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

                                                  Three Months Ended                  Nine Months Ended
                                                    September 30,                       September 30,
                                                2009             2008              2009               2008
                                                                      (In thousands)
Net sales(1):
Electronic Instruments                        $ 271,843        $ 357,589        $   860,569        $ 1,041,014
Electromechanical                               225,217          289,834            714,286            866,377

Consolidated net sales                        $ 497,060        $ 647,423        $ 1,574,855        $ 1,907,391


Operating income and income before
income taxes:
Segment operating income(2):
Electronic Instruments                        $  47,877        $  80,249        $   176,790        $   237,546
Electromechanical                                38,217           50,372            125,900            150,526

Total segment operating income                   86,094          130,621            302,690            388,072
Corporate administrative and other
expenses                                         (8,619 )        (10,556 )          (25,833 )          (37,663 )

Consolidated operating income                    77,475          120,065            276,857            350,409
Interest and other expenses, net                (18,082 )        (17,074 )          (53,802 )          (49,162 )

Consolidated income before income taxes       $  59,393        $ 102,991        $   223,055        $   301,247

(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 third quarter of 2009 compared with the third quarter of 2008
For the third quarter of 2009, the Company posted solid sales, operating income, net income and diluted earnings per share given the ongoing global economic recession. The Company's results include contributions from the acquisitions of the programmable power business of Xantrex Technology, Inc.
("Xantrex Programmable") in August 2008, Muirhead Aerospace Limited ("Muirhead")
in November 2008 and High Standard Aviation in January 2009. The Company expects the impact of the ongoing global economic recession to stabilize in the fourth quarter of 2009 in most of its markets. The full year impact of the 2008 acquisitions and our Operational Excellence capabilities will continue to have a positive impact on our 2009 results.
Net sales for the third quarter of 2009 were $497.1 million, a decrease of $150.3 million or 23.2% when compared with net sales of $647.4 million for the third quarter of 2008. The decline in net sales was primarily attributable to lower order rates as a result of the ongoing global economic recession, partially offset by the impact of the acquisitions mentioned above. The Company's internal sales declined approximately 26% for the third quarter of 2009, which excludes a 1% unfavorable effect of foreign currency translation. The acquisitions mentioned above offset approximately 4% of the Company's internal sales decline.
Total international sales for the third quarter of 2009 were $242.4 million or 48.8% of consolidated net sales, a decrease of $68.3 million or 22.0% when compared with international sales of $310.7 million or 48.0% of consolidated net sales for the third quarter of 2008. The decline in international sales resulted from decreased international sales from base businesses of $86.2 million, which includes the effect of foreign currency translation, partially offset by the impact of acquisitions completed in 2009 and 2008. The Company maintains a strong international sales presence in Europe and Asia in both reportable segments.

Results of Operations (continued)
Segment operating income for the third quarter of 2009 was $86.1 million, a decrease of $44.5 million or 34.1% when compared with segment operating income of $130.6 million for the third quarter of 2008. Segment operating income, as a percentage of sales, decreased to 17.3% for the third quarter of 2009 from 20.2% for the third quarter of 2008. The decrease in segment operating income and operating margins resulted primarily from the decrease in sales noted above, higher defined benefit pension expense and additional restructuring charges related to employee reductions, partially offset by profit contributions made by the acquisitions and cost reduction initiatives, including the cost savings achieved in the third quarter of 2009 from the acceleration of restructuring activities related to the fourth quarter of 2008 restructuring charge.
Selling, general and administrative ("SG&A") expenses for the third quarter of 2009 were $63.9 million, a decrease of $14.3 million or 18.3% when compared with $78.2 million for the third quarter of 2008. As a percentage of sales, SG&A expenses were 12.8% for the third quarter of 2009, compared with 12.1% for the third quarter of 2008. The decrease in SG&A expenses was primarily the result of lower sales and the Company's cost savings initiatives. For the third quarter of 2009, base business selling expenses decreased approximately 22%, compared with the same period of 2008, which was in line with the Company's internal sales decline. Selling expenses, as a percentage of sales, increased to 11.1% for the third quarter of 2009, compared with 10.5% for the third quarter of 2008.
Corporate administrative expenses for the third quarter of 2009 were $8.6 million, a decrease of $2.0 million or 18.9% when compared with $10.6 million for the third quarter of 2008. As a percentage of sales, corporate administrative expenses for the third quarter of 2009 were 1.7%, compared with 1.6% for the third quarter of 2008. The decrease in corporate administrative expenses was driven by lower consulting costs as well as the Company's cost saving initiatives, including the restructuring activities.
Consolidated operating income for the third quarter of 2009 was $77.5 million or 15.6% of sales, a decrease of $42.6 million or 35.5% when compared with $120.1 million or 18.5% of sales for the third quarter of 2008.
Interest expense was $17.4 million for the third quarter of 2009, an increase of $1.9 million or 12.3% when compared with $15.5 million for the third quarter of 2008. The increase was due to the impact of the funding of the long-term private placement senior notes in the third and fourth quarters of 2008.
The effective tax rate for the third quarter of 2009 was 27.6% compared with 31.1% for the third quarter of 2008. The lower effective tax rate for the third quarter of 2009 primarily reflects the impact of state income tax planning initiatives that benefited the quarter. The effective tax rate for the third quarter of 2008 primarily reflects relatively higher state and foreign income taxes, partially offset by a net favorable reduction to income tax expense for the settlement of an IRS audit.
Net income for the third quarter of 2009 was $43.0 million, a decrease of $27.9 million or 39.4% when compared with $70.9 million for the third quarter of 2008. Diluted earnings per share for the third quarter of 2009 was $0.40, which includes a $0.02 diluted earnings per share impact related to the third quarter of 2009 restructuring, a decrease of $0.26 or 39.4% when compared with $0.66 per diluted share for the third quarter of 2008.

Results of Operations (continued)
Segment Results
Electronic Instruments ("EIG") sales totaled $271.8 million for the third quarter of 2009, a decrease of $85.8 million or 24.0% when compared with $357.6 million for the third quarter of 2008. The sales decrease was due to an internal sales decline of approximately 25%, excluding an unfavorable 1% effect of foreign currency translation, driven primarily by EIG's process and industrial products businesses. Partially offsetting the sales decrease was the 2008 acquisition of Xantrex Programmable.
EIG's operating income was $47.9 million for the third quarter of 2009, a decrease of $32.3 million or 40.3% when compared with $80.2 million for the third quarter of 2008. EIG's operating margins were 17.6% of sales for the third quarter of 2009 compared with 22.4% of sales for the third quarter of 2008. The decrease in segment operating income and operating margins was driven by the decrease in sales noted above, predominantly by weakness in the Aerospace aftermarket, Process and Industrial businesses, and additional restructuring charges related to employee reductions, which was partially offset by the cost savings achieved from the acceleration of restructuring activities related to the fourth quarter of 2008 restructuring charge.
Electromechanical ("EMG") sales totaled $225.2 million for the third quarter of 2009, a decrease of $64.6 million or 22.3% from $289.8 million for the third quarter of 2008. The sales decrease was due to an internal sales decline of approximately 26%, excluding an unfavorable 2% effect of foreign currency translation, driven primarily by EMG's engineered materials, interconnects and packaging ("EMIP") and cost driven motors businesses. Partially offsetting the sales decrease was the recent acquisitions of Muirhead and High Standard Aviation.
EMG's operating income was $38.2 million for the third quarter of 2009, a decrease of $12.2 million or 24.2% when compared with $50.4 million for the third quarter of 2008. EMG's operating margins were 17.0% of sales for the third quarter of 2009 compared with 17.4% of sales for the third quarter of 2008. The decrease in segment operating income and operating margins was driven by the decrease in sales noted above. Operational Excellence capabilities, cost reduction initiatives throughout the Group and profit contributions made by the acquisitions mentioned above, including the cost savings achieved from the restructuring activities related to the fourth quarter of 2008 restructuring charge, partially offset the impact of lower sales on operating margins. Results of operations for the first nine months of 2009 compared with the first nine months of 2008
Net sales for the first nine months of 2009 were $1,574.9 million, a decrease of $332.5 million or 17.4% when compared with net sales of $1,907.4 million for the first nine months of 2008. The decline in net sales was primarily attributable to lower order rates as a result of the ongoing global economic recession, partially offset by the contributions from the acquisitions of Drake Air and Motion Control Group ("MCG") in February 2008, Reading Alloys in April 2008, Vision Research, Inc. in June 2008, Xantrex Programmable in August 2008, Muirhead in November 2008 and High Standard Aviation in January 2009. The Company's internal sales declined approximately 21% for the first nine months of 2009, which excludes a 3% unfavorable effect of foreign currency translation. The acquisitions mentioned above offset approximately 7% of the Company's internal sales decline.
Total international sales for the first nine months of 2009 were $772.2 million or 49.0% of consolidated net sales, a decrease of $157.9 million or 17.0% when compared with international sales of $930.1 million or 48.8% of consolidated net sales for the first nine months of 2008. The decline in international sales resulted from decreased international sales from base businesses of $229.2 million, which includes the effect of foreign currency translation, partially offset by the impact of acquisitions completed in 2009 and 2008. The Company maintains a strong international sales presence in Europe and Asia in both reportable segments.
New orders for the first nine months of 2009 were $1,451.3 million, a decrease of $556.9 million or 27.7% when compared with $2,008.2 million for the first nine months of 2008. As a result, the Company's backlog of unfilled orders at September 30, 2009 was $595.1 million, a decrease of $123.5 million or 17.2% when compared with $718.6 million at December 31, 2008. The Company has experienced lower order rates as a result of the ongoing global economic recession.

Results of Operations (continued)
Segment operating income for the first nine months of 2009 was $302.7 million, a decrease of $85.4 million or 22.0% when compared with segment operating income of $388.1 million for the first nine months of 2008. Segment operating income, as a percentage of sales, decreased to 19.2% for the first nine months of 2009 from 20.3% for the first nine months of 2008. The decrease in segment operating income and operating margins resulted primarily from the decrease in sales noted above, higher defined benefit pension expense and additional restructuring charges related to employee reductions, partially offset by profit contributions made by the acquisitions and cost reduction initiatives, including the cost savings achieved in the first nine months of 2009 from the restructuring activities related to the fourth quarter of 2008 restructuring charge.
SG&A expenses for the first nine months of 2009 were $189.4 million, a decrease of $47.8 million or 20.2% when compared with $237.2 million for the first nine months of 2008. As a percentage of sales, SG&A expenses were 12.0% for the first nine months of 2009, compared with 12.4% for the first nine months of 2008. The decrease in SG&A expenses was primarily the result of lower sales and the Company's cost savings initiatives. Additionally, the first nine months of 2008 includes a $7.1 million second quarter charge recorded in corporate administrative expenses related to the accelerated vesting of an April 2005 restricted stock grant. For the first nine months of 2009, base business selling expenses decreased approximately 23%, compared with the same period of 2008, which was significantly higher than the Company's internal sales decline. Selling expenses, as a percentage of sales, decreased to 10.4% for the first nine months of 2009, compared with 10.5% for the first nine months of 2008.
Corporate administrative expenses for the first nine months of 2009 were $25.7 million, a decrease of $12.0 million or 31.8% when compared with $37.7 million for the first nine months of 2008. As a percentage of sales, corporate administrative expenses for the first nine months of 2009 were 1.6%, compared with 2.0% for the first nine months of 2008. The decrease in corporate administrative expenses was driven by the equity based compensation associated with the accelerated vesting of restricted stock in the second quarter of 2008, noted above, as well as, the Company's cost saving initiatives, including the restructuring activities.
Consolidated operating income for the first nine months of 2009 was $276.9 million or 17.6% of sales, a decrease of $73.5 million or 21.0% when compared with $350.4 million or 18.4% of sales for the first nine months of 2008.
Interest expense was $52.1 million for the first nine months of 2009, an increase of $6.1 million or 13.3% when compared with $46.0 million for the first nine months of 2008. The increase was due to the impact of the funding of the long-term private placement senior notes in the third and fourth quarters of 2008.
Other expenses, net was $1.7 million for the first nine months of 2009, a decrease of $1.5 million when compared with $3.2 million for the first nine months of 2008. The decrease in other expenses was primarily due to an environmental provision recorded in the third quarter of 2008 resulting from an updated assessment of our existing sites, partially offset by higher interest income earned in the period. The provision covers the current assessment of the remediation and other known costs associated with these existing sites.
The effective tax rate for the first nine months of 2009 was 31.0% compared with 32.6% for the first nine months of 2008. The lower effective tax rate for the first nine months of 2009 primarily reflects the impact of settlements of income tax examinations and state income tax planning initiatives. The higher effective tax rate for the first nine months of 2008 primarily reflects an increase in state and foreign income taxes and the impact of accelerated vesting of nondeductible restricted stock amortization, offset by the impact of the settlements of various income tax issues with U.S. taxing authorities and the favorable agreement in the UK related to deductible interest expense for which previously unrecognized tax benefits were recognized.
Net income for the first nine months of 2009 was $153.9 million, a decrease of $49.2 million or 24.2% when compared with $203.1 million for the first nine months of 2008. Diluted earnings per share for the first nine months of 2009 was $1.43, which includes a $0.02 diluted earnings per share impact related to the third quarter of 2009 restructuring, a decrease of $0.46 or 24.3% when compared with $1.89 per diluted share for the first nine months of 2008.

Results of Operations (continued)
Segment Results
Electronic Instruments ("EIG") sales totaled $860.6 million for the first nine months of 2009, a decrease of $180.4 million or 17.3% when compared with $1,041.0 million for the first nine months of 2008. The sales decrease was due to an internal sales decline of approximately 19%, excluding an unfavorable 3% effect of foreign currency translation, driven primarily by EIG's process and industrial products businesses. Partially offsetting the sales decrease was the recent acquisitions of Vision Research and Xantrex Programmable.
EIG's operating income was $176.8 million for the first nine months of 2009, a decrease of $60.7 million or 25.6% when compared with $237.5 million for the first nine months of 2008. EIG's operating margins were 20.5% of sales for the first nine months of 2009 compared with 22.8% of sales for the first nine months of 2008. The decrease in segment operating income and operating margins was driven by the decrease in sales noted above, predominantly by weakness in the Aerospace aftermarket, Process and Industrial businesses, higher defined benefit pension expense and additional restructuring charges related to employee reductions, which was partially offset by the cost savings achieved from the restructuring activities related to the fourth quarter of 2008 restructuring charge.
Electromechanical ("EMG") sales totaled $714.3 million for the first nine months of 2009, a decrease of $152.1 million or 17.6% from $866.4 million for the first nine months of 2008. The sales decrease was due to an internal sales decline of approximately 22%, excluding an unfavorable 4% effect of foreign currency translation, driven primarily by EMG's EMIP and cost driven motors businesses. Partially offsetting the sales decrease was the recent acquisitions of Drake Air, MCG, Reading Alloys, Muirhead and High Standard Aviation.
EMG's operating income was $125.9 million for the first nine months of 2009, a decrease of $24.6 million or 16.3% when compared with $150.5 million for the first nine months of 2008. EMG's decrease in operating income was driven by the decrease in sales, partially offset by profit contributions made by the acquisitions mentioned above. EMG's operating margins were 17.6% of sales for the first nine months of 2009 compared with 17.4% of sales for the first nine months of 2008. The increase in operating margins was primarily driven by Operational Excellence capabilities and cost reduction initiatives throughout the Group, including the cost savings achieved from the restructuring activities related to the fourth quarter of 2008 restructuring charge.

Financial Condition
Liquidity and Capital Resources
Cash provided by operating activities totaled $255.9 million for the first nine months of 2009, an increase of $51.3 million or 25.1% when compared with $204.6 million for the first nine months of 2008. The increase in operating cash flow was primarily the result of lower overall operating working capital levels, which includes a tax refund that resulted from the Company's higher year end 2008 defined benefit pension contributions. The increase in cash provided by operating activities was partially offset by the $49.2 million decrease in net income and $19.9 million in defined benefit pension contributions paid for the first nine months of 2009, compared with $2.6 million in defined benefit pension contributions paid for the first nine months of 2008. Free cash flow (cash flow from operating activities less capital expenditures) was $234.4 million for the first nine months of 2009, compared with $173.6 million for the same period in 2008. Free cash flow is presented because the Company is aware that this measure is used by third parties in evaluating the Company.
Cash used for investing activities totaled $64.2 million for the first nine months of 2009, compared with $419.5 million for the first nine months of 2008. For the first nine months of 2009, the Company paid $43.0 million for two business acquisitions, net of cash received, compared with $399.0 million paid for five business acquisitions and one technology line, net of cash received, for the first nine months of 2008. Additions to property, plant and equipment totaled $21.5 million for the first nine months of 2009, compared with $31.0 million for the first nine months of 2008.
Cash used for financing activities totaled $81.8 million for the first nine months of 2009, compared with $214.7 million of cash provided by financing activities for the first nine months of 2008. In the first nine months of 2009, the net total borrowings decreased by $75.9 million, compared with a net total borrowings increase of $279.8 million in the first nine months of 2008. Additionally, for the first nine months of 2008, the Company repurchased 1.3 million shares of the Company's common stock for $57.4 million. In May 2009, the Company chose not to renew its $100 million accounts receivable securitization facility.
In the third quarter of 2008, the Company completed a private placement agreement to sell $350 million in senior notes to a group of institutional investors. There were two funding dates for the senior notes. The first funding occurred in September 2008 for $250 million, consisting of $90 million in aggregate principal amount of 6.59% senior notes due September 2015 and $160 million in aggregate principal amount of 7.08% senior notes due September 2018. The second funding date occurred in December 2008 for $100 million, consisting of $35 million in aggregate principal amount of 6.69% senior notes due December 2015 and $65 million in aggregate principal amount of 7.18% senior notes due December 2018. The senior notes carry a weighted average interest rate of 6.93%. The senior notes are subject to certain customary covenants, including financial covenants that, among other things, require the Company to maintain certain debt to EBITDA and interest coverage ratios. The proceeds from the senior notes were used to pay down a portion of the Company's revolving credit facility.
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.
At September 30, 2009, total debt outstanding was $1,059.7 million, compared with $1,111.7 million at December 31, 2008, with no significant maturities until 2012. Total long-term debt at September 30, 2009 was $974.3 million. The debt-to-capital ratio was 41.7% at September 30, 2009, compared with 46.3% at December 31, 2008. The net debt-to-capital ratio (total debt less cash and cash equivalents divided by the sum of net debt and stockholders' equity) was 36.7% at September 30, 2009, compared with 44.3% at December 31, 2008. 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.

Financial Condition (continued)
As a result of the Company's cash flow activities discussed above, cash and cash equivalents at September 30, 2009 totaled $201.0 million, compared with $87.0 million at December 31, 2008. The Company's liquidity has not been impacted by the recent financial crisis nor do we expect liquidity to be impacted in the near future. Additionally, the Company is in compliance with all of its debt covenants, which includes its financial covenants, for all of its debt agreements. The Company believes it has sufficient cash-generating capabilities from domestic and unrestricted foreign sources, available credit facilities and access to long-term capital funds to enable it to meet its operating needs and contractual obligations in the foreseeable future. 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 general economic conditions affecting the industries the Company serves; changes in the competitive environment or the effects of competition in the Company's markets; risks associated with international sales and operations; the Company's ability to consummate and successfully integrate future acquisitions; the Company's 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; and the ability to maintain adequate liquidity and financing sources. A detailed discussion of these and other factors that may affect the Company's 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.