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UNITED STATES

FORM 10-K

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

OR

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

Commission file number 1-12981

AMETEK, Inc.

Registrant’s telephone number, including area code:

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  o No

      Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  x Yes  o 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 June 30, 2003, was $1,210,820,087, the last business day of registrant’s most recently completed second fiscal quarter.

      The number of shares of common stock outstanding as of February 27, 2004, was 67,166,216.

Documents Incorporated By Reference

      Part III incorporates information by reference from the Proxy Statement for the Annual Meeting of Stockholders on May 18, 2004.

AMETEK, Inc.

2003 Form 10-K Annual Report

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PART I

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 and the Pacific Stock Exchange (symbol: AME). AMETEK is a component of the Russell 1000 and the S&P MidCap 400 indices.

Website Access to Information

      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. In advance of its 2004 annual shareholders meeting, the Company will post, free of charge, to the investor information portion of its website, its corporate governance guidelines, board committee charters and codes of ethics.

Recent Developments

      Stock Split. On January 27, 2004, the Company’s Board of Directors approved a two-for-one split of its common stock, distributed on February 27, 2004, to shareholders of record on February 13, 2004. By splitting its common stock, the Company expects to broaden the stock’s marketability and improve its trading liquidity. All share and per share information included in this Form 10-K is presented on a post-stock split basis.

      Dividend Increase. On January 27, 2004, the Company’s Board of Directors approved a 100% increase to its quarterly cash dividend on its common stock, to an indicated annual rate of $0.24 per share on a post-stock split basis. The first increased quarterly dividend is payable on March 26, 2004 to shareholders of record on March 12, 2004.

      Long-Term Incentive Compensation Plan Change. Beginning in 2004, the Company adopted a change in the composition of its long-term compensation plan. The long-term incentive plan for officers of the Company and other senior management personnel will be composed of approximately 50% restricted stock and 50% stock options for new awards, rather than primarily stock options as it had been previously. This change will result in the Company expensing approximately one-half of its future long-term compensation awards under current accounting rules. The Company believes this new arrangement will enhance the Company’s ability to attract and retain management talent.

      Financing. On February 27, 2004, the Company announced that it had amended its $300 million Revolving Credit Facility to extend the expiration date from September 2006 to February 2009. The new 5-year term of this Credit Facility provides the Company with increased flexibility to support its growth plans including its successful acquisition strategy. Other key terms of the Credit Facility were unchanged.

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, aerospace, industrial and power 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

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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, process, industrial, analytical and power 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 strategic 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. EMG focuses on low-cost design and manufacturing, while enhancing motor-blower performance through advances in power, efficiency, lighter weight and quieter 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 continue to create new market opportunities for its products.

      Efficient and Low-Cost Manufacturing Operations. AMETEK has motor manufacturing plants in China, the Czech Republic, Mexico and Brazil to lower its costs and achieve strategic proximity to its customers, providing the opportunity to increase international sales and market share in EMG. Certain of the Company’s electronic instrument businesses are 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 eighteen 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 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 and private 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.

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      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 2001, to the date of this report, the Company has completed six acquisitions with annualized sales totaling approximately $270 million, including 2003 acquisitions representing approximately $120 million in annualized revenues (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 this acquisition strategy.

      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, Austria 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 near Sao Paulo, Brazil and in Shanghai, China. It also continues to achieve geographic expansion and increased market expansion in Asia through joint ventures in China, Taiwan, Japan and South Korea and a direct sales and marketing presence in Singapore, Japan, China, Taiwan and Hong Kong.

      New Product Development. Through its new product development efforts, AMETEK seeks to improve its existing market positions and enter complementary markets.

      Among the new products introduced by EIG in 2003 are the Detective^TM and Detective-EX ^TM advanced portable nuclear detection systems. These high-performance, high-resolution systems are part of a suite of technologies that is being developed by AMETEK to detect potentially dangerous radioactive materials at border crossings, cargo ship docks and transportation terminals.

      In 2003, EIG also launched the ProMaxion^TM process mass spectrometer that provides pharmaceutical manufacturers with continuous, real-time monitoring and control of pharmaceutical manufacturing processes. The ProMaxion places AMETEK at the forefront of the U.S. Food and Drug Administration’s drive for improved pharmaceutical process analysis.

      EIG also launched the UniScan^TM and IntelliScan^TM families of continuous ultrasonic devices in 2003, which represent the next generation in continuous level measurement for process and industrial markets.

      During 2003, EMG introduced a premium line of WINDJAMMER® brushless blowers that feature the latest electronic control technology. The new Intelligen WINDJAMMER premium BLDC blower incorporates a state-of-the-art microprocessor control and digital signal processor technology allowing designers both increased flexibility for direct customization by application and a more precise control system.

      In Global Floor Care Motors, AMETEK partnered with leading floor care equipment manufacturers on further enhancements to its line of Acustek® Plus low-noise commercial vacuum motors. The patented Acustek Plus design features a unique air inlet and air diffusion system that greatly reduces working noise levels.

      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,

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2003 Overview

      In 2003, AMETEK generated sales of nearly $1.1 billion, and increased net income by 5% despite a difficult economic environment for the manufacturing sector. The Company set records for sales, operating income, net income and diluted earnings per share. This strong performance was driven primarily by the contribution of recently acquired businesses and by the Company’s continuing cost-reduction initiatives.

      AMETEK generated cash flow from operating activities during 2003 that totaled $155 million, a 49% increase from 2002. The primary contributors to that growth in cash flow were increased earnings, coupled with a continued focus on reducing operating working capital and lower contributions to the Company’s defined benefit pension plans.

      Early in 2003, the Company repurchased 380,000 shares of its common stock for approximately $5.8 million under a previous share repurchase program. On March 12, 2003, the Company’s Board of Directors authorized a new $50 million share repurchase program, adding to the $2.4 million remaining balance from the earlier program. As of December 31, 2003, $52.4 million was available for future share repurchases.

      On January 13, 2003, AMETEK acquired Airtechnology Holdings Limited (“Airtechnology”) from Candover Partners Limited for approximately 50 million British pounds sterling or approximately $80 million in cash. Airtechnology is a leading supplier of motors, fans and environmental control systems for aerospace and defense markets. It has annualized sales of 29 million British pounds sterling, or approximately $46 million. Airtechnology is part of the EMG business segment.

      Effective as of February 28, 2003, AMETEK purchased Solidstate Controls, Inc. (“Solidstate Controls”) from Marmon Industrial Companies LLC for approximately $34 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 annualized sales of $45 million. Solidstate Controls is part of the EIG business segment.

      On August 29, 2003 AMETEK acquired Chandler Instruments Company, LLC, a leading manufacturer of high-quality measurement instrumentation for the oil and gas industry for approximately $49 million in cash. Headquartered in Tulsa, OK, Chandler Instruments has annualized sales of approximately $30 million. Chandler Instruments is part of the EIG business segment.

Financial Information about Operating Segments, Foreign Operations, and Export Sales

      Reportable segment and geographic information is shown on pages 54-56 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 foreign sales (approximately 40% of total sales in 2003) has resulted from a combination of increases in export sales of products manufactured in the United States and sales from overseas operations.

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Description of Business

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

EIG

      EIG applies its specialized market focus and 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 36.0% of EIG’s 2003 sales were to markets outside the United States.

      EIG employs approximately 3,600 people, of whom approximately 700 are covered by collective bargaining agreements. Three of EIG’s collective bargaining agreements, which cover approximately 200 employees, will expire in 2004. The Company expects no material adverse effects from the pending labor contract negotiations. EIG has 33 manufacturing facilities: 26 in the United States, 4 in Europe, 2 in South America and 1 in Canada. EIG also shares manufacturing facilities with EMG in Mexico.

      Approximately 38% of EIG sales are from aerospace and power products. AMETEK’s 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 more 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. EIG is also 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.

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

      Approximately 46% of EIG sales are from instruments for process measurement and analysis. These include oxygen, moisture, combustion and liquid analyzers; emission monitors; mass spectrometers; mechanical and electronic pressure sensors and transmitters; level measurement devices; and force-measurement and

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      The EDAX and IRAS businesses acquired in 2001 significantly expanded AMETEK’s 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 business 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® product line in Japan.

      EIG’s 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.

      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 joint venture also markets the products, and by refocusing its domestic manufacturing on more advanced pressure measurement products.

      Chandler Instruments, acquired in August 2003, manufactures measurement instrumentation for the oil and gas industry. Chandler is a world leader in drilling and completion instruments for the oil and gas production markets. Chandler also produces vapor pressure instruments, flash point analyzers and spectrometers.

      Approximately 16% of EIG sales are to the industrial instrumentation market.

      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 construction, agricultural, 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 food service instrumentation market and is a primary source for stand-alone and integrated timing controls for the food service industry. On February 23, 2004, AMETEK acquired technology related to a line of electronic fryer cooking controls for the commercial food service industry. This technology complements and expands EIG’s other products serving the food service industry, including cooking and brewing controls for a wide range of commercial appliance applications.

      The Chemical Products division is a custom compounder of engineered thermoplastic resins that offer enhanced strength, temperature resistance and other properties for automotive, consumer appliance, electronics, and telecommunications applications. It also produces fluoropolymer-based products for heat exchangers.

      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 20% of EIG’s 2003 sales were made to its five largest customers, and no one customer accounted for more than 10% of 2003 consolidated sales.

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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 leader in the production of brushless DC motors and motor-blowers and a niche producer of specialty metal products used in automotive, electronics, telecommunications, consumer and other markets. EMG holds a leading market share for its electric vacuum 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 44.1% of EMG’s 2003 sales were to customers outside the United States.

      EMG employs approximately 4,100 people, of whom approximately 2,200 are covered by collective bargaining agreements (including some that are covered by local unions). It has 21 manufacturing facilities: 10 in the United States, 4 in the United Kingdom, 2 in Italy, 2 in Mexico, 1 in China, 1 in the Czech Republic, and 1 in Brazil. As part of its ongoing efforts to relocate production to low-cost facilities, EMG closed its Chambersburg, PA motor plant in 2003 and relocated its production to the Reynosa, Mexico and Shanghai, China facilities.

      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 25 million motors in 2003.

      Approximately 34% 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.

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      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 motors, representing 26% of EMG’s 2003 sales, are used in aerospace, business machines and computer equipment, military and mass transit vehicles, and medical equipment applications. 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 expanded AMETEK’s presence in high-end technical motors and strengthened EMG’s relationship with large European-based aerospace and defense companies.

      Approximately 21% of EMG sales are to specialty motor markets, where it manufactures a variety of specialty motors used in a wide range of products, such as household and personal care appliances; fitness equipment; electric materials handling vehicles; and sewing machines. Its products are also used in outdoor power equipment, such as electric chain saws, leaf blowers, string trimmers and power washers. Through these product lines, AMETEK’s market presence in permanent magnet motors is strengthened, 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.

      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.

      EMG’s Prestolite switch and industrial battery charger businesses greatly expand 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 and enjoy a reputation for high quality and service.

      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 12% of EMG’s sales for 2003 were made to its five largest customers.

Marketing

      The Company’s marketing efforts generally are organized and carried out at the division level. EIG makes significant use of distributors and sales representatives in marketing its products, as well as direct sales in some of its more technically sophisticated products. Within aerospace, its specialized customer base of aircraft and jet engine manufacturers is served primarily by direct sales engineers. Given the similarity and

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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. Increasingly, global vacuum motor production is being shifted to Asia where AMETEK has a weaker market position. In Europe, competition is limited to a single major competitor and several smaller competitors. 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. EMG’s differentiated businesses have competition from a limited number of companies in each of their markets. Competition is generally based on 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 higher backlog at December 31, 2003 was primarily due to the businesses acquired in 2003.

      Of the total backlog of unfilled orders at December 31, 2003, approximately 93% is expected to be shipped by December 31, 2004. 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.

Availability of 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.

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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 $49.9 million, $46.8 million and $45.2 million, in 2003, 2002, and 2001 respectively. These amounts included net Company-funded research and development expenses of $23.4 million, $23.7 million and $22.6 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 is set forth on page 26 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.

Employees

      At December 31, 2003, the Company employed approximately 7,800 people in its EMG, EIG and corporate operations, of whom approximately 2,900 employees 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.

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Item 2.     Properties

      The Company has 54 operating plant facilities in 17 states and 11 foreign countries. Of these facilities, 38 are owned by the Company and 16 are leased. The properties owned by the Company consist of approximately 576 acres, of which approximately 4.1 million square feet are under roof. Under lease is a total of approximately 739,000 square feet. The leases expire over a range of years from 2004 to 2018, with renewal options for varying terms contained in most of the leases. Production facilities in Taiwan, China, Japan and South 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

      Numerous industrial companies, including AMETEK and its subsidiaries, have been named defendants in lawsuits which are based on asbestos-related claims. 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, 2003.

PART II

      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 27, 2004, there were approximately 2,200 holders of record of the Company’s common stock.

      Market price and dividend information with respect to the Company’s common stock is set forth on page 58 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.

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See notes to Selected Financial Data on page 14.

13

Notes to Selected Financial Data

(1)	The amounts in 2001 and the preceding years include the amortization of goodwill. Beginning in 2002, the Company accounted for goodwill under 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 ($0.15 per diluted share), $9.2 million ($0.14 per diluted share) and $6.7 million ($0.10 per diluted share) in 2001, 2000 and 1999, respectively.
(2)	Earnings per share, dividends declared and paid per share, and weighted average common shares outstanding were restated to reflect a two-for-one stock split effective February 27, 2004.
(3)	EBITDA represents income before income taxes, interest, depreciation and amortization. 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 net 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 US GAAP to EBITDA.

(4)

Free cash flow represents cash flow from operating activities, before the effects of an accounts receivable securitization program, less capital expenditures. 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 3 above). The table below presents the reconciliation of operating cash flow from operating activities reported in accordance with US GAAP to free cash flow.

(5)

At December 31, 2003, 2002 and 2001, debt includes borrowings under the accounts receivable securitization program, referred to in note 4 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.

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      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 27 and 28.

      The following discussion and analysis of the Company’s results of operations and financial condition (“MD&A”) 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

      As a multinational business, AMETEK’s operations are affected by global, regional and industry economic factors. However, the Company’s geographic and industry diversity, and its mix of products and services has helped to limit the impact of any one industry or the economy of any single country on its consolidated operating results. In 2003, difficult economic conditions in the manufacturing sector continued to adversely impact many of the Company’s businesses. Despite those difficult conditions, AMETEK had an excellent year in 2003. The Company posted record sales, operating income, net income, and diluted earnings per share. An improving mix of businesses combined with successful operational excellence initiatives enabled the Company to post another year of record earnings. 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.

	•	Sales were $1.09 billion, an increase of 4.9% from 2002 on the contributions of the three acquisitions completed during the year, as follows:

	•	In January 2003, the Company completed the acquisition of Airtechnology Holdings Limited, significantly expanding its presence in high-end technical motors.
	•	In February 2003, the Company acquired Solidstate Controls, Inc., adding complementary products for the process and power generation industries.
	•	In August 2003, the Company acquired Chandler Instruments Company, LLC, enhancing the Company’s presence in the high-quality measurement instrument market.

	•	As the Company grows globally, it continues to have an increasing level of international sales, which results in more foreign currency exposure. In 2003, foreign currency fluctuation had a 2% positive impact on sales, primarily the result of the continued strength of the euro in relation to the U.S. dollar. Foreign currency impacts had a negligible impact on earnings in 2003. International sales, including U.S. export sales, represented 40% of consolidated sales in 2003, compared with 34% of sales in 2002.
	•	Improved product mix and its low cost strategy, along with the ongoing transition of a portion of the Company’s motor and instrument production to low-cost manufacturing facilities in Mexico, China and the Czech Republic, continue to benefit the Company. These operational excellence initiatives contributed to a net favorable impact on segment operating margins, which improved to 16.4% of sales in 2003, from 16.1% of sales in 2002.
	•	Higher income and a continuing focus on reducing operating working capital resulted in cash flow from operating activities that totaled $154.9 million, a 49.4% increase from 2002. The improved operating cash flow enhanced the Company’s ability to make acquisitions with minimal impact on debt levels. At year-end 2003, the debt-to-capital ratio was 45%, an improvement from 48% at the end of 2002.

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	•	The Company continued its emphasis on investment in research, development and engineering, spending $49.9 million in 2003, an increase of 6.6% over 2002. New product sales increased 3.5% over 2002 to $115.8 million.
	•	Early in 2004, several significant corporate actions were taken:

	•	In January 2004, the Company’s Board of Directors approved a two-for-one split of its common stock, effective February 27, 2004. The Company expects the stock split to broaden the stock’s marketability and improve its trading liquidity. All share and per share information in this report reflects the two-for-one stock split.
	•	As a result of increases in sales, profitability and cash flows over the last several years, the Company’s Board approved a 100% increase in its quarterly dividend payable to shareholders of record on March 12, 2004.
	•	The Company also adopted a change in its long-term incentive compensation program. Beginning in 2004, long-term incentive compensation for officers and other senior managers will be composed of approximately 50% restricted stock and 50% stock options, rather than primarily stock options as it had been previously. This change will result in the Company expensing approximately one-half of its future long-term compensation awards under current accounting rules. Management believes that this change will enhance its ability to attract and maintain the management talent necessary to continue to grow the Company.
	•	In February 2004, the Company extended the expiration date of its $300 million Revolving Credit Facility from September 2006 to February 2009. Extension of the term of the Credit Facility provides the Company with increased flexibility to support the Company’s growth plans, including its acquisition strategy. Other key terms of the Credit Facility were unchanged.

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, 2003, 2002, and 2001:

(1)	2001 includes charges of $23.3 million for cost realignment initiatives and asset writedowns.
(2)	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.
(3)	2001 includes goodwill amortization of $11.9 million.

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Year Ended December 31, 2003, Compared with Year Ended December 31, 2002

     Results of Operations

      In 2003, the Company posted record sales, operating income, net income, and diluted earnings per share, despite the difficult economic environment within the manufacturing sector. These records were achieved through contributions from the 2003 acquisitions, as well as higher sales due to strengthening foreign currencies. Margins benefited from the acquisitions, as well as from continued cost reduction initiatives in base businesses.

      The Company reported sales for 2003 of $1,091.6 million, an increase of $51.1 million or 4.9% from sales of $1,040.5 million in 2002. Strengthening foreign currencies contributed $23.9 million to the sales increase. The economic slowdown affecting the manufacturing sector impacted many of the Company’s businesses. Net sales for the Electronic Instruments Group (EIG) were $561.9 million in 2003, an increase of 4.2% from sales of $539.4 million in 2002. The 2003 sales increase for EIG was due mainly to the first quarter 2003 acquisition of Solidstate Controls, Inc. (SCI) and the third quarter 2003 acquisition of Chandler Instruments Company, LLC (Chandler), as well as strength in the high-end analytical instruments business, partially offset by continued weakness in the aerospace and power businesses. Net sales for the Electromechanical Group (EMG) were $529.7 million in 2003, an increase of 5.7% from sales of $501.1 million in 2002 primarily driven by the first quarter 2003 acquisition of Airtechnology Holdings Limited (Airtechnology). The EMG sales increase was partially offset by a decline in sales within the Group’s floor care and specialty motors businesses.

      Total international sales were $435.7 million in 2003 and represented 39.9% of consolidated net sales, compared with $353.4 million or 34.0% of sales in 2002. International sales increased 23.3% in 2003, primarily due to the 2003 acquisitions. Export shipments from the United States in 2003 were $200.8 million, an increase of 4.6% compared with $192.0 million in 2002.

      New orders for 2003 were $1,136.9 million, compared with $1,004.8 million for 2002, an increase of $132.1 million or 13.1%. The order backlog at December 31, 2003 was $286.2 million, compared with $240.9 million at December 31, 2002, an increase of $45.3 million or 18.8%. The increase in orders and backlog was due mainly to the three acquisitions completed in 2003. The Company experienced order declines in its floor care and specialty motors businesses.

      Segment operating income was $179.1 million for 2003, an increase of 6.8%, compared with segment operating income of $167.7 million for 2002. Segment operating margins in 2003 were 16.4% of sales, an increase from 16.1% of sales in 2002. The increase in segment operating income resulted from the profit contributions generated by the 2003 acquisitions, as well as the Company’s successful operational excellence strategy. This strategy includes the continued migration of production to low-cost locales in Mexico, China and Czech Republic and the aggressive lowering of the Company’s overall cost structure. Partially offsetting the increase in segment operating income was the impact of lower sales by the Company’s aerospace, power instruments, floor care and specialty motors businesses. An $11.4 million increase in pension costs, general business insurance and employee benefit costs, net of benefits from certain insurance programs in 2003, also lowered segment operating income. The Company expects lower pension expense in 2004, due primarily to the favorable performance of the pension plan investments. The estimated decrease in pension expense is expected to be substantially offset by higher employee-related expenses in 2004.

      Selling, general, and administrative (SG&A) expenses were $115.2 million in 2003, compared with $104.8 million in 2002, an increase of $10.4 million or 9.9%. As a percentage of net sales, SG&A expenses were 10.6% in 2003, compared to 10.1% in 2002. The selling expense component, as a percentage of sales, increased to 8.5% in 2003, compared to 8.3% in 2002. Lower selling expenses of the Company’s base businesses, were more than offset by selling expense of the businesses acquired in 2003. The businesses acquired in 2003 were differentiated businesses, which because of their technology and higher marketing costs, incur a higher percentage of selling expenses than the Company’s base businesses. The decrease in selling expense by base businesses reflects the Company’s continual focus on cost reduction initiatives as a part of its operational excellence strategy.

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      Corporate administrative expenses were $22.4 million or 2.0% of sales in 2003, an increase of $3.3 million or 17.6%, when compared with 2002. The increase was primarily the result of a one-time, noncash expense, in the third quarter of 2003, from the accelerated cost recognition due to the vesting of a restricted stock grant. Higher net business insurance and health insurance costs, as well as higher pension costs in 2003, also contributed to the increase.

      Consolidated operating income totaled $156.8 million or 14.4% of sales for 2003, compared to $148.7 million, or 14.3% of sales for 2002, an increase of $8.1 million or 5.4%.

      Interest expense was $26.0 million in 2003, an increase of 3.3% compared with $25.2 million in 2002. The increase was due to higher average debt levels to fund the 2003 acquisitions, partially offset by lower interest rates.

      The effective tax rate for 2003 was 32.5% compared with 31.9% in 2002. The higher tax rate in 2003 was primarily due to the nondeductibility of the expense recognized in connection with the vesting of the restricted stock grant mentioned above.

      Net income for 2003 was $87.8 million, an increase of 4.9% from $83.7 million in 2002. Diluted earnings per share on a post-stock split basis were $1.30, an increase of $0.06, when compared with $1.24 per diluted share in 2002.

     Operating Segment Results

      Electronic Instruments Group (EIG) sales were $561.9 million in 2003, an increase of 4.2% from 2002 sales of $539.4 million. The sales increase was primarily from the 2003 SCI and Chandler acquisitions, as well as strength in the Group’s high-end analytical businesses. A favorable foreign currency translation impact of $6.8 million also benefited the sales of this Group. Conditions continue to remain weak in many of EIG’s markets, especially in the aerospace and power instruments markets. EIG’s base business sales were 4.7% lower, including the favorable foreign currency impacts, when compared with 2002.

      EIG’s operating income for 2003 increased to $95.0 million from $87.5 million in 2002, an increase of $7.5 million, or 8.6%. The increase was primarily driven by the SCI and Chandler acquisitions, partially offset by a net increase of $8.1 million in pension costs and insurance expenses, as well as lower aerospace and power instruments operating income due to their lower sales. The Group’s operating margins for 2003 improved to 16.9% compared with margins of 16.2% for 2002. The higher margins in 2003 were due to the acquired businesses and the favorable effects of cost reduction initiatives.

      In September 2003, the Group’s Haveg business unit experienced a flood at its manufacturing facility in Wilmington, Delaware. The Company believes the flood loss is fully insured, and it does not expect to incur a loss upon the ultimate settlement of the flood claim. The Company is currently meeting with its insurance carriers to finalize the flood claim and it expects to finalize this matter in 2004.

      Electromechanical Group (EMG) sales for 2003 were $529.7 million, an increase of $28.6 million or 5.7%, compared with sales of $501.1 million in 2002. The sales increase was a result of the Airtechnology acquisition and $17.1 million of favorable foreign currency translation gains, partially offset by a decline in the floor care and specialty motors businesses. EMG’s sales by base businesses were 3.5% lower, including the favorable foreign currency impacts, when compared with 2002.

      EMG’s operating income for 2003 increased to $84.2 million from $80.2 million in 2002, an increase of $4.0 million or 4.9%. The increase was a result of the Airtechnology acquisition, partially offset by lower sales by the Group’s base businesses and higher benefit costs. The Group’s operating margins for 2003 were unchanged at 15.9%.

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Year Ended December 31, 2002, Compared with Year Ended December 31, 2001

      The Company reported sales in 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 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 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 in 2002 were $1,004.8 million, compared to $1,039.5 million in 2001, a decrease of $34.7 million or 3.3%, due to an orders decline 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 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% due to the decline in aerospace, power instrument and technical motor businesses.

      Total segment operating income increased to $167.7 million in 2002, an increase of 31.4%, compared with segment operating income of $127.7 million in 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 2002, the Company continued to benefit from its aggressive cost reduction initiatives, which began in the second half of 2000. These initiatives included the continued migration of production to low-cost locales in Mexico, China and Czech Republic and the lowering of its overall cost structure. Segment operating income in 2001 included a fourth-quarter pretax charge to operations of $23 million ($15 million after tax) for cash realignment initiatives and asset writedowns.

      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 to 7.9% in 2001. The higher selling expense in 2002 was due to the 2001 acquisitions in EIG, which had 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 expenses were $19.0 million or 1.8% of sales in 2002, an increase of $0.9 million or 5.0%, when compared to $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.

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

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      The effective tax rate in 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 open tax years by U.S. federal and state tax authorities.

      Net income in 2002 was $83.7 million, or $1.24 per diluted share on a post-stock split basis, compared with net income in 2001 of $66.1 million, or $0.99 per diluted share, a 26.6% increase in net income. Net income in 2001 included goodwill amortization of $10.2 million after tax, and the net effect of the unusual items, previously mentioned.

      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 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 was considered to be an isolated event. Conditions remained weak in most of EIG’s markets, especially in the aerospace, power instruments and heavy-vehicle markets. Without the acquisitions, EIG’s sales would have decreased by 5.5% when compared with 2001.

      EIG’s operating income in 2002 increased to $87.5 million from $57.0 million in 2001, an increase of $30.5 million, or 53.4%. The increase was 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.

      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 reflected 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 this acquisition, EMG’s sales would have decreased by 7.1%.

      EMG’s operating income in 2002 increased to $80.2 million from $70.6 million in 2001, an increase of 13.6%. The increase was the result of the 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.

      Results for the fourth quarter of 2002 compared with the fourth quarter of 2001 are presented because the two quarters differ in comparability due to significant unusual events in the fourth quarter of 2001. In the fourth quarter of 2001 the Company recorded unusual expenses associated with the realignment of its cost structure and asset writedowns. Also, in the fourth quarter of 2001, the Company recognized tax benefits from the closure of a number of tax years. In the fourth quarter of 2003 and 2002, significant unusual events did not take place.

      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, fourth quarter 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

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      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 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 $5.3 million, or 2.2% of sales for the fourth quarter of 2001.

      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 were $9.5 million compared to a tax benefit of $10.8 million in the fourth quarter of 2001. The 2001 fourth quarter results included 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 $0.32 per diluted share on a post-stock split basis, an increase of $9.8 million, or 86.1% from the fourth quarter of 2001 net income of $11.5 million, or $0.17 per diluted share. Net income for the fourth quarter of 2001 included goodwill amortization of $2.7 million after tax, or $0.04 per diluted share.

Liquidity and Capital Resources

      Cash provided by operating activities totaled $154.9 million for 2003, compared with $103.7 million in 2002, an increase of $51.2 million, or 49.4%. The increase in operating cash flow was primarily the result of higher earnings, and continuing emphasis on operating working capital management. Excluding the impact of the 2003 acquisitions, accounts receivable and inventories were lower than the prior year-end totals, and the Company’s inventory turnover and accounts receivable collection cycle improved. The inventory improvements were achieved even though the Company continued to move certain production to low-cost manufacturing sites. Lower pension plan contributions and lower required tax payments also benefited operating cash flow in 2003. The strong operating cash flow during 2003 enhanced the Company’s ability to make acquisitions, which are discussed below, with minimal impact on debt levels. Free cash flow (operating cash flow less capital spending) was $133.6 million in 2003, compared with $86.3 million in 2002, an increase of 54.8%. EBITDA (earnings before income taxes, interest, depreciation and amortization) was $191.1 million in 2003, compared with $180.4 million in 2002, a 5.9% improvement. Free cash flow and EBITDA are presented because the Company is aware that they are important measures that are used by third parties in evaluating the Company. (See table on page 14 for a reconciliation of comparable GAAP measures to non-GAAP measures).

      Cash used for investing activities was $181.0 million for 2003, compared with $19.7 million for 2002. In 2003, the Company purchased three businesses for $163.9 million. The Company acquired Airtechnology in January 2003, SCI in February 2003 and Chandler Instruments in August 2003. Cash provided by operating activities, along with additional borrowings, funded the 2003 acquisitions. Additions to property, plant and equipment totaled $21.3 million in 2003, compared with $17.4 million in 2002.

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      Cash provided by financing activities totaled $26.9 million in 2003, compared with cash used of $84.6 million in 2002. In 2003, net borrowings increased by $24.0 million compared with a decrease in borrowings of $82.8 million in 2002. Long-term borrowings increased $27.4 million and included a September 2003, 50 million British pound sterling (approximately $80.0 million) loan. The British pound sterling loan provides a natural hedge of the Company’s investment in United Kingdom-based Airtechnology. The remaining proceeds from the additional long-term borrowings were used to repay borrowings under the Company’s revolving credit agreement. The Company had available borrowing capacity of $239.1 million under its $300 million revolving bank credit facility, and $11.0 million under its accounts receivable securitization agreement at December 31, 2003. The revolving bank credit facility was amended on February 25, 2004 to extend its expiration date from September 2006 to February 2009. Extension of the credit facility provides the Company with increased flexibility to support its growth plans.

      At December 31, 2003, total debt outstanding was $424.4 million compared with $390.1 million at December 31, 2002. The debt-to-capital ratio was 44.5%, down from 48.1% at December 31, 2002. The Company’s debt agreements contain various covenants including limitations on indebtedness, dividend payments and maintenance of certain financial ratios. At December 31, 2003 and 2002, the Company was well within the allowable limits of the financial ratios.

      Repurchases of the Company’s common stock in 2003 totaled $5.8 million for 380,000 shares, compared to $7.3 million for 473,800 shares acquired in 2002. In March 2003, the Company’s Board of Directors authorized a new $50 million share repurchase program, adding to the $2.4 million remaining balance from an earlier share repurchase program. As of December 31, 2003, $52.4 million was available for future share repurchases.

      In January 2004, the Company’s Board of Directors approved a 100% increase in its quarterly cash dividend effective with the March 2004 dividend payment. Cash dividends paid in 2003 were $8.1 million.

      The following table summarizes AMETEK’s contractual cash obligations at December 31, 2003 and the effect such obligations are expected to have on the Company’s liquidity and cash flows in future years.

(a)	The 5.96% Senior Note is a seven-year 50 million British pound sterling loan, which is subject to foreign currency fluctuation. The loan was in conjunction with the Company’s investment in Airtechnology, a United Kingdom-based business, which was acquired in January 2003.
(b)	Although not contractually obligated, the Company expects to have the capability to repay this obligation within one year as permitted in the credit agreement. Accordingly, $36 million is classified as short-term debt at December 31, 2003.
(c)	Amount includes $64 million under the accounts receivable securitization program, which is classified as short-term borrowings at December 31, 2003.
(d)	Purchase obligations primarily consist of contractual commitments to purchase certain inventories at fixed prices.

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      The Company has standby letters of credit of approximately $24.9 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 to its financial position.

      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 in 2003, cash and cash equivalents increased slightly to $14.3 million at year-end, compared with $13.5 million at December 31, 2002. The Company believes it has sufficient cash-generating capabilities and available financing alternatives to enable it to meet operating needs and contractual commitments.

Transactions with Related Parties

      The Company has a business relationship with the law firm of Stroock & Stroock & Lavan LLP, a Partner of which is a member of the Company’s Board of Directors.

      In 2003, Stroock & Stroock & Lavan LLP billed fees to the Company in the aggregate for services rendered of $286,000.

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 that 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 the estimates used. 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 whereby materially different results of operations and financial condition could have been reported had different assumptions been used or different conditions existed. Primary disclosure of the Company’s significant accounting policies is 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, 2003, 2002 and 2001, the accrual for future warranty obligations was $6.9 million, $6.4 million and $7.7 million, respectively. The Company’s expense for warranty obligations approximated $5.0 million in each of the last three years. The warranty periods for products sold vary widely among the Company’s operations, but for the most part do not exceed one year. The Company calculates its warranty expense provision based on past warranty experience and adjustments are made periodically to reflect actual warranty expenses. 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 the majority of its inventories, whereby inventories reported on its balance sheet are conservatively valued. 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 $26.8 million and $27.0 million higher than the amount reported in the balance sheet at December 31, 2003 and 2002, respectively. The Company provides estimated inventory reserves for slow-moving and obsolete inventory based on current assessments about future demand, market conditions, customers who may be experiencing

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		financial difficulties, and related management initiatives. If these factors are less favorable than those projected by management, additional inventory reserves may be required.
	•	Goodwill and Intangible Assets. The Company accounts for goodwill and intangible assets under SFAS No. 142, “Goodwill and Other Intangible Assets”. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are not amortized; rather, they are tested for impairment at least annually. As required by SFAS No. 142, the Company ceased amortization of all goodwill and intangible assets with indefinite lives as of January 1, 2002. Intangible assets with finite lives are 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 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 must 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 Company would be required to record such impairment losses. 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. Changes in market conditions, among other factors, 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, 2003, goodwill totaled $507.0 million or 41.7% of the Company’s total assets. The Company performed its required annual impairment test in the fourth quarter of 2003 and determined that the Company’s goodwill was not impaired. There can be no assurance that goodwill impairment will not occur in the future.

	•	Pensions. The Company has defined benefit and defined contribution pension plans. The discussion that follows only covers the Company’s accounting policy for its U.S. defined benefit pension plans. AMETEK 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 the assumed pension liability discount rate 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 assumed 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 2003 pension cost was 6.75% for U.S. defined benefit pension plans. The discount rate used for determining the funded status of the plans at December 31, 2003, and determining the 2004 U.S. defined benefit pension plan cost is 6.25%. The Company has assumed that the expected long-term rate of return on plan assets for U.S. defined benefit pension plans for year-end 2003 and for the 2004 pension expense will be 8.9%. The rate of compensation increase used in determining the 2003 and 2004 pension expense for these plans was 3.5%. The unrecognized pension loss, which results from the net effect of changes in the assumed discount rate, as well as the effect of differences between the expected return and the actual return on plan assets, has been deferred and is subject to amortization. It totaled $62.2 million for U.S. defined benefit pension plans at December 31, 2003, compared with $74.9 million at December 31, 2002. This deferred loss will ultimately affect future pension costs. For the year ended December 31, 2003, the Company recognized consolidated pretax pension expense of $7.5 million from its defined benefit pension plans, which includes approximately $1.0 million in curtailment costs. This compares with pension income of $1.2 million recognized from these plans in 2002. As a result of the improved equity security market at the end of 2003, the Company anticipates lower pension expense for these plans by approximately $5 million in 2004. The Company made cash contributions to its U.S. defined benefit pension plans during 2003 which totaled $5.2 million, compared with $30.3 million in 2002. Based on the current economic outlook, the Company anticipates

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		making a cash contribution of approximately $5 million to its U.S. defined benefit pension plans in 2004.
	•	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, 2003 was $8.2 million, compared with $7.2 million at December 31, 2002.

New Accounting Standards

      In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”) and subsequently revised it in December 2003 with the issuance of FIN 46-R. FIN 46-R requires a company to consolidate a variable interest entity if the Company is designated as a primary beneficiary of that entity even if the company does not have a majority voting interest in the entity. A variable interest entity is generally defined as an entity in which equity investors do not have the characteristics of a controlling financial interest, or do not have sufficient equity at risk for the entity to finance its own activities without additional financial support from other parties, or whose owners lack the risks and rewards of ownership. FIN 46-R also has a disclosure requirement for all variable interest entities of a company, even if the company is not the primary beneficiary. The Company is currently evaluating the impact of adopting FIN 46-R applicable to variable interest entities created prior to February 1, 2003 but does not expect a material impact.

      Effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 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 a part of the carrying amount of the long-lived asset and subsequently allocated to expense over the asset’s useful life. The adoption of SFAS No. 143 had no effect on the Company’s consolidated results of operations, financial position, or cash flows.

      Effective January 1, 2003, the Company adopted SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No. 146 replaces Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” Among other things, SFAS 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. The initial adoption of SFAS No. 146 had no effect on the Company’s consolidated results of operations, financial position, or cash flows.

      Effective January 1, 2003, the Company adopted the recognition and measurement provisions of FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” (“FIN No. 45”) for guarantees issued or modified after December 31, 2002. FIN No. 45 requires that upon issuance of a guarantee, the entity must recognize a liability for the fair value of the obligation it assumes under that guarantee. The Company does not provide significant guarantees on a routine basis. As a result, the adoption of FIN No. 45 did not have an impact on the Company’s financial statements. The disclosures required by FIN No. 45 are included in Note 16 of the notes to the consolidated financial statements included elsewhere in this report, “Guarantees.”

      Effective December 31, 2003, the Company adopted EITF Issue 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” EITF Issue 03-1 reached a consensus

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Internal Reinvestment

      Capital expenditures were $21.3 million for 2003, compared with $17.4 million for 2002. Approximately 50% of the expenditures in 2003 were for equipment to increase productivity and expand capacity. The Company’s 2004 capital expenditures are expected to increase slightly when compared with 2003 levels, with a continuing emphasis on spending to improve productivity and expand low-cost manufacturing facilities. The Company expects 2004 capital expenditures to continue to approximate 2% of sales.

      Product development and engineering expenses are directed toward the development and improvement of new and existing products and processes. Such expenses were $49.9 million in 2003, an increase from $46.8 million in 2002, and $45.2 million in 2001. Included in the amounts above are net expenses for research and development of $23.4 million for 2003, $23.7 million for 2002, and $22.6 million for 2001.

      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 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, 2003 and 2002 were approximately $6.4 million and $7.1 million, respectively. In 2003, the Company spent approximately $1.1 million on such environmental matters, compared with approximately $2.0 million in 2002. The Company also has agreements with former owners of certain of its acquired businesses as well as new owners of previously owned businesses. Under certain of the agreements the former owners retained, or assumed and agreed to indemnify the Company 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 effect on income and 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 is not expected to materially affect the consolidated financial position, results of operations, or cash flows of the Company.

Market Risk

      The Company’s primary exposures to market risk are fluctuations in interest rates on its short-term debt, foreign currency exchange rates and commodity prices for certain raw material purchases.

      All of the Company’s long-term debt carries fixed rates and its short-term debt is variable-rate debt. These financial instruments are more fully described in the notes to the financial statements.

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      The foreign currencies to which the Company has the most significant exchange rate exposure include the euro, the British pound sterling, and the Japanese yen. 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.

      The primary commodities to which the Company has market exposure are raw material purchases of nickel, copper and steel. Exposure to price changes in these commodities is generally mitigated through adjustments in selling prices of the ultimate product, and purchase order pricing arrangements, although forward contracts may be used in some circumstances to manage some of those exposures.

      Based on a hypothetical ten percent adverse movement in interest rates, commodity prices, 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-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:

	•	An economic slowdown, or unforeseen price reductions in the Company’s global market segments, with adverse effects on profit margins.
	•	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. This would include the Company’s inability to obtain certain commodity raw materials, or its inability to recover commodity raw material price increases through higher selling prices.
	•	Underutilization of the Company’s existing factories and plants, or plant expansions or new plants, possibly resulting in production inefficiencies, and 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 of, or inability to obtain, property and liability insurance due to uncertainty in worldwide insurance and reinsurance markets.
	•	The potential write-off of substantial goodwill and other intangible assets, including indefinite-lived 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.

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	•	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; social and economic conditions; unforeseen inflationary pressures and monetary fluctuation; import and other charges or taxes; the inability of the Company to obtain, or hedge, foreign currencies; and fluctuation in foreign currency exchange 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.
	•	Changes in income tax regulations or tax rates affecting the Company.
	•	Increased corporate governance compliance costs.

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.

      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 pages 26 and 27 herein.

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.

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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, 2003 and 2002, and the related consolidated statements of income, cash flows, and stockholders’ equity for each of the three years in the period ended December 31, 2003. 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, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States.

      As discussed in Notes 1 and 6 to the consolidated financial statements, in 2002 AMETEK, Inc. changed its method of accounting for goodwill in accordance with Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets.”

	/s/ ERNST & YOUNG LLP

Philadelphia, Pennsylvania

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AMETEK, Inc.

Consolidated Statement of Income

(1)	Amounts have been restated to reflect a two-for-one stock split effective February 27, 2004.

See accompanying notes.

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AMETEK, Inc.

Consolidated Balance Sheet