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Ametek's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: AME

Backlog at the end of the second quarter was over $1 billion, an all-time record high. Working capital management was excellent, operating working capital was 17.7% of sales.

Turning our attention to the individual operating groups, the electronic instruments group had a solid second quarter. Sales were up 11% to $452.1 million on strength in our aerospace, oil and gas, and power instruments businesses in addition to the contributions from the acquisitions of O’Brien, TMC, EM Test, and Reichert Technologies. Internal growth was 1% while acquisitions added 12% and currency reduced sales by 2%. EIG’s operating income increased 16% to $117.7 million and operating margins were very strong at 26%, up 110 basis points over last year’s second quarter.

The electromechanical group also had a good quarter. Sales were up 6% to a record $373.8 million on strength in our differentiated businesses and the contributions from the acquisitions of Avicenna, Coining, and Dunkermotoren. Internal growth was down 1%. Acquisitions added 8%, and foreign currency reduced sales by 1%. ENG’s operating income increased 14% to $78.8 million, a record level, and operating margins increased 140 basis points to a record 21.1%.

I’d like to provide some perspective on the broader macroeconomic environment and what impact we are seeing on our business. We did see weakening in our business during the second quarter, in particular in Europe and Asia. Sales trends softened as customers turned cautious and delayed or pushed out shipments. Our process businesses, with approximately 70% of sales outside the U.S., had been impacted by the slowing as well as our cost-driven motors business, given its sizable European exposure. We now expect 2012 organic sales growth to be up low to mid-single digits versus our previous guidance of mid-single digits.

As we have demonstrated in the past, we will tighten our belts and aggressively manage our costs through this period of softness, while continuing to make investments in strategic acquisitions, market expansion, and new product development initiatives. In particular, our deal pipeline is strong and we will remain active in acquiring businesses.

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