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Sales growth over last year relates primarily to an increase in spending in international broadband markets. The interconnect business, which comprised 92% of our sales, was up 31% from last year and 16% sequentially. We saw strong demand in all of our markets and Adam will comment further on trends by market in a few minutes.Operating income for the quarter was $176 million, compared to $115 million last year. Operating margin was 19.8%, compared to 16.9 last year and 18.8 last quarter. Operating income is net of stock option expense of approximately $6.2 million or 0.7% of sales in the 2010 quarter compared to 5.2 million and 0.8% of sales in the 2009 quarter. From a segment standpoint, in the cable business margins were 13.5%, down from 15.8% last year and 14.9% last quarter. The margin decline relates, both the higher relative material costs and the impact of price reductions. In the Interconnect business, margins were 22.3%, compared to 19.3 last year and 21.1 in Q1 of 2010. The improvement in margin reflects the benefits of proactive and aggressive management of all elements of cost as volume has ramped back up. Overall, we are extremely pleased with the company’s operating margin achievement of 19.8%. This represents a conversion margin on incremental sales over 2009 of approximately 30% and we continue to believe that the company’s entrepreneurial operating structure and culture of cost control will allow us to react in a fast and flexible manner and achieve strong profitability going forward. Interest expense for the quarter was $10 million, compared to $9.1 last year. The increase over the prior year relates primarily to the inclusion in interest expense of fees on the company’s receivable securitization program in accordance with the adoption of the new accounting rules effective January 1, 2010. In 2009, these fees which totaled approximately $400,000 were included in other expense. The remaining increase in interest expense is due to higher average interest rates in the 2010 quarter.
In Q2, 2010 the company had an effective tax rate of 21.3%, compared to a rate of 27.5% in the second quarter of 2009. The 2010 quarter includes a $10 million or $0.06 per share net benefit relating to a reduction in international tax expense due primarily to the favorable settlement of certain tax positions and the completion of prior year audits.Excluding, these adjustments the effective tax rate is approximately 27.5% and we currently expect a similar tax rate in the third quarter of 2010. Net income excluding the tax benefit discussed above was $119 million, approximately 13.5% of sales, a very strong performance. Diluted earnings per share in Q2 was $0.74 as reported and $0.68 excluding the one-time tax adjustment. This is a growth of 58% over the prior year quarter, an EPS growth rate of approximately two times sales growth, demonstrating the company’s significant operating leverage. Orders for the quarter were $910 million, up 10% from Q1, 2010 and up 37% from last year resulting in a book-to-bill ratio of approximately 1.03 to 1. The company continues to be an excellent generator of cash. Cash flow from operations was $104 million in Q2 or 86% of net income in the quarter, excluding tax items. For the six months, operating cash flow is approximately equal to net income excluding tax items. Cash flow from operations along with proceeds and related tax benefits from option exercises of $5 million was used primarily for 25 million of capital expenditures. Acquisition related expenditures, net of cash acquired of $11 million relating to the previously disclosed acquisition of an Asian manufacturer of specialty industrial interconnect products in April. Dividend payments of $3 million, $20 million debt reduction, increases in short-term investments of $36 million and a $5 million increase in cash. In addition to its strong operating cash flow, the company had availability of $602 million under its revolving credit facility, $72 million under its receivables facility and cash and cash investments of approximately $519 million. The company has more than sufficient liquidity to meet its needs. Read the rest of this transcript for free on seekingalpha.com