Exhibit Index
                                                                   is on page 37

                                  UNITED STATES
                        SECURITIES & EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-Q

|X| Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended June 28, 2002, or

|_| Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from ______________ to ______________.

Commission File No. 1-5375

                                TECHNITROL, INC.
               (Exact name of registrant as specified in Charter)

         PENNSYLVANIA                                    23-1292472
(State or other jurisdiction of             (IRS Employer Identification Number)
incorporation or organization)

    1210 Northbrook Drive, Suite 385
         Trevose, Pennsylvania                              19053
(Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code: 215-355-2900

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 the filing
requirements for at least the past 90 days. YES |X| NO |_|

Common Stock - Shares Outstanding as of August 7, 2002: 40,064,835


                                  Page 1 of 38
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1: Financial Statements

                        Technitrol, Inc. and Subsidiaries

                           Consolidated Balance Sheets

                       June 28, 2002 and December 28, 2001
                                  In thousands

                                                        June 28,    December 28,
                                                           2002            2001
      Assets                                               ----            ----
Current assets:                                      (Unaudited)
     Cash and cash equivalents                        $ 198,741       $ 142,267
     Trade receivables, net                              71,652          63,294
     Inventories                                         60,403          62,404
     Prepaid expenses and other current assets           14,308          18,785
                                                      ---------       ---------
           Total current assets                         345,104         286,750

Property, plant and equipment                           169,494         170,665
     Less accumulated depreciation                       97,629          87,613
                                                      ---------       ---------
           Net property, plant and equipment             71,865          83,052
Deferred income taxes                                    10,569           9,499
Excess of cost over net assets acquired and other
  intangibles, net                                      101,720         128,512
Other assets                                             17,182          17,207
                                                      ---------       ---------
                                                      $ 546,440       $ 525,020
                                                      =========       =========

      Liabilities and Shareholders' Equity
Current liabilities:
     Current installments of long-term debt           $  10,187       $     122
     Accounts payable                                    26,025          24,780
     Accrued expenses                                    81,049          72,591
                                                      ---------       ---------
           Total current liabilities                    117,261          97,493

Long-term liabilities:
     Long-term debt, excluding current installments       5,519          89,007
     Other long-term liabilities                          8,090           9,289

Shareholders' equity:
     Common stock and additional paid-in capital        205,999          70,184
     Retained earnings                                  214,111         264,055
     Other                                               (4,540)         (5,008)
                                                      ---------       ---------
           Total shareholders' equity                   415,570         329,231
                                                      ---------       ---------
                                                      $ 546,440       $ 525,020
                                                      =========       =========

See accompanying Notes to Unaudited Consolidated Financial Statements.


                                  Page 2 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

                       Consolidated Statements of Earnings

                                   (Unaudited)
                       In thousands, except per share data

<TABLE>
<CAPTION>
                                                            Three Months Ended             Six Months Ended
                                                          June 28,       June 29,       June 28,      June 29,
                                                             2002           2001           2002          2001
                                                             ----           ----           ----          ----
<S>                                                     <C>            <C>            <C>            <C>
Net sales                                               $ 106,185      $ 112,835      $ 199,605      $270,079
Costs and expenses:
     Cost of sales                                         81,519         88,064        155,687       194,931
     Selling, general and administrative
        expenses                                           22,372         24,608         45,851        52,021
     Restructuring and unusual and
        infrequent items                                   43,098          2,956         45,756         4,206
                                                        ---------      ---------      ---------      --------

         Total costs and expenses applicable
             to sales                                     146,989        115,628        247,294       251,158
                                                        ---------      ---------      ---------      --------
Operating profit (loss)                                   (40,804)        (2,793)       (47,689)       18,921

Other (expense) income:
     Interest income (expense), net                          (133)           714           (374)        1,925
     Other                                                   (542)           162           (958)           98
                                                        ---------      ---------      ---------      --------

         Total other income (expense)                        (675)           876         (1,332)        2,023
                                                        ---------      ---------      ---------      --------

Earnings (loss) before taxes and cumulative
    effect of accounting change                           (41,479)        (1,917)       (49,021)       20,944

Income taxes (benefit)                                    (12,434)          (458)       (14,815)        4,409
                                                        ---------      ---------      ---------      --------
Net earnings (loss) before cumulative effect
    of accounting change                                  (29,045)        (1,459)       (34,206)       16,535

Cumulative effect of accounting change,
    net of income taxes                                        --             --        (15,738)           --
                                                        ---------      ---------      ---------      --------
Net earnings (loss)                                     $ (29,045)     $  (1,459)     $ (49,944)     $ 16,535
                                                        =========      =========      =========      ========

Basic earnings (loss) per share before cumulative
    effect of accounting change                         $   (0.75)     $   (0.04)     $   (0.95)     $   0.50
Cumulative effect of accounting change, net of
    income taxes                                               --             --          (0.44)           --
                                                        ---------      ---------      ---------      --------
Basic earnings (loss) per share                         $   (0.75)     $   (0.04)     $   (1.39)     $   0.50
                                                        =========      =========      =========      ========

Diluted earnings (loss) per share before cumulative
    effect of accounting change                         $   (0.75)     $   (0.04)     $   (0.95)     $   0.49
Cumulative effect of accounting change, net of
    income taxes                                        $      --      $      --      $   (0.44)     $     --
                                                        ---------      ---------      ---------      --------
Diluted earnings (loss) per share                       $   (0.75)     $   (0.04)     $   (1.39)     $   0.49
                                                        =========      =========      =========      ========

Cash dividends declared per share                       $      --      $  0.3375      $      --      $ 0.6750
</TABLE>

See accompanying Notes to Unaudited Consolidated Financial Statements.


                                  Page 3 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

                                   (Unaudited)

                                  In thousands

<TABLE>
<CAPTION>
                                                                                   Six Months Ended
                                                                                June 28,       June 29,
                                                                                   2002           2001
                                                                                   ----           ----
<S>                                                                           <C>            <C>
Cash flows from operating activities:
Net earnings (loss)                                                           $ (49,944)     $  16,535
Adjustments to reconcile net earnings to net cash provided
   by operating activities:
     Depreciation and amortization                                               10,543         12,229
     Tax benefit from employee stock compensation                                   406            231
     Amortization of stock incentive plan expense                                   746          1,708
     Restructuring and unusual and infrequent items, net of cash payments
       (excluding loss on disposal of assets and trade name write off, net
        of taxes)                                                                 2,915           (216)
     Cumulative effect of accounting change, net of income taxes                 15,738             --
     Loss on disposal of assets                                                   6,452            545
     Trade name write off, net of tax effect                                     19,260             --
     Changes in assets and liabilities, net of effect of acquisitions:
       Trade receivables                                                         (5,108)        34,036
       Inventories                                                                4,736         14,768
       Prepaid expenses and other current assets                                  4,799            947
       Accounts payable and accrued expenses                                     (2,495)       (35,317)
     Other, net                                                                  (5,848)        (3,921)
                                                                              ---------      ---------
         Net cash provided by operating activities                                2,200         41,545
                                                                              ---------      ---------

Cash flows from investing activities:
     Acquisitions, net of cash acquired                                              --        (26,784)
     Capital expenditures                                                        (2,571)        (8,691)
     Proceeds from sale of property, plant and equipment                             31          1,004
                                                                              ---------      ---------
         Net cash used in investing activities                                   (2,540)       (34,471)
                                                                              ---------      ---------
Cash flows from financing activities:
     Dividends paid                                                              (1,137)        (2,256)
     Proceeds of short-term borrowings, net of repayments                            --         15,078
     Principal payments of long-term debt                                       (75,073)        (8,331)
     Payoff of debt assumed in acquisition                                           --         (3,944)
     Sale of stock through employee stock purchase plan                             759          6,434
     Exercise of stock options                                                       --             17
     Net proceeds from follow-on offering                                       134,700             --
                                                                              ---------      ---------
         Net cash provided by financing activities                               59,249          6,998
                                                                              ---------      ---------
Net effect of exchange rate changes on cash                                      (2,435)          (538)
                                                                              ---------      ---------
Net increase in cash and cash equivalents                                        56,474         13,534
Cash and cash equivalents at beginning of year                                  142,267        162,631
                                                                              ---------      ---------
Cash and cash equivalents at June 28, 2002 and
  June 29, 2001                                                               $ 198,741      $ 176,165
                                                                              =========      =========
</TABLE>

See accompanying Notes to Unaudited Consolidated Financial Statements.


                                  Page 4 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

            Consolidated Statement of Changes in Shareholders' Equity

                         Six Months Ended June 28, 2002

                                   (Unaudited)
                                  In thousands

<TABLE>
<CAPTION>
                                                                                           Other
                                                                                -----------------------------
                                        Common stock and                                          Accumulated
                                        paid-in capital                                                 other
                                        ----------------            Retained        Deferred    comprehensive    Comprehensive
                                    Shares           Amount         earnings    compensation           income           income
                                    ------           ------         --------    ------------           ------           ------
<S>                                 <C>           <C>              <C>             <C>              <C>              <C>
Balance at December 28, 2001        33,683        $  70,184        $ 264,055       $  (2,430)       $  (2,578)
Stock options, awards and
    related compensation                (2)             (50)                             892
Tax benefit of stock
    compensation                                        406
Stock issued under employee
    stock purchase plan                 36              759
Follow-on offering                   6,348          134,700
Currency translation
    adjustments                                                                                          (424)       $    (424)
Net (loss) earnings                                                  (49,944)                                          (49,944)
                                                                                                                     ---------
Comprehensive(expense)
    income                                                                                                           $ (50,368)
                                                                                                                     =========
Balance at June 28, 2002            40,065        $ 205,999        $ 214,111       $  (1,538)       $  (3,002)
                                    ======        =========        =========       =========        =========
</TABLE>

See accompanying Notes to Unaudited Consolidated Financial Statements.


                                  Page 5 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

              Notes to Unaudited Consolidated Financial Statements

(1) Accounting Policies

      For a complete description of the accounting policies of Technitrol, Inc.
and its consolidated subsidiaries ("the Company"), refer to Note 1 of Notes to
Consolidated Financial Statements included in the Company's Form 10-K filed for
the year ended December 28, 2001.

      The results for the quarters ended June 28, 2002 and June 29, 2001, have
been prepared by Technitrol's management without audit by its independent
auditors. In the opinion of management, the financial statements fairly present,
in all material respects, the financial position and results of Technitrol's
operations for the periods presented. To the best knowledge and belief of
Technitrol, all adjustments have been made to properly reflect income and
expenses attributable to the periods presented. All such adjustments are of a
normal recurring nature, except for trade name writedown and goodwill impairment
as described in this report. Operating results for the six months ended June 28,
2002 are not necessarily indicative of annual results.

      Certain amounts in the prior year financial statements have been
reclassified to conform with the current year presentation.

(2) Acquisitions

      Excelsus Technologies, Inc.: In August 2001, the Company acquired all of
the capital stock of Excelsus Technologies, Inc. ("Excelsus") based in Carlsbad,
California. Excelsus produced customer-premises digital subscriber line filters
and other broadband accessories. The acquisition was accounted for by the
purchase method of accounting. The preliminary purchase price was approximately
$85.9 million, net of $4.8 million of cash acquired and a preliminary purchase
price adjustment of $2.6 million. The fair value of net assets acquired
approximated $18.2 million. Based on the fair value of the assets acquired, the
preliminary allocation of the unadjusted purchase price included $40.0 million
for trade names, $27.0 million for goodwill and $8.0 million for technology. The
technology intangible is subject to amortization and is estimated to have a
5-year life. Included in the assets acquired was a $6.3 million tax receivable,
generated by the acceleration and settlement of Excelsus stock options at the
time of closing. The Company filed income tax returns for the period ending on
the closing date, and received the full amount of the tax receivable during the
fourth quarter of 2001. In order to fund the purchase price, the Company used
approximately $19.0 million of cash on-hand and borrowed approximately $74.0
million under its existing credit facility with a syndicate of commercial banks.
Prior to the acquisition, Excelsus recorded revenues of approximately $40.0
million in 2000.

      During the quarter ended June 28, 2002 the Company recorded an impairment
charge of $32.1 million of the value assigned to the Excelsus trade names before
any tax benefit. The charge was recorded as restructuring and unusual and
infrequent items. The

                                                                     (continued)


                                  Page 6 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

         Notes to Unaudited Consolidated Financial Statements, continued

(2) Acquisitions, continued

impairment charge was triggered by the combined effect of reorganizing Pulse
into product line based organization and updated financial forecasts for DSL
microfilters. In addition, a purchase price allocation adjustment to record a
deferred tax liability of $16.0 million associated with the trade name was
recorded. Goodwill in an equal amount was also recognized. As required by FASB
Statement No. 109, Accounting for Income Taxes, approximately $12.8 million of
the additional deferred tax liability was recognized as a tax benefit in the
consolidated statement of earnings for the three months ended June 28, 2002,
concurrent with the trade name impairment.

      Full Rise Electronics Co. Ltd.: In April 2001, the Company made a minority
investment in the common stock of Full Rise Electronics Co. Ltd. ("FRE") which
was accounted for by the cost-basis method of accounting. FRE is based in the
Republic of China (Taiwan) and manufactures connector products including single
and multiple-port jacks and supplies such products for the Company under a
corporation agreement. On July 27, 2002 the Company made an additional
investment in FRE of $6.7 million which increased the total investment to $20.9
million. As a result of the increased ownership percentage to 29.1%, the Company
will account for the investment under the equity method beginning in the three
months ended September 27, 2002. The Company also has an option to purchase
additional shares of common stock in FRE in the future. See additional
discussion in the Liquidity and Capital Resources section of this report.

      Grupo ECM: In March 2001, the Company acquired Electro Componentes
Mexicana, S.A. de C.V. and affiliates based in Mexico City. These operations are
referred to as Grupo ECM. Grupo ECM manufactured and marketed inductive
components primarily for automotive applications. This business was integrated
into Pulse. The purchase price was not material to the Company's consolidated
financial position.

      Engelhard-CLAL: In January 2001, the Company acquired the electrical
contacts business of Engelhard-CLAL. These operations are based in France with
additional operations in Spain and the United Kingdom. Engelhard-CLAL
manufactured electrical contacts, wire and strip contact materials and related
products primarily for the European electrical equipment market. This business
was integrated into AMI Doduco. The purchase price was not material to the
Company's consolidated financial position.

(3) Restructuring and Unusual and Infrequent Items

      In the quarter ended June 28, 2002 the Company accrued $11.0 million in
total for the shutdown of its Philippines manufacturing facility, severance and
related payments, asset impairments and plant consolidations. The $11.0 million
charge included $3.8 million for the Philippines shutdown of which $1.4 million
represented severance and related payments and $2.4 million was recorded for
asset writedowns. An additional $32.1 million of Excelsus trade name impairment
was recorded as discussed in Note 2, "Acquisitions". Pulse accrued an additional
$1.0 million for severance and related payments for approximately 67 personnel
on a worldwide basis and $4.1 million for asset

                                                                     (continued)


                                  Page 7 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

         Notes to Unaudited Consolidated Financial Statements, continued

(3) Restructuring and Unusual and Infrequent Items, continued

impairments primarily involved in Asian manufacturing. AMI Doduco accrued
$2.1 million of restructuring and unusual and infrequent items in the second
quarter of 2002. This comprised approximately $1.0 million for severance and
related payments for approximately 45 people in Europe and $1.1 million for
asset impairments, writedowns and relocations in Europe.

      In the first quarter of 2002, the Company accrued $1.8 million for
severance and related payments, related to the termination of approximately 400
manufacturing personnel and approximately 75 support personnel. An additional
accrual of $0.8 million was provided for asset disposals. Substantially all of
these accruals were utilized by the end of the first quarter in 2002.

      Approximately $3.0 million of restructuring charges were accrued in the
six months ended June 29, 2001 to provide for severance and related payments for
Pulse manufacturing personnel primarily in Asia, and to provide for the shutdown
of a manufacturing facility in Thailand. The majority of this accrual was
utilized in the third quarter of 2001.

      The Company implemented numerous restructuring initiatives during 2002 and
2001 in order to reduce Pulse's cost structure and capacity, although the speed
and depth of the contraction in Pulse's markets made it impossible to reduce
costs at the same rate at which revenues contracted throughout 2001.

      Restructuring charges are summarized on a year-to-date basis for 2002 as
follows:

                                                 AMI
      Restructuring provision (in millions):  Doduco      Pulse      Total
                                              ------      -----      -----
      Balance accrued at December 28, 2001     $ 0.6      $ 2.4      $ 3.0
      Accrued during the six months ended
        June 28, 2002                            2.6       11.1       13.7
      Severance and other cash payments         (0.3)      (3.7)      (4.0)
      Non-cash asset disposals                    --       (6.8)      (6.8)
                                               -----      -----      -----
      Balance accrued at June 28, 2002         $ 2.9      $ 3.0      $ 5.9
                                               =====      =====      =====

(4) Inventories

      Inventories consisted of the following (in thousands):

                                           June 28,     December 28,
                                              2002             2001
                                              ----             ----
            Finished goods                 $22,486          $22,159
            Work in process                 12,750           11,723
            Raw materials and supplies      25,167           28,522
                                           -------          -------
                                           $60,403          $62,404
                                           =======          =======


                                  Page 8 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

         Notes to Unaudited Consolidated Financial Statements, continued

(5) Derivatives and Other Financial Instruments

      The Company utilizes derivative financial instruments, primarily forward
exchange contracts and currency options, to manage foreign currency risks. While
these hedging instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposures being
hedged.

      At June 28, 2002, the Company had three foreign exchange contracts
outstanding to hedge approximately 48.2 million of euro in the aggregate. The
primary purpose of the forward contracts was to hedge intercompany loans. The
terms of the contracts were less than 30 days The Company had no other financial
derivative instruments. In addition, management believes that there is no
material risk of loss from changes in market rates or prices which are inherent
in other financial instruments.

(6) Earnings (Loss) Per Share

      Basic earnings (loss) per share are calculated by dividing earnings by the
weighted average number of common shares outstanding (excluding restricted
shares) during the period. The Company had restricted shares outstanding of
approximately 311,000 and 325,000 as of June 28, 2002 and June 29, 2001,
respectively. For calculating diluted earnings per share, common share
equivalents and restricted stock outstanding are added to the weighted average
number of common shares outstanding. Common share equivalents result from
outstanding options to purchase common stock as calculated using the treasury
stock method. Such common share equivalent amounts were approximately 24,000 for
the six months ended June 28, 2002. There were no common stock options
outstanding for the six months ended June 29, 2001. As the three month period
ended June 28, 2002 resulted in a net loss, common share equivalents are
anti-dilutive, and therefore excluded from the earnings (loss) per share
calculation. Earnings (loss) per share calculations are as follows (in
thousands, except per share amounts):

                                                                     (continued)


                                  Page 9 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

         Notes to Unaudited Consolidated Financial Statements, continued

(6) Earnings (Loss) Per Share, continued

<TABLE>
<CAPTION>
                                                 Three Months Ended          Six Months Ended
                                                June 28,     June 29,      June 28,     June 29,
                                                   2002         2001          2002         2001
                                                   ----         ----          ----         ----
<S>                                            <C>           <C>          <C>           <C>
Net earnings (loss)                            $(29,045)     $(1,459)     $(49,944)     $16,535
     Basic earnings (loss) per share:
         Shares                                  38,718       33,253        36,021       33,089
         Per share amount, before
            change in accounting principle     $   (.75)     $  (.04)     $   (.95)     $   .50
         Change in accounting principle              --           --          (.44)          --
                                               --------      -------      --------      -------
         Per share amount                      $   (.75)     $  (.04)     $  (1.39)     $   .50
                                               ========      =======      ========      =======

     Diluted earnings (loss) per share:
         Shares                                  38,984       33,578        36,332       33,414
         Per share amount, before
            change in accounting principle     $   (.75)     $  (.04)     $   (.95)     $   .49
         Change in accounting principle              --           --          (.44)          --
                                               --------      -------      --------      -------
         Per share amount                      $   (.75)     $  (.04)     $  (1.39)     $   .49
                                               ========      =======      ========      =======
</TABLE>

(7) Business Segment Information

      For the quarters ended June 28, 2002 and June 29, 2001 there were
immaterial amounts of intersegment revenues eliminated in consolidation. There
has been no material change in segment assets from December 28, 2001 to June 28,
2002, except for trade name writedown and goodwill impairment as described in
this report. In addition, the basis for determining segment financial
information has not changed from 2001. Specific segment data are as follows:

                                                                     (continued)


                                  Page 10 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

         Notes to Unaudited Consolidated Financial Statements, continued

(7) Business Segment Information, continued

<TABLE>
<CAPTION>
                                          Three Months Ended             Six Months Ended
                                       June 28,       June 29,       June 28,       June 29,
Net sales:                                2002           2001           2002           2001
                                          ----           ----           ----           ----
<S>                                  <C>            <C>            <C>            <C>
     Pulse                           $  53,888      $  55,665      $  98,999      $ 146,985
     AMI Doduco                         52,297         57,170        100,606        123,094
                                     ---------      ---------      ---------      ---------
         Total                       $ 106,185      $ 112,835      $ 199,605      $ 270,079
                                     =========      =========      =========      =========
Earnings before income taxes:
     Pulse                           $   1,618      $  (2,325)     $  (2,621)     $  16,131
     Pulse restructuring and
        unusual and infrequent
        items                          (41,045)        (2,956)       (43,175)        (4,206)
     AMI Doduco                            676          2,488            688          6,996
     AMI Doduco restructuring
       and unusual and
       infrequent items                 (2,053)            --         (2,581)            --
                                     ---------      ---------      ---------      ---------
         Operating (loss) profit       (40,804)        (2,793)       (47,689)        18,921
     Other income, net                    (675)           876         (1,332)         2,023
                                     ---------      ---------      ---------      ---------
     Earnings (loss) before
       income taxes and
       cumulative effect of
       accounting change             $ (41,479)     $  (1,917)     $ (49,021)     $  20,944
                                     =========      =========      =========      =========
</TABLE>

(8) Adoption of SFAS 141 and SFAS 142

      In July 2001, the FASB issued Statement No. 141, Business Combinations,
("SFAS 141") and Statement No. 142, Goodwill and Other Intangible Assets ("SFAS
142"). SFAS 141 requires that the purchase method of accounting be used for all
business combinations completed after June 30, 2001. SFAS 141 also specifies
that intangible assets acquired in a purchase method business combination must
meet certain criteria to be recognized and reported apart from goodwill. SFAS
142 requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead they are tested for impairment at least
annually in accordance with the provisions of SFAS 142. SFAS 142 also requires
that other intangible assets with definite useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS 144.

                                                                     (continued)


                                  Page 11 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

         Notes to Unaudited Consolidated Financial Statements, continued

(8) Adoption of SFAS 142, continued

      We adopted the provisions of SFAS 141 in fiscal 2001, and SFAS 142
effective January 1, 2002. Goodwill and intangible assets determined to have an
indefinite useful life acquired in a purchase business combination completed
after June 30, 2001 are not amortized, but will continue to be evaluated for
permanent impairment. Goodwill and intangible assets acquired in business
combinations completed before July 1, 2001 were amortized until December 28,
2001. Since our acquisition of Excelsus was completed on August 7, 2001, the
provisions of SFAS 141 were applied. Therefore, goodwill and certain intangibles
with indefinite lives resulting from the Excelsus transaction have not been
subject to amortization.

      In connection with the transitional goodwill impairment evaluation, SFAS
142 required us to perform an assessment of whether goodwill is impaired as of
the date of adoption. We had approximately $80.3 million of unamortized goodwill
and $48.2 million of other intangible assets as of December 28, 2001, which was
subject to the transition provisions of SFAS 141 and SFAS 142. To accomplish the
impairment valuation, we determined the carrying value of each reporting unit by
assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units as of the date of adoption. As AMI
Doduco's reporting unit's carrying amount exceeded its fair value, an indication
existed that the reporting unit's goodwill may be impaired and we performed the
second step of the transitional impairment test. In the second step, we compared
the implied fair value of the AMI Doduco's goodwill, determined by allocating
the reporting unit's fair value to all of its assets and liabilities in a manner
similar to a purchase price allocation in accordance with SFAS 141, to its
carrying amount. As a result of the transitional impairment test, we recorded an
impairment loss of $15.7 million in the first quarter of 2002. This loss was
recognized as a cumulative effect of an accounting change during the three
months ended March 29, 2002.

                                                                     (continued)


                                  Page 12 of 38
<PAGE>

                        Technitrol, Inc. and Subsidiaries

         Notes to Unaudited Consolidated Financial Statements, continued

(8) Adoption of SFAS 142, continued

      Goodwill was not amortized for the six months ended June 28, 2002, whereas
amortization expense was $2.2 million for the six months ended June 29, 2001.

      The following table presents the impact of SFAS 142 on net income and net
income per share had the standard been in effect for the three months and six
months ended June 28, 2002 and June 29, 2001, respectively (in thousands, except
per share amounts):

<TABLE>
<CAPTION>
                                             Three Months Ended            Six Months Ended
                                            June 28,     June 29,      June 28,      June 29,
                                               2002         2001          2002          2001
                                               ----         ----          ----          ----
<S>                                      <C>             <C>          <C>           <C>
Net income - as reported                 $  (29,045)     $(1,459)     $(49,944)     $ 16,535
Adjustments:
     Amortization of goodwill                    --        1,151            --         2,242
     Cumulative effect of accounting
        change                                   --           --        15,763            --
     Income tax effect                           --          (25)          (25)          (50)
                                         ----------      -------      --------      --------

           Net adjustments                       --        1,126        15,738         2,192
                                         ----------      -------      --------      --------

Net income - adjusted                    $  (29,045)     $  (333)     $(34,206)     $ 18,727
                                         ==========      =======      ========      ========

Basic net income per share - as
  reported                               $     (.75)     $  (.04)     $  (1.39)     $    .49
Basic net income per share -
  adjusted                               $     (.75)     $   .01      $   (.95)     $    .57
Diluted net income per share - as
  reported                               $     (.75)     $  (.04)     $  (1.39)     $    .49
Diluted net income per share -
  adjusted                               $     (.75)     $   .01      $   (.95)     $    .56
</TABLE>

(9) Follow-on Equity Offering

      The Company completed a follow-on offering of 6,348,000 shares of its
common stock on April 11, 2002. The proceeds of the offering, net of expenses,
were approximately $134.7 million. The Company used approximately $36.5 million
of net proceeds from the sale of shares for voluntary repayment of outstanding
debt and expects to use the remaining proceeds at approximately $98.2 million
for potential strategic acquisitions and general corporate purposes.


                                  Page 13 of 38
<PAGE>

Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations

Introduction

      This discussion and analysis of our financial condition and results of
operations as well as other sections of this report, contain certain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the
risks faced by us described in "Risk Factors" section of this report on page 28
through 35.

Critical Accounting Policies

      The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires us to make judgments, assumptions and estimates that affect the amounts
reported in the Consolidated Financial Statements and accompanying notes. Note 1
to the Consolidated Financial Statements in the Annual Report on Form 10-K for
the fiscal year ended December 28, 2001 describes the significant accounting
policies and methods used in the preparation of the Consolidated Financial
Statements. Estimates are used for, but not limited to, the accounting for the
allowance for doubtful accounts and sales returns, inventory allowances,
goodwill impairments, restructuring expense and acquisition related
restructuring costs, income taxes, and contingency reserves. Actual results
could differ from these estimates. The following critical accounting policies
are impacted significantly by judgments, assumptions and estimates used in the
preparation of the Consolidated Financial Statements.

      Inventory Allowances. Inventory purchases and commitments are based upon
future demand forecasts estimated by taking into account actual purchases of our
products over the recent past. If there is a sudden and significant decrease in
demand for our products or there is a higher risk of inventory obsolescence
because of rapidly changing technology and customer requirements, we may be
required to increase our inventory allowances and our gross margin could be
adversely affected.

      Goodwill Impairment. We will assess goodwill impairment on an annual basis
and between annual tests in certain circumstances. In response to changes in
industry and market conditions, we may strategically realign our resources and
consider restructuring, disposing of, or otherwise exiting businesses, which
could result in an impairment of goodwill.

      Restructuring Expense and Acquisition Related Restructuring Costs. Our
recent restructuring activities, related to our existing and recently acquired
businesses, were designed to reduce both our fixed and variable costs,
particularly in response to the reduced demand for our products in the
electronics components industry. These costs included the closing of facilities
and the termination of employees. Acquisition-related costs are included in the
allocation of the cost of the acquired business and are added to goodwill. Other
restructuring costs are expensed during the period in which we determine that we
will incur those costs, and all of the requirements for accrual are met.


                                  Page 14 of 38
<PAGE>

      These restructuring costs are recorded based upon estimates. Our actual
expenditures for the restructuring activities may differ from the initially
recorded costs. If this occurs, we would adjust our estimates in future periods.
In the case of acquisition-related restructuring costs, and depending on whether
the assets impacted came from the acquired entity and the timing of the
restructuring charge, this would generally require a change in value of the
goodwill appearing on our balance sheet, which may not affect our earnings. In
the case of other restructuring costs, we could be required either to record
additional expenses in future periods if our initial estimates were too low, or
to reverse part of the charges that we recorded initially if our initial
estimates were too high.

      Income Taxes. We have not provided for U.S. federal income and foreign
withholding taxes on non-U.S. subsidiaries' undistributed earnings as calculated
for income tax purposes, as per Accounting Principles Board Opinion No. 23,
Accounting for Income Taxes - Special Areas ("APB 23") as such earnings are
intended to be reinvested outside the U.S. indefinitely. If we encounter a
significant domestic need for liquidity that we cannot fulfill through
borrowings or other internal or external sources, we may experience unfavorable
tax consequences as this cash is transferred to the U.S. This adverse
consequence would occur if the transfer of cash into the U.S. were subject to
income tax without sufficient foreign tax credits available to offset the U.S.
tax liability.

      Contingency Reserves. Our businesses involve a variety of issues which may
result in litigation and environmental compliance obligations. In developing our
contingency reserves we consider both the likelihood of a loss or incurrence of
a liability as well as our ability to reasonably estimate the amount of accrual.
We accrue for contingency reserves when a liability is probable and the amount
can be reasonably estimated. We periodically evaluate available information to
assess whether contingency reserves should be adjusted.

Overview

      We are a global producer of precision-engineered passive magnetics-based
electronic components and electrical contact products and materials. We believe
we are a leading global producer of these products and materials in the primary
markets we serve based on our estimates of the size of our primary markets in
annual revenues and our share of those markets relative to our competitors.

      We operate our business in two distinct segments:

      o     the electronic components segment, which operates under the name
            Pulse, and

      o     the electrical contact products segment, which operates under the
            name AMI Doduco.

      General. We experienced consistent growth in net sales from fiscal 1991
through fiscal 2000. We define net sales as gross sales less returns and
allowances. We sometimes refer to net sales as revenue. From 1994 through 2000,
the growth in our consolidated net sales has been due in large part to the
growth of Pulse. However, since late 2000, the electronics markets served by
Pulse have experienced a severe global contraction. While there remains
substantial uncertainty with respect to future demand for our products,
particularly at Pulse, we believe that the markets we serve have begun to
stabilize in 2002 and that a market recovery will be slow, gradual and uneven.


                                  Page 15 of 38
<PAGE>

      Throughout the year ended December 28, 2001 demand slowed at AMI Doduco,
mirroring the prevailing economic conditions in North America and Europe. These
anemic market conditions continued into early 2002; however, AMI Doduco has seen
increases in design and quoting activities for component subassemblies in
Europe, for automotive applications such as sensor housings, multi-function
switches, motor control sensors and ignition security systems, and
non-automotive uses such as appliance and industrial controls and medical
equipment. Although some of our customers and the popular press generally were
reporting modest optimism for the second half of the year, AMI Doduco continued
its cost reduction actions in the second quarter of 2002. For example, in
addition to workforce adjustments in line with market demand around the world,
AMI Doduco is also continuing the North American plant consolidation begun in
2001, as well as the consolidation of all European contact pre-material
production into our Pforzheim, Germany facility and other product and plant
consolidation actions in Europe.

      Historically, the gross margin at Pulse has been significantly higher than
at AMI Doduco. As a result, the mix of net sales generated by Pulse and AMI
Doduco during a period affects our consolidated gross margin. Our gross margin
is also significantly affected by capacity utilization at both Pulse and AMI
Doduco. Pulse has a relatively short-term product life cycle. Significant
product turnover occurs each year, resulting in a changing sales mix and
fluctuating average selling prices. Therefore, Pulse's changes in average
selling prices do not necessarily provide a meaningful and quantifiable measure
of Pulse's operations. AMI Doduco has a fairly long-term and mature product
line, without significant turnover. While there has been variation over time in
the prices of products sold, changes in unit volume account for most of the
sales growth or contraction at AMI Doduco.

      Acquisitions. Historically, acquisitions have been an important part of
our growth strategy. In many cases, our move into new and high-growth extensions
of our existing product lines or markets has been facilitated by an acquisition.
Our acquisitions continually change the mix of our net sales. Pulse made
numerous acquisitions in recent years which have increased its penetration into
its primary markets and expanded its presence in new markets. Recent examples of
these acquisitions include Excelsus, Grupo ECM and EWC. Excelsus was acquired in
August 2001 for approximately $85.9 million, net of cash acquired. Excelsus is
based in Carlsbad, California and is a leading North American producer of
customer-premises digital subscriber line filters and other broadband
accessories. Pulse acquired Electro Componentes Mexicana, which we refer to as
Grupo ECM, in March 2001. Grupo ECM was a manufacturer of inductive components
primarily for automotive applications. In October 2000, Pulse acquired various
assets of EWC, a manufacturer of magnetic components primarily for the defense
and aerospace industries.

      Similarly, AMI Doduco has made a number of recent acquisitions. In January
2001, AMI Doduco acquired the electrical contact and materials business of
Engelhard-CLAL, a manufacturer of electrical contacts, wire and strip contact
materials and related products. In addition, in fiscal 2000, AMI Doduco acquired
a tool and die fabrication facility in Estonia, and in fiscal 1999 it acquired
MEC Betras Italia, a producer of electrical contact rivets and stamped
electrical contact parts, located near Milan, Italy. These acquisitions were
driven by our strategy of expanding our product and geographical market presence
for electrical contact products. Due to our quick integration of acquisitions
and the interchangeable sources of net sales between existing and acquired
operations, we cannot separately track the net sales of an acquisition after the
date of the transaction.


                                  Page 16 of 38
<PAGE>

      Recent Cost Reduction Programs. During 1999 and 2000, the electronic
components industries served by Pulse were characterized by unprecedented
growth. Beginning in late 2000 and continuing all during 2001, however, the
opposite trend was experienced as these industries experienced a severe
worldwide contraction and virtually all of our customers canceled orders and
decreased their level of business activity as a result of lower demand for their
end products. While the electrical contact industry served by AMI Doduco is
generally less dependent on volatile technology markets, it too was negatively
impacted by general economic trends as reflected in slower overall construction
spending, and reduced capital spending. Our manufacturing business model at
Pulse has a very high variable cost component due to the labor-intensity of many
processes. This allows us to quickly change our capacity based on market demand.
Just as we expanded capacity during 1999 and 2000, we reduced capacity during
2001 and in the first half of 2002. AMI Doduco has a higher fixed cost component
of manufacturing activity than Pulse, as it is more capital intensive.
Therefore, AMI Doduco is unable to contract its capacity as quickly as Pulse in
response to market demand.

      In the second quarter of 2002 the Company accrued $11.0 million in total
for the shutdown of the Philippines manufacturing facility, severance and
related payments, asset impairments and plant consolidations. An additional
$32.1 million of Excelsus trade name impairment was recorded as discussed in
Note 2, "Acquisitions". The $11.0 million charge included $3.8 million for the
Philippines shutdown of which $1.4 million represented severance and related
payments and $2.4 million was recorded for asset writedowns. Pulse accrued an
additional $1.0 million for severance and related payments for approximately 67
personnel on a worldwide basis and $4.1 million for asset impairments primarily
involved in Asian manufacturing. AMI Doduco accrued $2.1 million of
restructuring and unusual and infrequent items in the second quarter of 2002.
This comprised approximately $1.0 million for severance and related payments for
approximately 45 people worldwide and $1.1 million for asset impairments,
writedowns and relocations in Europe.

      In the first quarter of 2002, we accrued $1.8 million for severance and
related payments, related to the termination of approximately 400 manufacturing
personnel and approximately 75 support personnel. An additional accrual of $0.8
million was provided for asset disposals. The majority of these accruals were
utilized by the end of the first quarter of 2002.

      Approximately $3.0 million of restructuring charges were accrued in the
six months ended June 29, 2001 to provide for severance and related payments for
Pulse manufactoring personnel primarily in Asia, and to provide for the shutdown
of a manufactoring facility in Thailand. The majority of this accrual was
utilized in the third quarter of 2001.

      We implemented numerous restructuring initiatives during 2002 and 2001 in
order to reduce Pulse's cost structure and capacity, although the speed and
depth of the contraction in Pulse's markets made it impossible to reduce costs
at the same rate at which revenues contracted throughout 2001.

      As a result of our continuing focus on both economic and operating profit,
we will continue to aggressively size both Pulse and AMI Doduco so that costs
are minimized while we wait for the recovery in demand and pursue additional
growth opportunities. While we do not currently anticipate further significant
cost reduction actions in 2002, they may


                                  Page 17 of 38
<PAGE>

occur if there is not a sustained recovery in our markets and in the economy in
general or if broader opportunities to reduce cost and increase economic profit
present themselves. If additional charges are necessary, the amounts will depend
on specific actions taken. The actions taken so far (plant closures, asset
impairments and reduction in personnel worldwide) resulted in the elimination of
a variety of costs. The majority of these costs represent the annual salaries
and benefits of terminated employees, both those directly related to
manufacturing and those providing selling, general and administrative services.
If incoming orders increase substantially, additional hiring may be necessary to
expand capacity. However, we do not anticipate requiring additional capacity in
the foreseeable future. The eliminated costs also include depreciation savings
from disposed equipment.

      Our restructuring charges are summarized for 2002 as follows:

                                                 AMI
      Restructuring provision (in millions):  Doduco      Pulse      Total
                                              ------      -----      -----
      Balance accrued at December 28, 2001     $ 0.6      $ 2.4      $ 3.0
      Accrued during the six months ended
        June 28, 2002                            2.6       11.1       13.7
      Severance and other cash payments         (0.3)      (3.7)      (4.0)
      Non-cash asset disposals                    --       (6.8)      (6.8)
                                               -----      -----      -----
      Balance accrued at June 28, 2002         $ 2.9      $ 3.0      $ 5.9
                                               =====      =====      =====

      International Operations. An increasing percentage of our sales in recent
years has been outside of the United States. As of June 28, 2002, we have
operations in 11 countries and we have significant net sales in currencies other
than the U.S. dollar. As a result, changing exchange rates often impact our
financial results and the analysis of our period-over-period results. This is
particularly true of movements in the exchange rate between the U.S. dollar and
the euro. AMI Doduco's European sales are denominated primarily in euros. A
portion of Pulse's European sales are also denominated in euros. However, the
proportion at Pulse is much less than it is at AMI Doduco. As a result of this
and other factors, Pulse uses the U.S. dollar as its functional currency in
Europe while AMI Doduco uses the euro. The use of different functional
currencies creates varied financial effects. The euro was 5.4% stronger, on
average, relative to the U.S. dollar during the six months ended June 28, 2002
than in the comparable prior-year period. As a result, AMI Doduco's
euro-denominated sales resulted in higher dollar sales upon translation for our
U.S. consolidated financial statements. As the euro was 12.2% stronger than the
U.S. dollar at June 28, 2002 versus December 28, 2001, we experienced a positive
translation adjustment to equity in the six months ended June 28, 2002 because
our investment in AMI Doduco's European operations was worth more in U.S.
dollars. If an increasing percentage of our sales is denominated in non-U.S.
currencies, it could increase our exposure to currency fluctuations. The impact
of exchange rate differences on AMI Doduco's European sales will be partially
offset by the impact on its expenses and bank borrowings in Europe, most of
which are also denominated in euros. Despite Pulse's significant presence in
Asia, the vast majority of its revenues from customers in Asia are denominated
in U.S. dollars. As a result, Pulse has less exposure than AMI Doduco to sales
fluctuations caused by currency fluctuations.

      In order to reduce our exposure resulting from currency fluctuations, we
may purchase currency exchange forward contracts and/or currency options. These
contracts guarantee a predetermined range of exchange rates at the time the
contract is purchased.


                                  Page 18 of 38
<PAGE>

This allows us to shift the majority of the risk of currency fluctuations from
the date of the contract to a third party for a fee. As of June 28, 2002, we had
three foreign exchange contracts outstanding to hedge approximately 48.2 million
of euro in the aggregate. The primary purpose of the forward contracts was to
hedge intercompany loans. In determining the use of forward exchange contracts
and currency options, we consider the amount of sales, purchases and net assets
or liabilities denominated in local currencies, the type of currency, and the
costs associated with the contracts.

      Precious Metals. AMI Doduco uses silver, as well as other precious metals,
in manufacturing many of its electrical contacts, contact materials and contact
subassemblies. Historically, as is the case with other manufacturers who use
precious metals in their products, we have leased or held these materials
through consignment arrangements with our suppliers. Leasing and consignment
costs have been substantially below the costs to borrow funds to purchase the
metals and these arrangements eliminate the fluctuations in the market price of
owned precious metal. AMI Doduco's terms of sale generally allow us to charge
customers for the market value of silver on the day after we deliver the silver
bearing product to the customer. Thus far we have been successful in managing
the costs associated with our precious metals. While limited amounts are
purchased for use in production, the majority of our precious metal inventory
continues to be leased or held on consignment. If our leasing/consignment fees
increase significantly in a short period of time, and we are unable to recover
these increased costs through higher sale prices, a negative impact on our
results of operations and liquidity may result. Leasing/consignment fee
increases/decreases are caused by increases/decreases in interest rates or
changes in the market price of the precious metals.

      Income Taxes. Our effective income tax rate is affected by the proportion
of our income earned in high-tax jurisdictions such as Germany and the income
earned in low-tax jurisdictions, particularly in Asia. This mix of income can
vary significantly from one period to another. We have benefited over recent
years from favorable offshore tax treatments. However, we may not be able to
take advantage of similar benefits in the future. Developing countries and, in
particular, the People's Republic of China, may change their tax policies at any
time. We have not provided for U.S. federal income and foreign withholding taxes
on approximately $294.0 million of our non-U.S. subsidiaries' undistributed
earnings (as calculated for income tax purposes) as of December 28, 2001. Such
earnings include pre-acquisition earnings of foreign entities acquired through
stock purchases, and are intended to be reinvested outside of the U.S.
indefinitely. It is not practical to estimate the amount of unrecognized
deferred taxes on these undistributed earnings. Where excess cash has
accumulated in our non-U.S. subsidiaries and it is advantageous for tax reasons,
subsidiary earnings may be remitted.


                                  Page 19 of 38
<PAGE>

Results of Operations

Three months ended June 28, 2002 compared to the three months ended June 29,
2001

      Net Sales. Net sales for the three months ended June 28, 2002 decreased
$6.7 million, or 5.9%, to $106.2 million from $112.8 million for the three
months ended June 29, 2001. Our sales decline from the comparable period last
year was attributable primarily to the continuing effect of a global downturn in
markets served by Pulse, and to a lesser extent, AMI Doduco that began late in
2000. Factors contributing to the downturn include declining capital
expenditures by end-users, excess inventory levels throughout the supply chain
and lack of end user demand for both electronic and electrical products.

      Pulse's net sales decreased $1.8 million, or 3.2%, to $53.9 million for
the three months ended June 28, 2002 from $55.7 million for the three months
ended June 29, 2001. This decline was experienced in Pulse's power conversion
markets on a worldwide basis, particularly in North America and Europe. Net
sales in 2002 include sales derived from our acquisitions of Grupo ECM and
Excelsus since the date of their acquisition in March and August 2001,
respectively.

      AMI Doduco's net sales decreased $4.9 million, or 8.5%, to $52.3 million
for the three months ended June 28, 2002 from $57.2 million for the three months
ended June 29, 2001. Sales in the 2002 period reflect weak North American and
European markets partially offset by a stronger average euro-to-U.S. dollar
exchange rate. Lower net sales resulted from lower manufacturing activity
primarily related to customers in the commercial and industrial controls and
non-residential construction industries.

      Cost of Sales. Our cost of sales decreased $6.5 million, or 7.4%, to $81.5
million for the three months ended June 28, 2002 from $88.1 million for the
three months ended June 29, 2001. This decrease was due to a decrease in net
sales. Our consolidated gross margin for the three months ended June 28, 2002
was 23.2% compared to 22.0% for the three months ended June 29, 2001. Our
consolidated gross margin in 2002 was positively affected by the following
factors:

      o     a mix of net sales weighted more toward Pulse which typically have a
            higher gross margin than those of AMI Doduco, and

      o     the positive effects of our cost-down initiatives taken throughout
            2001 and 2002.

Offsetting these positive factors were some manufacturing inefficiencies at both
Pulse and AMI Doduco due to under-utilization of capacity and continued
consolidation activities in European, Asian and North American manufacturing
facilities.

      Selling, General and Administrative Expenses. Total selling, general and
administrative expenses for the three months ended June 28 2002 decreased $2.2
million, or 9.1%, to $22.4 million, or 21.1% of net sales, from $24.6 million,
or 21.8% of net sales for the three months ended June 29, 2001. The decrease in
selling, general and administrative expenses in 2002 was due to aggressive
action that we took to reduce costs and tighten spending controls.


                                  Page 20 of 38
<PAGE>

      Research, development and engineering expenses are included in selling,
general and administrative expenses. We refer to research, development and
engineering expenses as RD&E. For the three months ended June 28, 2002 and June
29, 2001 respectively, RD&E by segment was as follows (dollars in thousands):

                                                       2002          2001
                                                       ----          ----
      Pulse                                        $  3,652      $  4,003
      Percentage of segment sales                       6.8%          7.2%

      AMI Doduco                                   $    901      $    985
      Percentage of segment sales                       1.7%          1.7%

      Although 2001 and 2002 have been characterized by cost reduction
activities and much lower sales levels, particularly at Pulse, we minimized
spending cuts in the RD&E area as we believe that the recovery in the electronic
components markets will be driven by next-generation products. Design and
development activities with our OEM customers continued at an aggressive pace
during 2001 and into 2002.

      Interest. Net interest expense was $0.1 million for the three months ended
June 28, 2002 compared to net interest income of $0.7 million for the three
months ended June 29, 2001. This decrease in net interest income is due
primarily to commitment fees on our revolving credit agreement and lower
interest income rates on a higher invested cash balance, which increased from
June 29, 2001 to June 28, 2002 by $22.5 million, from $176.2 million to $198.7
million. The increase in cash is attributable primarily to the follow-on
offering proceeds of $134.7 million less $36.5 million in debt payments to
retire outstanding debt less the cash used to purchase Excelsus as described in
Note 2, "Acquisitions". Total debt decreased from March 29, 2002 to June 28,
2002 by $34.6 million, including the effect of euro denominated debt being
valued at a weaker average U.S. dollar to euro rate on the June 28, 2002
consolidated balance sheet.

      Our primary credit facility, which was entered into on June 20, 2001, has
variable interest rates. Accordingly, interest expense may increase if the rates
associated with, or the amounts borrowed under, our credit facilities move
higher during subsequent quarters. We may use interest rate swaps or other
financial derivatives in order to manage the risk associated with changes in
market interest rates; however, we have not used any such instruments to date.
We did not have any borrowings outstanding under this credit facility as of June
28, 2002.

      Income Taxes. The effective income tax rate, in the form of a benefit for
the three months ended June 28, 2002, was 30.0% compared to 23.9% for the three
months ended June 29, 2001. The higher tax benefit in 2002 resulted from a
higher proportion of deductible restructuring and unusual and infrequent items,
and higher proportion of losses in high tax jurisdictions in the three months
ended June 28, 2002 versus the comparable period in 2001.

Six months ended June 28, 2002 compared to the six months ended June 29, 2001

      Net Sales. Net sales for the six months ended June 29, 2002 decreased
$70.5 million, or 26.1%, to $199.6 million from $270.1 million for the six
months ended June 29, 2001. Our sales decline from the comparable period last
year was attributable


                                  Page 21 of 38
<PAGE>

primarily to the continuing global downturn in markets served by Pulse, and to a
lesser extent, AMI Doduco, that began late in 2000. Factors contributing to the
downturn included declining capital expenditures by end-users, excess inventory
levels throughout the supply chain and lack of end user demand for both
electronic and electrical products.

      Pulse's net sales decreased $48.0 million, or 32.6%, to $99.0 million for
the six months ended June 28, 2002 from $147.0 million for the six months ended
June 29, 2001. This decline was experienced in Pulse's networking,
telecommunications and power conversion markets on a worldwide basis,
particularly in North America and Europe. A significant portion of Pulse sales
during the six months ended June 29, 2001 were for products ordered in 2000,
before the dramatic slowdown began. Net sales in 2002 include sales derived from
our acquisitions of Grupo ECM and Excelsus since the date of their acquisition
in March and August 2001, respectively.

      AMI Doduco's net sales decreased $22.5 million, or 18.3%, to $100.6
million for the six months ended June 28, 2002 from $123.1 million in the six
months ended June 29, 2001. Sales in the 2002 period reflect weak North American
and European markets but a stronger average euro-to-U.S. dollar exchange rate.
Lower net sales resulted from lower manufacturing activity primarily related to
customers in the commercial and industrial controls and non-residential
construction industries.

      Cost of Sales. Our cost of sales decreased $39.2 million, or 20.1%, to
$155.7 million for the six months ended June 28, 2002 from $194.9 million for
the six months ended June 29, 2001. This decrease was due to a decrease in net
sales. Our consolidated gross margin for the six months ended June 28, 2002 was
22.0% compared to 27.8% for the six months ended June 29, 2001. Our consolidated
gross margin in 2002 was negatively affected by:

      o     a mix of net sales weighted more toward AMI Doduco which typically
            have a lower gross margin than those of Pulse,

      o     manufacturing inefficiencies at both Pulse and AMI Doduco due to
            under-utilization of capacity and continued consolidation activities
            in European, Asian and North American manufacturing facilities, and

      o     a proportionate increase in sales at Pulse of new products for which
            optimal manufacturing efficiency has yet to be achieved.

      These factors more than offset the positive impact of our restructuring
initiatives.

      Selling, General and Administrative Expenses. Total selling, general and
administrative expenses for the six months ended June 28, 2002 decreased $6.2
million, or 11.9%, to $45.9 million, or 23.0% of net sales, from $52.0 million,
or 19.3% of net sales for the six months ended June 29, 2001. The decrease in
selling, general and administrative expenses in 2002 was due to aggressive
action that we took to reduce costs and tighten spending controls and lower
incentive awards and expenses related to our restricted stock plan in 2002. The
underlying expense for incentive awards is primarily variable and dependent upon
our overall financial performance regarding incentive plan targets, primarily
the achievement of economic profit and net operating profit objectives. These
targets, which were set in December of 2001, were not achieved for the first six
months of 2002, and therefore no cash incentives were paid to executives. These


                                  Page 22 of 38
<PAGE>

incentive awards were $0.4 million in the six months ended June 29, 2001.
Expenses associated with stock-based compensation plans including the restricted
stock plan were also significantly lower in the six months ended June 28, 2002
versus the comparable period in 2001, due to a lower average share price of our
common stock in 2002 compared to 2001. These expenses were $0.7 million in the
six months ended June 28, 2002 and $1.7 million in the six months ended June 29,
2001.

      Research, development and engineering expenses are included in selling,
general and administrative expenses. We refer to research, development and
engineering expenses as RD&E. For the six months ended June 28, 2002 and June
29, 2001 respectively, RD&E by segment was as follows (dollars in thousands):

                                                       2002          2001
                                                   --------      --------
      Pulse                                        $  7,489      $  8,334
      Percentage of segment sales                       7.6%          5.7%

      AMI Doduco                                   $  1,890      $  2,163
      Percentage of segment sales                       1.9%          1.8%

      Although 2001 and the first six months of 2002 have been characterized by
cost reduction activities and much lower sales levels, particularly at Pulse, we
minimized spending cuts in the RD&E area as we believe that the recovery in the
electronic components markets will be driven by next-generation products. Design
and development activities with our OEM customers continued at an aggressive
pace during 2001 and into 2002.

      Interest. Net interest expense was $0.4 million for the six months ended
June 28, 2002 compared to net interest income of $1.9 million for the six months
ended June 29, 2001. This decrease in net interest income is due primarily to
commitment fees on our revolving credit agreement and a higher invested cash
balance earning a lower interest income rate. Cash and cash equivalents
increased from December 28, 2001 to June 28, 2002 by $56.5 million, from $142.3
million to $198.7 million. The increase in cash is attributable primarily to the
follow-on offering proceeds of $134.7 million less debt payments of $75.1
million to retirement of outstanding debt. Total debt decreased from December
28, 2001 to June 28, 2002 by $73.4 million, as euro denominated debt was valued
at a weaker average U.S. dollar to euro rate on the June 28, 2002 consolidated
balance sheet.

      Income Taxes. The effective income tax rate, before cumulative effect of
accounting change, in the form of a benefit for the six months ended June 28,
2002, was 30.2% compared to 21.1% of income tax expense for the six months ended
June 29, 2001. The higher tax rate, in the form of a benefit in 2002, resulted
from a higher proportion of deductible restructuring and unusual and infrequent
items and higher proportion of losses in high tax jurisdictions in the six
months ended June 28, 2002 versus the comparable period in 2001.

Liquidity and Capital Resources

      Working capital as of June 28, 2002 was $227.8 million compared to $189.3
million as of December 28, 2001. This increase was primarily due to higher
invested cash


                                  Page 23 of 38
<PAGE>

as of June 28, 2002 related to net follow-on offering proceeds offset by $10.1
million of current installments of long-term debt which was reclassified from a
long-term debt as of December 28, 2001. This debt is fixed rate term loans due
June 26, 2003. Cash and cash equivalents, which is included in working capital,
increased from $142.3 million as of December 28, 2001 to $198.7 million as of
June 28, 2002.

      Net cash provided by operating activities was $2.2 million for the six
months ended June 28, 2002 and $41.5 million in the comparable period of 2001, a
decrease of $39.3 million. The first six months of 2001 were categorized by a
dramatic decrease in sales. The resulting decrease in accounts receivable and
inventories generated significant positive cash flow in the first six months of
2001. During the six months ended June 28, 2002, net earnings declined as a
result of the continuing slowdown in our markets, primarily those served by
Pulse. However, the lower earnings have been partially offset by decreased
working capital requirements and aggressive cash management actions that we took
in response to the slowdown. Inventory declined by $4.7 million during the six
months ended June 28, 2002 due to the significant reduction in Pulse's net sales
during the period and corresponding actions to limit purchases and production
activity. Accounts receivable increased during the six months ended June 28,
2002 by $5.1 million due to the sequential increase in net sales in the second
quarter of 2002 compared to the first quarter of 2002.

      Capital expenditures were $2.6 million during the six months ended June
28, 2002 and $8.7 million in the comparable period of 2001. The level of capital
expenditures decreased due to tight spending controls, lower Pulse capacity
needs resulting from lower sales, and our efforts to maximize cash flow during
this period of slow market activity. We significantly reduced our capital
spending in 2001 as compared to fiscal 2000 and expect that our spending in 2002
may be less than in 2001. We make capital expenditures to expand production
capacity and to improve our operating efficiency. We plan to continue making
such expenditures in the future.

      There was no cash used for acquisitions in the six months ended June 28,
2002, whereas during the six months ended June 29, 2001 there was $26.8 million
used for acquisitions. The 2001 spending included the acquisitions of
Engelhard-CLAL and Grupo ECM, and the initial cost basis investment in FRE. We
exercised our option to expand our investment in FRE on July 27, 2002, with an
additional investment of approximately $6.7 million which increased our total
investment to $20.9 million. As a result of the increase in ownership percentage
to approximately 29.1%, we will be required to account for the investment under
the equity method in the three months ending September 27, 2002. Under the
equity method, our proportionate share of income or loss of FRE as determined
under U.S. generally accepted accounting principles will be reflected in our
consolidated statement of earnings. We may acquire other businesses or product
lines to expand our breadth and scope of operations.

      We paid dividends of $1.1 million in the six months ended June 28, 2002,
and $2.3 million in the comparable period of 2001. We received proceeds of $0.8
million during the six months ended June 28, 2002, and $6.4 million in the
comparable period of 2001 from the sale of stock through our employee stock
purchase plan. After paying a dividend on January 25, 2002, to shareholders of
record on January 4, 2002, we no longer intend to pay cash dividends on our
common stock. We currently intend to retain future earnings to finance the
growth of our business.


                                  Page 24 of 38
<PAGE>

      As of June 28, 2002, we have no outstanding borrowings under our existing
three-year revolving credit agreement. We entered into this credit agreement on
June 20, 2001 providing for $225.0 million of credit capacity. Following the
conclusion of our follow-on equity offering, we voluntarily reduced the size of
this credit facility. We also amended the minimum net worth threshold from
$275.0 million to $259.3 million as a result of goodwill impairment charge
recorded in the three months ended March 29, 2002. The amounts outstanding under
the amended credit facility in total may now not exceed $175.0 million. The
amended facility consists of:

      o     an aggregate U.S. dollar-based revolving line of credit in the
            principal amount of up to $175.0 million including individual
            sub-limits of:

            o     a British pounds sterling-based or euro-based revolving line
                  of credit in the principal amount of up to the U.S. dollar
                  equivalent of $75.0 million; and

            o     a multicurrency facility providing for the issuance of letters
                  of credit in an aggregate amount not to exceed the U.S. dollar
                  equivalent of $10.0 million.

      At June 28, 2002 we had approximately $175.0 million of unused credit
available under the amended credit agreement, although outstanding borrowings
are limited to a maximum multiple of three times our ratio of debt to earnings
before interest, taxes, depreciation and amortization, ("EBITDA") on a rolling
twelve-month basis.

      We pay a facility fee irrespective of whether there are outstanding
borrowings or not, which ranges from 0.275% to 0.450% of the total commitment,
depending on our EBITDA. The interest rate for each currency's borrowing will be
a combination of the base rate for that currency plus a credit margin spread.
The base rate is different for each currency: LIBOR or prime rate for U.S.
dollars, Euro-LIBOR for euros, and a rate approximating sterling LIBOR for
British pounds. The credit margin spread is the same for each currency and is
0.850% to 1.425% depending on our debt to EBITDA ratio. Each of our domestic
subsidiaries with net worth equal to or greater than $5 million has agreed to
guarantee all obligations incurred under the credit facility. The credit
facility also contains covenants requiring maintenance of minimum net worth,
maximum debt to EBITDA ratio, minimum interest expense coverage, capital
expenditure limitations, and other customary and normal provisions. We are in
compliance with all such covenants.

      Our German subsidiary, AMI Doduco GmbH, has obligations outstanding under
two term loan agreements. The first is with Baden-Wurttembergische Bank for the
borrowing of two loans, each in the amount of approximately 5.1 million euro,
both due in June 2003. The second is with Sparkasse Pforzheim, for the borrowing
of approximately 5.1 million euro, and is due in August 2009. We and several of
our subsidiaries have guaranteed the obligations arising under these term loan
agreements.

      We believe that the combination of cash on hand, cash generated by
operations and, if necessary, additional borrowings under our credit agreement
will be sufficient to satisfy our short and long-term operating cash
requirements. In addition, we may use internally generated funds or borrowings,
or additional equity offerings for acquisitions of suitable businesses or
assets. On April 11, 2002 we completed a follow-on equity offering. The proceeds
of the offering, net of expenses, were approximately $134.7 million.
Approximately $36.5 million was used to retire outstanding debt. The remainder
of approximately $98.2 million is expected to be used for potential strategic
acquisitions and general corporate purposes.


                                  Page 25 of 38
<PAGE>

      With the exception of approximately $10.0 million of retained earnings as
of December 28, 2001 in the PRC that are restricted in accordance with Section
58 of the PRC Foreign Investment Enterprises Law, substantially all retained
earnings are free from legal or contractual restrictions. The amount restricted
in accordance with the PRC Foreign Investment Enterprise Law is for employee
welfare programs and is applicable to all foreign investment enterprises doing
business in the PRC. The restriction applies to 10% of our net earnings in the
PRC, limited to 50% of the total capital invested in the PRC. We have not
experienced any significant liquidity restrictions in any country in which we
operate and none are foreseen. However, foreign exchange ceilings imposed by
local governments and the sometimes lengthy approval processes which some
foreign governments require for international cash transfers may delay our
internal cash movements from time to time. The retained earnings in other
countries represent a material portion of our assets. We expect to reinvest
these earnings outside of the United States because we anticipate that a
significant portion of our opportunities for growth in the coming years will be
abroad. If these earnings were brought back to the United States, significant
tax liabilities could be incurred in the United States as several countries in
which we operate have rates significantly lower than the U.S. statutory rate.
Additionally, we have not accrued U.S. income taxes on foreign earnings
indefinitely invested abroad. We have also been granted special tax incentives
in other countries such as the PRC. This favorable situation could change if
these countries were to increase rates or revoke the special tax incentives, or
if we were to discontinue manufacturing operations in these countries. This
could have a material unfavorable impact on our net income and cash position.

      We commenced an intercompany lending program during the year ended
December 28, 2001, whereby excess U.S. dollar denominated cash is being used to
retire euro denominated debt. There are several benefits derived from this
program including lower net interest expense, as the U.S. dollar interest income
rates have been decreasing, while the euro interest expense rates have declined
less rapidly. In addition, we avoid paying a credit facility spread by using
cash on-hand to retire outstanding debt.

New Accounting Pronouncements

      In July 2002, the Financial Accounting Standards Board ("FASB") issued
Statement No. 146, Accounting for Costs Associated with Exit or Disposal
Activities, ("SFAS 146"). SFAS 146 nullifies 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, ("EITF 94-3"). The
principal difference between SFAS 146 and EITF 94-3 relates to the recognition
of a liability for a cost associated with an exit or disposal activity. SFAS 146
requires that a liability be recognized for those costs only when the liability
is incurred, that is, when it meets the definition of a liability in the FASB's
conceptual framework. In contrast, EITF 94-3 required recognition of a liability
for an exit cost when management committed to an exit plan. SFAS 146 also
establishes fair value as the objective for initial measurement of liabilities
related to exit or disposal activities. SFAS 146 is effective for exit or
disposal activities that are initiated after December 31, 2002. The provisions
of EITF 94-3 apply until adoption of SFAS 146. The impact on our operating
results upon adoption of this standard cannot be determined at this time and
depends on the recovery in our markets and the economy in general.

      In October 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, ("SFAS 144") which addresses financial accounting and reporting for the
impairment or


                                  Page 26 of 38
<PAGE>

disposal of long-lived assets. While SFAS 144 supersedes FASB Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, ("SFAS 121") it retains many of the fundamental provisions of
SFAS 121. SFAS 144 also supersedes the accounting and reporting provisions of
APB Opinion No. 30, Reporting the Results of Operations--Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions, ("APB 30"). SFAS 144 does
however, retain the requirement in APB 30 to report separately discontinued
operations, and extends this reporting requirement to a component of an entity
that either has been disposed of by sale, abandonment, or in a distribution to
owners; or is classified as held for sale. Goodwill is excluded from the scope
of SFAS 144. We were required to adopt the provisions of SFAS 144 during the
three months ended March 29, 2002. Adoption of this standard did not have a
material effect on our net sales, operating results or liquidity.

      In August 2001, the FASB issued Statement No. 143, Accounting for Asset
Retirement Obligations ("SFAS 143") which addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS 143 applies to legal
obligations associated with the retirement of tangible long-lived assets that
result from the acquisition, construction, development and (or) normal use of
the assets. SFAS 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 fair value of the liability
is added to the carrying amount of the associated asset and this additional
carrying amount is depreciated over the life of the asset. The liability is
accreted at the end of each period through charges to operating expense. If the
obligation is settled for other than the carrying amount of the liability, a
gain or loss on settlement will be recognized. We are required to adopt the
provisions of SFAS 143 during the three months ending March 28, 2003. Adoption
of this standard is not expected to have a material effect on our net sales,
operating results or liquidity.


                                  Page 27 of 38
<PAGE>

Factors That May Affect Our Future Results (Cautionary Statements for Purposes
of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act
of 1995)

      Our disclosures and analysis in this report contain forward-looking
statements. Forward-looking statements reflect our current expectations of
future events or future financial performance. You can identify these statements
by the fact that they do not relate strictly to historical or current facts.
They often use words such as "anticipate", "estimate", "expect", "project",
"intend", "plan", "believe", and similar terms. These forward-looking statements
are based on our current plans and expectations.

      Any or all of our forward-looking statements in this report may prove to
be incorrect. They may be affected by inaccurate assumptions we might make or by
risks and uncertainties which are either unknown or not fully known or
understood. Accordingly, actual outcomes and results may differ materially from
what is expressed or forecasted in this report.

      We sometimes provide forecasts of future financial performance. The risks
and uncertainties described under "Risk Factors" as well as other risks
identified from time to time in other Securities and Exchange Commission
reports, registration statements and public announcements, among others, should
be considered in evaluating our prospects for the future. We undertake no
obligation to release updates or revisions to any forward-looking statement,
whether as a result of new information, future events or otherwise.

Risk Factors

Cyclical changes in the markets we serve, including the recent contraction,
could result in a significant decrease in demand for our products and reduce our
profitability.

      Our components are used in various products for the electronic and
electrical equipment markets. These markets are highly cyclical. The demand for
our components reflects the demand for products in the electronic and electrical
equipment markets generally. Beginning in late 2000 and continuing into 2002,
these markets, particularly the electronics market, have experienced a severe
worldwide contraction. This contraction has resulted in a decrease in demand for
our products, as our customers have:

      o     canceled many existing orders;

      o     introduced fewer new products; and

      o     worked to decrease their inventory levels.

      The decrease in demand for our products has had a significant adverse
effect on our operating results and profitability. We cannot predict how long a
contraction will last nor the strength of any recovery. Accordingly, we may
continue to experience weakness in both our revenues and profits.

Reduced prices for our products may adversely affect our profit margins if we
are unable to reduce our costs of production.

      The average selling prices for our products tend to decrease over their
life cycle. In addition, the recent economic contraction has significantly
increased the pressure on our customers to seek lower prices from their
suppliers. As a result, our customers have


                                  Page 28 of 38
<PAGE>

continued to demand lower prices from us. To maintain our margins and remain
profitable, we must continue to meet our customers' design needs while reducing
costs through efficient raw material procurement and process and product
improvements. Our profit margins will suffer if we are unable to reduce our
costs of production as sales prices decline.

An inability to adequately respond to changes in technology may decrease our
sales.

      Pulse operates in an industry characterized by rapid change caused by the
frequent emergence of new technologies. Generally, we expect life cycles for our
products in the electronic components industry to be relatively short. This
requires us to anticipate and respond rapidly to changes in industry standards
and customer needs and to develop and introduce new and enhanced products on a
timely and cost effective basis. Our engineering and development teams place a
priority on working closely with our customers to design innovative products and
improve our manufacturing processes. Our inability to react to changes in
technology quickly and efficiently may decrease our sales and profitability.

If our inventories become obsolete, our future performance and operating results
will be adversely affected.

      The life cycles of our products depend heavily upon the life cycles of the
end products into which our products are designed. Many of Pulse's products have
very short life cycles which are measured in quarters. Products with short life
cycles require us to closely manage our production and inventory levels.
Inventory may become obsolete because of reductions in end market demand. During
market slowdowns, this may result in significant charges for inventory write
offs, as was the case during 2001. Our future operating results may be adversely
affected by material levels of obsolete or excess inventories.

An inability to capitalize on our recent or future acquisitions may adversely
affect our business.

      In recent years we have completed several acquisitions. We continually
seek acquisitions to grow our business. We may fail to derive significant
benefits from our acquisitions. In addition, if we fail to achieve sufficient
financial performance from an acquisition, goodwill and other intangibles could
become impaired, resulting in our recognition of a loss. While our acquisitions
have not generally resulted in goodwill impairment in the past, upon the
adoption of SFAS 142, we recorded a goodwill impairment charge in the first
quarter of 2002 of approximately $15.7 million related to AMI Doduco. The degree
of success of any of our acquisitions depends on our ability to:

      o     successfully integrate or consolidate acquired operations into our
            existing businesses;

      o     identify and take advantage of cost reduction opportunities; and

      o     further penetrate the markets for the product capabilities acquired.

      Integration of acquisitions may take longer than we expect and may never
be achieved to the extent originally anticipated. This could result in slower
than anticipated business growth or higher than anticipated costs. In addition,
acquisitions may:


                                  Page 29 of 38
<PAGE>

      o     cause a disruption in our ongoing business;

      o     distract our managers;

      o     unduly burden our other resources; and

      o     result in an inability to maintain our historical standards,
            procedures and controls.

Integration of acquisitions into the acquiring segment may limit the ability of
investors to track the performance of individual acquisitions and to analyze
trends in our operating results.

      Our practice has been to quickly integrate acquisitions into the existing
business of the acquiring segment and to only report financial performance on
the segment level. As a result of this practice, we do not separately track the
stand-alone performance of acquisitions after the date of the transaction.
Consequently, investors cannot quantify the financial performance and success of
any individual acquisition or the financial performance and success of a
particular segment excluding the impact of acquisitions. In addition, our
practice of quickly integrating acquisitions into the financial performance of
each segment may limit the ability of investors to analyze any trends in our
operating results over time.

An inability to identify additional acquisition opportunities may slow our
future growth.

      We intend to continue to identify and consummate additional acquisitions
to further diversify our business and to penetrate important markets. We may not
be able to identify suitable acquisition candidates at reasonable prices. Even
if we identify promising acquisition candidates, the timing, price, structure
and success of future acquisitions are uncertain. An inability to consummate
attractive acquisitions may reduce our growth rate and our ability to penetrate
new markets.

If our customers terminate their existing agreements, or do not enter into new
agreements or submit additional purchase orders for our products, our business
will suffer.

      Most of our sales are made on a purchase order basis as needed by our
customers. In addition, to the extent we have agreements in place with our
customers, most of these agreements are either short term in nature or provide
our customers with the ability to terminate the arrangement with little or no
prior notice. Our contracts typically do not provide us with any material
recourse in the event of non-renewal or early termination. We will lose business
and our revenues will decrease if a significant number of customers:

      o     do not submit additional purchase orders;

      o     do not enter into new agreements with us; or

      o     elect to terminate their relationship with us.


                                  Page 30 of 38
<PAGE>

If we do not effectively manage our business in the face of fluctuations in the
size of our organization, our business may be disrupted.

      We have grown rapidly over the last few years, both organically and as a
result of acquisitions. However, in the past twelve months we have significantly
reduced our workforce and facilities in response to a dramatic decrease in
demand for our products due to prevailing global market conditions. These rapid
fluctuations place strains on our resources and systems. If we do not
effectively manage our resources and systems, our business may suffer.

Uncertainty in demand for our products may result in increased costs of
production and an inability to service our customers.

      We currently have very little visibility into our customers' future
purchasing intentions and are highly dependent on our customers' forecasts.
These forecasts are non-binding and often highly unreliable. Given the
fluctuation in growth rates and cyclical demand for our products, as well as our
reliance on often imprecise customer forecasts, it is difficult to accurately
manage our production schedule, equipment and personnel needs and our raw
material and working capital requirements. Our failure to effectively manage
these issues may result in:

      o     production delays;

      o     increased costs of production;

      o     an inability to make timely deliveries; and

      o     a decrease in profits.

A decrease in availability or increase in cost of our key raw materials could
adversely affect our profit margins.

      We use several types of raw materials in the manufacturing of our
products, including:

      o     precious metals such as silver;

      o     base metals such as copper and brass; and

      o     ferrite cores.

      Some of these materials are produced by a limited number of suppliers.
From time to time, we may be unable to obtain these raw materials in sufficient
quantities or in a timely manner to meet the demand for our products. The lack
of availability or a delay in obtaining any of the raw materials used in our
products could adversely affect our manufacturing costs and profit margins. In
addition, if the price of our raw materials increases significantly over a short
period of time, customers may be unwilling to bear the increased price for our
products and we may be forced to sell our products containing these materials at
prices that reduce our profit margins.

      Some of our raw materials, such as precious metals, are considered
commodities and are subject to price volatility. We attempt to limit our
exposure to fluctuations in the cost of precious materials, including silver, by
holding the majority of our precious metal inventory through leasing or
consignment arrangements with our suppliers. We then


                                  Page 31 of 38
<PAGE>

typically purchase the precious metal from our supplier at the current market
price on the day after delivery to our customer and pass this cost on to our
customer. In addition, leasing and consignment costs have historically been
substantially below the costs to borrow funds to purchase the precious metals.
We currently have four consignment or leasing agreements related to precious
metals, all of which generally have one year terms with varying maturity dates,
but can be terminated by either party with 30 days' prior notice. Our results of
operations and liquidity will be negatively impacted if:

      o     we are unable to enter into new leasing or consignment arrangements
            with similarly favorable terms after our existing agreements
            terminate, or

      o     our leasing or consignment fees increase significantly in a short
            period of time and we are unable to recover these increased costs
            through higher sale prices.

      Fees charged by the consignor are driven by interest rates and the market
price of the consigned material. The market price of the consigned material is
determined by the supply of and the demand for the material. Consignment fees
will increase if interest rates or the price of the consigned material increase.

Competition may result in lower prices for our products and reduced sales.

      Both Pulse and AMI Doduco frequently encounter strong competition within
individual product lines from various competitors throughout the world. We
compete principally on the basis of:

      o     product quality and reliability;

      o     global design and manufacturing capabilities;

      o     breadth of product line;

      o     customer service; and

      o     price.

      Our inability to successfully compete on any or all of the above factors
may result in reduced sales.

Our backlog is not an accurate measure of future revenues and is subject to
customer cancellation.

      While our backlog consists of firm accepted orders with an express release
date generally scheduled within six months of the order, many of the orders that
comprise our backlog may be canceled by customers without penalty. It is widely
known that customers in the electronics industry have on occasion double and
triple ordered components from multiple sources to ensure timely delivery when
quoted lead time is particularly long. In addition, customers often cancel
orders when business is weak and inventories are excessive, a process that we
have experienced in the current contraction. Although you should not rely on our
backlog as an indicator of our future revenues, our results of operations could
be adversely impacted if customers cancel a material portion of orders in our
backlog.


                                  Page 32 of 38
<PAGE>

Fluctuations in foreign currency exchange rates may adversely affect our
operating results.

      We manufacture and sell our products in various regions of the world and
export and import these products to and from a large number of countries.
Fluctuations in exchange rates could negatively impact our cost of production
and sales that, in turn, could decrease our operating results and cash flow. For
example, there has been a material devaluation of the euro against the U.S.
dollar in the last several years which has negatively impacted our reported
profits. In recent months, the euro has strengthened substantially against the
U.S. dollar. Although we engage in limited hedging transactions, including
foreign currency contracts, to reduce our transaction and economic exposure to
foreign currency fluctuations, these measures may not eliminate or substantially
reduce our risk in the future.

Our international operations subject us to the risks of unfavorable political,
regulatory, labor and tax conditions in other countries.

      We manufacture and assemble some of our products in foreign locations,
including Estonia, France, Germany, Hungary, Italy, Mexico, the Philippines, the
Peoples' Republic of China, or PRC, and Spain. Our future operations and
earnings may be adversely affected by the risks related to, or any other
problems arising from, operating in international markets.

      Risks inherent in doing business internationally may include:

      o     economic and political instability;

      o     expropriation and nationalization;

      o     trade restrictions;

      o     capital and exchange control programs;

      o     transportation delays;

      o     foreign currency fluctuations; and

      o     unexpected changes in the laws and policies of the United States or
            of the countries in which we manufacture and sell our products.

      In particular, Pulse has a significant portion of its manufacturing
operations in the PRC. Our presence in the PRC has enabled Pulse to maintain
lower manufacturing costs and to flexibly adjust its work force to demand levels
for its products. Although the PRC has a large and growing economy, its
potential economic, political, legal and labor developments entail uncertainties
and risks. While the PRC has been receptive to foreign investment, we cannot be
certain that its current policies will continue indefinitely into the future. In
the event of any changes that adversely affect our ability to conduct our
operations within the PRC, our business will suffer.

      In addition, we have benefited over recent years from favorable tax
treatment as a result of our international operations. We operate in foreign
countries where we realize favorable income tax treatment relative to the U.S.
statutory rate. We have also been granted special tax incentives commonly known
as tax holidays in other countries such as the PRC. This favorable situation
could change if these countries were to increase rates or revoke the special tax
incentives, or if we discontinue our manufacturing operations in any of these
countries and do not replace the operations with operations in other locations
with


                                  Page 33 of 38
<PAGE>

favorable tax incentives. Accordingly, in the event of changes in laws and
regulations affecting our international operations, we may not be able to
continue to take advantage of similar benefits in the future.

Shifting our operations between regions may entail considerable expense.

      In the past we have shifted our operations from one region to another in
order to maximize manufacturing and operational efficiency. We may close one or
more additional factories in the future. This could entail significant one-time
earnings charges to account for severance, equipment write offs or writedowns
and moving expenses. In addition, as we implement transfers of our operations we
may experience disruptions, including strikes or other types of labor unrest
resulting from lay offs or termination of employees.

Liquidity requirements could necessitate movements of existing cash balances
which may be subject to restrictions or cause unfavorable tax and earnings
consequences.

      A significant portion of our cash is held offshore by our international
subsidiaries and is predominantly denominated in U.S. dollars. If we encounter a
significant domestic need for liquidity that we cannot fulfill through
borrowings or other internal or external sources, we may experience unfavorable
tax and earnings consequences as this cash is transferred to the United States.
These adverse consequences would occur if the transfer of cash into the United
States were subject to income tax without sufficient foreign tax credits
available to offset the U.S. tax liability. In addition, we may be prohibited
from transferring cash from the PRC. With the exception of approximately $10.0
million of retained earnings as of December 28, 2001 in the PRC that are
restricted in accordance with the PRC Foreign Investment Enterprises Law,
substantially all retained earnings are free from legal or contractual
restrictions. The PRC Foreign Investment Enterprise Law restricts 10% of our net
earnings in the PRC, up to a maximum amount equal to 50% of the total capital we
have invested in the PRC. We have not experienced any significant liquidity
restrictions in any country in which we operate and none are presently foreseen.
However, foreign exchange ceilings imposed by local governments and the
sometimes lengthy approval processes which some foreign governments require for
international cash transfers may delay our internal cash movements from time to
time.

Losing the services of our executive officers or our other highly qualified and
experienced employees could adversely affect our business.

      Our success depends upon the continued contributions of our executive
officers, many of whom have many years of experience and would be extremely
difficult to replace. We must also attract and maintain experienced and highly
skilled engineering, sales and marketing and managerial personnel. Competition
for qualified personnel is intense in our industries, and we may not be
successful in hiring and retaining these people. If we lose the services of our
executive officers or cannot attract and retain other qualified personnel, our
business could be adversely affected.

Environmental liability and compliance obligations may affect our operations and
results.

      Our manufacturing operations are subject to a variety of environmental
laws and regulations governing:


                                  Page 34 of 38
<PAGE>

      o     air emissions;

      o     wastewater discharges;

      o     the storage, use, handling, disposal and remediation of hazardous
            substances, wastes and chemicals; and

      o     employee health and safety.

      If violations of environmental laws should occur, we could be held liable
for damages, penalties, fines and remedial actions. Our operations and results
could be adversely affected by any material obligations arising from existing
laws, as well as any required material modifications arising from new
regulations that may be enacted in the future. We may also be held liable for
past disposal of hazardous substances generated by our business or businesses we
acquire. In addition, it is possible that we may be held liable for
contamination discovered at our present or former facilities.

      We are aware of contamination at two locations. In Sinsheim, Germany,
there is a shallow groundwater and soil contamination that is naturally
decreasing over time. The German environmental authorities have not required
corrective action to date. In addition, property in Leesburg, Indiana, which was
acquired with our acquisition of GTI in 1998, is the subject of a 1994
Corrective Action Order to GTI by the Indiana Department of Environmental
Management. The order requires us to investigate and take corrective actions.
Monitoring data is being collected to confirm and implement the corrective
measures. We anticipate making additional environmental expenditures in future
years to continue our environmental studies, analysis and remediation
activities. Based on current knowledge, we do not believe that any future
expenses or liabilities associated with environmental remediation will have a
material impact on our operations or our consolidated financial position,
liquidity or operating results; however, we may be subject to additional costs
and liabilities if the scope of the contamination or the cost of remediation
exceeds our current expectations.

Item 3: Quantitative and Qualitative Disclosures about Market Risk

      There were no material changes in market risk exposures that affect the
quantitative and qualitative disclosures presented in our Form 10-K for the year
ended December 28, 2001.


                                  Page 35 of 38
<PAGE>

                           PART II. OTHER INFORMATION

Item 1  Legal Proceedings                                              None

Item 2  Changes in Securities and Use of Proceeds                      None

Item 3  Defaults Upon Senior Securities                                None

Item 4  Submission of Matters to a Vote of Security Holders            None

        The Annual Meeting of Shareholders was held on May 22, 2002. Messrs.
        Graham Humes and C. Mark Melliar-Smith were elected to a three-year
        terms as directors of the Company. KPMG was also elected as the
        Company's independent public accountants for the year ending December
        29, 2002. The results of the votes were as follows:

                                                  Withhold
                                For               Authority
                                ---               ---------
        Graham Humes            27,435,191        482,955
        C. Mark Melliar-Smith   27,537,150        380,996

                                For               Against          Abstain
                                ---               -------          -------
        KPMG LLP                27,439,183        444,988          33,975

        In addition, each of the following directors continued in office after
        the meeting: Stanley E. Basara, John E. Burrows, Rajiv L. Gupta, David
        H. Hofmann, Edward M. Mazze and James M. Papada, III.

Item 5  Other Information                                              None

Item 6  Exhibits and Reports on Form 8-K

        (a)   Exhibits

              The Exhibit Index is on page 37

        (b)   Reports On Form 8-K

              None


                                  Page 36 of 38
<PAGE>

                                  Exhibit Index

Document
--------

3.1         Amended and Restated Articles of Incorporation of the Company
            (incorporated by reference to Exhibit 1 to the Company's
            Registration Statement on Form 8-A/A dated April 10, 1998).

3.2         Amendment to Amended and Restated Articles of Incorporation
            (incorporated by reference to Exhibit 3(i)(a) to the Company's Form
            10-Q for the quarter ended June 29, 2001).

3.3         By-laws (incorporated by reference to Exhibit 3.3 to the Company's
            Form 10-K for the year ended December 28, 2001).

4.1         Rights Agreement, dated as of August 30, 1996, between the Company
            and Registrar and Transfer Company, as Rights Agent (incorporated by
            reference to Exhibit 3 to the Company's Registration Statement on
            Form 8-A dated October 24, 1996).

4.2         Amendment No. 1 to the Rights Agreement, dated March 25, 1998,
            between the Company and Registrar and Transfer Company, as Rights
            Agent (incorporated by reference to Exhibit 4 to the Company's
            Registration Statement on Form 8-A/A dated April 10, 1998).

4.3         Amendment No. 2 to the Rights Agreement, dated June 15, 2000,
            between the Company and Registrar and Transfer Company, as Rights
            Agent (incorporated by reference to Exhibit 5 to the Company's
            Registration Statement on Form 8-A/A dated July 5, 2000).


                                  Page 37 of 38
<PAGE>

                                   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.

                                                    Technitrol, Inc.
                                        ----------------------------------------
                                                      (Registrant)


          August 8, 2002                /s/ Drew A. Moyer
-----------------------------------     ----------------------------------------
              (Date)                    Drew A. Moyer
                                        Vice President
                                        Corporate Controller and Secretary
                                           (duly authorized officer, principal
                                           financial and principal accounting
                                           officer)


                                  Page 38 of 38