UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2004

OR

For the transition period from                  to                   

Commission file number 1-12981

AMETEK, Inc.

37 North Valley Road, Building 4, P.O. Box 1764, Paoli, Pennsylvania 19301-0801

     Registrant’s telephone number, including area code 610-647-2121

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]  No [   ]

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X]  No [   ]

     The number of shares of the issuer’s common stock outstanding as of the latest practicable date was: Common Stock, $0.01 Par Value, outstanding at October 22, 2004 was 68,517,512 shares.

AMETEK, Inc.
Form 10-Q
Table of Contents

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMETEK, Inc.

(a)  Amounts for 2003 have been restated to reflect a two-for-one stock split effective February 27, 2004.

See accompanying notes.

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AMETEK, Inc.

See accompanying notes.

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AMETEK, Inc.

See accompanying notes.

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AMETEK, Inc.

Note 1 – Financial Statement Presentation

     The accompanying consolidated financial statements are unaudited. The Company believes that all adjustments (which primarily consist of normal recurring accruals) necessary for a fair presentation of the consolidated financial position of the Company at September 30, 2004, and the consolidated results of its operations for the three- and nine-month periods ended September 30, 2004 and 2003, and its cash flows for the nine month period ended September 30, 2004 and 2003 have been included. Quarterly results of operations are not necessarily indicative of results for the full year. The accompanying financial statements should be read in conjunction with the financial statements and related notes presented in the Company’s annual report on Form 10-K for the year ended December 31, 2003 as filed with the Securities and Exchange Commission.

Note 2 – 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. All share and per share amounts included in this report reflect the stock split.

Note 3 – Recent Accounting Pronouncements

     In the first quarter of 2004, the Company adopted Financial Accounting Standards Board (“FASB”) Financial Interpretation No. 46-R (“FIN 46-R”), “Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51”, which replaced FIN 46. FIN 46-R requires a company to consolidate a variable interest entity (“VIE”) if it is designated as a primary beneficiary of that entity even if the company does not have a majority voting interest in the entity. A VIE 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. The disclosure requirements of FIN 46-R were effective for financial statements issued after December 31, 2003. The initial recognition provisions of FIN 46-R relating to VIE’s created or obtained prior to February 2003 were to be implemented no later than the end of the first reporting period that ends after March 15, 2004. Adoption of FIN 46-R had no effect on the Company’s consolidated results of operations, financial position, or cash flows.

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AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)

Note 4 – Earnings Per Share

     The calculation of basic earnings per share for the three- and nine-month periods ended September 30, 2004 and 2003 is based on the average number of common shares considered outstanding during the periods. Diluted earnings per share for such periods reflect the effect of all potentially dilutive securities (primarily outstanding common stock options). The following table presents the number of shares used in the calculation of basic earnings per share and diluted earnings per share for the periods:

Note 5 – Acquisitions

     On July 16, 2004, the Company acquired substantially all of the assets of Hughes-Treitler Mfg. Corp. (Hughes-Treitler) for approximately $48.0 million in cash. Hughes-Treitler is a supplier of heat exchangers and thermal management subsystems for the aerospace and defense markets. Hughes-Treitler has expected annualized sales of approximately $32.0 million. Hughes-Treitler is a part of the Company’s Electromechanical Group.

     On June 18, 2004, the Company acquired Taylor Hobson Holdings Limited (Taylor Hobson) from funds advised by Permira, for approximately 51.0 million British pounds sterling, or $93.8 million in cash, net of cash received. Taylor Hobson is a leading manufacturer of ultra-precision measurement instrumentation for a variety of markets, including optics, semiconductors, hard disk drives and nanotechnology research. Taylor Hobson has expected 2004 full year sales of approximately 38.0 million British pounds sterling, or $70.0 million. Taylor Hobson is a part of the Company’s Electronic Instruments Group.

     The operating results of the above acquisitions are included in the Company’s consolidated results from their respective dates of acquisition.

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AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)

     The acquisitions have been accounted for using the purchase method in accordance with SFAS No. 141, “Business Combinations.” The following table presents the tentative allocation of the aggregate purchase price for Taylor Hobson and Hughes-Treitler based on their estimated fair values:

     The amount allocated to goodwill is reflective of the benefit the Company expects to realize from expanding its measurement capabilities into ultra-precision applications through Taylor Hobson and thermal management systems for the aerospace markets through Hughes-Treitler.

     The $20.2 million in other assets was assigned to intangibles, other than goodwill, with estimated lives up to 10 years.

     The Company is obtaining third party valuations of certain tangible and intangible assets acquired with the Taylor Hobson and the Hughes-Treitler acquisitions. Therefore, the allocation of purchase price to these acquisitions is subject to revision.

     Had the acquisitions of Taylor Hobson and Hughes-Treitler been made at the beginning of 2004, net sales, net income and diluted earnings per share for the three- and nine- month periods ended September 30, 2004 would not have been materially different than the amounts reported. Had these acquisitions and the acquisition of the Chandler Instruments business, which was acquired in August 2003 been made at the beginning of 2003, pro forma net sales for the three- and nine- month periods ended September 30, 2003 would have been $293.3 million and $892.2 million, respectively. Net income and diluted earnings per share for the respective periods of 2003 would not have been materially different than the amounts reported.

Note 6 – Goodwill

     As of September 30, 2004 and December 31, 2003, goodwill was $608.7 million and $507.0 million, respectively. Goodwill by segment as of September 30, 2004 and December 31, 2003 was: Electronic Instrument Group (EIG) — $378.2 million and $309.0 million, respectively; Electromechanical Group (EMG) - $230.5 million and $197.9 million, respectively. The net increase in goodwill since December 31, 2003 is primarily due to the acquisitions of Taylor Hobson and Hughes-Treitler.

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AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)

Note 7 – Inventories

     The components of inventory stated primarily at lower of last in, first out (LIFO), cost or market are:

     Inventory increased $24.3 million from December 31, 2003 to September 30, 2004. The increase in inventory is primarily the result of the acquisitions of Taylor Hobson and Hughes-Treitler and the build up of inventory to meet increased sales levels.

Note 8 – Comprehensive Income

     Comprehensive income includes all changes in stockholders’ equity during a period except those resulting from investments by and distributions to stockholders.

     The following table presents comprehensive income for the three- and nine-month periods ended September 30, 2004 and 2003:

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AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)

Note 9 – Segment Disclosure

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

     At September 30, 2004, there were no significant changes in identifiable assets of reportable segments from the amounts disclosed at December 31, 2003 other than increases due to the current year acquisitions, nor were there any changes in the basis of segmentation, or in the measurement of segment operating results. Operating information relating to the Company’s reportable segments for the three and nine-month periods ended September 30, 2004 and 2003 can be found in the table on page 13 in the Management Discussion & Analysis section of this Report.

Note 10 – Pro Forma Stock-Based Compensation

     The Company applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for its stock award plans, which recognizes expense based on the intrinsic value at the date of grant. Since stock options have been issued with the exercise price per share equal to the fair market value per share at the date of grant, no compensation expense has resulted. Had the Company accounted for stock options in accordance with the fair value method prescribed by Statement of Financial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock-Based Compensation,” the Company would have reported the following pro forma results for the three and nine-month periods ended September 30, 2004 and 2003:

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AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)

Note 11 – Retirement and Pension Plans

     The following table includes the components of net pension expense recognized under SFAS No. 87 for the three and nine-month periods ended September 30, 2004 and 2003 in accordance with the interim disclosure requirements of SFAS No. 132-R, “Employers’ Disclosures about Pension and Other Postretirement Benefits, an update of FASB Statements No. 87, 88, and 106”. The Company adopted SFAS No. 132-R as of December 31, 2003.

     In the third quarter of 2004 and for the nine-month year-to-date period the Company made a $3.4 million contribution to its U.S. defined benefit pension plans. For the full year 2004, the Company estimates that it will make employer contributions to its defined benefit pension plans of approximately $5 to $7 million.

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AMETEK, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2004
(Unaudited)

Note 12 – Product Warranties

     The Company provides limited warranties in connection with the sale of its products. The warranty periods for products sold varies 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.

     Changes in the Company’s accrued product warranty obligation for the nine months ended September 30, 2004 and 2003 were as follows:

     Product warranty obligations are reported as current liabilities in the consolidated balance sheet.

Note 13 – Flood Damage

     In September 2003, one of the Company’s manufacturing plants was significantly damaged by a flood. The flood resulted in damage to the building and the operating assets. During the last twelve months, the Company received insurance proceeds totaling $14.5 million related to the damage or loss of these assets. The portion of the claim relating to the building, its contents, and operating assets has been finalized in the third quarter of 2004 with the Company’s insurers resulting in the recognition of a pretax gain totaling $2.8 million in the quarter. The portion of the insurance claim with respect to business interruption and other expenses has not been finalized with the insurance companies as of September 30, 2004, and the Company has not received any proceeds related to these items. Settlement of these items could result in an additional gain. The Company has relocated certain of the product lines affected by the flood to another manufacturing facility of the Company.

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AMETEK, Inc.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

     The following table sets forth sales and income by reportable segment, and consolidated operating income and pretax income:

Operations for the third quarter of 2004 compared with the third quarter of 2003

   In the third quarter of 2004, the Company posted record sales, operating income, net income and diluted earnings per share. The Company achieved these results on the contributions of the Hughes-Treitler business acquired in July 2004, the Taylor Hobson business acquired in June 2004 and the Chandler Instruments business acquired in August 2003 as well as from internal growth in both its Electronic Instruments (EIG) and Electromechanical (EMG) Groups. The Company continued to experience improved market conditions in most of its businesses in the third quarter of 2004. The power instruments market and the cost driven floorcare and specialty motors businesses remain weak. Sales and orders continued to benefit from the broad-based economic improvement impacting the Company’s short-cycle businesses as well as improvement in its aerospace business in the third quarter of 2004. The Company expects the economic rebound to continue benefiting its short-cycle businesses, while its long-cycle businesses are not expected to see a major rebound in 2004.

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AMETEK, Inc.

Results of Operations (continued)

     Net sales for the third quarter of 2004 were $310.7 million, an increase of $42.9 million, or 16.0%, compared with the third quarter of 2003 net sales of $267.8 million. The net sales increase for EIG was driven by the acquisitions of Taylor Hobson and Chandler Instruments along with strong performance in the Group’s high-end analytical instrumentation and heavy-vehicle instruments businesses. This increase in net sales was partially offset by weak conditions in the Group’s power instruments market.

     Increased net sales for the Electromechanical Group (EMG) were primarily driven by the acquisition of Hughes-Treitler as well as strength in its differentiated businesses, partially offset by weak market conditions in its cost driven floorcare and specialty motors businesses. Sales of both Groups benefited from $4.3 million in favorable foreign currency impacts, primarily from the Euro and the British pound sterling. Without the acquisitions previously mentioned, sales for the third quarter of 2004 would have increased 5.0% when compared with the same period in 2003. International sales for the third quarter increased to $135.2 million or 43.5% of consolidated sales, an increase of $23.0 million when compared with $112.2 million in the same period in 2003.

     Segment operating income for the third quarter of 2004 was $56.1 million, an increase of $9.6 million or 20.6% from $46.5 million in the third quarter of 2003. Segment operating income, as a percentage of sales, increased to 18.1% of sales in the third quarter of 2004 from 17.4% of sales in the third quarter of 2003. The increase in segment operating income resulted from the profit contributions made by the previously mentioned acquisitions as well as the benefits from continued operational excellence programs, and the profit contribution on the higher sales level.

     Selling, general and administrative expenses were $35.1 million in the third quarter of 2004, an increase of $5.0 million or 16.5%, when compared with the third quarter of 2003. Selling expenses, as a percentage of sales increased to 9.5% in the third quarter of 2004 compared with 8.6% of sales in the third quarter of 2003. The selling expense increase, and the corresponding increase in its percentage of sales were due primarily to the businesses acquired in 2004 and 2003. Without the acquisitions, selling expense as a percentage of sales for the third quarter of 2004 would have been 8.6%, equal to the percentage for the third quarter of 2003. The Company’s acquisition strategy generally is to acquire differentiated businesses, which because of their distribution channels and higher marketing costs tend to have a higher content of selling expenses.

     Corporate administrative expenses for the third quarter of 2004 were $5.7 million, a decrease of $1.4 million when compared with the same period in 2003. Corporate administrative expenses were 1.8% of sales in the third quarter of 2004, compared with 2.6% of sales for the same period in 2003. The decrease in corporate administrative expenses was the result of a $2.1 million one-time, non-cash expense, in the third quarter of 2003, from the accelerated cost recognition due to the vesting of a restricted stock grant. This decrease in 2004 is partially offset by higher legal, professional, and consulting fees. The higher professional and consulting fees are primarily the result of the Company’s Sarbanes-Oxley compliance.

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AMETEK, Inc.

Results of Operations (continued)

     After deducting corporate administrative expenses, consolidated operating income totaled $50.5 million, or 16.2% of sales for the third quarter of 2004, compared with $39.5 million, or 14.7% of sales for the third quarter of 2003, an increase of $11.0 million, or 27.8%.

     Interest and other expense increased to $8.2 million in the third quarter of 2004 from $6.3 million for the same quarter of 2003. The increase was mainly interest expense as a result of higher average interest rates on higher British pound sterling long-term debt levels incurred in connection with recent acquisitions. Other expenses increased primarily because of failed acquisition costs incurred in the current quarter.

     The effective tax rate for the third quarter of 2004 was 31.3% compared with 33.9% for the same period in 2003. The lower tax rate in 2004 reflects higher tax benefits in connection with U.S. export sales while the higher tax rate in 2003 was primarily due to the non-deductibility of the non-cash expense from the acceleration of restricted stock expense, discussed above. The Company is continuing to study the potential effects the new American Jobs Creation Act of 2004 will have on its future effective tax rate.

     Net income for the third quarter of 2004 totaled $29.0 million, an increase of 32.4% from $21.9 million in the third quarter of 2003. Diluted earnings per share rose 31.3% to $0.42 per share, compared with $0.32 per share for the same quarter of 2003.

Segment Results

     Electronic Instruments Group (EIG) net sales totaled $172.9 million in the third quarter of 2004, an increase of $34.0 million or 24.4% from $139.0 million in the same quarter of 2003. The net sales increase in the third quarter of 2004 was driven by the June 2004 acquisition of Taylor Hobson and the August 2003 acquisition of Chandler Instruments, along with internal sales improvement from the strong performances in the Group’s high-end analytical instrumentation and heavy-vehicle instruments businesses. However, weak economic conditions continue to affect the Group’s power instrument businesses. Without the acquisitions, sales for the third quarter of 2004 would have increased 7.6% when compared with the same period in 2003.

     Operating income of EIG was $32.1 million for the third quarter of 2004, an increase of $7.2 million, or 28.9% when compared with the $24.9 million in the third quarter of 2003. The increase in operating income was primarily driven by the recent acquisitions and the contribution from the improvement in internal sales mentioned above, as well as the benefits from ongoing cost reduction initiatives. As part of these cost reduction initiatives, in the third quarter of 2004, the Group incurred $2.4 million of charges related to a product line relocation and the settlement of two union contracts. Operating income for EIG also includes a $2.8 million pretax gain in partial settlement of a previously disclosed flood loss at one of the Group’s manufacturing plants. The gain is from finalization of the Company’s claim for damage to the building, its contents and the operating assets affected by the flood. Upon future finalization of the business interruption and other expense claim with the insurance companies, the Company could realize an additional gain. Due to the substantial damage to the building and the operating assets at the site, the Company has relocated certain product lines to another manufacturing facility of the Company. Operating margins of EIG were

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AMETEK, Inc.

Results of Operations (continued)

18.6% of sales in the third quarter of 2004 compared with operating margins of 17.9% of sales in the third quarter of 2003.

     Electromechanical Group (EMG) net sales totaled $137.8 million in the third quarter 2004, an increase of $9.0 million or 7.0% from $128.8 million in the same quarter in 2003. The sales increase was primarily the result of the July 2004 acquisition of Hughes-Treitler, strength in the Group’s differentiated businesses and a favorable foreign currency translation impact of $2.9 million, partially offset by continued weakness in the Group’s cost driven floorcare and specialty motors businesses. Without the acquisition, sales for the third quarter of 2004 would have increased 2.2% when compared with the same period in 2003.

     Operating income of EMG was $24.0 million for the third quarter of 2004, an increase of $2.4 million or 11.0% from $21.6 million in the third quarter of 2003. Operating income increased primarily due to the recent acquisition and sales increases mentioned above and the favorable effects of cost reduction programs. Group operating income as a percentage of sales for the third quarter of 2004 increased to 17.4%, when compared with a 16.8% operating margin in the third quarter of 2003.

Operations for the first nine months of 2004 compared with the first nine months of 2003.

     Net sales for the first nine months of 2004 were $906.0 million, an increase of $93.8 million or 11.6%, when compared with net sales of $812.2 million reported for the first nine months of 2003. Acquisitions, internal growth in both the EIG and EMG Groups and favorable foreign currency translation effects accounted for the sales increase. The Company continued to see improved market conditions across most of its businesses.

     EIG’s net sales increased by $73.2 million or 17.8% to $483.1 million for the first nine months of 2004. EIG’s sales increase was primarily due to the acquisitions of Taylor Hobson in June of 2004, Chandler Instruments in August 2003 and Solidstate Controls in February 2003, as well as strength in the Group’s high-end analytical instrumentation and heavy-vehicle businesses. EMG’s net sales increased $20.7 million or 5.1% to $423.0 million for the first nine months of 2004, primarily from the acquisition of Hughes-Treitler in July 2004, strength in the Group’s differentiated businesses and favorable foreign currency translation impacts, partially offset by continued weakness in the Group’s cost driven floorcare and specialty motors businesses. International sales were $388.8 million, or 42.9% of consolidated sales, for the nine months ended September 30, 2004, compared with $341.2 million, or 42.0% of consolidated sales, for the comparable period in 2003.

     New orders for the nine months ended September 30, 2004 were $956.0 million, compared with $856.6 million for the same period in 2003, an increase of $99.4 million, or 11.6%. The Company’s backlog of unfilled orders at September 30, 2004 was $336.1 million, compared with $286.2 million at December 31, 2003. The increase in orders and backlog was mainly due to the Hughes-Treitler and Taylor Hobson acquisitions along with increased order rates primarily in the Company’s differentiated businesses.

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AMETEK, Inc.

Results of Operations (continued)

     Segment operating income for the first nine months of 2004 was $158.6 million, an increase of $26.7 million, or 20.3% compared with the same period in 2003. The increase was the result of the profit contribution from both the 2004 and 2003 acquisitions previously mentioned, strength in the differentiated businesses of each Group, and the benefits from the Company’s continued cost reduction programs and the profit contribution on the higher sales level. The cost reduction initiatives are part of the Company’s operational excellence strategy and include the continued migration of production to lower cost locales and the aggressive lowering of the Company’s overall cost structure.

     Selling, general and administrative expenses were $98.0 million for the first nine months of 2004, an increase of $12.3 million or 14.3%, when compared with the same period in 2003. Selling expenses, as a percentage of sales, increased to 8.9% for the first nine months of 2004, compared with 8.5% for the same period in 2003. The selling expense increase, and the corresponding increase in selling expenses as a percentage of sales were due primarily to the businesses acquired in 2004 and 2003. Without the acquisitions, selling expenses as a percentage of sales for the first nine months of 2004 would have been flat at 8.5%.

     Corporate administrative expenses were $17.2 million for the first nine months of 2004, relatively unchanged from $17.0 million in the same period in 2003. As a percentage of sales, corporate administrative expenses were 1.9%, compared with 2.1% for the same period in 2003. The decrease in corporate administrative expenses as a percentage of sales is the result of a $2.1 million one-time, non-cash expense, in the third quarter of 2003, from the accelerated cost recognition due to the vesting of a restricted stock grant. This decrease in 2004 is partially offset by higher legal, professional and consulting fees, as well as severance costs. The higher professional and consulting fees are primarily the result of the Company’s Sarbanes-Oxley compliance, and these higher fees are expected to continue through the end of 2004.

     After deducting corporate administrative expenses, consolidated operating income was $141.4 million, an increase of $26.5 million or 23.1% when compared with $114.9 million for the same period in 2003. This represents an operating margin of 15.6% for the first nine months of 2004 compared with 14.1% for the same period in 2003.

     Interest expense was $20.7 million for the first nine months of 2004, an increase of $1.3 million when compared with the first nine months of 2003. Higher average interest rates for the first nine months of 2004 resulted from higher British pound sterling long-term debt incurred in connection with recent acquisitions mentioned above.

     The effective tax rate for the first nine months of 2004 was 32.2% compared with 32.9% for the same period in 2003. The lower tax rate in 2004 reflects higher tax benefits in connection with U.S. export sales, while the higher tax rate in 2003 is primarily due to the non-deductibility of the non-cash expense from the acceleration of restricted stock expense, discussed previously. The Company is continuing to study the potential effects the new American Jobs Creation Act of 2004 will have on its future effective tax rate.

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AMETEK, Inc.

Results of Operations (continued)

     Net income for the first nine months of 2004 was $81.4 million, or $1.18 per share on a diluted basis, compared with net income of $63.5 million, or $0.94 per diluted share for the first nine months of 2003.

Segment Results

     Electronic Instruments Group (EIG) net sales were $483.1 million for the first nine months of 2004, an increase of $73.2 million or 17.8% compared with the same period of 2003. The sales increase for the first nine months of 2004 was due to the acquisitions, mentioned previously, strength in the Group’s high-end analytical instrumentation and heavy-vehicle businesses as well as a favorable foreign currency translation impact of $5.6 million. However, weak market conditions continue to affect the Group’s power instrument businesses. Without the acquisitions, sales for the first nine months of 2004 would have increased 5.6% when compared with the same period in 2003.

     EIG’s operating income for the first nine months of 2004 totaled $86.2 million, an increase of $19.5 million or 29.2% when compared with the same period of 2003. The increase in operating income is the result of the recent acquisitions and the contributions on the improvement in internal sales previously mentioned, and benefits from the Group’s ongoing cost reduction initiatives. As part of these cost reduction initiatives, in the third quarter of 2004, the Group incurred $2.4 million of charges related to product line relocation and the settlement of two union contracts. Operating income for EIG for 2004 also includes a third-quarter $2.8 million pretax gain in partial finalization of a previously disclosed flood loss at one of the Group’s manufacturing plants. The gain is from finalization of the Company’s claim for damage to the building, its contents and the operating assets affected by the flood. Upon future settlement of the business interruption and other expense claim with the insurance companies, the Company could realize an additional gain. Due to the substantial damage to the building and the operating assets at the site, the Company has relocated certain product lines to another manufacturing facility of the Company. Operating margins of EIG were 17.8% of sales for the first nine months of 2004 compared with operating margins of 16.3% of sales in the comparable period in 2003.

     Electromechanical Group (EMG) net sales totaled $423.0 million for the first nine months of 2004, an increase of $20.7 million or 5.1% compared with the same period in 2003. The sales increase was primarily the result of a favorable foreign currency translation impact of $11.8 million and strength in the Group’s differentiated businesses, partially offset by weakness in the Group’s cost driven floorcare and specialty motors businesses.

     EMG’s operating income for the first nine months of 2004 was $72.4 million, an increase of $7.3 million or 11.1% when compared with the same period in 2003. The higher profit was the result of the Group’s recent acquisition mentioned above, strength in the Group’s differentiated businesses and the benefits of ongoing cost reduction programs, partially offset by continued weakness in the Group’s cost driven floorcare and specialty motors businesses. Operating margins for the first nine months of 2004 were 17.1%, compared with operating margins of 16.2% for the comparable period in 2003.

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AMETEK, Inc.

Financial Condition

Liquidity and Capital Resources

     Cash provided by operating activities totaled $100.2 million in the first nine months of 2004, compared with $108.1 million of cash provided in the same period of 2003, a decrease of $7.9 million. The decrease in operating cash flow primarily resulted from an increase in net operating working capital requirements driven by the growth in the Company’s business to meet increased sales levels. In the third quarter of 2004, the Company made a $3.4 million contribution to its U.S. defined benefit pension plans. Also, during the first nine months of 2004, the Company received net cash proceeds of $9.6 million primarily related to an insurance claim. The insurance proceeds were from the partial settlement of a previously disclosed flood insurance claim involving one of the Company’s manufacturing facilities.

     Cash used for investing activities totaled $154.9 million in the first nine months of 2004, compared with $174.7 million used in the same period of 2003. The Company’s acquisitions of Hughes-Treitler and Taylor Hobson in the first nine months of 2004 used $143.5 million of cash. In 2003, the Company acquired Airtechnology Holdings Limited, Solidstate Controls, Inc. and Chandler Instruments for $163.2 million in cash. Additions to property, plant and equipment in the first nine months of 2004 totaled $14.4 million, compared to $13.5 million in the first nine months of 2003.

     Cash provided by financing activities in the first nine months of 2004 totaled $63.9 million, compared with $70.0 million for the same period of 2003. In the first nine months of 2004, total net borrowings increased by $62.9 million, compared with an increase of $72.7 million in for the first nine months of 2003. Long-term borrowings increased $89.7 million in the first nine months of 2004 and included a 50 million British pound sterling (approximately $91 million) borrowing under the Company’s $300 million revolving bank credit facility. The borrowing of British pound sterling provides a natural hedge of the Company’s investment in United Kingdom-based Taylor Hobson. The borrowings in the first nine months of 2004 and 2003, along with cash provided by operating activities, were used to finance the 2004 and 2003 acquisitions. At September 30, 2004, the Company has available borrowing capacity of $183.2 million under its $300 million revolving bank credit facility, and $6.0 million under its accounts receivable securitization agreement. 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 financial flexibility to support its growth plans.

     Net cash proceeds from the exercise of employee stock options totaled $13.2 million in the first nine months of 2004, compared with $9.3 million for the same period of 2003. In January 2004, the Company’s Board of Directors approved a 100% increase in its quarterly cash dividend effective with the first quarter 2004 dividend payment. Cash dividends paid in the first nine months of 2004 totaled $12.2 million, compared to $6.1 million in the first nine months of 2003. In the first nine months of 2003, the Company repurchased 380,000 shares of its common stock at a cost of $5.8 million. No share repurchases were made in the first nine months of 2004.

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AMETEK, Inc.

Financial Condition (continued)

Liquidity and Capital Resources

     As a result of the activities discussed above, the Company’s cash and cash equivalents at September 30, 2004 totaled $23.5 million, compared with $16.8 million at December 31, 2003. The Company believes it has sufficient cash-generating capabilities and available credit facilities to enable it to meet its needs in the foreseeable future.

Forward-looking Information

     Information contained in this discussion, other than historical information, is considered “forward-looking statements” and may be subject to change based on various important factors and uncertainties. Some, but not all, of the factors and uncertainties that may cause actual results to differ significantly from those expected in any forward-looking statement are disclosed in the Company’s 2003 Form 10-K as filed with the Securities and Exchange Commission.

Item 4. Controls and Procedures

     As of the end of the quarter ended September 30, 2004, management, including the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, in all material respects, as of the end of the period covered by this report.

     There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2004 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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AMETEK, Inc.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

a)

Exhibits:

b)

Reports on Form 8-K:

During the quarter ended September 30, 2004, the Company furnished the following Current Report on Form 8-K. On July 21, 2004, the Company furnished a report on Form 8-K under Items 7 and 12, reporting the Company’s operating results for the three and six month periods ending June 30, 2004. The report also included the previously announced July 16, 2004 acquisition of Hughes-Treitler Manufacturing Corporation and the June 18, 2004 acquisition of Taylor Hobson Holdings Limited.

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AMETEK, Inc.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

October 28, 2004

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