阿美特克 (AME) 2006 Q3 法說會逐字稿

Good day, everyone, and welcome to this AMETEK, Inc. third quarter earnings release conference call. This call is being recorded. For opening remarks and introductions, I'd like to turn the call over to Mr. Bill Burke, Vice President of Investor Relations. Please go ahead, sir.

Good morning and welcome to AMETEK's third quarter earnings conference call. Joining me this morning are Frank Hermance, Chairman and Chief Executive Officer, and John Molinelli, Executive Vice President and Chief Financial Officer.

AMETEK's third quarter results were released before the market opened today and have been distributed to everyone on our list. These results are also available electronically on your market systems and on our website at www.AMETEK.com/investors. A tape of today's conference call may be accessed until November 3rd by calling 888-203-1112 and entering the confirmation code number 1056429. This conference call is also webcast and can be accessed at AMETEK.com and at streetevents.com. The conference call will be archived on both of these websites.

I will remind you that any statements made by AMETEK during the call that are not clearly historical in nature are to be considered forward-looking statements. As such, these statements are subject to change based on various factors and uncertainties that may cause actual results to differ significantly from expectations. Those factors are contained in our SEC filings. I will also refer you to the investors 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'll now turn the meeting over to Frank.

AMETEK had an excellent third quarter establishing records for sales, operating income, net income, and diluted earnings per share. Sales are up 35% to $464.2 million on strong internal growth of 13% and the contributions from acquired businesses.

Operating income was up 39% driven by the topline growth and our continued focus on operational improvements. This resulted in a 60 basis point improvement in operating income margin. Net income of $47.4 million was up 38% and diluted earnings per share of $0.67 were up 37%.

Cash flow from operations was $59 million, up 26% from last year's third quarter level of $47 million. Overall, we're extremely pleased with these results. Our markets are strong and our businesses are performing very well. Our disciplined acquisition strategy is working well and our operational excellence initiatives continued to drive profitability.

Turning our attention to the individual operating groups -- Electronic Instruments Group had a great quarter with sales of 28% to $262.3 million. Internal growth was a very strong 13% driven by our long-cycle aerospace and power businesses as well as continued strong performance in our Process and Analytical Instrument business.

The Solartron, Land Instruments, and Pulsar acquisitions also contributed to the topline increase. EIG's operating income was up 22% for the quarter to $52 million. Operating margins were 19.8% in the quarter as compared with 20.7% in the third quarter of 2005.

Last year's third quarter operating income included a gain on a sale of a facility of approximately $4 million. Without this gain, last year's third quarter operating income margin would have been 18.6%.

The Electromechanical Group also had a great quarter with revenues up 45% to $201.9 million. EMG's internal growth was 12% driven by strong performances in its aerospace and defense, technical motors, and specialty metals businesses. The HCC Industries, Penn Engineering Motion Technologies acquisitions contributed to the revenue growth. EMG's operating income for the quarter was up 66% to $36.2 million. Group operating margins were 17.9%, up sharply from the 15.7% recorded in the last year's third quarter.

A hallmark of AMETEK has been our consistent margin improvement and 2006 is no exception. Operating income margins are up 70 basis points for the first nine months of this year over last year. From a longer-term view, operating income margins have grown from 12.7% in 2001 to 17.2% for the first nine months of this year.

We increased margins in both bad economic times and now in these very good economic times. Operational Excellence, our cornerstone strategy has been a key driver to this dramatic increase in profitability. Our relentless focus on cost and asset management has improved both our financial position and our ability to service our customers more effectively.

Operational Excellence is essential for our cost-driven businesses which has allowed them to compete successfully in their markets. Many of the most important thrusts in OpEx have come out of our cost-driven businesses and then migrated to the rest of the Company.

Our best cost strategy of establishing production facilities in lower-cost parts of the world has been a key driver for the cost-driven businesses. Not only does it enable AMETEK to produce its motors at the lowest possible cost, it has the added benefit of locating our production near our customers in emerging markets.

For AMETEK, our best cost facilities are in Shanghai, Reynosa, Mexico, and the Czech Republic. Last year, approximately $245 million of our revenue was produced in those three locations and our expectation is that we will add another $40 to $50 million to that total this year.

Operational Excellence also adds significant value to our differentiated businesses, enabling them to earn higher margins than many of their competitors while delivering tremendous value to their customers. Our differentiated businesses are taking advantage of our best cost manufacturing capabilities. This capability gives our differentiated businesses the opportunity to leverage the cost structure created for our cost-driven businesses creating competitive advantage.

AMETEK global sourcing office in Shanghai is another example of Operational Excellence at work. This organization was originally chartered to support our motor manufacturing efforts in Shanghai. Given its success supporting local operations, last year we decided to utilize it as a corporatewide resource, with a charter to assist all AMETEK divisions in procuring material in China and throughout Asia.

While we are still in the early stages of adoption, cost savings this year should be about $4 million with the expectation that these savings will grow in the coming years.

Operational Excellence also enables AMETEK to deliver value from its acquisitions through cost and asset reductions. With each of our acquisitions, we bring our Operational Excellence initiatives to bear, to rapidly integrate the business and significantly improve profitability.

These improvements can take many forms and will vary from acquisition to acquisition, but often include global sales channel rationalization, manufacturing consolidations, and other expense reductions.

We've analyzed the last 17 acquisitions we have completed -- this is going back to the beginning of 1998 and that we have owned for more than one year. The pretax profitability of these businesses in our first year of ownership as compared to the last year of the prior ownership is up on average 40%, and that number has increased with some of our recent acquisitions.

We believe we will continue to drive margin improvement through Operational Excellence initiatives including best cost manufacturing, global sourcing, and acquisition integration. While we see no major storm clouds on the economic horizon, we know eventually an economic downturn will come. When that does occur, AMETEK's proven ability to manage cost and assets will serve its shareholders well.

Turning now to our outlook for 2006, we expect 2006 revenue to grow by approximately 25% on strong internal growth and the contributions from acquired companies. Given our strong third quarter results and the expectation of continued strength in our markets, we anticipate our full-year 2006 earnings to be in the range of $2.52 to $2.54 per diluted share, an increase of 30 to 31% over 2005 earnings of $1.94 per diluted share. This estimate is in line with the increased guidance we gave on October 12.

For the fourth quarter, sales are expected to be up approximately 15% from last year's fourth quarter. Earnings are expected to be approximately $0.63 to $0.65 per diluted share, an increase of 21 to 25% over last year's fourth quarter of $0.52 per diluted share.

I'd like to stress that a key distinguishing factor for AMETEK is our long-cycle businesses. They represent 30% of our volume and a higher percentage of our profits. They are showing accelerated growth and should continue to have strong results for an extended period of time beyond the peak in general industrial markets.

So in summary, we're delighted with our performance in the third quarter. Double-digit internal growth and the contributions from acquired businesses enabled us to grow the topline by 35%. We've been able to translate topline growth into bottom-line performance, driving margin expansion and a strong profitability. Excellent internal growth driven by our long-cycle businesses, continued focus on Operational Excellence, and our ability to make additional acquisitions make me very optimistic on the balance of the year and as we move into 2007.

John will now cover some of the financial details and then we'd be happy to take your questions.

Thank you, Frank. As Frank has covered our financial results at a high-level, I will provide some additional details on the Company's performance. Compared to the quarter of a year ago, we drove margin improvement at the group level and lowered our G&A spending as a percentage of sales. Below the operating income line, higher other income was more than offset by a higher tax rate yielding a continuing high quality of earnings.

On an overall note, as of January 1, 2006, AMETEK adopted financial accounting standard 123-R to expense stock options using the modified retrospective method. That means all relevant 2005 as well as 2006 numbers are presented in accordance with this accounting standard.

Selling expenses were up 27% in the quarter driven by the impact of the acquisitions. As a percent of sales, selling expenses dropped from 11% to 10.2%. Corporate G&A expenses were $8.4 million in the quarter, representing 1.8% of sales down from 2.1% of sales in last year's third quarter. Year-over-year, corporate expenses are up 18% on higher compensation related cost and other costs to grow the business.

Other income was up approximately $1.5 million as last year's third quarter contained costs related to an acquisition that AMETEK chose not to complete and in this year's third quarter, there was higher investment income.

The tax rate for the third quarter was 31.0%, up from last year's rate of 28.6%. Last year's abnormally low tax rate resulted from the realization of benefits from tax planning initiatives. We expect our full-year 2006 tax rate to be between 31.5% and 32%. As we have said before, actual quarterly effective tax rates can differ significantly, either higher or lower, than the annual tax rate as certain tax events are realized in a given quarter.

On the balance sheet, AMETEK's operating working capital performance continues to be very good. Our operating working capital defined as inventories plus receivables less payables ended the quarter at approximately 21.6% of third quarter sales annualized, down from 21.9% in the third quarter of 2005. We have a long-term goal of driving this number below 20% on a consistent basis.

Cash flow from operations was up 26% in the quarter totaling $59 million. For the first nine months of 2006, operating cash flow was $161 million, up 46% from the same period of 2005. We expect operating cash flow for the Company to be in the range of $225 to $235 million in 2006 reflecting growth in earnings, better working capital management and the additional working capital needs of a growing business.

Total debt was $673 million at September 30, a decrease of $18 million in the quarter. Our debt to capital ratio at the quarter end was 42%, down from 44% at December 31, 2005, even as we have spent $124 million in acquisitions this year and spent $21 million on share repurchases. Our strong cash flow enables us to fund our acquisition strategy and maintain a strong balance sheet.

We have a long-standing philosophy of opportunistically repurchasing our shares in the open market with the objective of offsetting the dilutive impact of shares granted under our benefit plans. To that end, during the quarter, we repurchased approximately 372,000 shares of our stock for a cost of approximately $15.6 million, bringing our year-to-date repurchases to 500,000 shares for a total cost of $21 million. We have approximately $31 million remaining from our Board authorization for stock repurchases.

Capital spending was about $5 million for the quarter and $18 million year-to-date. Depreciation and amortization was $12 million for the quarter and $34 million year-to-date.

For 2006, we expect the capital expenditures will total approximately $30 million while depreciation and amortization should be about $46 million.

In addition to the strong cash flow of the Company, we have substantial resources at our disposal to continue to fund our growth. At the end of September, we had about $275 million available under our existing credit lines. Those credit facilities were recently enhanced by amending our existing revolver agreement to extend the maturity to October of 2011 and improve certain economic terms of the agreement.

In summary, we continue to manage our cost structure and balance sheet effectively, generating excellent cash flow and positioning the Company for future growth. Bill?

That concludes our prepared remarks. We'd be happy to take questions now.

(OPERATOR INSTRUCTIONS). Jim Lucas, Janney Montgomery Scott.

First, housekeeping question. John, Accounts Payable number?

$146 million.

And Frank, two questions here, somewhat unrelated. First, the second quarter in a row that we've had a pretty significant positive surprise and while part of it could be chalked up to the conservativism of the Company, could you talk a little bit about where the degree of surprises have come from?

And secondly, on the aerospace side, given that this is an important part of the long-term story and you've made some acquisitions here, could you give us a little bit more color about what comprises the aerospace segment of AMETEK today? What you're seeing from an OE versus aftermarket and more important, on a pricing side?

Sure, Jim. I'd be glad to do this. The degree of surprise is almost across the entire Company. I think I indicated in the second quarter conference call that we were seeing strength in all parts of our business and that has continued and it's actually unusual. If you go back in time, typically some part of our business is not really in as much of a growth mode as other parts. And right now, every part of the Company is performing extremely well.

As you have heard from our opening comments, the internal growth on both sides of the business was strong. I think in the second quarter conference call, I talked about the internal order growth in our long-cycle businesses and that's just come through very, very strong in the third quarter and stronger than we had anticipated.

So I think there is two factors. We were conservative as we saw this improvement in the second quarter, and it really manifest itself even more positively in the third quarter. I will say though, our fourth quarter estimates are much more reasonable. It's highly unlikely that you're going to see an upward surprise to the level that we saw in the third quarter, just to put some bounds on our optimism.

So let me switch to aerospace because actually your first comment leads into the second question. And that is if I first look at what comprises our aerospace business, on the EIG side, we have about $150 million in revenue in rough numbers. That business is focused on sensing products that go on aircraft in all segments of the marketplace. And on the electromechanical side, we now have -- I guess it's about $275 million -- no, actually it's $225 million, excuse me, $225 million of volume. So, we're just under a $400 million number for all of AMETEK's aerospace and defense business.

In the third quarter, these businesses have done just phenomenal. There's strength in all parts of the business. If you segment that roughly $400 million of revenue, it's about 50% in military, about 25% in commercial, about 25% in regional and business aircraft. Every one of those segments is just performing in a stellar fashion right now.

In military, on the EIG side of the business, we're focused on helicopters which has been obviously a part of the DOD budget that has increased more than the average DOD budget. On the EMG side, we have focused on electronic cooling and the same thing, electronic cooling is growing at a faster rate than the average of the DOD budget. So we're seeing very strong performance there.

On the commercial side, Boeing and Airbus are having just great years. Boeing's production is up 36%. Airbus just raised their numbers. They're now going to be up about 14%. So, very strong performance in that part of the business.

And in business and regional aircraft, there's been a lot in the literature just in the last month about how the business jet phenomena which, to some degree was largely a U.S. phenomena, is now spreading across the world; and very strong performance in Asia and in Europe which probably relates to some of the terrorist activities that people are concerned and the difficulty of traveling on commercial airlines. So the business and regional aircraft market is doing very, very well.

In terms of your questions on OE versus aftermarket, the OE portion -- or let me do it the other way. The aftermarket portion is about 30% of the total volume in our aerospace businesses. Pricing is -- across our entire business and in aerospace as well -- is easier than it was. That's, I think, just driven by the global economy. So very, very strong picture, Jim.

Thank you very much for the update.

Amit Daryanani, RBC Capital Markets.

Just a question on the incremental operating margins this quarter. It looks like the Instruments Group was about 9%, Mechanical Group was about 11. Could you maybe give us some color on what the incremental margins would look like ex- the acquisitions for both the groups?

Yes, absolutely. The margins were -- the contribution margin was actually 5 in the quarter and if you extract the acquisitions -- which is the way we compute on a contribution margin -- the contribution margin was approximately 30% and it was a little bit higher in EIG and a little bit lower in EMG as we have told you for several years would be the case.

Fair enough. And then just looking at the margins in the EMG segment, they were about 17.9% this quarter, the highest I think they've been in several years. Can you talk about sort of what you expect the margins to do over the next few quarters in that segment? And would the upside, if any, would come from better volumes? Or is there more cost-saving initiatives left at all in that group?

It's actually both. The EMG part of the business is the one that will experience the more significant increase in margins as we go forward. It's driven by the OpEx initiatives which I talked about in my opening remarks, specifically on the cost driven side of that business as well as some in the differentiated side.

And then, the obvious strength in our differentiated part of EMG, we were actually up midteens in organic growth in the differentiated part of EMG which was a factor in these margins. So, we're just delighted with the margin performance in EMG and we think there's more runway here.

Fair enough. Just a last question on the global procurement center you guys spoke about in Shanghai. Can you talk about maybe what percent of your total raw material is procured from low-cost regions today?

I [actually] don't have a number on that, but it's not at this point a huge part of AMETEK's material procurement activities, but we see it as a growing part of this. We are very, let's say, optimistic about the amount of additional cost improvement we can get. Our divisions are just becoming familiar now across our Company of working with our Shanghai operations; essentially, get these cost benefits and we think it's going to get legs next year and the year after that.

Frank, if you can just remind me, is it reasonable to expect 10 to 15% cost savings if you move your procurement from a high-cost region to a low-cost region?

Yes, you've got the right number. That's about what we see in terms of, on average, pretax profits will go up by 10 to 15 points when we move. It might not happen in the first quarter after a move because there's some inefficiencies, but over time, that's the kind of numbers we see.

And that's ex any savings you might have to pass on to your customers, right?

Yes. Absolutely.

Wendy Caplan, Wachovia Securities.

Question about the margin improvement, cutting at it a little bit differently. How much of the margin improvement was related to acquisitions that we've acquired over the past -- improvement in margins from acquisitions that we've acquired over the past year or so -- year or two?

We typically don't have that data. I don't look at it that way, so I can't actually give you that number.

But on a [field] basis, would we assume that a lot of that uptick is recent acquisitions versus --?

I think it's a combination of both. Our acquisitions are doing extremely well as you heard from my opening comments with that one statistic I gave on the profit improvement in our first year of ownership versus the previous one. In addition, our base businesses are doing fine. I just don't have a breakdown of how much, but my instincts tell me it's a reasonable combination.

This may be kind of a picky point and I'm not usually this picky, but you mentioned in your remarks that you didn't see any major storm clouds in the forecast. Is it too picky to ask you if you see any minor storm clouds in the future?

Actually I don't. And part of this may be biased by the type of businesses that we have, because I know that companies that are having more exposure to the consumer are seeing impacts. We simply are not seeing that in any of the parts of our business. So, we're actually feeling pretty bullish now and not overly concerned about a downturn, but we're prepared. As you well know, [they were] pretty good if a downturn occurs, so we watch it like a hawk, but right now we're feeling pretty good.

Finally, you've done about half as many acquisitions this year as last. It's now middle of October. Should we -- would it be wrong for us to assume that there won't be any more in calendar '06?

As I said many times, we can never predict when we're going to do acquisitions and I sure wouldn't put any additional ones in your estimates, but having said that, I'd probably be a little surprised if you didn't hear from us.

Scott Graham, Bear Stearns.

Nice quarter, as usual. The question I have, of course, is to maybe, if you would, Frank, unbundle each segment's operating -- I'm sorry, sales growth by your subsegments. If you would do that I'd appreciate it.

Sure. I'll tell you what. Why don't I just walk through the Company and give you a flavor of what's going on in each of those subsegments and I'll talk to the growth in each part as I do that. Okay, Scott?

That sounds great.

So let's start with EIG. As I mentioned in my opening comments, sales overall were up 28%; and organic growth of 13% and that's after extracting currency. On the EIG side, we were actually at 15% if you include currency.

If we go through the businesses, the long-cycle businesses are doing great. You've already heard me talk about aerospace so I won't put a lot more color on that, but on the EIG side, the internal growth in aerospace was midteens and on the EMG side, it was actually greater than 20%. So that when we look at our full aerospace and defense business, we were up high teens in organic growth. So very, very strong performance.

The other long-cycle business is power. It also was very strong in the quarter. The internal growth in that business was more than 25%; and overall growth because we had done an acquisition on this part of the business, was over 45%.

Solid State Controls, our UPS business, had really a super quarter and also we had very strong performance in our Power Quality Instruments business. We see nothing on the horizon would say we would not have significantly positive performance as we go forward.

The third part of the Instruments Group is our Process businesses. Here, the markets remained very strong driven by the price of oil. Analytic Instruments part of the Process businesses are doing great. Process and Analytic Instruments division itself had a great quarter. Also, SPECTRO and EDAX had excellent performance in the quarter.

And in particular, new products -- you may remember at the beginning of the year we talked about putting about a $9 million incremental investment in the Company, above and beyond what we normally do. A major part of that has gone into this Process segment and those products, some of those are starting to roll out now and they're doing quite well. The internal growth here was up double-digits in the Process segments and we expect that to continue as we go forward.

The last part of EIG is the industrial business -- here, the heavy truck business remains strong and at a market peak. The truck manufacturers continue to produce at very high levels. Our internal growth in Q3 was up low single digits. However, we expect double-digit revenue growth in the fourth quarter, so we're going to -- we expect pretty good performance in the fourth quarter for that part of the Instruments Group.

Now, flipping to the other side of the Company, sales for all of EMG as I indicated in my opening remarks, were up about 45%. Organic growth was 12% after currency and it was 13% if you include currency. Look at the differentiated part of EMG as I mentioned before -- great performance, it was driven by strength in aerospace and defense, technical motors and specialty metals. So broad-based operating performance here. In particular, our U.S. military business is very, very strong on this side of the Company.

The HCC and Penn Engineering acquisitions will add about $110 million of incremental revenue in the quarter, and the internal growth here was up midteens. We see nothing that's going to stop strong performance as we go forward.

And probably -- and this is also another comment on Jim's first question this morning -- is that our cost-driven businesses have just been a huge surprise to us. They're doing great. The Q2 internal growth was up mid single digits, which was much higher than expected at the beginning of the year. I think as you are all aware, we run this business for maximum profitability versus growth and we're expecting double-digit profit improvement for the full year on this business, based on continued movement of production to low-cost locales including China, Mexico, and the Czech Republic and a focus on lean and efficient manufacturing.

We'll continue to remove low-end business which is not highly profitable for us. So, this will not have the same kind of growth characteristics as our other segments by design, by our strategy, but we think we'll do continuingly well on the bottom line and again, expect double-digit profit improvement for the Company. So this was essentially a picture perfect quarter.

That was very helpful, Frank, and if I just might digress for a second and talk for a moment if you would on HCC, which is a business that I think you and I have talked about as having applicability and synergy with several other businesses within AMETEK. Could you talk about the integration of HCC and some of the opportunities you're pursuing there? Thanks.

Absolutely, Scott. Actually, let me talk about all three of the acquisitions we did this year, because all of them are having positive impact on our Company's performance.

We did Pulsar the first part of the year. You remember that was in the Power side of our business, and that particular acquisition we have now consolidated manufacturing out of Florida into our Rochester operation, so we're seeing increased capability in that particular part of our business in terms of profitability.

The acquisition we did of Penn Engineering, which was the second one this year, also we have now consolidated the Italian part of that acquisition into our motor plants in Italy, and John and I were just over there a few weeks ago and we were, I think, delighted with what we saw in terms of the operational improvements that they're seeing as a result of that consolidation.

And similarly with Land, which was the third acquisition we did this year. We basically have been able to and have announced now a major consolidation of the U.S. distribution network of that particular acquisition, so it is doing great.

With HCC, which is the one we did before these three and the one that you focused your question on, we're very pleased with where we are in that company. They've had good performance this year. There is a different kind of synergy with this acquisition than what I would call a typical AMETEK acquisition in that the synergy here is with our specialty metals division, and what we are basically doing is supplying raw material to HCC that they can use in end-products.

It has two positive impacts. The first is that that raw material lowers the cost of AMETEK of the total raw material that we're purchasing so we get a profit improvement. And secondly, we can design new materials that enables HCC to penetrate additional markets that they are unable to do.

We also recently announced a General Ceramics acquisition, which was really the fourth one this year. That is a very strategic acquisition for HCC where basically, we picked up the only key technology they did not have for electronic packaging and that's high temperature co-fired ceramic capability, which basically is very important in military and aerospace applications because you can get much higher density of components by utilizing that technology.

So it was a small acquisition. It was about $5 million in revenue but very, very strategic for that business. So, we're really excited and we're going to get substantially increased levels of synergy from buying HCC as we go forward. I answered more than you wanted, but I hope that's an adequate answer, Scott.

Never enough detail. Thanks a lot.

Matt Summerville, KeyBanc.

Just a couple questions. Frank, can you talk a little bit about -- you talk about revenue during the quarter, but order trends across the two divisions and then, with all of the issues, I know you have quite a bit of content on the A380. With all the issues Airbus is having, is that disconcerting to you as you look out over the next couple years?

Orders were great in the quarter. They were $467 million -- do I have the right number, guys? Okay, $467 million. It was up 28%. Internal growth in orders was double-digits and it was strong on both parts of the Company.

So, the trends are continuing on orders and probably one of the keys when I'm -- you feel me somewhat optimistic this morning, it's based on not only our performance in terms of sales, but also on the order intake side of the business.

Any single airplane for us is not a big deal. The 380 is no exception to that. The impact on our revenues is not going to be significant in any given year. This pushout essentially immaterial in terms of our overall guidance and our overall approach.

And that doesn't even assume that we may see some upside in the sense that I think you're going to see more 747's ordered. When Airbus first came out with their first delay, which was, I think it was six months, Boeing 747 orders did not see a positive impact. And although not announced yet, my anticipation is that with this second delay, you're going to see more 747's or larger aircraft ordered from Boeing. So it's just not a significant factor for AMETEK.

Elana Wood, Merrill Lynch.

If you look at the 13% internal growth, do you have any sense of how much of that is driven by underlying market growth versus penetration or market share gains?

Boy, that's a very difficult question for us to answer and the real answer is I can't tell you because we have so many different markets and so many different areas to try to put a number on that. It's very, very difficult to do. Maybe the best thing I could say is that on average, the markets that we're in have growth rates in the 5, 6% kind of region, but that's just a sort of a gut feel that I'm giving you.

And then separately, can you quantify how much incremental investment in internal growth initiatives weighed down on EPS this quarter? And do you think the $0.08 is still valid for the full year?

Yes, I looked at that actually last night. We have spent year-to-date about $5 million. And in the third quarter, it was like $0.015 of impact, roughly that order of magnitude for the quarter. There's a possibility that instead of spending the full $9 million, we might be at a number like $8 million or $8.5 million, so I think the $9 million was $0.08 a share, so we may be a penny below that in terms of the amount of spend.

And just separately, the Power growth, I think you talked about 25% topline growth. Can you give us a sense of where that's coming from? Is it driven by overseas markets? Are you getting any business in China?

Yes, good question. First, if I segment it by products first and then by geographies -- by products, the battery backup business, the UPS business -- these are products that basically if the A.C. power goes down, like on an oil platform or in a control plant, these products will take from batteries, the power, and convert it to A.C. so the plant or the oil platform keeps running. It was extremely strong in the quarter. That was a key driver to the greater than 25% organic growth in the business.

The other part of the business which is basically a quality -- we measure the quality of power. That business also was very strong but not to the same degree as our battery backup business.

And if I look at it geographically, we had strong performance in Asia, strong performance in South America. One of the product lines that was sort of a pet favorite of mine, which is a product line that basically can -- I don't know how the best way to describe it would be -- but if you have a pipe, like an oil pipe, and you may just recall recently there was some rusting that occurred in Alaska that basically caused the pipes to burst. We have a technology that basically can eliminate that rust in the pipes. It's an electronic technology where you actually pass a current through the ground to eliminate the rusting impact. That business has taken off on us as a result of some of these problems that have happened around the world.

So, it's a pretty good picture and, as you may recall, this was the last business that came back for AMETEK in terms of -- after sort of the downturn of the 2001, 2002, 2003 time period, and it's just turning [right now].

Richard Eastman, Robert Baird.

Frank, just a couple things. One is, could you just give a sense of what the order growth was in those longer-cycle businesses? So, power and aerospace? Those two businesses -- just the order growth year-over-year in those two?

I don't have that right at my fingertips. Why don't you go to your second question and we'll see if these guys can pull that out. Okay?

Then secondarily, just, your kind of bigger-picture, maybe, cut at the geographic growth, if you just look at the overall organic growth and try to use that relative to North America, Asia and Europe, which geographies maybe you're growing above or below?

Yes. Sure. Absolutely.

Really thinking organic versus the acquisitions.

Yes. If you look at the growth, it essentially relates to the GDPs of the various parts of the world. The strongest part of the organic growth is coming out of Asia. Very, very strong performance, in China in particular. Some of that investment that I just talked about to Elana's question, we opened an office in Chengdu, China, which is new for us this year and we've substantially increased the amount of feet on the street in China in particular. So that clearly is the number one part of the world in terms of raw organic growth.

U.S. would be second. We've had very strong performance in the U.S., stronger than I actually had anticipated. And Europe, we have to segment because when we roll up Europe, we also roll up Russia and the Middle East in Europe. So if I extract the Middle East and Russia, the organic growth was lower in Europe itself.

However, not part of your question, but we did a lot of acquisitions in Europe. So overall the growth was great in Europe, driven by some of the acquisitions that we have recently completed.

And then if I switch to Russia and the Middle East, that probably is very similar -- although I don't have an exact number -- it's probably very similar to China. We opened an office in Russia this year and we're really focused on the former Stan states as the area of emphasis again, because of oil production in those parts of the world. So very good performance there. So I think that's the best ranking I can give you geographically.

That's fine. And then within North America, the double-digit growth there, that's kind of the second strongest market for you. I guess maybe to summarize aerospace and then I would think the Process Instruments business.

That's exactly right. They are the drivers. They are the drivers. No question about that.

And then, is it possible to maybe define any price realization that you got in the quarter? Could it be --

Yes, I think actually John did that. John, why don't you answer that question?

Yes, we are -- to the best we can, and it's hard to really track it with precision, but to the best we can, we're looking at about a little over 3% pricing year-over-year in the quarter and that's been on an ascent throughout the year. So we're a little over 2% year-to-date and a little bit over 3% for the quarter. We're pleased with that.

I think that's it, short of the order question if you were able to find that.

We don't have it here right at our fingertips. We'll have to circle back with you, Rick.

(OPERATOR INSTRUCTIONS). (indiscernible)

Will that 13% organic growth continue into the fourth quarter? And then, are there any reasons why your margins would dip in the fourth quarter? So any color or guidance on fourth quarter margins? Thanks.

Yes, I think the organic growth in the third quarter was exceptional. I don't -- I would not truly put that in your models as we go forward, and with the guidance that we have given you when you run the numbers, you'll see it's not as high.

The one thing I should point out on that organic growth is that last year, our organic growth was about 2% in the third quarter and probably a more normalized thought process would be 4 to 13%, not 2 to 13%, just to put some color on that comment. And your second question was what?

Just any guidance or color on fourth quarter margins (multiple speakers)?

I think the margins are going to be fine. I think the margins are going to be fine in the fourth quarter. We're going to see good margin improvement on a quarter-over-quarter basis.

There are no questions at this time. I would like to turn the conference back to Mr. Burke.

I would like to thank everyone for joining our call and, as we said at the beginning, the call will be archived on both AMETEK.com and streetevents.com. Thank you.

That does conclude our conference for today. We thank you for your participation and have a wonderful day.