UNITED STATES
                       SECURITIES AND 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 30, 2003

                                       OR

[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from_________to______

                          Commission file number 1-5356

                     PENN ENGINEERING & MANUFACTURING CORP.
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                    23-0951065
-------------------------------         ------------------------------------
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
 incorporation or organization)

P.O. Box 1000, Danboro, Pennsylvania 18916 (Address of principal executive
offices) (Zip Code)


                                 (215)-766-8853
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                                 Not Applicable
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

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

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


Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date: 3,350,164 shares of Class A
common stock, $.01 par value, and 14,098,538 shares of common stock, $.01 par
value, outstanding on August 8, 2003.



                               Page 1 of 21 pages.


<PAGE>



                          PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements

                     PENN ENGINEERING & MANUFACTURING CORP.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands)
                                     ASSETS
<TABLE>
<CAPTION>
<S>                                                                                             <C>                   <C>

                                                                                            (unaudited)
CURRENT ASSETS                                                                              June 30, 2003       December 31, 2002
                                                                                            -------------       -----------------
   Cash and cash equivalents                                                                   $6,522                 $20,927
   Short-term investments                                                                         234                     233

   Accounts receivable-net                                                                     34,971                  25,373
   Inventories                                                                                 54,259                  56,458
   Refundable income taxes                                                                      1,302                   1,939
   Other current assets                                                                         1,291                   1,641
                                                                                                -----                   -----
      Total current assets                                                                     98,579                 106,571
                                                                                               ------                 -------

PROPERTY
   Property, plant & equipment                                                                187,735                 174,871
   Less accumulated depreciation                                                               94,320                  88,202
                                                                                               ------                  ------
       Property - net                                                                          93,415                  86,669
                                                                                               ------                  ------

GOODWILL, Net                                                                                  38,344                  27,047
                                                                                               ------                  ------

OTHER ASSETS                                                                                    5,170                   4,692
                                                                                                -----                   -----
       TOTAL ASSETS                                                                          $235,508                $224,979
                                                                                             ========                ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                                            $6,441                  $3,817
   Bank debt                                                                                   13,845                  20,000
   Dividends payable                                                                                -                   1,042
   Accrued expenses:
     Profit sharing                                                                               755                       -
     Payroll & commissions                                                                      4,259                   3,087
     Other                                                                                      5,672                   2,603
                                                                                                -----                   -----
      Total current liabilities                                                                30,972                  30,549
                                                                                               ------                  ------
ACCRUED PENSION COST                                                                            5,578                   3,778
                                                                                                -----                   -----

DEFERRED INCOME TAXES                                                                           9,802                   7,435
                                                                                                -----                   -----

LONG-TERM BANK DEBT                                                                             3,146                       -
                                                                                                -----                       -

STOCKHOLDERS' EQUITY
   Common stock                                                                                   149                     148
   Class A common stock                                                                            35                      35
   Additional paid-in capital                                                                  41,458                  40,682
   Retained earnings                                                                          147,983                 148,211
   Accumulated other comprehensive income                                                       2,471                     227
   Treasury stock                                                                              (6,086)                 (6,086)
                                                                                                -----                   -----
      Total stockholders' equity                                                              186,010                 183,217
                                                                                              -------                 -------
         TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                                          $235,508                $224,979
                                                                                             ========                ========
See Notes to Condensed Consolidated Financial Statements
</TABLE>



                                       2

<PAGE>





                     PENN ENGINEERING & MANUFACTURING CORP.
                   STATEMENTS OF CONDENSED CONSOLIDATED INCOME

(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
<S>                                                                <C>              <C>                    <C>              <C>


                                                                   THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                                       (unaudited)                             (unaudited)
                                                             June 30, 2003    June 30, 2002          June 30, 2003    June 30, 2002
                                                             -------------    -------------          -------------    -------------


Net Sales                                                       $47,439          $38,004                $92,253          $73,335
Cost of Products Sold                                            34,440           26,630                 66,680           50,653
                                                                 ------           ------                 ------           ------
Gross Profit                                                     12,999           11,374                 25,573           22,682

Selling Expenses                                                  5,482            4,783                 10,711            9,551
General and Administrative Expenses                               6,082            6,095                 12,349           11,800
                                                                  -----            -----                 ------           ------
Operating Profit                                                  1,435              496                  2,513            1,331
                                                                  -----              ---                  -----            -----
Other Income (Expense):
   Interest income                                                   54               29                    101               44
   Interest expense                                                (218)            (216)                  (524)            (409)
   Other, net                                                       413            1,084                    287              949
                                                                    ---            -----                    ---              ---
Total Other Income (Expense)                                        249              897                   (136)             584
                                                                    ---              ---                   -----             ---
Income Before Income Taxes                                        1,684            1,393                  2,377            1,915
Provision for Income Taxes                                          364              405                    516              556
                                                                    ---              ---                    ---              ---
Net Income                                                       $1,320             $988                 $1,861           $1,359
                                                                  =====              ===                  =====            =====

PER SHARE DATA:
    Basic earnings                                                $0.08            $0.06                  $0.11            $0.08
                                                                  =====            =====                  =====            =====

    Diluted earnings                                              $0.08            $0.06                  $0.11            $0.08
                                                                  =====            =====                  =====            =====

    Cash dividends declared                                       $0.06            $0.08                  $0.12            $0.16
                                                                  =====            =====                  =====            =====


See Notes to Condensed Consolidated Financial Statements
</TABLE>


                                       3

<PAGE>




                     PENN ENGINEERING & MANUFACTURING CORP.
                 STATEMENTS OF CONDENSED CONSOLIDATED CASH FLOWS

(Dollars in thousands)
<TABLE>
<CAPTION>
<S>                                                                                       <C>                      <C>


                                                                                                 SIX MONTHS ENDED
                                                                                                   (unaudited)
                                                                                     June 30, 2003            June 30, 2002
                                                                                     -------------            -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                            $1,861                   $1,359
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation and amortization                                                        5,635                    5,210
    Deferred income taxes                                                                    1                       53
    Foreign currency transaction gains                                                    (254)                    (305)
    Loss (gain) on disposal of property                                                     55                       (1)
    Loss on disposal of investments                                                          0                      137
    Changes in assets and liabilities:
     Increase in receivables                                                            (4,956)                    (309)
     Decrease (increase) in inventories                                                  5,761                      (43)
     Decrease in refundable income taxes                                                   591                    4,809
     Decrease in other current assets                                                      672                      751
     (Increase) decrease in other assets                                                  (477)                     500
     (Decrease) increase in accounts payable                                              (380)                     724
     Increase in accrued expenses                                                        2,215                      383
     Increase (decrease) in accrued pension cost                                         1,800                     (925)
                                                                                         -----                     -----
      Net cash provided by operating activities                                         12,524                   12,343
                                                                                        ------                   ------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Property additions                                                                   (2,144)                  (1,027)
   Acquisitions of businesses (net of cash acquired)                                   (10,442)                       0
   Proceeds from disposal of available-for-sale investments                                  0                      531
   Proceeds from disposal of property                                                       17                        7
                                                                                            --                        -
      Net cash used in investing activities                                            (12,569)                    (489)
                                                                                      --------                    -----

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net bank debt repayments                                                            (12,213)                  (3,664)
   Dividends paid                                                                       (3,131)                  (2,768)
   Issuance of common stock                                                                776                      882
                                                                                           ---                      ---
      Net cash used in financing activities                                            (14,568)                  (5,550)
                                                                                      --------                  -------

   Effect of exchange rate changes on cash                                                 208                     (245)
                                                                                           ---                     -----
     Net (decrease) increase in cash and cash equivalents                              (14,405)                   6,059
     Cash and cash equivalents at beginning of period                                   20,927                    8,421
                                                                                        ------                    -----
     Cash and cash equivalents at end of period                                         $6,522                  $14,480
                                                                                        ======                  =======
</TABLE>



See Notes to Condensed Consolidated Financial Statements




                                       4


<PAGE>



                     PENN ENGINEERING & MANUFACTURING CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003

Note 1. Condensed Consolidated Financial Statements (Unaudited)

     The accompanying condensed consolidated financial statements and notes
should be read in conjunction with the annual financial statements and notes
thereto included in the Company's Annual Report for the year ended December 31,
2002. The information contained in this report is unaudited and in the opinion
of management, reflects all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the Company's consolidated
financial position at June 30, 2003 and 2002 and the consolidated statements of
income and cash flows for the six-month periods then ended. The results of
operations for the three and six months ended June 30, 2003 are not necessarily
indicative of the results of operations to be expected for the year ending
December 31, 2003.

Note 2. Inventories

     Substantially all of the Company's domestic fastener inventories are priced
on the last-in, first-out (LIFO) method, at the lower of cost or market. The
remainder of the inventories are priced on the first-in, first-out (FIFO)
method, at the lower of cost or market.

        Inventories are as follows:  (Dollars in thousands)

                                              (unaudited)
                                             June 30, 2003     December 31, 2002
                                             -------------     -----------------
Raw material                                     $6,538            $4,566
Tooling                                           4,566             4,926
Work-in-process                                   9,008             7,935
Finished goods                                   34,147            39,031
                                                 ------            ------
TOTAL                                           $54,259           $56,458
                                                =======           =======

     If the FIFO method of inventory valuation had been used by the Company for
all inventories, inventories would have been $10,393,000 and $10,100,000 higher
than reported at June 30, 2003 and December 31, 2002, respectively, and net
income would have been $230,000 and $262,000 higher than reported for the six
months ended June 30, 2003 and 2002, respectively. Long-term tooling inventory
totaling $2,000,000 at June 30, 2003 and $2,500,000 at December 31, 2002 is
included in Other Assets.

Note 3. Bank Debt

     As of June 30, 2003, the Company has six unsecured line-of-credit
facilities available. All lines-of-credit bear interest at interest rate options
provided in the facilities and are reviewed annually by the banks for renewal.
The first facility is a working capital facility that permits maximum borrowings
of $7,000,000, due on demand. At June 30, 2003, there was no outstanding amount
on this facility. The second facility is a general facility that allows for
borrowings of up to $40,000,000. At June 30, 2003, there was no outstanding
amount on this facility. The third facility allows for borrowings of up to
$12,000,000. A $6,000,000 term loan is currently outstanding on this facility at
a rate of 3.6% (3.1% after giving effect to interest rate swaps). This loan is
payable in 12 equal monthly installments commencing January 31, 2003 with the
final payment due and payable on December 31, 2003. This loan is currently
classified as short-term debt.

     The fourth facility permits borrowings of up to $8,000,000. At June 30,
2003, $4,000,000, bearing interest at 2.32% (3.35% after giving effect to
interest rate swaps) was outstanding on this facility and was classified as
short-term debt.

     The fifth facility is a revolving credit facility with maximum borrowing of
$15,000,000. The sixth facility is a lease line financing commitment with
maximum borrowing of $1,000,000. Both of these credit facilities had no amounts
outstanding at June 30, 2003.

     These line of credit facilities require the Company to comply with certain
financial covenants. At June 30, 2003, the Company was in compliance with all
financial covenants.

      In addition to the above domestic line-of-credit facilities, the Company's
new subsidiary, M.A.E. S.p.A. (MAE) (see Note 7) has several short-term credit
facilities in place and there was $3,319,000 outstanding on such facilities at
June 30, 2003. MAE also has an outstanding mortgage, where $526,000 is
classified as short-term debt and $3,146,000 is classified as long-term debt as
of June 30, 2003.



                                       5

<PAGE>




                     PENN ENGINEERING & MANUFACTURING CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003



Note 4. Comprehensive Income

     Total comprehensive income amounted to $2,912,000 and $2,616,000 for the
three months ended June 30, 2003 and 2002, respectively, and $4,105,000 and
$2,860,000 for the six months ended June 30, 2003 and 2002, respectively.

Note 5. Accounting for Stock Options

     The Company follows Accounting Principles Board Opinion No. 25 ("APB 25"),
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for stock options. Under APB 25, if the exercise price of stock
options granted equals or exceeds the market price of the underlying common
stock on the date of grant, no compensation expense is recognized. Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123") requires pro forma
information regarding net income and earnings per share as if the Company had
accounted for its employee stock options under the fair value method of SFAS No.
123. The fair value of each option granted was estimated on the date of grant
using the Black-Scholes option-pricing model. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period. Had compensation costs for the Company's plans
been determined based on the fair value at the grant date for awards under these
plans consistent with the method of SFAS No. 123, the impact on the Company's
financial results would have been as follows:
<TABLE>
<CAPTION>
<S>                                                                       <C>           <C>              <C>          <C>




                                                                          THREE MONTHS ENDED             SIX MONTHS ENDED
                                                                                June 30                      June 30
                                                                                -------                      -------
                                                                          2003          2002             2003        2002
                                                                          ----          ----             ----        ----
(Dollars in thousands except per share amounts)
      Net income as reported                                              $1,320        $988             $1,861    $1,359
      Pro forma compensation cost, net of tax                               (216)       (291)              (495)     (581)
                                                                           -----       -----              -----     -----
      Pro forma net income                                                $1,104        $697             $1,366      $778
                                                                          ======        ====             ======      ====
Basic earnings per share:
      As reported                                                          $0.08       $0.06              $0.11     $0.08
      Pro forma                                                             0.06        0.04               0.08      0.04
Diluted earnings per share:
      As reported                                                          $0.08       $0.06              $0.11     $0.08
      Pro forma                                                             0.06        0.04               0.08      0.04

</TABLE>


Note 6. Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.



                                       6

<PAGE>






                     PENN ENGINEERING & MANUFACTURING CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003


Note 7. Acquisition

     On February 5, 2003, the Company acquired all of the issued and outstanding
capital stock of Maelux SA and its sole operating company, M.A.E. S.p.A. (MAE)
of Offanengo, Italy for cash of $10,442,000, including acquisition related
expenses. MAE is a manufacturer of stepper, brush, and brushless DC motors
serving customers throughout Europe, and its operations are included with the
Company's motor segment. The results of the operations of MAE have been included
in the accompanying consolidated statement of income since the acquisition date.
The purchase price has been preliminarily allocated to MAE's assets and
liabilities as follows; accounts receivable - $4,100,000, inventory -
$3,214,000, property - $8,628,000, other current assets - $296,000, goodwill -
$10,008,000, deferred income taxes - $2,475,000, and current liabilities
including short-term bank debt - $13,329,000.
     Additional consideration may be required based on the earnings of MAE
through year 2006. Any contingent payments will be recorded as additional
purchase price.

Note 8. Segment Information

          (Dollars in Thousands)
<TABLE>
<CAPTION>
<S>                                                <C>            <C>        <C>              <C>            <C>            <C>


                                                          THREE MONTHS ENDED                         THREE MONTHS ENDED
                                                            June 30, 2003                              June 30, 2002
                                                            -------------                              -------------
                                               Fasteners   Distribution    Motors         Fasteners      Distribution      Motors
                                               ---------   ------------    ------         ---------      ------------      ------
Revenues from external customers               $  24,868    $    11,291  $ 11,280      $     21,309      $      8,975    $  7,720
Intersegment revenues                              6,533                       49             5,447
Operating profit                                   2,930            202       769               580               326         422



                                                           SIX MONTHS ENDED                           SIX MONTHS ENDED
                                                            June 30, 2003                               June 30, 2002
                                                             -------------                              -------------
                                               Fasteners   Distribution    Motors         Fasteners      Distribution      Motors
                                               ---------   ------------    ------         ---------      ------------      ------
Revenues from external customers               $  48,465      $  22,557  $ 21,231        $   40,784      $     17,290     $15,261
Intersegment revenues                             12,652                      106            10,374
Operating profit                                   4,422            788     1,337             1,375               697         745

</TABLE>



A reconciliation of combined operating profit for the reportable segments to
consolidated income before income taxes is as follows:

<TABLE>
<CAPTION>
<S>                                                    <C>           <C>                        <C>         <C>


                                                       THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                           June 30                               June 30
                                                           -------                               -------
                                                       2003          2002                      2003        2002
                                                       -----         ----                      -----       ----
Total profit for reportable segments                $  3,901     $  1,328                    $ 6,547    $ 2,817

Unallocated corporate expenses                        (2,466)        (832)                    (4,034)    (1,486)

Other income (expense)                                   249          897                       (136)       584
                                                         ---        -----                      -----        ---
Income before income taxes                         $   1,684      $ 1,393                   $  2,377    $ 1,915
                                                       =====        =====                      =====      =====

</TABLE>



                                       7
<PAGE>




                     PENN ENGINEERING & MANUFACTURING CORP.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 2003


Note 9. Earnings Per Share Data
      The following table sets forth the computation of basic and diluted
earnings per share for the periods indicated.

<TABLE>
<CAPTION>
<S>                                                    <C>            <C>                       <C>         <C>


                                                       THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                            June 30                                June 30
                                                            -------                                -------
                                                       2003          2002                      2003        2002
                                                       ----          ----                      ----        ----

     (In Thousands, except per share data)

Basic:
Net income                                           $ 1,320        $ 988                      $ 1,861  $ 1,359
Weighted average shares outstanding                   17,436       17,385                       17,410   17,362
                                                      ------       ------                       ------   ------
Basic EPS                                            $  0.08       $ 0.06                       $ 0.11   $ 0.08
                                                        ====         ====                       ====== ========

Diluted:
Net income                                           $ 1,320        $ 988                      $ 1,861  $ 1,359
                                                    ========          ===                      =======    =====
Weighted average shares outstanding                   17,436       17,385                       17,410   17,362
Net effect of dilutive stock options-
    based on treasury stock method                       162          363                           80      349
                                                         ---          ---                           --      ---
Totals                                                17,598       17,748                       17,490   17,711
                                                      ======       ======                       ======   ======
Diluted EPS                                           $ 0.08       $ 0.06                      $  0.11  $  0.08
                                                      ======        =====                         ====   ======


</TABLE>



                                       8

<PAGE>





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

                     PENN ENGINEERING & MANUFACTURING CORP.
                                  June 30, 2003

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Quarter Ended June 30, 2003 vs. Quarter Ended June 30, 2002

   Consolidated net sales for the quarter ended June 30, 2003 were $47.4
million, versus $38.0 million for the quarter ended June 30, 2002, a 24.7%
increase. Net sales to customers outside the United States for the quarter ended
June 30, 2003 were $18.7 million, versus $12.4 million for the quarter ended
June 30, 2002, a 50.8% increase. Net sales for the fastener segment for the
quarter ended June 30, 2003 were $24.9 million, versus $21.3 million for the
quarter ended June 30, 2002, a 16.9% increase. Motor segment net sales were
$11.3 million for the quarter ended June 30, 2003, versus $7.7 million recorded
for the quarter ended June 30, 2002, a 46.8% increase. The motor segment sales
for the quarter ended June 30, 2003 included $3.0 million of sales at MAE which
was purchased in February, 2003 (see Note 7). Net sales for the distribution
segment for the quarter ended June 30, 2003 were $11.3 million, versus $9.0
million for the quarter ended June 30, 2002, a 25.6% increase.

     Within the fastener segment, sales volume increased 14.2% in both the
domestic and international markets from the second quarter of 2002 to the second
quarter of 2003 and the average selling price also increased approximately 4.5%
during the same period. There was no change in per unit selling prices from
quarter to quarter however the Company benefited from the weakening US dollar.
Within the motor segment, the number of motors sold (excluding sales by MAE)
increased approximately 7.6% in the second quarter of 2003 compared to the
second quarter of 2002 while the average selling price per motor remained
constant. Within the distribution segment, sales into Europe increased
approximately 1.8%, sales into North America increased less than 1%, while sales
into Asia increased approximately 25.0% from the second quarter of 2002 to the
second quarter of 2003. This segment continues to experience international
growth as personal computer and electronics companies shift production to other
global areas to take advantage of lower assembly costs.

     Consolidated gross profit for the second quarter of 2003 was $13.0 million,
versus $11.4 million for the second quarter of 2002, an increase of 14.0%.
However, gross profit as a percent of sales decreased from 30.0% in the second
quarter of 2002 to 27.4% in the second quarter of 2003. The Company's gross
profit was negatively impacted by increased wages, medical expenses,
unemployment taxes, and pension expense as well as increased freight costs
necessary to support the sales growth in Asia.

     Consolidated selling, general, and administrative expenses ("SG&A") for the
second quarter of 2003 were $11.6 million, versus $10.9 million for the second
quarter of 2002, a 6.4% increase. Excluding the additional SG&A related to the
acquisition of MAE, the increase from 2002 to 2003 was approximately 2.2%.
Increases in both employee benefit expenses and software maintenance charges
contributed to the overall increase.

     Consolidated net income for the second quarter of 2003 was $1.3 million,
versus $988,000 for the second quarter of 2002, an increase of 31.6%. The
Company benefited from a lower effective income tax rate in the second quarter
of 2003 due to increased foreign sales while in the second quarter of 2002, the
Company benefited from favorable currency exchange transactions.


                                       9
<PAGE>





                     PENN ENGINEERING & MANUFACTURING CORP.
                                  June 30, 2003

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Six Months Ended June 30, 2003 vs. Six Months Ended June 30, 2002

     Consolidated net sales for the six months ended June 30, 2003 were $92.3
million, versus $73.3 million for the six months ended June 30, 2002, a 25.9%
increase. Sales from the Company's newest acquisition (MAE) amounted to $4.7
million for the period to date since it was acquired on February 5, 2003. Net
sales to customers outside the United States for the six months ended June 30,
2003 were $35.9 million, versus $24.4 million for the six months ended June 30,
2002, and increase of 47.1%. Net sales for the fastener segment for the six
months ended June 30, 2003 were $48.5 million, versus $40.8 million for the six
months ended June 30, 2002, an 18.9% increase. Motor segment net sales
(including MAE) were $21.2 for the six months ended June 30, 2003, versus $15.3
million for the six months ended June 30, 2002, a 38.6% increase. Net sales for
the distribution segment for the six months ended June 30, 2003 were $22.6
million, versus $17.3 million for the six months ended June 30, 2002, a 30.6%
increase.

     Within the fastener segment, sales volume increased 19.2% in both the
domestic and international markets from the first six months of 2002 to the
first six months of 2003 while the average selling price remained constant. As
the business climate slowly improves in all markets served by the Company,
distributors are gradually replenishing inventory levels. Within the motor
segment, the number of motors sold (excluding MAE) increased approximately 9.9%
in the first six months of 2003 compared to the first six months of 2002 while
the average selling price declined approximately 1.2%. Within the distribution
segment, the Company experienced international growth during the first six
months of 2003 compared to the same period in 2002 as the Asian market increased
31.3% and the European market increased 10.3%. The recovery in the domestic
distribution market remained sluggish during the first six months of 2003,
posting only a 2.8% increase over the comparable period in 2002.

     Consolidated gross profit for the first six months of 2003 was $25.6
million, versus $22.7 million for the first six months of 2002, a 12.8%
increase. The percentage increase in gross profit from the first six months of
2002 to the first six months of 2003 was less than the sales percentage increase
in all three segments due primarily to increased wages and benefit expenses as
well as increased freight and duty costs related to the increased level of sales
activity overseas. The Company has not been able to pass these costs on to the
customer as selling prices have remained constant from year to year.

     Consolidated selling, general, and administrative expenses for the first
six months of 2003 were $23.1 million, versus $21.4 million for the first six
months of 2002, an increase of 7.9%. In addition to the increased wages and
employee benefits mentioned above, the Company also experienced increased
charges for software maintenance and liability insurance.

     Consolidated net income for the first six months of 2003 was $1.9 million,
versus $1.4 million for the first six months of 2002. The Company has benefited
from a lower effective tax rate in 2003 due to increased foreign sales while
favorable foreign currency transactions affected both periods.




                                       10
<PAGE>




                     PENN ENGINEERING & MANUFACTURING CORP.
                                  June 30, 2003

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION


Liquidity and Capital Resources

     Cash and cash equivalents at June 30, 2003 were $6.5 million compared to
$20.9 million at December 31, 2002. Working capital totaled $67.6 million at
June 30, 2003 compared to $76.0 million at December 31, 2002.

     Net cash of $12.5 million was provided by operating activities for the six
months ended June 30, 2003 compared to $12.3 million provided by operating
activities for the six months ended June 30, 2002. The Company continued to
generate cash from further reductions in overall inventory levels during the
first half of 2003. However, as sales volume increased, the level of accounts
receivable also increased, thus decreasing the amount of cash provided from
operations.

     Net cash used in investing activities totaled $12.6 million for the six
months ended June 30, 2003 due mainly to the acquisition of MAE in February of
2003. The Company spent $2.1 million for capital additions in the first half of
2003, the bulk of which was for a new heat treat furnace at the Company's
manufacturing facility in Ireland.

     Net cash used in financing activities totaled $14.6 million for the six
months ended June 30, 2003 compared to $5.6 million for the six months ended
June 30, 2002. Because of the decreased capital expenditures, the Company repaid
short-term debt during both years. Despite the economic downturn and its impact
on the Company's earnings, the Company's strong cash and working capital
position have allowed for the continued payment of cash dividends of $3.1
million for the six months ended June 30, 2003. This represents the payment of
the dividend declared in the fourth quarter of 2002, which was accrued as of
December 31, 2002, as well as the first and second quarter 2003 dividends.

     The Company's main contractual obligations are the repayment of its
short-term debt (see Note 3) and the payment of operating lease commitments
covering certain automobiles, office space, and office equipment which are
listed in Note 12 to the Company's Annual Report for the year ended December 31,
2002. The Company anticipates that its existing capital resources and cash flow
generated from future operations as well as existing short-term lines of credit
will enable it to maintain its current level of operations and its planned
growth for the foreseeable future.

Critical Accounting Policies

     The Company has identified a number of its accounting polices that it has
determined to be critical. These critical accounting policies primarily relate
to financial statement assertions that are based on the estimates and
assumptions of management and the effect of changing those estimates and
assumptions could have a material effect on our financial statements. The
following is a summary of those critical accounting policies.

Inventories

     The Company's domestic fastener inventories are priced on the last-in,
first-out (LIFO) method of accounting. Other inventories, representing
approximately 74% and 69% of total inventories at June 30, 2003 and December 31,
2002, respectively, are priced on the first-in, first-out (FIFO) method. The
original cost of inventory is written-down to its estimated net realizable value
based on projected sales of the inventory and the age of the inventory in stock.
If actual future demand or market conditions are less favorable than those
projected by management, additional inventory write-downs may be required.
Provisions for the write-down of inventory are recorded in cost of products
sold.




                                       11
<PAGE>






                     PENN ENGINEERING & MANUFACTURING CORP.
                                  June 30, 2003

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Accounts Receivable

     The Company maintains an allowance for doubtful accounts for trade
receivables for which collectibility is uncertain. At June 30, 2003 and December
31, 2002, this allowance was approximately $720,000 and $830,000, respectively.
In estimating uncollectible accounts, the Company considers factors such as
current overall economic conditions, industry-specific economic conditions, and
historical and anticipated customer performance. While the Company believes that
its procedures effectively address exposure for doubtful accounts, changes in
the economy, industry, or specific customer conditions may require adjustments
to the allowance.

Goodwill

     SFAS No. 142 requires that goodwill no longer be amortized, and instead, be
tested for impairment on a periodic basis. At June 30, 2003, the Company had
$38,344,000 in goodwill. The process of evaluating the potential impairment of
goodwill is highly subjective and requires significant judgments at many points
during the analysis. In estimating the fair value of the reporting units with
recognized goodwill for the purposes of the Company's fiscal 2002 financial
statements, the Company made estimates and judgments about the future cash flows
of these reporting units. The Company's cash flow forecasts were based on
assumptions that are consistent with the plans and estimates the Company is
using to manage the underlying businesses. In addition, the Company made certain
judgments about allocating shared assets to the balance sheet for those
reporting units. Based on its estimates, the Company has concluded that there is
no impairment of its goodwill as of June 30, 2003. However, changes in these
estimates could cause one or more of the reporting units to be valued
differently in the future. The Company will evaluate its goodwill again for
impairment as of October 1, 2003, or sooner if deemed necessary by management.

Pensions

         The Company accounts for its defined benefit pension plan in accordance
with SFAS No. 87, "Employers' Accounting for Pensions," which requires that
amounts recognized in the financial statements be determined on an actuarial
basis. The most significant elements in determining the Company's pension
expense are pension liability discount rates and the expected return on plan
assets. The pension discount rate reflects the current interest rate at which
pension liabilities could be settled at the end of the year. At the end of each
year, the Company determines the discount rate to be used to discount plan
liabilities. In estimating this rate, the Company looks to rates of return on
high-quality, fixed-income investments. At December 31, 2002, the Company
determined this rate to be 7.00% and no adjustment to this rate has been made
for the six months ended June 30, 2003. Historically the Company has assumed
that the expected long-term rate of return on plan assets will be 8.00%, and
this expected rate of return has been used for many years. Although in the last
two years pension plan assets have earned substantially less than 8.00%, over
the long-term, the Company believes that the return assumption of 8.00% is
reasonable, based on expectations about future returns. Should the downward
trend in return on pension assets continue, future pension expense would likely
increase. The net effect of changes in discount rate, as well as the effect of
differences between the expected return and the actual return on plan assets
have been deferred in accordance with SFAS No. 87 and will ultimately affect
future pension expense.





                                       12
<PAGE>



                     PENN ENGINEERING & MANUFACTURING CORP.
                                  June 30, 2003

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Derivative Instruments and Hedging

         The Company manages risks associated with foreign exchange rates and
interest rates with derivative instruments. The Company does not use derivative
instruments for trading or speculative purposes and only uses derivatives when
there is an underlying exposure. The evaluation of hedge effectiveness is
subject to assumptions based on the terms and the timing of the underlying
exposures. All derivative instruments are recognized in the Consolidated Balance
Sheet at fair value, which is generally based on quoted market prices.

Forward-Looking Statements

     Forward-looking statements, within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
under the Private Securities Litigation Reform Act of 1995, are made throughout
this Management's Discussion and Analysis. The Company's results may differ
materially from those in the forward-looking statements. Forward-looking
statements are based on management's current views and assumptions, and involve
risks and uncertainties that significantly affect expected results. For example,
operating results may be affected by external factors such as: changes in laws
and regulations, changes in accounting standards, fluctuations in demand in
markets served by the Company, particularly the computer and telecommunications
markets, fluctuations in the cost and availability of the supply chain
resources, and foreign economic conditions, including currency rate
fluctuations.

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

     There have been no material changes to Part 2, Item 7A of the Company's
Form 10-K Annual Report for the year ended December 31, 2002.

Item 4. Controls and Procedures.

     As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of
the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on this evaluation, the Company's
management, including the Chief Executive Officer and the Chief Financial
Officer, concluded that the Company's disclosure controls and procedures are
effective for recording, processing, summarizing, and reporting the information
the Company is required to disclose in the reports it files under the Securities
Exchange Act of 1934, within the time periods specified in the SEC's rules and
forms. There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of this evaluation.



                                       13
<PAGE>




                            PART II OTHER INFORMATION

Item 1. Legal Proceedings

     Reference is made to Part 1, Item 3 of the Company's Form 10-K Annual
Report for the year ended December 31, 2002.

Item 2. Changes in Securities

     Not Applicable

Item 3. Defaults upon Senior Securities

     Not Applicable

Item 4. Submission of Matters to a Vote of Security Holders

      The Company held its 2003 Annual Meeting of Stockholders (the "Annual
Meeting") on May 1, 2003. The matter voted upon at the Annual Meeting and the
respective results were as follows:

1.       The election of two Class C Directors of the Company to hold office
         until the Annual Meeting of Stockholders to be held in 2006 and until
         their successors are duly elected.

     Name of Nominee                         For                       Withheld
     ----------------------                  ---                       --------
     Daryl L. Swanstrom                   2,726,719                    321,508
     Andrew B. Williams                   3,046,159                      2,068

     The Directors whose term of office continued after the meeting were:

     Class A Directors:
     ------------------
     Martin Bidart
     Maurice D. Oaks
     Charles R. Smith

     Class B Directors:
     ------------------
     Kenneth A. Swanstrom
     Mark W. Simon
     John J. Sickler

Item 5. Other Information

      Not Applicable




                                       14
<PAGE>




Item 6. Exhibits and Reports on Form 8-K


     Exhibit No.                    Description

        3.1          Restated Certificate of Incorporation (Incorporated by
                     reference to Exhibit 3.1 of the Company's Form 10-Q
                     Quarterly Report for the period ended March 31, 2001.)

        3.2          By-laws, as amended (Incorporated by reference to Exhibit
                     3.2 of the Company's Form 10-K Annual Report for the year
                     ended December 31, 2001.)

       31.1          Certification pursuant to Section 302 of the Sarbanes-Oxley
                     Act of 2002.

       31.2          Certification pursuant to Section 302 of the Sarbanes-Oxley
                     Act of 2002.

       32.1          Certification pursuant to 18 U.S.C. Section 1350, As
                     Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
                     of 2002.

       32.2          Certification pursuant to 18 U.S.C. Section 1350, As
                     Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
                     of 2002.


b) Reports on Form 8-K

         None.




                                       15
<PAGE>






                                    SIGNATURE






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







                                        Penn Engineering & Manufacturing Corp.


Dated:     August 14, 2003              By: /s/ Kenneth A. Swanstrom
                                        -----------------------------
                                             Kenneth A. Swanstrom
                                             Chairman/CEO




Dated:     August 14, 2003              By: /s/ Mark  W. Simon
                                        ------------------------------
                                            Mark W. Simon
                                            Senior Vice President/CFO




<PAGE>



                     PENN ENGINEERING & MANUFACTURING CORP.
                                  EXHIBIT INDEX



     Exhibit No.                    Description

        3.1          Restated Certificate of Incorporation (Incorporated by
                     reference to Exhibit 3.1 of the Company's Form 10-Q
                     Quarterly Report for the period ended March 31, 2001.

        3.3          By-laws, as amended (Incorporated by reference to Exhibit
                     3.2 of the Company's Form 10-K Annual Report for the year
                     ended December 31, 2001.)

       31.1          Certification pursuant to Section 302 of the Sarbanes-Oxley
                     Act of 2002.

       31.2          Certification pursuant to Section 302 of the Sarbanes-Oxley
                     Act of 2002.

       32.1          Other Exhibit - Certification pursuant to 18 U.S.C. Section
                     1350, As Adopted Pursuant to Section 906 of the Sarbanes-
                     Oxley Act of 2002.

       32.2          Other Exhibit - Certification pursuant to 18 U.S.C. Section
                     1350, As Adopted Pursuant to Section 906 of the Sarbanes-
                     Oxley Act of 2002.