Results of Operations
   The following table sets forth net sales and income of the Company by
reportable segment and on a consolidated basis:

                                                     Three Months Ended                   Six Months Ended
                                                          June 30,                            June 30,
                                                   2008             2007              2008               2007
                                                                          (In thousands)
Net Sales(1):
Electronic Instruments                           $ 343,050        $ 281,713        $   683,425        $   564,646
Electromechanical                                  305,721          237,755            576,543            460,105

Consolidated net sales                           $ 648,771        $ 519,468        $ 1,259,968        $ 1,024,751


Income:
Segment operating income(2):
Electronic Instruments                           $  78,108        $  62,157        $   157,297        $   124,358
Electromechanical                                   53,103           43,711            100,154             81,717

Total segment operating income                     131,211          105,868            257,451            206,075
Corporate administrative and other expenses        (17,100 )         (9,258 )          (27,107 )          (19,541 )

Consolidated operating income                      114,111           96,610            230,344            186,534
Interest and other expenses, net                   (16,257 )        (12,535 )          (32,088 )          (24,010 )

Consolidated income before income taxes          $  97,854        $  84,075        $   198,256        $   162,524

(1) After elimination of intra- and intersegment sales, which are not significant in amount.

(2) Segment operating income represents sales less all direct costs and expenses (including certain administrative and other expenses) applicable to each segment, but does not include interest expense.

Results of operations for the second quarter of 2008 compared with the second quarter of 2007
For the second quarter of 2008, the Company posted record sales and established second quarter records for operating income, net income and diluted earnings per share. The Company achieved these results from strong internal growth in both its Electronic Instruments (EIG) and Electromechanical (EMG) Groups, as well as contributions from the acquisitions of Seacon Phoenix in April 2007, Advanced Industries, B&S Aircraft and Hamilton Precision Metals in June 2007, Cameca SAS in August 2007, the Repair & Overhaul Division of Umeco plc ("Umeco") in November 2007, California Instruments in December 2007, Drake Air and Motion Control Group in February 2008, Reading Alloys in April 2008 and Vision Research in June 2008.
Net sales for the second quarter of 2008 were $648.8 million, an increase of $129.3 million or 24.9% when compared with net sales of $519.5 million for the second quarter of 2007. The net sales increase for the second quarter of 2008 was driven by strong internal sales growth of approximately 7%, which excludes a 3% favorable effect of foreign currency translation, led by the Company's differentiated businesses. The acquisitions mentioned above contributed the remainder of the net sales increase.

Results of Operations (continued)
Total international sales for the second quarter of 2008 were $306.8 million, or 47.3% of consolidated net sales, an increase of $52.7 million or 20.8% when compared with $254.1 million, or 48.9% of consolidated net sales for the second quarter of 2007. The sales generated by the recent acquisitions noted above are more heavily weighted towards domestic sales. The increase in international sales primarily results from increased sales from base businesses, which includes the effect of foreign currency translation, as well as, the acquisitions, most notably the Cameca and Umeco acquisitions. Increased international sales came primarily from sales to Europe and Asia by both reportable segments.
Segment operating income for the second quarter of 2008 was $131.2 million, an increase of $25.3 million or 23.9% when compared with $105.9 million for the second quarter of 2007. The increase in segment operating income resulted primarily from strength in the Company's differentiated businesses, which includes the profit contributions made by the acquisitions. Segment operating income, as a percentage of sales, decreased to 20.2% for the second quarter of 2008 from 20.4% for the second quarter of 2007. The decrease in operating margins was primarily driven by the dilutive impact of acquisitions within the Electromechanical Group.
Selling, general and administrative expenses (SG&A) for the second quarter of 2008 were $85.7 million, an increase of $22.8 million or 36.3% when compared with $62.9 million for the second quarter of 2007. As a percentage of sales, SG&A expenses were 13.2% for the second quarter of 2008, compared with 12.1% for the second quarter of 2007. A portion of the increase in SG&A expenses was the result of a $7.1 million charge recorded in corporate administrative expenses related to the accelerated vesting of an April 2005 restricted stock grant in the second quarter of 2008. Additionally, the Company's acquisition strategy generally is to acquire differentiated businesses, which because of their distribution channels and higher marketing costs tend to have a higher content of selling expenses. Base business selling expenses increased approximately 10%, including the impact of foreign currency translation, for the second quarter of 2008, compared with the same period of 2007, which was in line with internal sales growth. Selling expenses, as a percentage of sales, increased to 10.6% for the second quarter of 2008, compared with 10.3% for the second quarter of 2007.
Corporate administrative expenses for the second quarter of 2008 were $17.1 million, an increase of $7.9 million when compared with $9.2 million for the second quarter of 2007. As a percentage of sales, corporate administrative expenses for the second quarter of 2008 were 2.6%, compared with 1.8% for the second quarter of 2007. The increase in corporate administrative expenses is the result of equity based compensation associated with the accelerated vesting of restricted stock in the second quarter of 2008, noted above.
Consolidated operating income was $114.1 million or 17.6% of sales for the second quarter of 2008, an increase of $17.5 million or 18.1% when compared with $96.6 million, or 18.6% of sales for the second quarter of 2007.
Interest expense was $15.3 million for the second quarter of 2008, an increase of $4.3 million or 39.4% when compared with $11.0 million for the second quarter of 2007. The increase was due to the impact of the initial funding of the private placement senior notes in the fourth quarter of 2007, higher average borrowings to fund the recent acquisitions and the repurchase of 0.3 million shares of the Company's common stock in the second quarter of 2008.
The effective tax rate for the second quarter of 2008 was 32.7% compared with 31.0% for the second quarter of 2007. The higher effective tax rate for the second quarter of 2008 primarily reflects the impact of accelerated vesting of non-deductible restricted stock amortization, offset by the impact of a favorable agreement in the UK related to deductible interest expense for which previously unrecognized tax benefits were recognized. The lower effective tax rate for the second quarter of 2007 primarily reflects the recognition of tax benefits from our international tax planning initiatives.
Net income for the second quarter of 2008 totaled $65.8 million, an increase of 13.5% when compared with $58.0 million for the second quarter of 2007. Diluted earnings per share increased 13.0% to $0.61 per share, compared with $0.54 per share for the second quarter of 2007.

Results of Operations (continued)
Segment Results
Electronic Instruments Group (EIG) sales totaled $343.1 million for the second quarter of 2008, an increase of $61.4 million or 21.8% when compared with $281.7 million for the second quarter of 2007. The sales increase was due to internal growth of approximately 9%, excluding a favorable 2% effect of foreign currency, driven primarily by the Group's aerospace, power, and process and analytical businesses. The acquisitions of Advanced Industries, B&S Aircraft, Cameca, California Instruments and Vision Research primarily accounted for the remainder of the sales increase.
Operating income of EIG was $78.1 million for the second quarter of 2008, an increase of $15.9 million or 25.6% when compared with $62.2 million for the second quarter of 2007. The increases in segment operating income were due to the contribution from the higher sales by the Group's aerospace, power and process and analytical businesses, which includes the acquisitions mentioned above. Operating margins for the Group were 22.8% of sales for the second quarter of 2008 compared with 22.1% of sales for the second quarter of 2007. The increase in operating margins was primarily driven by a gain on the sale of a facility, along with operational excellence initiatives throughout the Group.
Electromechanical Group (EMG) sales totaled $305.7 million for the second quarter of 2008, an increase of $67.9 million or 28.6% from $237.8 million for the second quarter of 2007. The sales increase was due to internal growth of approximately 6%, excluding a favorable 2% effect of foreign currency, driven primarily by the Group's differentiated businesses. The acquisitions of Seacon Phoenix, Hamilton Precision Metals, Umeco, Drake Air, Motion Control Group and Reading Alloys accounted for the remainder of the sales increase.
Operating income of EMG was $53.1 million for the second quarter of 2008, an increase of $9.4 million or 21.5% when compared with $43.7 million for the second quarter of 2007. EMG's increase in operating income was primarily due to higher sales from the Group's differentiated businesses, which includes the acquisitions mentioned above. Operating margins for the Group were 17.4% of sales for the second quarter of 2008 compared with 18.4% of sales for the second quarter of 2007. The decrease in operating margins was primarily driven by the dilutive impact of the recent acquisitions. Additionally, in the second quarter of 2007, the Group realized a gain on the settlement of a warranty issue with a customer.

Results of Operations (continued)
Results of operations for the first six months of 2008 compared with the first six months of 2007
Net sales for the first six months of 2008 were $1,260.0 million, an increase of $235.2 million or 23.0% when compared with net sales of $1,024.8 million for the same period of 2007. The net sales increase for the first six months of 2008 was driven by strong internal sales growth of approximately 6%, which excludes a 3% favorable effect of foreign currency translation, led by the Company's differentiated businesses. The acquisitions mentioned above contributed the remainder of the net sales increase.
Total international sales for the first six months of 2008 were $619.4 million, or 49.2% of consolidated net sales, an increase of $113.3 million or 22.4% when compared with $506.1 million, or 49.4% of consolidated net sales for the same period of 2007. The increase in international sales primarily results from increased sales from base businesses, which includes the effect of foreign currency translation, as well as, the acquisitions, most notably the Cameca and Umeco acquisitions. Increased international sales came primarily from sales to Europe and Asia by both reportable segments.
New orders for the first six months of 2008 was a record at $1,367.6 million, an increase of $264.2 million or 23.9% when compared with $1,103.4 million for the same period of 2007. The increase in new orders was due to internal growth in the Company's differentiated businesses, led by the Company's process and industrial, and power businesses, of approximately 6%, excluding the effect of foreign currency, with the acquisitions accounting for the remainder of the increase. As a result, the Company's backlog of unfilled orders at June 30, 2008 was $795.8 million, an increase of $107.6 million or 15.6% when compared with $688.2 million at December 31, 2007. The increase in backlog was due to higher order levels in base differentiated businesses and the recent acquisitions, noted above.
Segment operating income for the first six months of 2008 was $257.5 million, an increase of $51.4 million or 24.9% when compared with $206.1 million for the same period of 2007. Segment operating income, as a percentage of sales, increased to 20.4% for the first six months of 2008 from 20.1% for the same period of 2007. The increase in segment operating income and in operating margins resulted primarily from strength in the Company's differentiated businesses, which includes the profit contributions made by the acquisitions.
Selling, general and administrative expenses (SG&A) for the first six months of 2008 were $159.0 million, an increase of $34.1 million or 27.3% when compared with $124.9 million for the same period of 2007. As a percentage of sales, SG&A expenses were 12.6% for the first six months of 2008, compared with 12.2% for the same period of 2007. A portion of the increase in SG&A expenses was the result of a $7.1 million charge recorded in corporate administrative expenses related to the accelerated vesting of an April 2005 restricted stock grant in the second quarter of 2008. Additionally, the Company's acquisition strategy generally is to acquire differentiated businesses, which because of their distribution channels and higher marketing costs tend to have a higher content of selling expenses. Base business selling expenses increased approximately 9%, including the impact of foreign currency translation, for the first six months of 2008, compared with the same period of 2007, which was in line with internal sales growth. Selling expenses, as a percentage of sales, increased to 10.5% for the first six months of 2008, compared with 10.3% for the same period of 2007.
Corporate administrative expenses for the first six months of 2008 were $27.0 million, an increase of $7.5 million when compared with $19.5 million for the same period of 2007. As a percentage of sales, corporate administrative expenses for the first six months of 2008 were 2.1%, compared with 1.9% for the same period of 2007. The increase in corporate administrative expenses is the result of equity based compensation associated with the accelerated vesting of restricted stock in the second quarter of 2008, noted above.
Consolidated operating income was $230.3 million or 18.3% of sales for the first six months of 2008, an increase of $43.8 million or 23.5% when compared with $186.5 million, or 18.2% of sales for the same period of 2007.

Results of Operations (continued)
Interest expense was $30.5 million for the first six months of 2008, an increase of $8.6 million or 39.1% when compared with $21.9 million for the same period of 2007. The increase was due to the impact of the initial funding of the private placement senior notes in the fourth quarter of 2007, higher average borrowings to fund the recent acquisitions and the repurchase of 1.3 million shares of the Company's common stock in the first six months of 2008.
The effective tax rate for the first six months of 2008 was 33.3% compared with 33.0% for the same period of 2007. The higher effective tax rate for the first six months of 2008 primarily reflects an increase in state income taxes and the impact of accelerated vesting of non-deductible restricted stock amortization, offset by the impact of a favorable agreement in the UK related to deductible interest expense for which previously unrecognized tax benefits were recognized.
Net income for the first six months of 2008 totaled $132.2 million, an increase of 21.4% when compared with $108.9 million for the same period of 2007. Diluted earnings per share increased 20.6% to $1.23 per share, compared with $1.02 per share for the first six months of 2007. Segment Results
Electronic Instruments Group (EIG) sales totaled $683.4 million for the first six months of 2008, an increase of $118.8 million or 21.0% when compared with $564.6 million for the same period of 2007. The sales increase was due to internal growth of approximately 7%, excluding a favorable 3% effect of foreign currency, driven primarily by the Group's aerospace, power, and process and analytical businesses. The acquisitions of Advanced Industries, B&S Aircraft, Cameca, California Instruments and Vision Research primarily accounted for the remainder of the sales increase.
Operating income of EIG was $157.3 million for the first six months of 2008, an increase of $32.9 million or 26.5% when compared with $124.4 million for the same period of 2007. The increases in segment operating income were due to the contribution from the higher sales by the Group's aerospace, power and process and analytical businesses, which includes the acquisitions mentioned above. Operating margins for the Group were 23.0% of sales for the first six months of 2008 compared with 22.0% of sales for the same period of 2007. The increase in operating margins was driven by operational excellence initiatives throughout the Group.
Electromechanical Group (EMG) sales totaled $576.5 million for the first six months of 2008, an increase of $116.4 million or 25.3% from $460.1 million for the same period of 2007. The sales increase was due to internal growth of approximately 5%, excluding a favorable 3% effect of foreign currency, driven primarily by the Group's differentiated businesses. The acquisitions of Seacon Phoenix, Hamilton Precision Metals, Umeco, Drake Air, Motion Control Group and Reading Alloys primarily accounted for the remainder of the sales increase.
Operating income of EMG was $100.2 million for the first six months of 2008, an increase of $18.5 million or 22.6% when compared with $81.7 million for the same period of 2007. EMG's increase in operating income was primarily due to higher sales from the Group's differentiated businesses, which includes the acquisitions mentioned above. Operating margins for the Group were 17.4% of sales for the first six months of 2008 compared with 17.8% of sales for the same period of 2007. The decrease in operating margins was primarily driven by the dilutive impact of acquisitions.

Financial Condition
Liquidity and Capital Resources
Cash provided by operating activities totaled $141.8 million for the first six months of 2008, an increase of $21.9 million or 18.3% when compared with $119.9 million for the first six months of 2007. The increase in operating cash flow was primarily the result of higher earnings, partially offset by higher overall operating working capital levels necessary to grow the business.
Cash used for investing activities totaled $293.0 million for the first six months of 2008, compared with $117.5 million for the first six months of 2007. In the first six months of 2008, the Company paid $278.3 million for four business acquisitions and one technology line acquisition, net of cash received, compared with $100.3 million paid for four business acquisitions and one technology line, net of cash received in the same period of 2007. Additions to property, plant and equipment totaled $19.9 million for the first six months of 2008, compared with $17.2 million in the same period of 2007.
Cash provided by financing activities totaled $118.7 million for the first six months of 2008, compared with $23.6 million for the first six months of 2007. In the first six months of 2008, the net total borrowings increased by $177.6 million, compared with a net total increase of $21.4 million in the first six months of 2007. In May 2008, the accounts receivable securitization facility was amended and restated, which decreased the Company's available borrowing capacity from $110 million to $100 million and extended the expiration date from May 2008 to May 2009. There were no borrowings under this facility at June 30, 2008.
At June 30, 2008, total debt outstanding was $1,089.9 million, compared with $903.0 million at December 31, 2007. The debt-to-capital ratio was 44.7% at June 30, 2008, compared with 42.1% at December 31, 2007. The net debt-to-capital ratio (total debt less cash and cash equivalents divided by the sum of net debt and stockholders' equity) was 41.3% at June 30, 2008, compared with 37.1% at December 31, 2007. The net debt-to-capital ratio is presented because the Company is aware that this measure is used by third parties in evaluating the Company.
Additional financing activities for the first six months of 2008 include net cash proceeds from the exercise of employee stock options of $6.3 million compared with $11.7 million for the first six months of 2007. Repurchases of approximately 1.3 million shares of the Company's common stock in the first six months of 2008 totaled $57.4 million, compared with a total of $2.9 million for 81.5 thousand shares repurchased in the first six months of 2007. On January 24, 2008, the Board of Directors approved an increase of $50 million in the authorization for the repurchase of its common stock, adding to the $25.9 million that remained available at December 31, 2007 from an existing $50 million authorization approved in March 2003 for a total of $75.9 million. On July 23, 2008, the Board of Directors approved an increase of $50 million in the authorization for the repurchase of its common stock, adding to the $18.5 million that remained available at June 30, 2008 from an existing $50 million authorization approved in January 2008 for a total of $68.5 million.
As a result of the activities discussed above, the Company's cash and cash equivalents at June 30, 2008 totaled $141.6 million, compared with $170.1 million at December 31, 2007. The Company believes it has sufficient cash-generating capabilities, available credit facilities and access to long-term capital funds to enable it to meet its needs in the foreseeable future.
In July 2008, the Company repaid the $225 million 7.20% senior notes due July 2008 using the proceeds from borrowings under its existing revolving credit facility. Also in July 2008, the Company obtained the second funding of $80 million in aggregate principal amount of 6.35% senior notes due July 2018 under the third quarter of 2007 private placement agreement which completed the sale of $450 million in senior notes to a group of institutional investors. The first funding occurred in December 2007 for $370 million, consisting of $270 million in aggregate principal amount of 6.20% senior notes due December 2017 and $100 million in aggregate principal amount of 6.30% senior notes due December 2019.

Forward-looking Information
Information contained in this discussion, other than historical information, is considered "forward-looking statements" and is subject to various factors and uncertainties that may cause actual results to differ significantly from expectations. These factors and uncertainties include our ability to consummate and successfully integrate future acquisitions; risks associated with international sales and operations; our ability to successfully develop new products, open new facilities or transfer product lines; the price and availability of raw materials; compliance with government regulations, including environmental regulations; changes in the competitive environment or the effects of competition in our markets; the ability to maintain adequate liquidity and financing sources; and general economic conditions affecting the industries we serve. A detailed discussion of these and other factors that may affect our future results is contained in AMETEK's filings with the Securities and Exchange Commission, including its most recent reports on Form 10-K, 10-Q and 8-K. AMETEK disclaims any intention or obligation to update or revise any forward-looking statements, unless required by the securities laws to do so. Item 4. Controls and Procedures
The Company maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management in a timely manner. The Company's principal executive officer and principal financial officer evaluated the effectiveness of the system of disclosure controls and procedures as of June 30, 2008. Based on that evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective in all material respects as of June 30, 2008.
Such evaluation did not identify any change in the Company's internal control over financial reporting during the quarter ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.