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Ametek's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Stocks in this article: AME

Cash flow was very strong. Operating cash flow was $141 million, up 36% over last year's first quarter. Free cash flow was $132 million, or 120% of net income. Working capital management was excellent. Operating working capital was 17.2% of sales.

Turning our attention to the individual operating groups. The Electronic Instruments Group had a great first quarter. Sales were up 21% to a record $468.8 million on strength in our Aerospace and Process businesses. In addition, we had strong contributions from the 4 acquisitions that we completed in the fourth quarter of 2011 and in January of 2012. Internal growth was strong at 9%, while currency reduced sales by 1%. EIG's operating income increased 23% to a record $123 million, and operating margin were a very strong at 26.2%, up 50 basis points over last year's first quarter.

The Electromechanical Group also had a very good quarter. Sales were up 9% to $358.3 million on strength in our differentiated businesses and the contributions from the acquisitions of Avicenna and Coining. Internal growth was 3%. Acquisitions added 7%, and foreign currency reduced sales by 1%. EMG's operating income increased 13% to $70.9 million, a record level, and operating margins increased 70 basis points to 19.8%.

Focusing now on our 4 growth strategies of Operational Excellence, global and market expansion, new product development and acquisitions. Operational Excellence is the cornerstone strategy for the company, and our focus on costs and asset management has been a key driver to both our competitive and financial success. Operational Excellence has many facets within our company, including lean manufacturing, Six Sigma in our factories and back office operations, design for Six Sigma in our new product development efforts and a movement of production to low-cost locales. We also continued to drive lower costs through our global sourcing office and strategic procurement initiatives. From these sourcing activities, we recognized approximately $10 million in savings in the first quarter and are conservatively estimating $40 million in savings for all of 2012. Our continued focus on these Operational Excellence efforts were key drivers in achieving the record operating margin of 22.1% in the first quarter.

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