What is the primary impact of the adoption of SFAS No. 142 on AMETEK's financial results?

The adoption of SFAS No. 142, effective January 1, 2002, eliminated the amortization of goodwill. This change has a significant positive impact on AMETEK's reported net income and earnings per share, as prior periods included goodwill amortization. For the second quarter of 2002, this added $2.5 million (net of tax) to net income, and for the first six months, it added $4.8 million (net of tax). This accounting change should be considered when comparing current performance to historical results.

How are the company's two reportable segments, EIG and EMG, performing?

The Electronic Instruments Group (EIG) showed strong performance, with net sales increasing by 10.2% in the second quarter and 9.3% in the first six months, largely due to acquisitions in 2001. The Electromechanical Group (EMG), however, experienced a sales decline of 4.7% in the second quarter and 6.4% in the first six months, attributed to continued weakness in markets such as worldwide floor care. Despite lower sales, EMG's operating income saw slight increases due to acquisitions, cost reductions, and the non-amortization of goodwill.

What is the outlook for liquidity and capital resources?

AMETEK's liquidity appears solid. Cash provided by operating activities significantly increased in the first six months of 2002, driven by strong working capital management, particularly lower inventories. The company ended the period with $15.4 million in cash and cash equivalents and believes it has sufficient cash-generating capabilities and available credit facilities to meet its foreseeable needs.

Are there any significant cost-saving initiatives mentioned?

Yes, AMETEK continues to benefit from its 2001 cost reduction initiatives. These initiatives include the migration of production to low-cost locales in Reynosa, Mexico, China, and the Czech Republic. The company also expects to incur approximately $7.0 million in after-tax cash expenditures related to cost reduction initiatives in 2002.

AME 10-Q Quarterly Report Q2 FY2002 — Revenue, Net Income, EPS

Summary

AMETEK, Inc. reported increased net sales and net income for the second quarter and the first six months of 2002 compared to the prior year. Despite ongoing economic slowdown impacting some businesses, the company saw top-line growth driven by strategic acquisitions in 2001 and improved operating performance. The adoption of SFAS No. 142, eliminating goodwill amortization, significantly boosted reported earnings and margins, a key factor for investors to note. The company also demonstrated effective working capital management, leading to a substantial increase in operating cash flow. While certain segments like Electromechanical Group experienced sales declines due to market softness, the Electronic Instruments Group showed resilience and growth, partly due to acquisitions. Overall, AMETEK appears to be navigating a challenging economic environment effectively, leveraging acquisitions and cost-saving initiatives. The strong increase in net income and EPS, significantly influenced by accounting changes, alongside improved cash generation, presents a positive picture for shareholders. Investors should monitor the impact of the economic slowdown on order intake and sales in the Electromechanical segment, while appreciating the company's strategic moves and operational efficiencies.

Key Highlights

1Net sales increased by 2.3% to $267.4 million for Q2 2002 and by 1.0% to $531.0 million for the six months ended June 30, 2002, compared to the prior year periods.
2Net income grew by 14.3% to $21.3 million for Q2 2002 and by 11.0% to $41.0 million for the six months ended June 30, 2002.
3Diluted earnings per share (EPS) increased to $0.63 for Q2 2002 and $1.22 for the six months ended June 30, 2002, up from $0.56 and $1.11, respectively, in the prior year.
4The adoption of SFAS No. 142, ceasing goodwill amortization, significantly impacted reported results, adding $2.5 million (net of tax) to Q2 2002 net income and $4.8 million (net of tax) to the six-month period's net income, and boosting adjusted EPS.
5Cash provided by operating activities surged to $56.7 million in the first six months of 2002, a significant increase from $18.1 million in the prior year, driven by improved working capital management and lower inventories.
6The Electronic Instruments Group (EIG) saw sales increase by 10.2% in Q2 and 9.3% in the first six months, bolstered by 2001 acquisitions, while the Electromechanical Group (EMG) experienced sales declines of 4.7% in Q2 and 6.4% in the first six months due to market weakness.
7The company's effective tax rate decreased to 32.1% in Q2 2002 and 32.5% for the six months, partly due to the tax effect of not amortizing goodwill and higher export sales tax credits.

AMETEK INC/ Quarterly Report for Q2 Ended Jun 30, 2002

Summary

Key Highlights

Frequently Asked Questions