AMETEK, Inc. ( AME) Q2 2011 Earnings Call July 26, 2011 8:30 a.m. ET Executives Bill Burke - VP of IR & Treasurer Frank Hermance- Chairman and CEO John Molinelli - EVP and CFO Analysts Jim Lucas - Janney Capital Markets Matt Summerville – KeyBanc Jamie Sullivan - RBC Capital Markets Robert Barry – UBS Allison Poliniak - Wells Fargo Securities, LLC Wendy Caplan – SunTrust Robinson Mark Douglass - Longbow Research Richard Eastman - Robert W. Baird Jim Fong - Capelli Presentation Operator
Previous Statements by AME
» AMETEK Inc. Q4 2009 Earnings Call Transcript
» AMETEK Inc. Q3 2009 Earnings Conference Call
» AMETEK, Inc. Q4 2008 Earnings Call Transcript
» Ametek Inc. Q3 2008 Earnings Conference Call Transcript
I will remind you that any statements made by AMETEK during the call that are not historical in nature are to be considered forward-looking statements. As such, these statements are subject to change based on various risk factors and uncertainties that may cause actual results to differ significantly from expectations.A detailed discussion of the risks and uncertainties that may affect our future results is contained in AMETEK's filings with the Securities and Exchange Commission. AMETEK disclaims any intention or obligation to update or revise any forward-looking statements. I will also refer you to the investor section of ametek.com for a reconciliation of any non-GAAP financial measures used during this conference call. We will begin today with some prepared remarks, and then we will take your questions. I will now turn the meeting over to Frank. Frank Hermance Thank you, Bill. AMETEK had a tremendous second quarter. We established quarterly records for sales, operating income, net income, and diluted earnings per share. Orders in the second quarter were strong, up 24% to $797 million. Book-to-bill was 1.05 and backlog of 948 million was an all-time high. Sales in the second quarter were up 28% to $758.8 million, internal growth was very strong at 14%, while acquisitions added 12%, and currency added 2% to sales. Operating income for the second quarter increased 36% to $157 million from $115.6 million last year, reflecting the impact of the higher sales and our operational excellence activities. Operating income margin of 20.7% was a 120 basis point improvement over the second quarter of 2010. Operating margins include $5.2 million in cost associated with the performance-based accelerated vesting of restricted stock, which resulted from the doubling of our stock price from the April of 2009 grant date. Excluding these cost, operating margins in the quarter were a record 21.4%.
Net income was up 40% to $94.1 million, and diluted earnings per share of $0.58 were up 38% over last year’s second quarter.Operating cash flow in the quarter of $115 million was superb, representing a 30% increase over last year’s second quarter. Free cash flow was $105 million or 111% of net income. Working capital management was excellent. Operating working capital fell to 17.5% of sales, our lowest level in my tenure as CEO. Turning our attention to the individual operating groups. Electronic Instruments group had a tremendous second quarter. Sales were up 31% to $407.4 million on continuing strength in our process, power, and industrial businesses, and the contribution from the Atlas Material Testing Tech acquisition that we completed in November. As expected, our oil and gas businesses were very strong. Internal growth for EIG was 21%, acquisitions added 7% to sales, while currency added 3%. EIGs operating income increased 38% to $101.5 million. Operating margins were very strong at 24.9%, up 110 basis points over last year’s second quarter. The Electromechanical group also had an excellent second quarter. Sales were up 25% to $351.5 million on strength and our differentiated businesses and the contribution from the acquisitions of Technical Service for Electronics, Haydon Enterprises, Avicenna Technology, and Coining. Internal growth was 6%, acquisitions added 16% to sales, while currency added 3%. EMG’s operating income increased 32% to $69.2 million, and operating margins were very strong at 19.7%, up 120 basis points over last year’s second quarter. Operational excellence is the cornerstone strategy for the company, and our focus on cost and asset management has been a key driver to both our competitive and financial success. Operational excellence has many facets within AMETEK, including lean manufacturing, Six Sigma, and our factories and back office operations, design for Six Sigma, and our new product development efforts, and the movement of production to low cost locals.
We also continue to drive lower cost through our global sourcing office and strategic procurement initiatives. From these sourcing activities, we recognize $7 million in savings in the second quarter and expect $28 million in savings for all of 2011. These efforts were key drivers in the very strong operating margins in the second quarter.Read the rest of this transcript for free on seekingalpha.com