. Through its Operational Excellence
strategy, the Company seeks to reduce production costs and improve its market
positions. The strategy has played a key role in achieving synergies from newly
acquired companies. AMETEK believes that Operational Excellence's focus on flow
manufacturing and its emphasis on team building and a participative management
culture have enabled the Company to improve operating efficiencies and product
quality, increase customer satisfaction and yield higher cash flow from
operations, while significantly lowering operating and administrative costs and
shortening manufacturing cycle times.

2002 OVERVIEW

Operating Performance

In 2002, AMETEK generated sales of approximately $1 billion, and increased
income by 27% despite a difficult economic environment. The Company achieved its
ninth consecutive year of growth in income and earnings per share from
continuing operations, before unusual items. In addition, in 2002 it set records
for sales, operating income, net income and diluted earnings per share. This
strong performance was driven primarily by the Company's continuing
cost-reduction initiatives, the contribution of recently acquired businesses,
and the non-amortization of goodwill.

AMETEK generated cash flow from operations during 2002 that totaled $104
million, a 3% increase from 2001. The primary contributors to that growth in
cash flow were increased earnings, coupled with a continued focus on reducing
operating working capital, partially offset by significant contributions to the
Company's defined benefit pension plans.

Share Repurchase Program

Under the Company's 1998 share repurchase authorization, approximately $8.3
million was available for share repurchases as of December 31, 2002. During
2002, the Company repurchased 236,900 shares of its

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common stock for $7.3 million. Subsequent to December 31, 2002, the Company
repurchased an additional 190,000 shares of its common stock for approximately
$5.8 million.

On March 12, 2003, the Company's Board of Directors authorized a new $50
million share repurchase program, adding to the $2.5 million remaining balance
from the September 1998 $50 million program. Under the 1998 program, $47.5
million was used for share repurchases. As of March 12, 2003, $52.5 million was
approved for future share repurchases.

Financing

The Company has a shelf registration statement that became effective in
2002. It provides for up to $300 million in additional financing through various
means, such as the potential issuance of common or preferred stock, debt
securities or warrants. Preferred stock and debt security issuances may be fixed
and/or convertible.

Recent Acquisitions

In January 2003, the Company acquired Airtechnology Holdings Limited
("Airtechnology") from Candover Partners Limited for approximately 50 million
British pounds sterling or $80 million in cash. Airtechnology is a leading
supplier of motors, fans and environmental control systems for aerospace and
defense markets. It has estimated annual sales of 29 million British pounds
sterling, or approximately $46 million. The acquired business is now part of the
EMG operating group.

Effective as of February 28, 2003, AMETEK purchased Solidstate Controls,
Inc. ("Solidstate Controls") from the Marmon Industrial Companies LLC for
approximately $36 million in cash. Solidstate Controls is a leading supplier of
Uninterruptible Power Supply systems for the process and power generation
industries. Solidstate Controls is headquartered in Columbus, Ohio, and has
estimated 2003 sales of $45 million. The acquired business joins AMETEK as part
of the EIG operating group.

FINANCIAL INFORMATION ABOUT OPERATING SEGMENTS, FOREIGN OPERATIONS, AND EXPORT
SALES

Reportable segment and geographic information are shown on pages 52-54 of
this report.

The Company's Global and Market Expansion growth strategy is subject to
certain risks that are inherent in conducting business outside the United
States. Those include fluctuations in currency exchange rates and controls,
restrictions on the movement of funds, import and export controls, and other
economic, political and regulatory policies of the countries in which business
is conducted.

The Company's high level of foreign sales has resulted from a combination
of export sales of products manufactured in the United States, sales from
overseas operations and sales resulting from strategic alliances.

DESCRIPTION OF BUSINESS

The products and markets of each operating segment are described below:

EIG

EIG applies its specialized market focus and superior technology to produce
testing, monitoring and calibration instruments for the aerospace, power,
process, and industrial markets. EIG's growth is based on the four strategies
outlined in AMETEK's Corporate Growth Plan. EIG designs products that are
significantly different from, or technologically better than, competing
products. It has reduced costs by implementing operational improvements,
achieving acquisition synergies, improving supply chain management, moving
production to low cost locales and reducing headcount. EIG is among the leaders
in many of the specialized markets it serves, including aerospace engine
sensors, heavy-vehicle instrument panels, analytical instrumentation, level
measurement products, power instruments and pressure gauges. It also has joint
venture manufacturing operations in Japan, China and Taiwan. Approximately 35%
of EIG's 2002 sales were to markets outside the United States.

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EIG employs approximately 3,400 people, of whom approximately 700 are
covered by collective bargaining agreements. It has 27 manufacturing facilities:
23 in the United States, 3 in Europe and 1 in Canada.

Aerospace and Power Instruments Markets and Products

Approximately 37% of EIG revenues are from the sale of aerospace and power
products. AMETEK Aerospace products are designed to customer specifications and
are manufactured to stringent operational and reliability requirements. Its
aerospace business operates in specialized markets, where its products have a
technological and/or cost advantage. Acquisitions have complemented and expanded
EIG's core sensor and transducer product line, used in a wide range of
industrial and aerospace applications.

Aerospace products include airborne data systems, turbine engine
temperature measurement products, vibration-monitoring systems, indicators and
displays, fuel and fluid measurement products, sensors, switches, cable
harnesses and transducers. EIG serves all segments of commercial aerospace,
including helicopters, business jets, commuter aircraft, and commercial
airliners, as well as the military market.

Among its significant competitive advantages are EIG's 50-plus years of
experience as an aerospace supplier and its long-standing customer relationships
with global commercial aircraft OEMs. Its customers are the leading producers of
airframes and jet engines. It also serves the commercial aerospace aftermarket
with spare part sales and repair and overhaul services.

EIG is a leader in the development and manufacture of sensor systems for
gas turbine engines and for boilers and burners used by the utility,
petrochemical, process, and marine industries worldwide. That core technology
initially was developed for aerospace but was adapted by AMETEK for land-based
gas turbines. With its 2000 acquisition of Rochester Instrument Systems, EIG
also became a leader in the design and manufacture of power measurement and
recording instrumentation used by the electric power and manufacturing
industries. Those products include power transducers and meters, event and
transient recorders, annunciators and alarm monitoring systems used to measure,
monitor and record variables in the transmission and distribution of electric
power.

Process Instruments Markets and Products

Approximately 39% of EIG sales are from instruments for process measurement
and analysis. These include pressure gauges and transducers; oxygen, moisture,
combustion and liquid analyzers; emission monitors; mass spectrometers;
electronic pressure sensors and transmitters; and level measurement devices.
EIG's focus is on process industries, including oil, gas and petrochemical
refining, power generation, specialty gas production, water and waste treatment,
natural gas distribution and semiconductor manufacture. AMETEK is the world
leader in the analysis of tail gas in sulfur recovery processes.

In 2001, AMETEK acquired two businesses, EDAX and IRAS, which significantly
expanded its position in laboratory instrumentation. EDAX manufactures and
markets energy dispersive X-ray microanalysis instrumentation used in electron
microscope systems to identify and quantify the elemental composition and
structure of solid materials. The IRAS acquisition has greatly extended AMETEK's
capabilities in the measurement of physical properties with instruments that are
used in environmental monitoring, detection of nuclear and chemical weapons, and
laboratory research. IRAS also produces instrumentation for electronic signal
processing and electrochemical applications. As part of the IRAS acquisition,
AMETEK acquired a 49% ownership position in Seiko EG&G Co., Ltd., a joint
venture that serves as the exclusive distributor of IRAS's Ortec(R) product line
in Japan.

EIG is among the leading North American manufacturers of pressure gauges, a
market that has been adversely affected by low-cost products manufactured
offshore. EIG has addressed this issue by participating in a 50%-owned joint
venture that manufactures low-cost pressure gauges in China and Taiwan, where
the venture also markets the products, and refocusing its domestic manufacturing
on more advanced pressure measurement products.

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Industrial Instrumentation Markets and Products

Approximately 24% of EIG sales are to the industrial instrumentation
market. Its Test & Calibration Instruments (T&CI) business manufactures a
comprehensive line of force-measurement and materials testing devices in the
United States and Europe. These include hand-held force measurement gauges and
test stands. T&CI also provides analytical software and support services. T&CI's
products are marketed worldwide under the Chatillon, Lloyd, Erichsen, Jofra, and
Davenport brand names through a global network of distributors, sales
representatives, and direct sales.

The acquisition of Solidstate Controls, as of the end of February 2003,
brings to AMETEK a line of Uninterruptible Power Supply systems for the process
and power generation industries.

EIG's Dixson business is a leading North American manufacturer of dashboard
instruments for heavy trucks, and is also a major supplier of similar products
for agricultural, construction, and off-road vehicles. It has a strong product
development capability in solid-state instruments that primarily monitor
engine-operating parameters.

Through its NCC business, EIG has a leading position in the market for food
service instrumentation and is a primary source for stand-alone and integrated
timing controls for the food service industry.

The Chemical Products division produces silica-, phenolic resin-, and
fluoropolymer-based products for high-temperature and highly corrosive
applications, including protective welding curtains and products for the
filtering of molten metal and heat exchangers. EIG also is a custom compounder
of engineered thermoplastic resins that offer enhanced strength, temperature
resistance and other properties for automotive parts, consumer appliances and
electronics, and telecommunications.

Customers

EIG is not dependent on any single customer such that the loss of that
customer would have a material adverse effect on EIG's operations. Approximately
23% of EIG's 2002 sales were made to its five largest customers.

EMG

The Company believes EMG is the world's largest producer of high-speed,
air-moving electric motors for OEMs of floor care products. It designs and
manufactures small vacuum motors with fans that rotate at high speeds and
require advanced manufacturing technology. EMG addresses complex motor-blower
dynamics, including heat, noise, vibration and wear in designing its customized
products. EMG also is a world leader in the production of brushless DC motors
and motor-blowers and a leading producer of specialty metal products used in
automotive, electronics, telecommunications, consumer and other markets. EMG
holds a leading market share for its electric motors in North America and
Western Europe and is focused on expanding its share in a growing Asian market.
It has expanded its operations worldwide by leveraging manufacturing and
technological expertise developed over many years.

EMG uses its technical expertise in the manufacture of high-speed,
air-moving electric motors to penetrate a variety of targeted markets, including
floor care and small appliances. It has formed alliances with OEM customers to
design and manufacture cost-effective products for numerous floor care
applications and is using its technical and marketing skills to further
penetrate other markets, such as outdoor power equipment and personal care
products.

To achieve greater global penetration and further reduce costs, EMG is
building on its market leadership in North American and European floor care by
expanding its electric motor production operations in China, Mexico, the Czech
Republic and Brazil. Approximately 33% of EMG's 2002 sales were to customers
outside the United States.

EMG employs approximately 4,200 people, of whom approximately 2,300 are
covered by collective bargaining agreements (including some which are covered by
local unions). It has 21 manufacturing facilities: 12 in the United States, 2 in
Italy, 2 in the United Kingdom, 2 in Mexico, 1 in China, 1 in the Czech
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Republic, and 1 in Brazil. As part of its ongoing efforts to relocate production
to low-cost facilities, EMG closed its Hudson, WI motor plant in 2002 and
relocated its production to the Reynosa, Mexico facility.

EMG's flexible production lines are designed for low-cost, high-volume
operations. Advanced technological capability allowed EMG to provide its
customers with custom-designed products and the Group produced approximately 28
million motors in 2002.

Floor Care Markets and Products

Approximately 39% of EMG sales are to floor care markets, where it has the
leading share, through its sales of air-moving electric motors to most of the
world's major floor care OEMs, including vertically integrated OEMs that produce
some of their own motors. EMG produces motor-blowers for a full range of floor
care products, ranging from hand-held, canister, and upright vacuums to central
vacuums for residential use. High-performance vacuum motors also are marketed
for commercial and industrial applications.

EMG has been successful in directing a portion of its global floor care
marketing to vertically integrated vacuum cleaner manufacturers, who seek to
outsource all or part of their motor production. By purchasing their motors from
EMG, these customers are able to realize economic and operational advantages by
reducing or discontinuing their own motor production and avoiding the capital
investment required to keep their motor manufacturing current with changing
technologies and market demands.

EMG has focused its new product development efforts on minimizing costs and
enhancing motor-blower performance through advances in power, efficiency, size,
weight, and quieter operation. Among its latest advances are the ADVANTEK(TM)
series of universal vacuum motors that incorporate design and construction
techniques that lower cost while improving operating efficiency and reliability;
the Air-Watt(TM) Series of commercial motor-blowers, whose advanced design
translates directly into higher performance and energy savings for end users;
and ACUSTEK Plus(TM) low-noise commercial vacuum motors.

EMG has a significant position in the European floor care market with
manufacturing operations in Italy and the Czech Republic. The electric motors
produced in Italy and the Czech Republic are similar to those produced in North
America.

Technical Motor Markets and Products

EMG's technical motors are used in aerospace applications, business
machines and computer equipment, military and mass transit vehicles, and medical
equipment. These electronically commutated (brushless) motors, blowers and pumps
offer long life, reliability and near maintenance-free operation. They are used
increasingly in medical and other applications, in which their long life, and
spark-free and reliable operation are key. They also can be found in gasoline
vapor recovery systems, and provide cooling and ventilation for electronic
devices, military and mass transit vehicles and a wide range of aircraft. In the
emerging fuel cell market, AMETEK is working closely with many of the leading
developers of fuel cell technology, with blowers and pumps specifically
developed for these applications. The acquisition of Airtechnology in January
2003 significantly expands AMETEK's presence in high-end technical motors and
strengthens EMG's relationship with large European-based aerospace and defense
companies.

Specialty Motor Markets and Products

Approximately 22% of EMG sales are to specialty motor markets, where it
manufactures a variety of specialty motors used in a wide range of products,
including outdoor power equipment, such as electric chain saws, leaf blowers,
string trimmers and power washers; household and personal care appliances;
fitness equipment; electric materials handling vehicles; and sewing machines.
The 2001 acquisition of GS Electric added to AMETEK's presence in permanent
magnet motors, allowing it to participate in a variety of new niche markets that
have higher growth rates than floor care, and further leverage the Company's
low-cost motor manufacturing infrastructure.

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Specialty Metals Markets and Products

AMETEK is an innovator and market leader in metal powder, strip, wire, and
bonded products. It produces stainless steel and nickel clad alloys, stainless
steel, cobalt, and nickel alloy powders; metal strip; specialty shaped and
electronic wire; and advanced metal matrix composites used in electronic thermal
management. Its products are used in automotive, appliance, telecommunications,
marine and general industrial applications. Its niche market focus is based upon
proprietary manufacturing technology and strong customer relationships.

Power and Switch Markets and Products

The August 2000 acquisition of the Prestolite switch and industrial battery
charger businesses greatly expanded AMETEK's electromechanical product
offerings. The switch business produces solenoids, and other electromechanical
devices for the motive and stationary power markets. The battery charger
business manufactures high-quality industrial battery chargers for use in the
materials handling market. Both the switch and battery charger businesses have
strong market positions, superior technologies, and enjoy a reputation for high
quality and service.

Customers

EMG is not dependent on any single customer such that the loss of that
customer would have a material adverse effect on EMG's operations. Approximately
14% of EMG's sales for 2002 were made to its five largest customers.

MARKETING

The Company's marketing efforts generally are organized and carried out at
the group and division levels. EIG makes significant use of distributors and
sales representatives in marketing its products. Within aerospace, its
specialized customer base of aircraft and jet engine manufacturers are served
primarily by direct sales engineers. Given the similarity and technical nature
of its many products as well as its significant worldwide market share, EMG
conducts most of its domestic and international marketing activities through a
direct sales force and makes some use of sales representatives and distributors
both in the United States and other countries.

COMPETITION

In general, most of the Company's markets are highly competitive. The
principal elements of competition for the Company's products are price, product
technology, distribution, quality, and service.

In the markets served by EIG, the Company believes that it ranks among the
leading U.S. producers of certain measuring and control instruments. It also is
a leader in the U.S. heavy-vehicle instrumentation and power instruments markets
and one of the leading instrument and sensor suppliers to the commercial
aviation market. Competition remains strong and can intensify for certain EIG
products, especially its pressure gauge and heavy-vehicle instrumentation. Both
of these businesses have several strong competitors. In the process and
analytical instruments markets, numerous companies in each specialized market
compete on the basis of product quality, performance and innovation. The
aerospace and power instruments businesses have a number of diversified
competitors, which vary depending on the specific market niche.

EMG has limited domestic competition in the U.S. floor care market from
independent manufacturers. Competition is increasing from Asian motor
manufacturers that serve the U.S. floor care market. There is potential
competition from vertically integrated manufacturers of floor care products that
produce their own motor-blowers. Many of these manufacturers would also be
potential EMG customers if they decided to outsource their motor production. In
Europe, competition comes from a small group of large international competitors,
vertically integrated manufacturers, and numerous small competitors. EMG's
businesses have competition from a limited number of companies in each of their
markets. Competition is generally based on

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product innovation, performance and price. EMG's specialty metal products
business has several specialized product lines that have few competitors. The
primary competition is from alternative materials and processes.

BACKLOG AND SEASONAL VARIATIONS OF BUSINESS

The Company's approximate backlog of unfilled orders by business segment at
the dates specified below was as follows:

The decline in backlog from December 31, 2001 was primarily in the
Company's aerospace, power and technical motor businesses.

Of the total backlog of unfilled orders at December 31, 2002, approximately
95% is expected to be shipped by December 31, 2003. The Company believes that
neither its business as a whole, nor either of its operating segments, is
subject to significant seasonal variations, although certain individual
operations experience some seasonal variability.

RAW MATERIALS

The Company's business segments obtain raw materials and supplies from a
variety of sources, and generally from more than one supplier. However, for EMG,
certain items, including various base metals and certain steel components, are
available only from a limited number of suppliers. The Company believes its
sources and supplies of raw materials are adequate for its needs.

RESEARCH, PRODUCT DEVELOPMENT AND ENGINEERING

The Company is committed to research, product development, and engineering
activities that are designed to identify and develop potential new and improved
products or enhance existing products. Research, product development, and
engineering costs were $46.8 million, $45.2 million and $45.9 million, in 2002,
2001, and 2000 respectively. These amounts included net Company-funded research
and development expenses of $23.7 million, $22.6 million and $23.8 million,
respectively. Such expenditures were directed toward the development of new
products and processes, and the improvement of existing products and processes.

ENVIRONMENTAL COMPLIANCE

Information with respect to environmental matters of the Company is set
forth on pages 27 and 28 of this report in the section of Management's
Discussion and Analysis of Financial Condition and Results of Operations
entitled "Environmental Matters".

PATENTS, LICENSES, AND TRADEMARKS

The Company owns numerous unexpired U.S. patents, and foreign patents,
including counterparts of its more important U.S. patents, in the major
industrial countries of the world. The Company is a licensor or licensee under
patent agreements of various types, and its products are marketed under various
registered and unregistered U.S. and foreign trademarks and trade names.
However, the Company does not consider any single patent or trademark, or any
group thereof, essential either to its business as a whole or to either of its
business segments. The annual royalties received or paid under license
agreements are not significant to either of its business segments or to the
Company's overall operations.

10

EMPLOYEES

At December 31, 2002, the Company employed approximately 7,700 people in
its EMG, EIG and corporate operations, of whom approximately 3,000 were covered
by collective bargaining agreements.

WORKING CAPITAL PRACTICES

The Company does not have extraordinary working capital requirements in
either of its business segments. Customers generally are billed at normal trade
terms, which may include extended payment provisions. Inventories are closely
controlled and maintained at levels related to production cycles, and are
responsive to the normal delivery requirements of customers.

ITEM 2. PROPERTIES

The Company has 48 operating plant facilities in 17 states and 9 foreign
countries. Of these facilities, 33 are owned by the Company and 15 are leased.
The properties owned by the Company consist of approximately 552 acres, of which
approximately 3.9 million square feet are under roof. Under lease is a total of
approximately 791,000 square feet. The leases expire over a range of years from
2003 to 2015, with renewal options for varying terms contained in most of the
leases. Production facilities in Taiwan, China, Japan and Korea provide the
Company with additional production capacity through the Company's investment in
50% or less owned joint ventures. The Company also has one idle production
facility available for sale. The Company's executive offices in Paoli, PA,
occupy approximately 34,000 square feet under a lease that will expire in 2007.

The Company's machinery, plants, and offices are in satisfactory operating
condition and are adequate for the uses to which they are put. The operating
facilities of the Company by business segment are summarized in the following
table:

ITEM 3. LEGAL PROCEEDINGS

There recently has been a significant increase in certain asbestos-related
claims against numerous industrial companies in certain states. AMETEK, or its
subsidiaries, have been named defendants in some such cases. No significant
resources have been required by the Company to respond to these cases, no
judgments have been made against AMETEK, and no payments have been made to
plaintiffs to settle such asbestos-related claims. The Company believes it has
strong defenses to such claims, and it also is indemnified against certain of
these claims. If required, the Company intends to defend itself vigorously in
these matters.

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

No matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies or otherwise, during the last quarter of the
fiscal year ended December 31, 2002.

11

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The principal market on which the Company's common stock is traded is the
New York Stock Exchange. The Company's common stock is also listed on the
Pacific Exchange, Inc. On February 28, 2003, there were approximately 2,400
holders of record of the Company's common stock.

Market price and dividend information with respect to the Company's common
stock are set forth on page 55 in the section of the Notes to the Consolidated
Financial Statements entitled "Quarterly Financial Data (Unaudited)." Future
dividend payments by the Company will be dependent on future earnings, financial
requirements, contractual provisions of debt agreements, and other relevant
factors.

12

ITEM 6. SELECTED FINANCIAL DATA

13

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

(1) 2001 includes unusual pretax charges totaling $23.3 million, $15.3 million
after tax ($0.46 per diluted share). The charges were for employee
reductions, facility closures and asset writedowns. The year 2001 also
included a tax benefit and related interest income of $10.5 million after
tax ($0.32 per diluted share) resulting from the closure of a number of tax
years. The amounts in 1998 include a nonrecurring pretax charge for cost
reduction initiatives totaling $8.0 million, ($4.8 million after-tax or
$0.14 per diluted share).

(2) The amounts in 2001 and the preceding years include the amortization of
goodwill. Effective January 1, 2002, the Company adopted Financial
Accounting Standards Board Statement No. 142, "Goodwill and Other Intangible
Assets", which no longer permits the amortization of goodwill and
indefinite-lived intangible assets. Had the Company not amortized goodwill,
net income and diluted earnings per share would have been higher by $10.2
million ($0.30 per diluted share), $9.2 million ($0.28 per diluted share),
$6.7 million ($0.20 per diluted share) and $4.9 million ($0.15 per diluted
share) in 2001, 2000, 1999 and 1998, respectively.

(3) Amounts in 1998 include a pretax loss on the early repayment of debt of
$13.8 million, $8.7 million, aftertax ($0.26 per diluted share). Prior to
the issuance of FASB Statement No. 145 ("Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13 and Technical
Corrections,") in April 2002, such a transaction was reported as an
extraordinary item in accordance with FASB Statement No. 4. The issuance of
Statement No. 145 rescinds Statement No. 4 and requires retroactive
reclassification of prior period items that do not meet specified criteria
for classification as an extraordinary item.

(4) See description of unusual and nonrecurring charge in Note 1 above. The
table below presents the reconciliation of operating income reported in
accordance with GAAP to operating income before unusual and nonrecurring
items.

14

(5) EBITDA represents income before income taxes, interest, depreciation and
amortization, amortization of deferred financing costs, and nonrecurring
items. EBITDA is presented because the Company is aware that it is used by
rating agencies, securities analysts, investors and other parties in
evaluating the Company. It should not be considered, however, as an
alternative to operating income as an indicator of the Company's operating
performance, or as an alternative to cash flows as a measure of the
Company's overall liquidity as presented in the Company's financial
statements. Furthermore, EBITDA measures shown for the Company may not be
comparable to similarly titled measures used by other companies. The table
below presents the reconciliation of net income reported in accordance with
U.S. GAAP to EBITDA.

(6) Before the effects of an accounts receivable securitization program.

(7) Free cash flow represents net income, plus depreciation and amortization,
less capital expenditures and dividends. Free cash flow is presented because
the Company is aware that it is used by rating agencies, securities
analysts, investors and other parties in evaluating the Company. (Also see
note 5 above). The table below presents the reconciliation of net income
reported in accordance with U.S. GAAP to Free Cash Flow.

(8) At December 31, 2002 and 2001, debt includes borrowings under the accounts
receivable securitization program, referred to in note 6 above. At December
31, 2000 and 1999, such amounts were excluded from the balance sheet. Had
these amounts been included in the balance sheet, total debt and total debt
as a percentage of capitalization would have been $406.2 million and $375.4
million and 59.1% and 63.6%, respectively, at December 31, 2000 and 1999.

15

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This report includes forward-looking statements based on the Company's
current assumptions, expectations and projections about future events. When used
in this report, the words "believes," "anticipates," "may," "expect," "intend,"
"estimate," "project," and similar expressions are intended to identify forward-
looking statements, although not all forward-looking statements contain such
words. In this report, we disclose important factors that could cause actual
results to differ materially from management's expectations. For more
information on these and other factors see "Forward-Looking Information" on
pages 28 and 29.

The following discussion and analysis of the Company's results of
operations and financial condition should be read in conjunction with "Item 6.
Selected Financial Data" and the consolidated financial statements of the
Company and the related notes included elsewhere in this Form 10-K.

BUSINESS OVERVIEW

AMETEK performed well in 2002 in what remains a difficult economic
environment. In 2002, the Company posted record sales, operating income, net
income, and diluted earnings per share. The Company benefited from its 2001
acquisitions, the aggressive management of its cost structure and a substantial
reduction in its operating working capital. AMETEK is continuing to take the
appropriate steps to size its business to the current economic environment. The
Company also continues to achieve several major objectives under its four growth
strategies: Strategic Acquisitions and Alliances, Global and Market Expansion,
New Products, and Operational Excellence. Significant 2002 and recent events
were:

- Sales were $1.04 billion in 2002, an increase of 2.1% from 2001 despite
weak economic conditions both domestically and internationally.

- Continuing with the Company's global plan to lower its cost structure,
Operational Excellence initiatives in 2002 included the ongoing
transition of a portion of the Company's motor and instrument production
to low-cost manufacturing facilities in Mexico as well as in China and
the Czech Republic. The Company produced 17% of its products in low-cost
locales in 2002.

- A successful program to reduce operating working capital in 2002 resulted
in strong cash flow from operations that totaled $104 million, a 3%
increase from 2001. Inventories were lowered by $23.1 million, or 15%,
since December 31, 2001. The major use of the Company's increased
operating cash flow in 2002 was an $82.8 million reduction of debt. The
reduction in debt continues to provide the Company with additional
financing capability to, among other things, purchase new businesses.

- The Company's shelf registration statement became effective in the fourth
quarter of 2002, allowing for up to $300 million in additional financing
through the potential issuance of a variety of debt and/or equity
securities.

- In a difficult economic environment, the Company continued its emphasis
on investment in research, development and engineering, spending $46.8
million in 2002, an increase of 3.7% over 2001. Benefiting from its
previous investment in research and development, new product sales
increased 6.8% over 2001 to $111.9 million.

- In mid January 2003, the Company completed the acquisition of
Airtechnology Holdings Limited, significantly expanding its presence in
high-end technical motors.

- As of the end of February 2003, the Company acquired Solidstate Controls,
Inc., adding complementary products for the process and power generation
industries.

- In mid March 2003, a new $50 million share repurchase program was
authorized.

16

RESULTS OF OPERATIONS

The following table sets forth net sales and income of the Company by
business segment and on a consolidated basis for the years ended December 31,
2002, 2001, and 2000:

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

(1) After elimination of intra- and intersegment sales, which are not
significant in amount.

(2) The amounts in 2001 include unusual charges of $23.3 million for cost
realignment initiatives and asset writedowns.

(3) Segment operating income represents sales less all direct costs and expenses
(including certain administrative and other expenses) applicable to each
segment, but does not include interest expense.

(4) 2002 excludes goodwill amortization (see "Operating Segment Results").

YEAR ENDED DECEMBER 31, 2002, COMPARED WITH YEAR ENDED DECEMBER 31, 2001.

Results of Operations

The Company reported sales for 2002 of $1,040.5 million, an increase of
2.1% from sales of $1,019.3 million in 2001, despite the difficult global
economic environment, which continued to impact many of the Company's
businesses. Net sales for the Electronic Instruments Group (EIG) were $539.4
million in 2002, an increase of 8.0% from sales of $499.5 million in 2001. The
sales increase for EIG was due mainly to the 2001 acquisitions of Instruments
for Research and Applied Science (IRAS) and EDAX, Inc., as well as strength in
the Company's heavy-vehicle instruments business. These increases were partially
offset by a continued decline in demand from most of the Group's other
businesses, primarily aerospace and power instruments. Net sales for the
Electromechanical Group (EMG) were $501.1 million in 2002, a decrease of 3.6%
from sales of $519.8 million in 2001, due to continued weakness in the United
States and European floor care markets, partially offset by the 2001 acquisition
of GS Electric and currency translation gains from international businesses.
Without the impact of the 2001 acquisitions, consolidated sales for 2002 would
have been lower by 6.3% when compared with 2001. Total consolidated
international sales were $353.4 million in 2002, an increase of 10.0% from sales
of $321.2 million in 2001. Export shipments from the United States in 2002 were
$192.0 million, an increase of 12.9% compared with $170.0 million in 2001.

New orders for 2002 were $1,004.8 million, compared with $1,039.5 million
for 2001, a decrease of $34.7 million or 3.3%, due to declines primarily in the
aerospace and power instrument businesses resulting from softness in these
markets, as well as the overall economic slowdown. The decline in orders was
partially

17

offset by orders from the 2001 acquisitions. The order backlog at December 31,
2002 was $240.9 million, compared with $276.6 million at December 31, 2001, a
decrease of $35.7 million or 12.9% primarily in the aerospace, power instrument,
and technical motor businesses.

Total segment operating income increased to $167.7 million for 2002, an
increase of 31.4%, compared with segment operating income of $127.7 million for
2001. Segment operating margins in 2002 were 16.1% of sales, an increase from
12.5% of sales in 2001. The higher operating income was primarily driven by the
2001 acquisitions and the non-amortization of goodwill, effective at the
beginning of 2002. This increase was reduced somewhat by higher net pension
costs resulting primarily from lower pension income from the Company's U.S.
defined benefit pension plans. In 2003, the Company expects an increase in total
pension expense of approximately $7.0 million pretax, due primarily to the
recent decline in the market value of pension plan investments caused by the
poor performance of the equity markets, as well as changes in actuarial
assumptions at year-end 2002. In 2002, the Company continued to benefit from its
aggressive cost reduction initiatives, which began in the second half of 2000.
These initiatives include the continued migration of production to low-cost
locales in Mexico, China and the Czech Republic and the lowering of its overall
cost structure. Segment operating income in 2001 included a fourth-quarter
unusual pretax charge to operations of $23 million ($15 million after tax, or
$0.46 per diluted share). Before the 2001 fourth-quarter unusual charge, segment
operating income was $150.7 million, and margins were 14.8% of sales.

Selling, general, and administrative (SG&A) expenses were $104.8 million in
2002, compared with $98.7 million in 2001, an increase of $6.1 million or 6.2%.
As a percentage of net sales, SG&A expenses were 10.1% in 2002, compared to 9.7%
in 2001. The selling expense component, as a percentage of sales, increased to
8.3% in 2002, compared with 7.9% in 2001. The higher selling expense in 2002 was
due to the 2001 acquisitions in EIG, which have a different overall cost
structure than AMETEK's base businesses. Selling expense of base businesses
decreased as a percentage of sales during 2002, reflecting the Company's
continual focus on cost reduction initiatives.

Corporate and other expenses were $19.0 million, or 1.8% of sales in 2002,
an increase of $0.9 million or 5.0%, when compared with $18.1 million in 2001,
but were unchanged as a percentage of sales. Higher insurance expense, pension
costs, and professional fees in 2002 accounted for the increase in corporate
expenses in 2002.

After deducting corporate expenses, consolidated operating income was
$148.7 million or 14.3% of sales, an increase of $39.1 million when compared
with 2001 operating income of $109.6 million or 10.7% of sales. Before unusual
charges in 2001, operating income was $132.8 million, or 13.0% of sales.

Interest expense was $25.2 million in 2002, a decrease of 9.8% compared
with $27.9 million in 2001. A lower average interest rate was the primary reason
for the decrease in interest expense. Other expenses were $0.6 million for 2002,
compared with other income of $2.7 million for 2001. The $3.3 million change
resulted primarily from lower investment income from the Company's captive
insurance subsidiary in 2002. The prior year also included interest income
related to the tax benefits recognized in the fourth quarter of 2001.

The effective tax rate for 2002 was 31.9% compared with 21.6% in 2001. The
effective tax rate in 2002 was favorably impacted by the effect of not
amortizing goodwill due to the adoption of SFAS No. 142, and the Company's tax
planning initiatives. The lower tax rate in 2001 was primarily due to the
recognition of $10.5 million in tax benefits resulting from the closure of a
number of tax years by U.S. federal and state tax authorities. Before unusual
charges and tax benefits, the 2001 effective tax rate was 33.2%.

Net income for 2002 was $83.7 million, or $2.49 per diluted share, compared
with net income for 2001 of $66.1 million, or $1.98 per diluted share, a 26.6%
increase in net income. Net income in 2001 included goodwill amortization of
$10.2 million after tax, or $0.30 per diluted share, and the net effect of the
unusual items, previously mentioned.

Operating Segment Results

The ELECTRONIC INSTRUMENTS GROUP (EIG) sales were $539.4 million in 2002,
an increase of 8.0% from 2001 sales of $499.5 million. The sales increase was
primarily from the IRAS and EDAX acquisitions, as well
18

as strength in the heavy-vehicle business. The Company believes the increase in
heavy-vehicle instrument sales was due mainly to truck purchases in advance of
more stringent federal emission standards that became effective October 1, 2002
and is considered to be an isolated event. Conditions remain weak in many of
EIG's markets, especially in the aerospace, power instruments and heavy-vehicle
markets. Without the recent acquisitions, EIG's 2002 sales would have decreased
by 5.5% when compared with 2001.

EIG's operating income for 2002 increased to $87.5 million from $57.0
million in 2001, an increase of $30.5 million, or 53.4%. The increase is the
result of unusual charges recorded in the fourth quarter of 2001 resulting from
headcount reductions, shifting production to low-cost locales and other expense
reduction initiatives. EIG also benefited from the non-amortization of goodwill
in 2002. EIG's pretax goodwill amortization in 2001 was $6.7 million. The
Group's operating margins for 2002 improved to 16.2% from 11.4% in 2001. Without
the 2001 unusual expenses, and goodwill amortization, the Group's operating
income for 2002 would have shown an increase of $11.2 million, or 14.7% when
compared with 2001.

ELECTROMECHANICAL GROUP (EMG) sales were $501.1 million in 2002, a decrease
of 3.6% from 2001 sales of $519.8 million. The sales decrease reflects the
continued overall weakness in the Group's markets, led by continued softness in
the floor care market. The 2001 acquisition of GS Electric and currency
translation gains from international businesses partially offset the sales
decline. Without the recent acquisition, EMG's sales would have decreased by
7.1%.

EMG's operating income for 2002 increased to $80.2 million from $70.6
million in 2001, an increase of 13.6%. The increase is the result of unusual
charges recorded in the fourth quarter of 2001, and improved operating margins
resulting from headcount reductions, shifting production to low-cost locales and
other expense reduction initiatives. EMG also benefited from the
non-amortization of goodwill in 2002. EMG's pretax goodwill amortization in 2001
was $5.2 million. Group operating margins were 16.0% of sales in 2002, up from
13.6% of sales in 2001. Without the 2001 unusual expenses, and goodwill
amortization, the Group's operating income would have decreased by $6.3 million,
or 7.8%.

Fourth Quarter Results

Sales for the fourth quarter of 2002 were $252.6 million, compared with
$237.3 million in the fourth quarter of 2001, an increase of $15.3 million, or
6.4%. The increase in sales was primarily driven by the IRAS acquisition,
although the difficult global economic environment continued to impact many of
the Company's businesses. Without the acquisition, 2002 sales increased
slightly.

Operating income for the fourth quarter of 2002 was $36.5 million, compared
with $5.3 million for the fourth quarter of 2001, an increase of $31.2 million.
Operating income was lower in the fourth quarter of 2001 primarily due to the
recording of unusual expenses that totaled $23.3 million, of which $12.4 million
was related to the costs of employee reductions, facility closures, and the
continued migration of production to low-cost locales, and $10.9 million was
related to asset writedowns. In the fourth quarter of 2002, the Company
continued to benefit from the aggressive management of its cost structure, which
began in the fourth quarter of 2000. The contribution from the acquisition of
IRAS and the non-amortization of goodwill, which started at the beginning of
2002 also benefited the 2002 fourth quarter. Without the effect of unusual
expenses in the fourth quarter of 2001, segment operating income for 2001 would
have been $28.6 million.

Selling, general and administrative expenses were $23.9 million in the
fourth quarter of 2002, a decrease of $3.7 million or 13.4%, when compared with
the fourth quarter of 2001. Selling expenses, as a percentage of sales,
decreased to 7.6% in the fourth quarter of 2002, compared with 9.8% for the same
period in 2001, which reflects the Company's continual focus on cost reduction
initiatives, and the unusual charges in 2001. This decrease was partially offset
by selling expenses related to the IRAS acquisition, acquired in December 2001.
The 2001 fourth quarter included selling, general and administrative expenses of
$2.7 million related to unusual charges.

Corporate and other expenses for the fourth quarter of 2002 were $4.8
million, or 1.9% of sales, compared to $4.3 million, or 1.8% of sales in the
fourth quarter of 2001. After deducting corporate expenses, consolidated
operating income totaled $36.5 million or 14.4% of sales for the fourth quarter
of 2002, compared with

19

$5.3 million, or 2.2% of sales for the fourth quarter of 2001. Before unusual
charges, operating income in the fourth quarter of 2001 was $28.6 million, or
12.1% of sales.

Interest expense was $5.7 million in the fourth quarter of 2002, compared
with $6.6 million for the same quarter of 2001. The decrease of $0.9 million, or
13.6%, resulted from lower interest rates and debt levels.

The fourth quarter 2002 provision for income taxes was $9.5 million
compared to a tax benefit of $10.8 million in the fourth quarter of 2001. The
2001 fourth quarter results include a tax benefit of $10.5 million, from the
closure of a number of tax years by U.S. federal and state tax authorities.

Net income for the fourth quarter of 2002 totaled $21.3 million, or $0.63
per diluted share, an increase of $9.8 million, or 86.1% from the fourth quarter
of 2001, when net income was $11.5 million, or $0.34 per diluted share. Before
the unusual items, fourth quarter 2001 earnings were $16.2 million, or $0.48 per
diluted share. Net income for the fourth quarter of 2001 included goodwill
amortization of $2.7 million after tax, or $0.08 per diluted share.

YEAR ENDED DECEMBER 31, 2001, COMPARED WITH YEAR ENDED DECEMBER 31, 2000

Results of Operations

The Company reported sales for 2001 of $1,019.3 million, a decrease of 0.5%
from sales of $1,024.7 million in 2000, caused by weak economic conditions which
impacted most of the Company's businesses. Significantly offsetting the weak
economic conditions were the contributions from the Company's 2001 and 2000
business acquisitions and strength in its aerospace and power instruments
businesses. Without the acquisitions, sales for 2001 would have been 10% lower.
EIG segment sales were $499.5 million in 2001, a decrease of 2.0% from sales of
$509.5 million in 2000. Sales for EIG were lower largely due to a decline in
demand from most of its businesses. Acquisitions and continued strength in the
aerospace and power instruments businesses offset most of the Group's sales
decline. EMG segment sales were $519.8 million in 2001, an increase of 0.9% from
sales of $515.2 million in 2000 due to the sales contribution from acquisitions.
The Group's sales increase was offset by adverse economic conditions and other
competitive factors in the United States and European floor care markets. Total
consolidated international sales were $321.2 million in 2001, a decrease of 1.1%
from sales of $324.9 million in 2000. Export shipments from the United States in
2001 were $170.0 million, a decrease of 5.1% compared with $179.1 million in
2000.

New orders for 2001 were $1,039.5 million, essentially unchanged from
$1,037.6 million for 2000. The order backlog at December 31, 2001 was $276.6
million, compared with $256.4 million at December 31, 2000. New orders from
acquisitions made by the Company during 2001 and increased orders from the
aerospace and power instrument businesses were the primary reasons for the
increase.

Total segment operating income declined to $127.7 million for 2001, a
decrease of 18.3%, compared with segment operating income of $156.3 million for
2000. Segment operating margins in 2001 were 12.5% of sales, a decrease from
15.3% of sales in 2000. The overall reduction in segment operating margins in
2001 was primarily due to fourth quarter unusual pretax charges to operations of
$23 million ($15 million after tax, or $0.46 per diluted share). Partially
offsetting the lower segment operating margins in 2001, was lower pension
expense due primarily to use of the assumed return on pension investment assets.
Before the unusual charge, segment operating margins for 2001 were 14.8%. These
unusual charges are more fully discussed below under the "Fourth Quarter
Results".

Selling, general, and administrative (SG&A) expenses were $98.7 million in
2001, compared with $95.1 million in 2000, a $3.6 million increase due mainly to
increased selling expenses from acquisitions completed in 2001. As a percentage
of net sales, SG&A expenses were 9.7% in 2001, compared to 9.3% in 2000.
Corporate administrative expenses decreased to $18.1 million in 2001, compared
with $20.4 million in 2000, a decrease of $2.3 million, or 11.3%. The decrease
in corporate expenses reflected the impact of corporate cost reduction
activities primarily resulting from reduced information technology, consulting,
and travel expenses. Corporate expenses for 2001 were 1.8% percent of sales,
compared with 2.0% of sales for 2000.

20

After deducting corporate administrative expenses, consolidated operating
income was $109.6 million or 10.7% of sales, a decrease of $26.3 million when
compared with 2000 operating income of $135.9 million or 13.3% of sales. Before
unusual charges, operating income was $132.8 million, or 13.1% of sales.

Interest expense was $27.9 million in 2001, a decrease of 4.4% compared
with $29.2 million in 2000. Lower average interest rates, partially offset by
higher average debt levels to finance acquisitions, were the primary reasons for
the decrease in interest expense. Other income was $2.7 million for 2001,
compared with other expense of $0.5 million for 2000. The improvement resulted
primarily from interest income related to tax benefits recognized in the fourth
quarter of 2001 and from increased gains on sales of marketable securities held
by the Company's captive insurance subsidiary.

The effective tax rate for 2001 was 21.6% compared with 35.4% in 2000. The
lower tax rate in 2001 reflected the fourth quarter recognition of $10.5 million
in tax benefits ($0.32 per diluted share) resulting from the closure of a number
of open tax years by U.S. federal and state tax authorities, as well as higher
tax credits associated with export sales. Before unusual charges and the tax
benefits, the 2001 effective tax rate was 33.2%.

Net income for 2001 was $66.1 million, or $1.98 per diluted share, compared
with net income for 2000 of $68.5 million, or $2.11 per diluted share. The 3.5%
decrease in net income was due primarily to the fourth quarter net effect of the
unusual items, previously mentioned. Before the unusual items, earnings for 2001
were up 3.3% to $70.8 million, or $2.12 per diluted share.

Fourth Quarter Results

Sales for the fourth quarter of 2001 were $237.3 million, compared with
$258.2 million in the fourth quarter of 2000, a decrease of $20.9 million, or
8.1%. The decrease in fourth quarter sales was the result of significantly
weaker economic conditions, which impacted most of the Company's businesses.
Without the acquisitions, sales for the fourth quarter of 2001 would have been
17% lower.

Operating income for the fourth quarter of 2001 was $5.3 million, compared
with $34.1 million for the fourth quarter of 2000, a decrease of $28.8 million
or 84.4%. In response to weak economic conditions, in the fourth quarter of
2001, the Company recorded unusual expenses totaling $23.3 million of which
$12.4 million is related to the costs of employee reductions, facility closures,
the continued migration of production to low-cost locales, and $10.9 million
related to asset writedowns. The asset writedowns related to receivables ($3.3
million), inventory ($6.1 million) and equipment ($1.5 million). The asset
writedowns are primarily the result of the difficulties the economic environment
has had on a number of the Company's customers. The annualized cost savings
resulting from the severance and related actions are expected to be
approximately $25 million. These cost reduction initiatives were a continuation
of cost reduction programs that began in the fourth quarter of 2000, for which
the Company recorded a $3.4 million pretax charge in that quarter, and continued
during 2001.

Also, the fourth quarter 2001 results included a tax benefit of $10.5
million ($0.32 per diluted share), resulting from the closure of a number of tax
years by U.S. federal and state tax authorities. The tax benefits consisted of
cash of $4.4 million and a non-cash benefit of $6.1 million. As a result of the
tax benefit relating to the unusual charges, and the tax benefits discussed
here, the Company reported a total income tax benefit of $10.8 million in the
fourth quarter of 2001 compared with a tax provision of $9.2 million in the same
period of 2000.

Net income for the fourth quarter of 2001 totaled $11.5 million, or $0.34
per diluted share, a decrease of $5.8 million, or 33.5% from the fourth quarter
of 2000 net income of $17.2 million, or $0.53 per diluted share. Before the
unusual items, fourth quarter 2001 earnings were $16.2 million, or $0.48 per
diluted share.

Operating Segment Results

EIG sales were $499.5 million in 2001, a decrease of 2.0% from 2000 sales
of $509.5 million. The continued economic slowdown impacted most of the EIG
Group's businesses and was partially offset by the

21

sales contribution of the Company's 2001 and 2000 acquisitions and the strength
of the aerospace and power instruments businesses.

EIG's operating income for 2001 decreased to $57.0 million from $78.7
million in 2000, a decrease of $21.7 million, or 27.6%. Lower base business
sales caused by weak economic conditions, and significant unusual charges for
inventory writedowns, receivable losses related to a bankrupt customer, cost
realignment and employee severance related activities in the fourth quarter of
2001 drove the lower operating income. The Group's operating margins for 2001
declined to 11.4% from 15.5% in 2000. Without the unusual expenses, the Group's
operating income for 2001 would have been $69.5 million, a decrease of $9.3
million, or 13.9% of sales, compared with 2000.

EMG's sales for 2001 were $519.8 million, an increase of 0.9%, from sales
of $515.2 million in 2000. The 2001 and 2000 acquisitions drove the year-to-year
increase in sales. Weakness in the North American and European floor care
markets, along with lower sales of specialty metal products offset most of the
sales increase from acquisitions.

EMG's operating income for 2001 decreased to $70.6 million from $77.6
million in 2000, an 8.9% decrease. Lower profits were the result of significant
unusual expenses associated with cost reduction activities in the fourth quarter
of 2001 related primarily to employee severance activities, inventory
writedowns, losses on receivables due to customer bankruptcies, and the
writedown of certain machinery and equipment. Group operating margins were 13.6%
of sales in 2001 down from 15.1% of sales in 2000. Without the unusual expenses,
the Group's operating income would have increased to $81.3 million, an increase
of $3.7 million, or 15.6% of sales.

LIQUIDITY AND CAPITAL RESOURCES

In 2002, cash provided by operating activities totaled $103.7 million,
compared with $101.1 million (before accounts receivable securitization
transactions) for 2001, an increase of $2.6 million. The $2.6 million increase
in operating cash flow was the result of higher earnings and a strong focus on
reducing operating working capital. At December 31, 2002, inventories were lower
by $23.1 million, or 15.1% and receivables were lower by $5.8 million or 3.2%
compared with December 31, 2001. The 2001 inventory balance included a build-up
of inventories to protect customers during the Company's movement of certain
production to low-cost manufacturing facilities. Those movements are continuing,
and some inventory build-up at certain locations remain in place. Strong
operating cash flow during 2002 allowed the Company to repay $82.8 million in
debt and to contribute $30.3 million to its U.S. defined benefit pension plans,
including a $19.6 million contribution late in the fourth quarter of 2002. The
Company's after-tax cash expenditures for 2002, relating to its fourth quarter
2001 accrual for cost reduction initiatives, were $4.1 million. The remaining
$2.9 million in after-tax cash expenditures is expected to be expended for the
intended programs by the first half of 2004. Free cash flow (net income, plus
depreciation and amortization, less capital spending and dividends) was $91.4
million in 2002, compared with $75.3 million in 2001. Free cash flow and EBITDA
(presented elsewhere in this report) are presented because the Company is aware
that they are important measures that are used by third parties in evaluating
the Company.

In connection with its accounts receivable securitization program in 2001,
the Company recorded $45.0 million of securitized accounts receivable and
short-term borrowings of a special-purpose subsidiary. After deducting this
item, cash generated by operating activities in 2001 totaled $56.1 million.

Cash used for investing activities was $19.7 million for 2002, compared
with $152.5 million of cash used in 2001. In 2001, the Company purchased three
businesses for $131.8 million. The Company acquired GS Electric in May 2001,
EDAX in July 2001 and IRAS in December 2001. Additions to property, plant and
equipment totaled $17.4 million in 2002, compared with $29.4 million in 2001.

Cash used for financing activities totaled $84.6 million in 2002, compared
with cash provided of $103.3 million in 2001. In 2002 net short-term borrowings
decreased by $59.0 million, and long-term borrowings decreased $23.8 million.
These decreases reflect the partial use of the strong operating cash inflows for
2002 to pay down debt outstanding under the revolving credit facility. In 2001,
short-term borrowings

22

increased $37.7 million and long-term debt had a net increase of $72.6 million.
The 2001 increases were for borrowings to fund the 2001 acquisitions and the
accounts receivable securitization transaction discussed above.

Repurchases of the Company's common stock in 2002 totaled $7.3 million for
236,900 shares, compared with $11.6 million for 440,000 shares acquired in 2001.
Subsequent to December 31, 2002, the Company repurchased an additional 190,000
shares of its common stock for approximately $5.8 million. The share repurchases
were made under a 1998 $50 million share repurchase program. On March 12, 2003,
the Company's Board of Directors authorized a new $50 million share repurchase
program, adding to the $2.5 million remaining balance from the 1998 program.
Under the 1998 program, $47.5 million was used for share repurchases. As of
March 12, 2003, $52.5 million was approved for future share repurchases. Net
cash proceeds from the exercise of employee stock options and other items, net,
totaled $13.4 million in 2002, compared with $12.5 million in 2001.

At December 31, 2002, total debt outstanding was $390.1 million compared
with $470.8 million at December 31, 2001. The Company's debt agreements contain
various covenants including limitations on indebtedness, dividend payments and
maintenance of certain financial ratios. At December 31, 2002 and 2001, the
Company was within the allowable limits of the financial ratios. Debt as a
percentage of capitalization decreased to 48.1% at December 31, 2002 from 58.4%
at December 31, 2001. EBITDA (income before income taxes, interest expense,
interest income, depreciation and amortization) in 2002 was $180.4 million,
compared with $178.0 million for 2001 before unusual items. The Company's
debt-to-EBITDA ratio (computed in accordance with the credit agreement), was 2.2
to 1 at December 31, 2002, compared with 2.4 to 1 at the prior year-end, and
EBITDA covered interest expense 7.2 times in 2002 compared with 6.4 times in
2001.

Contractual Cash Obligations

The following table summarizes AMETEK's contractual cash obligations at
December 31, 2002 and the effect such obligations are expected to have on its
liquidity and cash flows in future periods.

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

(a) Although not contractually obligated, the Company expects to have the
capability to repay this obligation in less than four years as permitted in
the credit agreement. Accordingly, $38 million is classified as short-term
borrowings and the remaining $50 million is considered long-term debt at
December 31, 2002.

(b) Amount includes $65 million under the accounts receivable securitization
program, which is classified as short-term borrowings at December 31, 2002.

23

Other Commitments

The Company has standby letters of credit of approximately $21.4 million
related to performance and payment guarantees. Based on experience with these
arrangements, the Company believes that any obligations that may arise will not
be material.

The Company may, from time to time, redeem, tender for, or repurchase its
long-term debt in the open market or in privately negotiated transactions
depending upon availability, market conditions and other factors.

As a result of all of the Company's cash flow activities, cash and cash
equivalents decreased $0.6 million in 2002 to $13.5 million at year-end,
compared with $14.1 million at December 31, 2001. The Company also had available
borrowing capacity of $190.6 million under its $300 million revolving bank
credit facility at December 31, 2002, and $10.0 million under its accounts
receivable securitization agreement. The Company believes it has sufficient
cash-generating capability and available financing alternatives to enable it to
meet its needs for the foreseeable future. The Company's shelf registration
statement, filed with the Securities and Exchange Commission, became effective
in October 2002 and allows for up to $300 million in additional equity or debt
financing.

TRANSACTIONS WITH RELATED PARTIES

The Company has a business relationship with the law firm of Stroock &
Stroock & Lavan LLP. A partner of this firm is a member of the Company's Board
of Directors. The investment banking firm of American Securities, L.P. rendered
financial advisory, investment management, and other services to the Company.
Three managing directors of American Securities, L.P. are members of the
Company's Board of Directors.

In 2002, Stroock & Stroock & Lavan LLP, and American Securities, L.P., and
its affiliates billed fees to the Company in the aggregate for services rendered
of $200,000 and $270,000, respectively. Beginning in 2003, the Company will no
longer utilize the services of American Securities, L.P. and its affiliates.

CRITICAL ACCOUNTING POLICIES

The Company has identified its most critical accounting policies as those
accounting policies that can have a significant impact on the presentation of
the Company's financial condition and results of operations, and require the use
of complex and subjective estimates based upon past experience and management's
judgment. Because of the uncertainty inherent in such estimates, actual results
may differ materially from these estimates. The consolidated financial
statements and related notes contain information that is pertinent to the
Company's accounting policies and to management's discussion and analysis. The
information that follows represents additional specific disclosures about the
Company's accounting policies regarding risks, estimates, subjective decisions,
or assessments where materially different results of operations and financial
condition could have been reported had different assumptions been used or
different conditions existed. Disclosure of the Company's significant accounting
policies can be found in Note 1 of "Notes to Consolidated Financial Statements,"
included elsewhere in this report.

- Revenue Recognition. The Company recognizes revenues in accordance with
invoice terms, generally when products are shipped and services are
rendered. The policy with respect to sales returns and allowances
generally provides that the customer may not return products or be given
allowances, except at the Company's option. Accruals for sales returns,
other allowances, and estimated warranty costs are provided at the time
of shipment based upon past experience. At December 31, 2002 and 2001,
the accrual for future warranty obligations was $6.4 million and $7.7
million, respectively. If actual future sales returns, allowances and
warranty amounts are higher than past experience, additional amounts may
be required.

- Inventories. The Company uses the last-in, first-out (LIFO) method of
accounting for most inventories. Inventories reported on the Company's
balance sheet are conservatively valued. The Company provides estimated
inventory reserves for slow-moving and obsolete inventory based on
24

current assessments about future demand, market conditions, customers who may be
experiencing financial difficulties, and related management initiatives. If
these factors are less favorable than those projected by management, additional
inventory reserves may be required. If the Company had used the first-in,
first-out (FIFO) method of inventory valuation, which approximates current
replacement cost, inventories would have been approximately $27.0 million
and $29.1 million higher than the amount reported in the balance sheet at
December 31, 2002 and 2001, respectively.

- Goodwill and Intangible Assets. The Company adopted SFAS No. 142
"Goodwill and Other Intangible Assets" as of January 1, 2002. Under SFAS
No. 142, goodwill and intangible assets with indefinite lives are not
amortized; rather, they are tested for impairment on at least an annual
basis. Accordingly, the Company ceased amortization of all goodwill and
intangible assets with indefinite lives as of January 1, 2002. Intangible
assets with finite lives will continue to be amortized over their useful
lives.

SFAS No. 142 requires a two-step impairment test for goodwill. The
first step is to compare the carrying amount of the reporting unit's net
assets to the fair value of the reporting unit. If the fair value exceeds
the carrying value, no further evaluation is required and no impairment
loss is recognized. If the carrying amount exceeds the fair value then the
second step is required to be completed, which involves allocating the
fair value of the reporting unit to each asset and liability, with the
excess being implied goodwill. An impairment loss occurs if the amount of
the recorded goodwill exceeds the implied goodwill. The determination of
the fair value of the Company's reporting units is based, among other
things, on estimates of future operating performance of the reporting unit
being valued. The Company is required to complete the impairment test for
goodwill and record any resulting impairment losses annually. Changes in
market interest rates and other conditions may have an impact on these
estimates. The Company's acquisitions have generally included a large
goodwill component and the Company expects to continue to make
acquisitions. At December 31, 2002, goodwill totaled $391.9 million or 38%
of the Company's total assets. The Company's transitional impairment test
that resulted from adoption of SFAS 142 early in 2002, and the required
annual impairment test in the fourth quarter of 2002, determined that the
Company's goodwill was not impaired.

- Pensions. The Company accounts for its defined benefit pension plans in
accordance with SFAS No. 87, "Employers' Accounting for Pensions", which
requires that amounts recognized in financial statements be determined on
an actuarial basis. The most significant elements in determining the
Company's pension income or expense are pension liability discount rates
and the expected return on plan assets. The pension discount rate
reflects the current interest rate at which the pension liabilities could
be settled at the year-end valuation date. At the end of each year, the
Company determines the discount rate to be used to discount plan
liabilities. In estimating this rate, the Company looks to rates of
return on high-quality, fixed-income investments. The discount rate used
in determining the 2002 pension cost was 7.25% for U.S. defined benefit
pension plans. The discount rate used for determining the funded status
of the plans at December 31, 2002, and determining the 2003 U.S. defined
benefit pension plan cost is 6.75%. The Company has assumed that the
expected long-term rate of return on plan assets for the 2003 pension
expense will be 8.90%, down from 9.25% used for 2002. The rate of
compensation increase used in determining the 2002 pension cost was 4.0%
for U.S. defined benefit pension plans and 3.5% for the 2003 pension cost
for U.S. defined benefit plans. The net effect of changes in the discount
rate, as well as the effect of differences between the expected return
and the actual return on plan assets which have been deferred and are
subject to amortization totaled $74.9 million at December 31, 2002, and
will ultimately affect future pension costs. For the year ended December
31, 2002, the Company recognized consolidated pretax pension income of
$1.2 million from its defined benefit pension plans, compared with
pension income of $4.7 million from these plans in 2001. Due primarily to
the continued depressed equity security markets in 2002 and changes in
the assumed discount rate and long-term rate of return, the Company
anticipates significantly higher pension expense by approximately $7
million in 2003. The Company contributed a total of $30.3 million to its
U.S. defined benefit pension plans during 2002, including a $19.6 million
cash contribution

25

late in the fourth quarter of 2002. Based on information available to the
Company at December 31, 2002, the Company does not expect a significant
pension contribution in 2003.

- Accounts Receivable. The Company maintains allowances for estimated
losses resulting from the inability of specific customers to meet their
financial obligations to the Company. A specific reserve for bad debts is
recorded against the amount due from these customers. For all other
customers, the Company recognizes reserves for bad debts based on the
length of time specific receivables are past due based on its past
experience. If the financial condition of the Company's customers were to
deteriorate, resulting in their inability to make payments, additional
allowances may be required. The allowance for possible losses on
receivables at December 31, 2002 was $7.2 million, compared with $7.6
million at December 31, 2001.

NEW ACCOUNTING STANDARDS

Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets." Goodwill and intangible assets with indefinite lives
are not amortized; rather, they are tested for impairment on at least an annual
basis. Had the Company not amortized goodwill during the years 2001 and 2000,
net income for 2001 and 2000 would have been approximately $10.2 million and
$9.2 million higher respectively, than the reported amounts. Diluted earnings
per share would have been $0.30 and $0.28 higher in 2001 and 2000, respectively.
Pursuant to SFAS No. 142, the Company was required to complete a transitional
impairment test of goodwill in the initial year of adopting the standard, with
any impairment charges recorded as a cumulative effect of a change in accounting
principle. Additionally, the Company completed its annual impairment test in the
fourth quarter of 2002. Both tests determined that no impairment existed.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." This statement addresses
financial accounting and reporting for legal obligations associated with the
retirement of tangible long-lived assets that result from the acquisition,
construction, development and normal operation of a long-lived asset. SFAS No.
143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset and
subsequently allocated to expense over the asset's useful life. Statement No.
143 is effective January 1, 2003 for the Company. The Company is currently
evaluating the impact, if any, the adoption of SFAS No. 143 will have on its
consolidated results of operations, financial position, or cash flows.

Effective January 1, 2002, the Company adopted SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS No. 144 requires an impairment loss to be recognized only if the
carrying amounts of long-lived assets to be held and used are not recoverable
from their expected undiscounted future cash flows. Adoption of SFAS No. 144 had
no effect on the Company's consolidated results of operations, financial
position, or cash flows.

In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections." SFAS No. 145 rescinds SFAS
No. 4, which required that all gains and losses from extinguishment of debt be
reported as an extraordinary item. The provisions of SFAS No. 145 related to the
rescission of SFAS No. 4 must be applied in fiscal years beginning after May 15,
2002 (January 1, 2003 for the Company). The Company has early adopted this
statement for the year ended December 31, 2002. In 1998, the Company recorded a
loss on the early extinguishment of debt that was previously classified as an
extraordinary item in its 5-year Selected Financial Data table on page 13. As of
December 31, 2002, such loss has been reclassified to interest expense in the
5-year table previously mentioned. The adoption of this Statement will have no
effect on the Company's consolidated results of operations, financial position,
or cash flows.

In July 2002, the Financial Accounting Standards Board issued Statement No.
146, "Accounting for Costs Associated with Exit or Disposal Activities".
Statement No. 146 replaces EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
26

(including Certain Costs Incurred in a Restructuring)." Among other things,
Statement No. 146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred instead of at
the date of an entity's commitment to an exit plan, as under EITF Issue No.
94-3. Statement No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
Company does not expect the adoption of this statement to have a significant
effect on the Company's consolidated results of operations, financial position,
or cash flows.

In December 2002, the Financial Accounting Standards Board issued Statement
No. 148 "Accounting for Stock-Based Compensation -- Transition and Disclosures",
which amended FASB Statement No. 123, "Accounting for Stock-Based Compensation".
Statement No. 148 provides alternative methods of transition for a voluntary
change to the fair-value-based method of accounting for stock-based employee
compensation. Statement No. 148 amends the disclosure requirements of Statement
No. 123 to require more prominent and more frequent disclosure in the financial
statements about the effects of stock-based compensation. Statement No. 148 is
effective for fiscal years ended after December 15, 2002. Accordingly, the
Company has adopted the annual disclosure provisions of Statement No. 148 in its
financial statements for the year ended December 31, 2002. The Company will
implement Statement No. 148 effective January 1, 2003 regarding disclosure
requirements for condensed financial statements for interim periods. As provided
by Statements No. 123 and 148, the Company has chosen to continue use of the
accounting method under APB 25 and the related interpretations to account for
the Company's stock compensation plans. As adoption of Statement No. 148 only
involves disclosures by the Company, there is no impact from its adoption on the
Company's results of operations, financial position, or liquidity.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No.
5, 57, and 107 and Rescission of FASB Interpretation No. 34" (FIN No. 45). The
interpretation requires that upon issuance of a guarantee, the entity must
recognize a liability for the fair value of the obligation it assumes under that
obligation. This interpretation is intended to improve the comparability of
financial reporting, by requiring identical accounting for guarantees issued
with separately identified consideration and guarantees issued without
separately identified consideration. The disclosure provisions of FIN No. 45 are
effective for the Company as of December 31, 2002. The Company has guarantees
and claims arising during the course of its business operations. The Company
accrues for losses under these arrangements when they become probable and
estimable. The initial recognition and measurement provisions of FIN No. 45 are
applicable to guarantees issued or modified after December 31, 2002. The Company
is currently evaluating what impact, if any, adoption of FIN No. 45 will have on
its consolidated results of operations, financial position, or cash flows.

INTERNAL REINVESTMENT

Capital Expenditures

Capital expenditures were $17.4 million for 2002, compared with $29.4
million for 2001. Approximately 61% of the expenditures in 2002 were for
equipment to increase productivity and expand capacity. The Company's 2003
capital expenditures are expected to increase when compared with 2002 levels,
with a continuing emphasis on spending to improve productivity and expand
low-cost manufacturing facilities.

Product Development and Engineering

Product development and engineering expenses are directed toward the
development and improvement of new and existing products and processes. Such
expenses were $46.8 million in 2002, an increase from $45.2 million in 2001, and
$45.9 million in 2000. Included in the amounts above are net expenses for
research and development of $23.7 million for 2002, $22.6 million for 2001, and
$23.8 million for 2000.

Environmental Matters

Certain historic processes in the manufacture of previous AMETEK products
have resulted in environmentally hazardous waste by-products as defined by
federal and state laws and regulations. While these waste

27

products were handled in compliance with regulations existing at that time, the
Company has been named a Potentially Responsible Party (PRP) regarding waste
remediation at several non-AMETEK sites that are the subject of
government-mandated cleanups. In addition to these non-AMETEK sites, the Company
has an ongoing practice of providing reserves for probable remediation
activities at certain of its manufacturing locations and for claims and
proceedings against the Company with respect to other environmental matters once
the Company has determined that a loss is probable and estimable. Total
environmental reserves at December 31, 2002 and 2001 were approximately $7
million and $9 million, respectively. In 2002, the Company spent approximately
$2 million on such environmental matters, compared with approximately $1 million
in 2001. The Company also has agreements with former owners of certain of its
acquired businesses as well as new owners of previously owned businesses under
which the Company and former owners have retained or assumed and agreed to
indemnify the other party against certain environmental and other liabilities
under certain circumstances. The Company and some of the other parties carry
insurance coverage for some environmental matters. To date, those parties have
met their obligation in all material respects. The Company has no reason to
believe that such third parties would fail to perform their obligation in the
future. However, if the Company were required to record a liability with respect
to all, or a portion of, such matters on its balance sheet, the amount of the
liability would not be significant. In the opinion of management, based upon
presently available information and past experience related to such matters,
either adequate provision for probable costs has been made, or the ultimate cost
resulting from these actions are not expected to materially affect the
consolidated financial position, results of operations, or cash flow of the
Company.

IMPACT OF INFLATION

The Company attempts to minimize the impact of inflation through cost
reduction programs and by improving productivity. In addition, the Company uses
the last-in, first-out (LIFO) method of accounting for most inventories (whereby
the cost of products sold approximates current costs), and therefore, the impact
of inflation is substantially reflected in operating costs. In general, the
Company believes programs are in place that are designed to monitor the impact
of inflation and to take necessary steps to minimize inflation's effect on
operations.

MARKET RISK

The Company's primary exposures to market risk are fluctuations in interest
rates on its short-term debt, and in foreign currency exchange rates.

The Company's long-term debt is fixed-rate debt and its short-term debt is
variable-rate debt. These financial instruments are more fully described in the
notes to the financial statements.

The foreign currencies to which the Company has the most significant
exchange rate exposure include the euro, the Japanese yen, and the British pound
sterling. Exposure to foreign currency rate fluctuation is monitored, and when
possible, mitigated through the use of local borrowings in the foreign country
affected. The effect of translating foreign subsidiaries' balance sheets into
U.S. dollars is included in other comprehensive income, within stockholders'
equity. Foreign currency transactions have not had a significant effect on the
operating results reported by the Company.

Based on a hypothetical ten percent adverse movement in either interest
rates or foreign currency exchange rates, the potential losses in future
earnings, fair value of risk-sensitive financial instruments, and cash flows are
not material, although the actual effects may differ materially from the
hypothetical analysis.

FORWARD-LOOKING INFORMATION

Certain matters discussed in this Form 10-K are "forward-looking
statements" as defined in the Private Securities Litigation Reform Act (PSLRA)
of 1995, which involve risk and uncertainties that exist in the Company's
operations and business environment, and are subject to change based on various
important factors. The Company wishes to take advantage of the "safe harbor"
provisions of the PSLRA by cautioning readers that numerous important factors
discussed below, among others, in some cases have caused, and in the future
could cause, the Company's actual results to differ materially from those
expressed in any forward-
28

looking statements made by, or on behalf of, the Company. The following include
some, but not all, of the factors or uncertainties that could cause actual
results to differ from projections:

- The current economic slowdown, or unforeseen price reductions in the
Company's global market segments, with adverse effects on profit margins.

- Acts of war, terrorism or natural disasters.

- The Company's inability to continue achieving its cost reduction
objectives, due in part to varying prices and availability of certain raw
materials and semifinished materials and components.

- Underutilization of the Company's existing factories and plants, or plant
expansions or new plants, possibly resulting in production
inefficiencies.

- Higher than anticipated, or unanticipated start-up expenses and
production delays at new plants.

- The unanticipated expenses of divesting businesses, or of assimilating
newly acquired businesses into the Company's business structure, as well
as the impact of unusual expenses from business strategies, asset
valuations, acquisitions, divestitures and organizational structures.
Acquisition and divestiture strategies may face legal and regulatory
delays and other unforeseeable obstacles beyond the Company's control.

- The increased cost or inability to obtain property and liability
insurance due to uncertainty in worldwide insurance and reinsurance
markets.

- The potential writeoff of substantial goodwill and other intangible
assets.

- Unpredictable delays or difficulties in the development of key new
product programs, and the risk of not recovering major research and
development expenses, and/or the risks of major technological shifts away
from the Company's technologies and core competencies.

- A prolonged slowing of the growth rate in the U.S. and Europe for
electric motor products, aerospace, heavy-vehicle and process
instrumentation, as well as a restriction in the ability of heavy-vehicle
manufacturers to secure components manufactured by outside suppliers.

- Rapid or unforeseen escalation of the cost of regulatory compliance
and/or litigation, including but not limited to, environmental
compliance, product-related liability, assertions related to intellectual
property rights and licenses, adoption of new, or changes in, accounting
policies and practices and the application of such policies and
practices.

- The effects, in the United States and abroad, of changes in trade
practices; monetary and fiscal policies; laws and regulations; other
activities of governments, agencies and similar organizations, such as
trade restrictions or prohibitions; and social and economic conditions;
unforeseen inflationary pressures and monetary fluctuation; import and
other charges or taxes and the ability or inability of the Company to
obtain, or hedge, foreign currencies, foreign currency exchange rates and
fluctuation in those rates. This would include extreme currency
fluctuations; protectionism and confiscation of assets; nationalizations;
unstable governments and legal systems; and intergovernmental disputes.

- Variation in the level of orders booked, which can be affected by general
economic conditions, intensity of competition and continued marketplace
acceptance of products.

- Increased environmental compliance costs, and the potential costs
associated with asbestos-related litigation.

The Company believes that it has the product offerings, facilities, personnel
and competitive and financial resources for continued business success. However,
future revenues, costs, margins, product mix and profits are all influenced by a
number of factors, as discussed above.

29

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information concerning market risk is set forth under the heading "Market
Risk" in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on page 28 herein.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:

FINANCIAL STATEMENT SCHEDULES (ITEM 15(a) 2)

Financial statement schedules have been omitted because either they are not
applicable or the required information is included in the financial statements
or the notes thereto.

30

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of AMETEK, Inc.

We have audited the accompanying consolidated balance sheets of AMETEK,
Inc. as of December 31, 2002 and 2001, and the related consolidated statements
of income, cash flows, and stockholders' equity for each of the three years in
the period ended December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
AMETEK, Inc. at December 31, 2002 and 2001, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted
in the United States.

As discussed in Note 2 to the consolidated financial statements, AMETEK,
Inc. changed its method of accounting for goodwill in accordance with Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets," in 2002.

/s/ ERNST & YOUNG LLP

Philadelphia, PA
January 28, 2002

31

AMETEK, INC.

CONSOLIDATED STATEMENT OF INCOME

See accompanying notes.
32

AMETEK, INC.

CONSOLIDATED BALANCE SHEET

See accompanying notes.
33

AMETEK, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

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

(1) Amounts presented are net of tax based on an average tax rate of 35%, except
for foreign currency translation adjustments, which are presented on a
pretax basis.

(2) Includes reclassification adjustment for (losses) gains included in net
income for 2002, 2001, and 2000 of $(0.1) million, $0.6 million, and $0.3

million, respectively.

See accompanying notes.
34

AMETEK, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

See accompanying notes.
35

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The accompanying consolidated financial statements reflect the operations,
financial position and cash flows of AMETEK, Inc. (the "Company"), and include
the accounts of the Company and subsidiaries, after elimination of all
significant intercompany transactions in consolidation. The Company's investment
in 50% or less owned joint ventures are accounted for by the equity method of
accounting. Such investments are not significant.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Cash Equivalents, Securities, and Other Investments

All highly liquid investments with maturities of three months or less when
purchased are considered cash equivalents. At December 31, 2002 and 2001, all of
the Company's equity securities and fixed-income securities (primarily those of
a captive insurance subsidiary) are classified as "available-for-sale", although
the Company may hold fixed-income securities until their maturity dates. The
aggregate market value of such securities at December 31, 2002 and 2001 was:
2002 - $13.9 million ($14.0 million amortized cost) and 2001 - $16.6 million
($16.3 million amortized cost). The temporary unrealized gain or loss on such
securities is recorded as a separate component of other comprehensive income (in
stockholders' equity), and is not material. The Company's other investments are
accounted for by the equity method.

Inventories

Inventories are stated at the lower of cost or market, cost being
determined principally by the last-in, first-out (LIFO) method of inventory
valuation, and market on the basis of the lower of replacement cost or estimated
net proceeds from sales. The excess of the first-in, first-out (FIFO) value over
the LIFO value at December 31, 2002 and 2001 was $27.0 million and $29.1
million, respectively.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Expenditures for
additions to plant facilities, or that extend their useful lives, are
capitalized. The cost of minor tools, jigs, and dies, and maintenance and
repairs is charged to operations as incurred. Depreciation of plant and
equipment is calculated principally on a straight-line basis over the estimated
useful lives of the related assets.

Revenue Recognition

The Company generally recognizes revenue when products are shipped and
services are rendered. The policy with respect to sales returns and allowances
generally provides that a customer may not return products, or be given
allowances, except at the Company's option. Accruals for sales returns, other
allowances, and estimated warranty costs are provided at the time of shipment
based upon past experience, and are adjusted periodically to reflect actual
expenses. At December 31, 2002 and 2001, the accrual for future warranty
obligations was $6.4 million and $7.7 million, respectively.

36

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Research and Development

Company-funded research and development costs are charged to operations as
incurred and during the past three years were: 2002 - $23.7 million,
2001 - $22.6 million, and 2000 - $23.8 million.

Earnings Per Share

The calculation of basic earnings per share is based on the average number
of common shares outstanding during the period. The calculation of diluted
earnings per share includes the effect of all potentially dilutive securities
(primarily outstanding common stock options). The following table presents the
number of shares used in the calculation of basic earnings per share and diluted
earnings per share:

Foreign Currency Translation

Assets and liabilities of foreign operations are translated using exchange
rates in effect at the balance sheet date, and their results of operations are
translated using average exchange rates for the year.

Certain transactions of the Company and its subsidiaries are made in
currencies other than their functional currency. Exchange gains and losses from
those transactions are included in operating results for the year.

Stock-Based Compensation

Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123) and SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosures, which amends SFAS 123, encourage
entities to recognize compensation expense for stock-based employee compensation
plans at fair value, but provide the option of measuring compensation expense
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). The Company
accounts for stock-based compensation in accordance with APB 25. The exercise
price of stock options, set at the time of the grant, is not less than the fair
market value per share at the date of the grant. Had the Company applied the
fair value recognition provisions of SFAS 123, pretax stock-based compensation
expense would have increased $4.5 million, $3.2 million, and $2.9 million for
2002, 2001, and 2000, respectively. Diluted earnings per share would have been
lower by $0.07, $0.05, and $0.05 for the respective years. Options generally
have a four-to-ten year vesting period from date of grant. Note 7 presents pro
forma results of operations as if SFAS 123 had been used to account for
stock-based compensation plans.

Derivative Financial Instruments

The Company makes limited use of derivative financial instruments to manage
interest rate, foreign exchange, and forward contract exposure. The Company does
not hold or trade in derivatives for speculative purposes. Interest rate swap
and cap agreements are sometimes used to manage the interest rate
characteristics of certain outstanding revolving credit loans to a more
desirable fixed or variable rate basis, or to limit the Company's exposure to
rising interest rates. There were no interest rate swap or cap agreements in
place at or during December 31, 2002 and 2001. Foreign currency option
contracts, foreign currency exchange contracts, and foreign currency swap
agreements may be entered into to mitigate the translation exposure from

37

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

investments in certain foreign subsidiaries. Foreign currency forward contracts
are entered into from time-to-time to hedge specific firm commitments for
certain export sales, thereby minimizing the Company's exposure to foreign
currency fluctuation. These contracts may be entered into for periods generally
not to exceed one year. When present, all derivative financial instruments are
accounted for in accordance with SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which was adopted by the Company on January
1, 2001. There are no carrying amounts related to derivative financial
instruments in the consolidated balance sheet and the Company had no derivatives
outstanding at December 31, 2002 and 2001. The Company had one interest rate
swap agreement, which was settled in 2001.

Goodwill and Other Intangible Assets

Goodwill represents costs in excess of fair values assigned to the
underlying net assets of acquired businesses and prior to the adoption of SFAS
No. 142, was amortized on a straight-line basis primarily over a 30-year period
for all purchase business combinations made prior to July 1, 2001. Business
combinations can also result in other intangible assets being recognized.
Amortization of such intangible assets, if applicable, occurs over their
estimated useful lives. SFAS No. 142 required companies to cease amortizing
goodwill that existed at June 30, 2001, and established criteria for testing
goodwill for impairment on at least an annual basis, or when events occur that
might reduce the fair value of a reporting unit below its carrying value.

The Company conducts this review for impairment for all of its reporting
units during the fourth quarter of the fiscal year. The results of this review
in the fourth quarter of 2002 and the transitional review performed earlier in
2002 determined that the Company's goodwill was not impaired.

Reclassifications

Certain amounts appearing in the prior year's financial statements and
supporting footnote disclosures have been reclassified to conform to the current
year's presentation.

2. ACCOUNTING PRONOUNCEMENTS

Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets." Goodwill and intangible assets with indefinite lives
are not amortized; rather, they are tested for impairment on at least an annual
basis. Pursuant to SFAS No. 142, the Company was required to complete a
transitional impairment test of goodwill in the initial year of adopting the
standard, with any impairment charges recorded as a cumulative effect of a
change in accounting principle. The Company determined that its goodwill was not
impaired as a result of its transitional impairment test. Additionally, the
Company completed its annual impairment test in the fourth quarter of 2002 and
determined that no goodwill impairment existed.

38

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's net income and earnings per share for the years ended
December 31, 2002, 2001 and 2000 adjusted to exclude goodwill amortization were
as follows (in thousands, except per share amounts):

As of December 31, 2002 and 2001, goodwill by segment was: Electronic
Instruments Group (EIG) - $244.1 million and $242.8 million; Electromechanical
Group (EMG) - $147.8 million and $144.6 million. Changes in the carrying value
of goodwill during 2002 were the result of adjustments related to the
finalization of purchase accounting for acquisitions in 2001, foreign currency
translation adjustments, and certain reclassifications upon adoption of SFAS No.
142.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." This statement addresses
financial accounting and reporting for legal obligations associated with the
retirement of tangible long-lived assets that result from the acquisition,
construction, development and normal operation of a long-lived asset. SFAS No.
143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made. The associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset and
subsequently allocated to expense over the asset's useful life. Statement No.
143 is effective January 1, 2003 for the Company. The Company is currently
evaluating what impact, if any, the adoption of SFAS No. 143 will have on its
consolidated results of operations, financial position, or cash flows.

Effective January 1, 2002, the Company adopted SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS No. 144 requires an impairment loss to be recognized only if the
carrying amounts of long-lived assets to be held and used are not recoverable
from their expected undiscounted future cash flows. Adoption of SFAS No. 144 had
no effect on the Company's consolidated results of operations, financial
position, or cash flows.

In April 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections." SFAS No. 145 rescinds SFAS
No. 4, which required that all gains and losses from extinguishment of debt be
reported as an extraordinary item. The provisions of SFAS No. 145 related to the
rescission of SFAS No. 4 must be applied in fiscal years beginning after May 15,
2002. The Company has early adopted this statement for the year ended December
31, 2002 for a previously recognized extraordinary item. However, its adoption
will have no effect on the Company's future results of operations, financial
position, or cash flows.

In July 2002, the Financial Accounting Standards Board issued Statement No.
146, "Accounting for Costs Associated with Exit or Disposal Activities".
Statement No. 146 replaces EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity

39

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(including Certain Costs Incurred in a Restructuring)." Among other things,
Statement No. 146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is incurred instead of at
the date of an entity's commitment to an exit plan, as under EITF Issue No.
94-3. Statement No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
Company does not expect the adoption of this statement to have a significant
effect on the Company's consolidated results of operations, financial position,
or cash flows.

In December 2002, the Financial Accounting Standards Board issued Statement
No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosures",
which amends FASB Statement No. 123, "Accounting for Stock-Based Compensation".
Statement No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. Statement No. 148 amends the disclosure requirements of Statement
No. 123 to require more prominent and more frequent disclosure in the financial
statements about the effects of stock-based compensation. Statement No. 148 is
effective for fiscal years ended after December 15, 2002. Accordingly, the
Company has adopted the annual disclosure provisions of Statement No. 148 in its
financial statements for the year ended December 31, 2002. The Company will
implement Statement No. 148 effective January 1, 2003 regarding disclosure
requirements for condensed financial statements for interim periods. As provided
by Statement No. 123 and 148, the Company has chosen to continue use of the
accounting method under Accounting Principles Board Opinion No. 25 and the
related interpretations to account for the Company's stock compensation plans.
As adoption of Statement No. 148 only involves disclosures by the Company, the
Company does not expect any impact on its results of operations, financial
position, or liquidity.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No.
5, 57, and 107 and Rescission of FASB Interpretation No. 34" (FIN No. 45). The
interpretation requires that upon issuance of a guarantee, the entity must
recognize a liability for the fair value of the obligation it assumes under that
obligation. This interpretation is intended to improve the comparability of
financial reporting by requiring identical accounting for guarantees issued with
separately identified consideration and guarantees issued without separately
identified consideration. The disclosure provisions of FIN No. 45 are effective
for the Company as of December 31, 2002. The Company has guarantees and claims
arising during the course of its business operations. The Company accrues for
losses under these arrangements when they become probable and estimable. The
initial recognition and measurement provisions of FIN No. 45 are applicable to
guarantees issued or modified after December 31, 2002. The Company is currently
evaluating what impact, if any, adoption of FIN No. 45 will have on its
consolidated results of operations, financial position, or cash flows.

3. ACQUISITIONS

In 2001, the Company made three acquisitions. In May 2001, the Company
acquired from SPX Corporation the assets of GS Electric, a U.S. manufacturer of
universal and permanent magnet motors for the global floor care and other
markets for approximately $32.0 million in cash. GS Electric is now part of the
Company's Electromechanical Group. In July 2001, the Company acquired EDAX,
Inc., a manufacturer of analytical instrumentation which complements the
Company's process and analytical instruments product lines, from Panta
Electronics for approximately $37.0 million in cash. In December, 2001, the
Company acquired from PerkinElmer, Inc., Instruments for Research and Applied
Science (IRAS), a developer and manufacturer of advanced analytical
instrumentation, that is used in a number of applications including nuclear
spectroscopy, research electrochemistry and electronic signal processing, for
approximately $63.0 million. EDAX and IRAS are now part of the Company's
Electronic Instruments Group. Together with the EDAX acquisition, IRAS greatly
expands our presence in the laboratory and research markets.

40

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In 2000, the Company made two acquisitions. In August 2000, the Company
acquired the assets of certain businesses of Prestolite Electric Incorporated.
The acquired businesses consist of Prestolite's Switch Division, its Industrial
Battery Charger business, and its Direct-Current (DC) motor business, which is
now a part of the Electromechanical Group. Additionally, in September 2000, the
Company acquired the assets of Rochester Instrument Systems, a supplier for the
electric power generation market, which is now a part of the Electronic
Instruments Group. The aggregate purchase price paid for the 2000 acquisitions
was $81 million.

As of the closing dates, the Company also recorded liabilities as a
component of the purchase price for estimated future pension obligations, and
for specific personnel-related costs associated with the relocation and
consolidation of certain of the acquired businesses.

All of the above acquisitions were accounted for by the purchase method,
and accordingly, the results of their operations are included in the Company's
consolidated results from their respective dates of acquisition.

Had the 2001 acquisitions been made at the beginning of 2001, proforma net
sales for 2001 would have been $1,106.3 million. Proforma net income, after
giving effect to the amortization of goodwill, and diluted earnings per share
would not have been materially different, as a result of the acquisitions, for
the year.

Acquisitions Subsequent to Year-end (Unaudited)

In mid January 2003, the Company acquired Airtechnology Holdings Limited
("Airtechnology") from Candover Partners Limited, for approximately 50.0 million
British pounds sterling or $80.0 million in cash. Airtechnology is a supplier of
motors, fans and environmental control systems for the aerospace and defense
markets with estimated annual sales of 29.0 million British pounds sterling, or
$46.0 million. The Airtechnology acquisition will expand the Company's presence
in high-end technical motors and strengthen the Company's relationships with
large European-based aerospace and defense companies. Airtechnology is a part of
the Company's Electromechanical Group.

Effective as of February 28, 2003, AMETEK purchased Solidstate Controls,
Inc. ("Solidstate Controls") from the Marmon Industrial Companies LLC for
approximately $36 million in cash. Solidstate Controls is a leading supplier of
Uninterruptible Power Supply systems for the process and power generation
industries. Solidstate Controls is headquartered in Columbus, Ohio, and has
estimated 2003 sales of $45 million. The acquired business joins AMETEK as part
of the EIG operating group.

41

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. OTHER BALANCE SHEET INFORMATION

42

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. DEBT

At December 31, 2002 and 2001, long-term debt consisted of the following:

Maturities of long-term debt outstanding at December 31, 2002 are as
follows: $2.7 million in 2004; $0.2 million in 2005; $50.2 million in 2006; and
$0.2 million in 2007; and $225.2 million in 2008; and $1.1 million in 2009 and
thereafter.

On September 17, 2001, the Company completed its $300 million Revolving
Credit Facility that matures in 2006. The five-year Revolving Credit Facility is
unsecured. Interest rates on outstanding loans under the Revolving Credit
Facility are either based on the London Interbank Offered Rate (LIBOR), plus a
negotiated spread over LIBOR, or at the U.S. prime rate. At December 31, 2002,
the Company had $88.0 million in revolving credit loans outstanding at a blended
rate of 2.8%, of which $38.0 million is included in short-term borrowings and
$50.0 million is included in long-term debt. At December 31, 2002, $190.6
million was unused and available under the revolving credit facility.

The Revolving Credit Facility places certain restrictions on allowable
foreign debt, and the measurement of the pro forma effect of potential
acquisitions in certain debt covenant compliance calculations. The Revolving
Credit Facility also places certain restrictions on certain cash payments,
including the payment of dividends. At December 31, 2002, retained earnings of
approximately $23.4 million were not subject to the dividend limitation.

Foreign subsidiaries of the Company had available credit facilities with
local foreign lenders of approximately $26.8 million, of which $6.2 million was
outstanding at December 31, 2002, including $0.7 million reported in long-term
debt. The weighted average interest rate on total debt outstanding at

43

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 2002 and 2001 was 5.4% and 5.2%, respectively. The Company also had
outstanding letters of credit totaling $21.4 million at December 31, 2002.

Accounts Receivable Financing

The Company's accounts receivable financing agreement with a bank provides
for borrowings up to $75 million against its trade accounts receivable. At
December 31, 2002 and 2001, $65.0 million and $47.0 million, respectively, was
used under this secured credit facility. The weighted average interest rate on
the amounts outstanding at December 31, 2002 and 2001 was 2.5% and 4.8%,
respectively.

6. STOCKHOLDERS' EQUITY

In 2002, the Company repurchased 236,900 shares of its common stock under
its current share repurchase authorization at a total cost of $7.3 million. This
compares with repurchases of 440,000 shares at a total cost of $11.6 million in
2001. At December 31, 2002, approximately $8.3 million of the current $50
million authorization was unexpended. At December 31, 2002, the Company held
approximately 0.8 million shares in its treasury at a cost of $24.2 million
compared with approximately 0.6 million shares at a cost of $17.9 million at the
end of 2001. The number of shares outstanding at December 31, 2002 was 33.1
million shares, compared with 32.8 million shares at December 31, 2001.

The Company has a Shareholder Rights Plan, under which the Company's Board
of Directors declared a dividend of one Right for each share of Company common
stock owned. The Plan provides, under certain conditions involving acquisition
of the Company's common stock, that holders of Rights, except for the acquiring
entity, would be entitled (i) to purchase shares of preferred stock at a
specified exercise price, or (ii) to purchase shares of common stock of the
Company, or the acquiring company, having a value of twice the Rights exercise
price. The Rights under the Plan expire in 2007.

7. STOCK OPTION AND AWARD PLANS

In 2002, the Company adopted the 2002 Stock Incentive Plan ("the 2002
Plan"). The 2002 Plan provides for the grant of up to 2.0 million shares of
common stock to eligible employees and nonemployee directors of the Company in
the form of options, phantom stock awards, restricted stock awards and stock
rights. The Company's 1999 Stock Incentive Plan permits the grant of up to 2.0
million shares of common stock. The Company's 1997 Stock Incentive Plan permits
the grant of up to 3.8 million shares of common stock. Stock options may be
granted as non-qualified stock options or as incentive stock options.

Restricted awards of the Company's common stock are made to eligible
employees and non-employee directors at such cost to the grantee as the stock
option committee of the Board of Directors may determine. Such shares are issued
subject to certain conditions with respect to transfer and other restrictions as
prescribed by the plan. Upon issuance of restricted stock, unearned
compensation, equivalent to the excess of the market price of the shares awarded
over the price paid by the grantee at the date of grant, is charged to
stockholders' equity and is amortized to expense over the periods until the
restrictions lapse. The unamortized balance of unearned compensation related to
restricted stock awards included in stockholders' equity at December 31, 2002
totaled $2.4 million. No restricted stock awards were granted in 2002 and 2001.
In December 2000, the Company awarded 150,000 shares of restricted stock to its
Chairman and Chief Executive Officer. The expense related to restricted stock is
not significant. Under the terms of the existing Stock Incentive Plans, at
December 31, 2002, 388,553 additional restricted stock awards may be granted.

In 2002, the Company reserved 9,419 shares of common stock, and there were
reductions for retirements and terminations which totaled 32,824 shares, under a
Supplemental Executive Retirement Plan (SERP), bringing the total number of
shares reserved to 80,400 shares of common stock as of December 31, 2002.

44

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Charges to expense under the SERP, not significant in amount, are considered
pension expense (see Note 10), with the offsetting credit reflected in
stockholders' equity.

At December 31, 2002, 4,969,066 (3,439,372 in 2001) shares of common stock
were reserved for issuance, (including stock options outstanding), under the
2002, 1999 and 1997 plans. The options are exercisable at prices not less than
market prices on dates of grant, and in installments over four-to-ten-year-
periods from dates of grant. The Company had no stock appreciation rights
outstanding at December 31, 2002 or 2001. Stock appreciation rights, if and when
issued, are exercisable for cash and/or shares of the Company's common stock
when the related option is exercised. A charge to income would be made for these
rights and the related options.

A summary of the Company's stock option activity and related information
for the years ended December 31 follows:

The following table summarizes information pertaining to the Company's
stock options outstanding at December 31, 2002:

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," in accounting for its stock option plans and the
disclosure only option under SFAS 123, "Accounting for Stock-Based
Compensation." Had the Company applied the fair value recognition provisions of
SFAS 123, pretax stock-based compensation expense would have increased $4.5
million, $3.2 million, and $2.9 million for 2002, 2001, and 2000, respectively.
Diluted earnings per share would have been lower by

45

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$0.07, $0.05, and $0.05 for the respective years. The following table
illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of SFAS 123:

The weighted average fair value of each option grant on the grant date was
$13.07 for 2002, $8.88 for 2001, and $7.18 for 2000. The fair value of each
option was estimated using the Black-Scholes option pricing model with the
following weighted-average assumptions for options granted in each of the last
three years.

8. LEASES

Minimum aggregate rental commitments under non-cancelable leases in effect
at December 31, 2002 (principally for production and administrative facilities
and equipment) amounted to $21.4 million consisting of annual payments of $4.6
million in 2003, $4.0 million in 2004, $3.2 million in 2005, $2.9 million in
2006, $1.9 million in 2007 and $4.8 million in 2008 and thereafter. Rental
expense was $8.5 million in 2002, $8.9 million in 2001 and $8.1 million in 2000.

46

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES

The components of income before income taxes and the details of the
provision for income taxes are as follows:

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

(a) The amount in 2002 reflects a deferred tax benefit of $6.1 million related
to the Company's 2002 pension plan contributions.

Significant components of the Company's deferred tax (asset) liability as
of December 31 are as follows:

47

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The effective rate of the provision for income taxes reconciles to the
statutory rate as follows:

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

(a) Includes the reversal of certain prior years' excess federal and state
income tax accruals.

(b) At year-end 2001, U.S. tax authorities closed several open years for which
the Company's income tax returns were under examination. As a result, the
Company recognized a tax benefit of $10.5 million after tax. The benefit
consisted of tax refunds received of $4.4 million (including interest) and
the reversal of certain federal and state tax accruals totaling $6.1 million
associated with the closed years.

At December 31, 2002, the Company had federal and foreign available net
operating loss carryforwards of approximately $0.9 million and $0.5 million,
respectively, to offset future taxable income. The federal carryforwards will
expire in 2019. The foreign carryforward is based on the latest available data,
and will expire in 2004.

Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $48.0 million at December 31, 2002. Those earnings are considered
to be indefinitely reinvested and, accordingly, no provision for U.S. deferred
taxes has been made. Upon distribution of those earnings to the United States,
the Company would be subject to U.S. income taxes (subject to a reduction for
foreign tax credits) and withholding taxes payable to the various foreign
countries. Determination of the amount of unrecognized deferred income tax
liability is not practicable.

10. RETIREMENT AND PENSION PLANS

The Company maintains noncontributory defined benefit pension plans.
Benefits for eligible U.S. salaried and hourly employees are funded through
trusts established in conjunction with the plans. The Company's funding policy
with respect to its defined benefit plans is to contribute amounts that provide
for benefits in accordance with the funding requirements of federal law and
regulations. Assets of these plans are invested in a variety of equity and debt
instruments and in pooled temporary funds, as well as in the Company's common
stock. At December 31, 2002, the plans' investment in the Company's common stock
represented approximately 8% of total plan asset value.

The Company also sponsors a 401(k) retirement and savings plan for eligible
employees. Participants in the savings plan may contribute a portion of their
compensation on a before-tax basis. The Company matches employee contributions
on a dollar-for-dollar basis up to 6% of eligible compensation or a maximum of
$1,200 per participant.

The Company's retirement and savings plan has a defined contribution
retirement feature principally to cover U.S. salaried employees joining the
Company after December 31, 1996. Under this retirement feature, the Company
makes contributions for eligible employees based on a pre-established percentage
of the covered employee's salary. Employees of certain of the Company's foreign
operations participate in various local plans that in the aggregate are not
significant.

48

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company also has a defined contribution retirement plan for its
acquired businesses for the benefit of eligible employees. Company contributions
are made for each participant up to a specified percentage, not to exceed 6% of
the participant's base compensation.

The Company has nonqualified unfunded retirement plans for its Directors
and certain retired employees. It also provides supplemental retirement
benefits, through contractual arrangements and/or a SERP covering certain
current and former employees of the Company. These supplemental benefits are
designed to compensate the employee for retirement benefits the executive would
have been provided under the Company's primary retirement plan, except for
statutory limitations on compensation that may be taken into account under those
plans. The projected benefit obligations of the SERP and the contracts will
primarily be funded by a grant of shares of the Company's common stock upon
retirement or termination of the employee. The Company is providing for these
obligations by charges to earnings over the applicable periods.

Effective December 31, 2001, the Company changed the measurement date for
the determination of the fair value of its pension assets, as well as the
discount rate used to compute the present value of plan liabilities to December
31 for its defined benefit plans. Previously, the measurement date was October
1. This change had no effect on pension income for 2001.

The following table provides a reconciliation of the changes in benefit
obligations and fair value of plan assets for the funded and unfunded defined
benefit plans for 2002 and 2001:

The following table provides aggregate information for defined benefit
pension plans with accumulated benefits in excess of plan assets:

49

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table provides the amounts recognized in the consolidated
balance sheets at December 31, 2002 and 2001:

The following table provides the components of net periodic pension
(income) expense for the three years ended December 31:

Assumptions used in accounting for the defined benefit plans as of December
31 of each year were (based on a measurement date of December 31st for 2002 and
2001 and October 1st for 2000):

50

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has a deferred compensation plan which allows employees whose
compensation exceeds the statutory IRS limit for retirement benefits to defer a
portion of earned bonus compensation. The plan permits deferred amounts to be
deemed invested in either, or a combination of, (a) an interest bearing fund,
benefits from which are payable out of the general assets of the Company, or (b)
a fund which invests in shares of the Company's common stock on behalf of the
employee. The amount deferred under the plan, including income earned, was $2.8
million and $2.1 million at December 31, 2002 and 2001, respectively. Initial
employee deferrals began January 1, 2000. Administrative expense for the plan is
borne by the Company and is not significant.

The Company provides limited postretirement benefits other than pensions
for certain retirees and a small number of employees. Benefits under these
arrangements are not significant. The Company also provides limited
postemployment benefits for certain former or inactive employees after
employment but before retirement. Those benefits, which are not significant in
amount, are accounted for on the accrual basis of accounting.

11. FINANCIAL INSTRUMENTS

The Company makes limited use of derivative financial instruments, and does
not use them for trading purposes. Such instruments are generally used to manage
well-defined interest rate risks and to hedge firm commitments related to
certain export sales denominated in a foreign currency.

Interest rate swap and cap agreements are used to reduce the potential
impact of increases in interest rates on the Company's borrowings. Accordingly,
the Company may enter into these agreements to effectively convert floating-rate
loans to fixed-rate loans and to cap certain interest rates that are indexed to
LIBOR rates to reduce the risk from rising interest rates. In 2002 and 2001, the
Company did not enter into any such agreements and none are outstanding at
December 31, 2002.

Cross-currency and interest rate agreements may be used to hedge a portion
of the Company's net investment in certain foreign subsidiaries. At December 31,
2002 and 2001, no such agreements were outstanding. During 2001, the Company
settled its outstanding interest rate swap agreement, which totaled $3.8
million. The gain on settlement of this agreement was $0.4 million.

Forward currency contracts may be entered into from time to time to hedge
certain firm export sales commitments denominated in foreign currencies. The
purpose of such hedging activities is to protect the Company from the risk that
the eventual net cash dollar inflows and outflows resulting from the sale of
products to foreign customers will be adversely affected by changes in exchange
rates. At December 31, 2002 and 2001, the Company was not party to any forward
currency contracts. The terms of the currency contracts are dependent on a firm
commitment and generally do not exceed one year. Deferred gains and losses on
such contracts, which are not significant, are recognized in operations as the
related sales and purchases occurred.

The estimated fair values of the Company's other financial instruments are
compared below to the recorded amounts at December 31, 2002 and 2001. Cash, cash
equivalents, and marketable securities are recorded at fair value at December
31, 2002 and 2001 in the accompanying balance sheet.

51

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The fair values of fixed-income investments are based on quoted market
prices. The fair value of equity investments are based on amounts reported by
the investee. The fair value of short-term borrowings is based on the carrying
value at year-end. The fair value of the Company's long-term debt, which
consists primarily of publicly traded notes, is based on the quoted market price
for such notes and borrowing rates currently available to the Company for loans
with similar terms and maturities.

12. ADDITIONAL INCOME STATEMENT AND CASH FLOW INFORMATION

Included in other income are interest and other investment income of $0.9
million, $2.0 million, and $1.5 million for 2002, 2001, and 2000, respectively.
Income taxes paid in 2002, 2001, and 2000 were $26.9 million, $27.6 million, and
$33.6 million, respectively. Cash paid for interest was $24.0 million, $27.5
million, and $30.2 million in 2002, 2001, and 2000, respectively.

13. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

Descriptive Information About Reportable Segments

The Company has two reportable segments, the Electronic Instruments Group
and the Electromechanical Group. The Company organizes its businesses primarily
on the basis of product type, production processes, distribution methods, and
management organizations.

The Electronic Instruments Group produces instrumentation for various
electronic applications that service certain types of transportation industries,
including aircraft cockpit instruments and displays, airborne electronics
systems that monitor and record flight and engine data, and
pressure-temperature-flow and liquid-level sensors for commercial airlines and
aircraft and jet engine manufacturers. The Group also produces analytic
instrumentation for the laboratory and research markets, as well as instruments
for foodservice equipment, measurement and monitoring instrumentation for
various process industries and instruments and complete instrument panels for
heavy truck manufacturers and heavy construction and agricultural vehicles. The
Group also manufactures high-temperature-resistant and corrosion-resistant
materials, as well as thermoplastic compounds for automotive, appliance, and
telecommunications applications.

The Electromechanical Group produces air-moving electric motors and
motor-blower systems for manufacturers of floor care appliances and outdoor
power equipment, fractional horsepower and brushless air-moving motors for
aerospace, mass transit, medical equipment, computer and business machine
applications. The Group also produces high-purity metal powders and alloys in
powder, strip, and wire form for electronic components, aircraft and automotive
products. Sales of electric motors, blowers, and fans represented 41.7% in 2002,
44.1% in 2001, and 42.2% in 2000 of the Company's consolidated net sales.

Measurement of Segment Results

Segment operating income represents sales, less all direct costs and
expenses (including certain administrative and other expenses) applicable to
each segment, but does not include an allocation of interest expense. Net sales
by segment are reported after elimination of intra- and inter-segment sales,
which are insignificant in amount. Such sales are generally based on prevailing
market prices. Reported segment assets include allocations directly related to
the segment's operations. Corporate assets consist primarily of investments,
insurance deposits, and deferred taxes.

52

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REPORTABLE SEGMENT FINANCIAL INFORMATION

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

(1) Includes $2.1 million in 2002, $6.0 million in 2001, and $4.2 million in
2000 from acquired businesses.

(2) 2001 and 2000 includes goodwill amortization of $11.9 million and $10.4
million, respectively. Goodwill amortization is not included in 2002 in
accordance with SFAS No. 142, "Goodwill and Other Intangible Assets".

53

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GEOGRAPHIC AREAS

Information about the Company's operations in different geographic areas
for the years ended December 31, 2002, 2001, and 2000 is shown below. Net sales
were attributed to geographic areas based on the location of the customer.
Accordingly, U.S. export sales are reported in international sales.

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

(a) Includes U.S. export sales of $192.0 million in 2002, $170.0 million in
2001, and $179.1 million in 2000.

(b) Represents long-lived assets of foreign-based operations only.

54

AMETEK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. QUARTERLY FINANCIAL DATA (UNAUDITED)

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

(a) The sum of quarterly earnings per share may not equal total year earnings
per share due to the effect of the Company's purchasing shares of its
outstanding common stock.

(b) Trading ranges are based on the New York Stock Exchange composite tape.

(c) Goodwill amortization was $2.7 million ($2.3 million after tax), $2.9
million ($2.5 million after tax), $3.1 million ($2.6 million after tax) and
$3.1 million ($2.7 million after tax) for the first, second, third and
fourth quarters of 2001, respectively. Such goodwill amortization is
excluded from the Company's 2002 results effective January 1, 2002, in
accordance with SFAS No. 142, "Goodwill and Other Intangible Assets".

(d) In the fourth quarter of 2001, the Company recorded unusual expenses
totaling $23.3 million (pretax) of which $12.4 million was related to the
cost of employee reductions, facility closures, and the continued migration
of production to low-cost locales, and $10.9 million was related to asset
writedowns. The asset writedowns resulted primarily from certain customer
difficulties associated with the adverse economic environment. The fourth
quarter also included a tax benefit and related interest income of $10.5
million after tax ($0.32 per diluted share) resulting from the closure of a
number of open tax years by U.S. federal and state tax authorities.

55

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to Directors and Executive Officers of the
Company, and information with respect to compliance with Section 16(a) of the
Securities Exchange Act of 1934, is incorporated herein by reference to the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission (the "Commission") not later than 120 days after the close
of the fiscal year ended December 31, 2002, under the captions "Election of
Directors," "Executive Officers," and "Compliance with Section 16(a) of the
Securities Exchange Act of 1934."

ITEMS 11. EXECUTIVE COMPENSATION

Information regarding executive compensation appearing under "Compensation
of Directors," "Executive Compensation," "Compensation Committee Interlocks and
Insider Participation," "Compensation Committee Report on Executive
Compensation," and "Employment Contracts and Termination, Severance and Change
of Control Arrangements" in the 2003 Proxy Statement is incorporated herein by
reference.

ITEMS 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Equity Compensation Plan Information

The following table sets forth information as of December 31, 2002
regarding all of the Company's existing compensation plans pursuant to which
equity securities are authorized for issuance to employees and non-employee
directors:

Information regarding security ownership of certain beneficial owners and
management appearing under "Stock Ownership," "Other Beneficial Ownership," and
"Stock Options and Stock Appreciation Rights" in the 2003 Proxy Statement is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information appearing under "Certain Relationships and Transactions" in the
2003 Proxy Statement is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

During the 90 days period prior to the date of filing 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 Chief Financial Officer, of the effectiveness of the
design and operation of the

56

Company's disclosure controls and procedures pursuant to Rules 13a-15 of the
Securities Exchange Act of 1934 (as amended) (the "Exchange Act"). Based upon
that evaluation, the Company's Chief Executive Officer, and Chief Financial
Officer, have concluded that the Company's disclosure controls and procedures
were effective in timely alerting them to material information required to be
included in the Company's filings under the Exchange Act.

There have been no significant changes in the Company's internal controls
or in other factors which could significantly affect these controls subsequent
to the date of their evaluation. There were no significant deficiencies or
material weaknesses identified in the evaluation and, therefore, no corrective
actions were taken.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Financial Statements, Financial Statement Schedules and Exhibits filed.

1. and 2.

Financial statements and schedules are shown in the index on page
30 of this report.

3. Exhibits

Exhibits are shown in the index on pages 61-67 of this report.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended December
31, 2002.

57

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

AMETEK, Inc.

By /s/ FRANK S. HERMANCE
------------------------------------
Frank S. Hermance, Chairman of the
Board,
Chief Executive Officer and Director

Dated: March 12, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

58

CERTIFICATIONS

I, Frank S. Hermance, certify that:

1. I have reviewed this annual report on Form 10-K of AMETEK, Inc. (the
"registrant");

2. Based on my knowledge, this annual 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 annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 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 annual 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 annual report (the "Evaluation Date"); and

c) presented in this annual 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 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
annual 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.

/s/ FRANK S. HERMANCE
--------------------------------------
Frank S. Hermance
Chairman and Chief Executive Officer

Date: March 12, 2003

59

CERTIFICATIONS

I, John J. Molinelli, certify that:

1. I have reviewed this annual report on Form 10-K of AMETEK, Inc. (the
"registrant");

2. Based on my knowledge, this annual 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 annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 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 annual 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 annual report (the "Evaluation Date"); and

c) presented in this annual 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 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
annual 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.

/s/ JOHN J. MOLINELLI
--------------------------------------
John J. Molinelli
Executive Vice President and
Chief Financial Officer

Date: March 12, 2003

60

INDEX TO EXHIBITS

ITEM 15(A)3)

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

* Management contract or compensatory plan required to be filed pursuant to Item
601 of Regulation S-K.

67