阿美特克 (AME) 2008 Q1 法說會逐字稿

Good day, everyone, and welcome to this AMETEK, Inc.

first-quarter earnings conference call.

This call is being recorded.

For opening remarks and introductions, I would like to turn the call over to Mr.

Bill Burke, Vice President of Investor Relations.

Thank you, Jessica.

Good morning, everyone, and welcome to AMETEK's first-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 first-quarter results were released before the market opened today and have been distributed to everyone on our lists.

Those results are also available electronically on your market systems and on our Web site at www.AMETEK.com/investors.

A tape of today's conference call may be accessed until May 6 by calling 888-203-1112, and entering the confirmation code number 722-8440.

This conference call is also being Webcast and can be accessed at AMETEK.com and at StreetEvents.com.

The conference call will be archived on both of these Web sites.

I will remind you that any statements made by AMETEK bring the call that are not historical in nature are to be considered forward-looking statements.

As such, these statements are subject to change based on various factors and uncertainties that may cause actual results to differ significantly from expectations.

Those factors are contained in our SEC filings.

I will also review refer you to the investors section of AMETEK.com for a reconciliation of any non-GAAP financial measures used during this call.

We will begin today with some prepared remarks, and then we will take your questions.

I will now turn the meeting over to Frank.

Thank you, Bill.

AMETEK had an excellent first quarter.

We set records for sales, operating income, net income and diluted earnings per share.

Sales were up 21% to $611.2 million on strong internal growth of 6% and the contributions from acquired businesses.

If the effects of foreign currency are included, internal growth was 8%.

Order growth was very strong as well, with total orders up 24% in the quarter.

Internal growth in orders was excellent at 7%.

Operating income was up 29%, driven by the top-line growth and operational excellence improvements, resulting in a 120 basis point improvement in operating income margin.

Net income was up 30% and diluted earnings per share of $0.62 were up 29%.

Cash flow from operations was $77 million, up 39% over last year's first quarter.

Overall we're very pleased with these results.

Our markets are strong, our strategy of acquiring differentiated businesses is working well, and our focus on operational excellence continues to drive profitability.

Turning our attention to the individual operating groups, the Electronic Instruments group had an excellent quarter.

Sales were up 20% on strong core growth of 6% and the contributions from the acquisitions of Advanced Industries, B&S Aircraft Parts, Cameca and California Instruments.

If the effects of foreign currency are included, internal growth was 9%.

EIG's operating income was up 27% for the quarter.

Operating margins improved 130 basis points to 23.3%, as compared to 22% in the first quarter of 2007.

The Electromechanical Group also had a great quarter with revenues up 22%.

Solid internal growth of 5% and the contributions from the Seacon Phoenix, Hamilton Precision Metals, Umeco, Motion Control Group and Drake Air acquisitions, drove the revenue growth.

If the effects of foreign currency are included, internal growth was 7%.

Operating income for the quarter was up 24%, and operating margins improved 30 basis points to 17.4% compared with 17.1% in last year's first quarter.

In addition to our excellent financial results, we continue to make significant progress in the implementation of our four growth strategies -- operational excellence, global and market expansion, new product development, and acquisitions.

Operational excellence is the cornerstone strategy for the Company, and our relentless focus on cost and asset management has been a key driver to both our competitive and financial success.

This quarter was no exception, as we dramatically improved operating margins by 120 basis points to 19%.

While there are many factors contributing to this improvement, operational excellence is clearly a driver to our strong operating results.

At each business unit, AMETEK colleagues are implementing initiatives to improve plant productivity and quality, reduce costs and increase capital efficiency.

In addition to these business unit level activities, there are some companywide initiatives that are driving significant financial benefits.

Our global sourcing office and strategic procurement initiatives are expected to be a key driver to increase profitability in 2008.

We expect to generate 16 million in incremental savings this year from these activities.

In the first quarter we realized $4.5 million.

In 2008 we are continuing our migration to best cost manufacturing locales, Reynoso, Mexico, Shanghai, and the Czech Republic.

Revenues from these plants is expected to total 365 to $375 million in 2008, an increase of 40 to $50 million from 2007.

In the first quarter, revenue from our best cost facilities was $92 million, an increase of 14% over the first quarter of 2007.

Global and market expansion continues to be a driver for AMETEK's growth.

In the first quarter international sales grew by 24% and were 51% of our total sales.

This growth was driven by demand for our process, aerospace, power and electromechanical products.

In 2006, we took on additional sales and marketing expense to help fuel our internal growth, including new sales offices in [Shangdu], China and Moscow.

These investments are paying off in higher sales and increased penetration of these growing markets.

Our sales office in Moscow recorded a 30% increase in sales to Russia and the CIS region in the last year.

We have recently doubled the size of our staff in this office to support our growth in this key geography.

To support the international growth of our MRO business, we have opened two new facilities -- one in Singapore, and the other in Paris.

These facilities are critical to our ability to service global customers and to expand our MRO platform.

We're also very excited about the upcoming opening of AMETEK Commercial Enterprise Shanghai -- or ACES -- our sales, service and demonstration center.

ACES will give us a first-class customer demonstration facility, exhibiting the full range of AMETEK's instrument offerings.

It also gives AMETEK the ability to drive service revenue growth in China by offering these services to our customers rather than relying on third parties.

We believe that ACES will be a key element in our plan to drive higher revenue from China; in the first quarter our China revenue was up 22%.

Another key area of internal growth is new product development.

We have consistently invested in RD&E.

This year the total is expected to be $115 million, up 12% over last year.

Internal growth, reflecting the continued strong level of funding and the traction from our design for Six Sigma efforts, was a strong 6% overall in the quarter.

While no single new product is significant to AMETEK as a whole, we are excited about some recent introductions.

Cameca's new Shallow Probe technology has been embraced by two large semiconductor manufacturers, with more customer wins expected.

Our aerospace division won contracts to supply bus adapter units on the Alenia C-27 aircraft and a C-5 retrofit program.

These contracts have a total value of $6 million over the life of the multi-year program.

Our [ACC] business booked an $8.5 million order from a defense contractor for electrical interconnects to be used in a next-generation IED detection technology.

Potential over the next several years for this product could be substantial.

Our Hamilton Precision Metals business booked a $1 million plus contract for a very thin stainless-steel metal strip with an ultra-smooth surface finish that will be used for solar panel substrates.

From an overall perspective, revenue from products introduced over the last three years was 16% of sales, reflecting the excellent work of our businesses in developing the right products to serve their customers.

Turning to acquisitions, we have acquired four companies this year representing more than $120 million in annualized revenue.

These are all differentiated businesses that expand our market positions in aerospace MRO, technical motors and engineered materials.

In the first quarter we acquired Newage, Drake Air, and Motion Control Group.

Newage was a technology acquisition which added materials hardness testing capability.

Drake Air is a Tulsa, Oklahoma-based provider of heat transfer repair services to the commercial aerospace industry with expected annual sales of $15 million.

This acquisition represents a further expansion of AMETEK's growing presence in the global aerospace maintenance repair and overall services industry.

Drake, coupled with AMETEK's recent acquisitions of Umeco Repair & Overhaul, Southern Aeroparts, and B&S Aircraft Parts, expands our global MRO platform.

Drake extends our MRO capabilities to the thermal management segment of the aerospace market by providing FAA-approved repair services for these products.

With this acquisition, our aerospace MRO platform has revenues in excess of $100 million.

The third acquisition was Motion Control Group, a leading global manufacturer of highly customized motors and motion control solutions for the medical, life sciences, automation, semiconductor and aviation markets.

With annual sales of 26 million, MCG is an excellent strategic fit with our highly differentiated technical motor business, sharing common markets, customers, distribution channels and motor platforms.

Finally, last week we announced the acquisition of Reading Alloys, a privately held niche specialty metals producer.

With annual sales of approximately $80 million, Reading is a global leader in specialty titanium master alloys and highly engineered metal powders used in the aerospace, medical implant, military and electronic markets.

Reading's titanium master alloys are experiencing outstanding growth, driven by increasing demand for titanium in the commercial aerospace, military aerospace and power generation markets.

80% of Reading's sales are in aerospace and defense applications.

The pipeline of acquisition candidates remains strong, and we continue to look to add differentiated businesses to AMETEK.

We have the financial and managerial capacity to continue to do acquisitions, and believe this will be a great environment for AMETEK.

There is much concern among investors about the slowing US economy.

To date, we have seen only minimal impacts to our business.

Our diversified global customer base, significant exposure to long cycle markets, a lack of presence in certain very weak areas of the US economy, and our operational excellence capabilities, provide AMETEK and you as investors with a buffer against an economic slowdown.

Some key points.

Our customer base is global, with 51% of our sales outside the US, up from 32% in 2001.

The international markets are doing extremely well now.

We have significant revenue, approximately $750 million, concentrated in the long cycle aerospace and power markets.

From all market indications, these businesses should enjoy a number of years of solid growth.

In addition, it should be noted that these long cycle businesses have higher-than-average profitability.

We have minimal exposure to the residential housing and automotive markets -- two particularly weak areas of the US economy.

Also, when necessary, we will react swiftly to align our cost base with economic realities.

This capability enabled us to improve markets throughout the last downturn, one of the first industrial companies to do so.

In addition, as a precautionary measure, we included general belt-tightening improvements in our 2008 budget.

Pulling all of this together, only about 25% of our sales, and a smaller amount of our profitability, are exposed to the short cycle US economy.

Our higher profit, long cycle businesses should continue to perform well in an economic downturn.

And when needed, we have the ability to react swiftly to properly size our operations to continue our strong profitability.

Turning to the outlook for 2008, we are very optimistic about our prospects for the balance of 2008 and are increasing our guidance for the year.

All of our key markets are strong.

For the year, revenue is estimated to increase in the high teens on a percentage basis, on mid single-digit core growth in each group and the annualized impact of acquisitions.

Internal growth of the Electronic Instruments Group will benefit from continued strength in our aerospace, power and process businesses.

In the Electromechanical Group, the core growth will be driven by strong performance in our differentiated businesses.

The full-year impact of our 2007 acquisitions, as well as the impact of the acquisitions we have completed to date in 2008, will also be a key contributor to the top-line growth.

Earnings are expected to be approximately $2.47 to $2.52 per diluted share, an increase of 17% to 19% over the 2007 level of $2.12 per diluted share.

For the second quarter of 2008, sales are expected to be up in the high teens on a percentage basis from last year's second quarter.

We estimate our earnings to be approximately $0.61 to $0.63 per diluted share, an increase of 13% to 17% over last year's first quarter of $0.54 per diluted share.

In summary, we are very pleased with our performance in the first quarter.

Solid internal growth and the contributions from acquired businesses enabled us to grow the top-line by 21%.

We have been able to translate the top-line growth into bottom-line performance, driving significant margin expansion and strong net income and earnings per share growth.

2008 is shaping up to be another great year.

All of our key markets are strong.

Our operational excellence, capabilities, global customer base, exposure to long cycle aerospace and power markets, and the impact of our recent acquisitions should enable us to grow both the top and bottom lines and meet our earnings estimates, even as the US economy slows.

The pipeline of acquisition candidates remains strong, and we continue to look to add differentiated businesses to AMETEK.

We look forward to building on our track record of success during 2008, and remain confident that our four growth strategies will continue to create value for our shareholders.

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

Thank you, Frank.

The results we are reporting today demonstrate a continuing high quality of earnings, strong margin growth, and a balance sheet well equipped to support our growth plans.

As Frank has covered our results at a high level, I will focus on some particular areas of interest.

Selling expenses were up 22% in the first quarter, essentially unchanged as a percent of sales.

Excluding acquisitions, selling expense increased in line with our core growth.

Corporate G&A expense for the first quarter was roughly flat on an absolute basis when compared to last year's first quarter, and fell to 1.6% of sales, as compared to 2% in last year's first quarter.

We expect G&A spend for the full-year to be about the same as 2007.

The effective tax rate for the quarter was 33.9%.

We expect the effective tax rate for the full year 2008 to be approximately 32.5 to 33%.

As we have said before, this is a full-year rate, and actual quarterly rates can differ dramatically, either positively or negatively, from this full-year rate.

On the balance sheet, working capital -- defined as receivables plus inventory less payables -- was 21% of sales for the first quarter, essentially unchanged from last year's first quarter.

We continue to see an opportunity to reduce our working capital investment.

Our plans are to reduce this overall percentage in 2008.

Capital spending was $9 million for the quarter.

Depreciation and amortization was $14 million in the quarter.

For 2008, we expect that capital expenditures will total approximately $50 million, while depreciation and amortization is expected to be about $60 million.

Operating cash flow for the first quarter was superb, and totaled $77 million, up 39% over the first quarter of 2007.

We expect operating cash flow for the Company to be roughly $335 million for the full year, up about 20% from last year.

In January, the Board approved an increase to the authorized level for stock repurchases, adding $50 million to the approximately $26 million that remained under previous Board authorization.

In keeping with our strategy of opportunistically repurchasing common stock to offset the dilutive impact of our benefit plans, during the first quarter we expended $43.5 million repurchasing 1 million shares of our common stock.

At March 31st, approximately 32.4 million remained available under this Board authorization.

Total debt was $904 million at March 31st, unchanged from December 31st.

Offsetting this debt is cash and cash equivalents of $115 million, resulting in a net debt to capital ratio at quarter-end of approximately 38%, up slightly from 37% at the end of 2007.

These ratios reflect the investment of $75 million in acquisitions and the repurchase of $43.5 million of common stock noted above.

At the end of March, we had approximately $633 million available under our short-term credit lines.

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

Bill?

That concludes our prepared remarks.

Jessica, we'd be happy to take questions now.

(OPERATOR INSTRUCTIONS).

Jim Lucas, Janney Montgomery Scott.

Frank -- actually, let me start first with John.

Payables number in the quarter?

237 million.

Thanks.

Frank, two questions.

With the MRO business, you mentioned the two new offices internationally.

Could you comment, from an acquisition standpoint -- as you've been building out that business, it's been more domestic to begin with.

Are there equal opportunities from a consolidation standpoint on the international front?

And then, somewhat related to that, could you speak to what you're seeing in the acquisition environment in general, particularly with the multiples that you're seeing out there?

Sure.

Starting with the MRO business, there's definite opportunities in Europe to do the type of consolidations that we are talking about and are doing in the US.

You may recall that we acquired Umeco, which was a large MRO operation in Europe, and we see good opportunities to extend that platform by adding more companies to it.

In Asia, the acquisition environment for acquisitions in general, I would say, in our space, as well as specifically in the MRO business, are not as strong.

And that's in essence why we decided to start our own operation in Singapore.

We think there's significant leverage in terms of servicing that market, but the strategy there will be much more internally driven than acquisition driven.

In terms of the overall acquisition environment, it's extremely good right now.

We have definitely done a lot already in the first three to four months of the year, with over $120 million in annual sales acquired.

Our backlog is strong.

And I would say in terms of the pricing, Jim, it's a little bit of a mixed bag right now.

We are still seeing on some acquisitions pricing that is very high.

And I think it's somewhat historical from the viewpoint of the seller's viewpoint that they were getting used to higher multiples and have not decided to come down yet.

Yet on the other side of the coin, we're also seeing on some deals the pricing come down.

And if you look at what we've done in the first four months of the year, we are averaging sub-8 times EBITDA on the deals that we have done.

So I would say for those deals we are down a bit from what we had done, say, over the previous 18 months to that.

My expectations are that we're going to see the multiples come down, and hopefully we'll be back to more normalized levels in the next six to nine months.

And to your point on the bifurcated multiples that you're seeing out there, I guess, just to take it one step further, is it any particular types of deals, sellers?

Is it private expectations versus companies and private equity looking to perhaps raise some funds?

It's really hard for me to put any further clarification on that.

It just seems to be somewhat sporadic right now, and I think that's probably not that atypical as to where we are in the cycle.

Thank you very much.

John Baliotti, FTN Midwest.

John, could you maybe just go over receivables inventories a little bit?

The quarter was obviously very strong, and I'm just expecting that maybe some of the inventories and so on and receivables just could be factored based on core growth and acquisitions.

Is that fair?

Let me give you some perspective there.

Our inventories are up about 6% when you extract the effect of acquisitions, so it's clearly in line with the way the Company is growing.

And our receivables are up 7%, also in line with the growth of the Company.

Our metrics there are acceptable, 61 days on days outstanding on receivables, down slightly from a year ago.

And turns were about 4.6 turns.

And that's really the effect of the acquisitions in the last six to 12 months have taken that metric down slightly.

But we've got some plans to improve that in the near term.

So, in general, underlying, everything is tracking pretty well; it's just the obvious short-term impact of taking on the balance sheets of the acquired companies?

And the internal growth, and plus you've got some currency effect.

The Euro inventories are coming to the balance sheet at a much higher dollar level than they were a year ago.

Thanks very much.

Amit Daryanani, RBC Capital Markets.

Congratulations on a good quarter.

I'm just trying to better understand the 2008 guidance here.

It looks like Q1 was about $0.10 ahead of the midpoint of your prior guidance, but you're raising the full year '08 by about $0.07.

The way I'm looking at it, implicitly, you're really lowering about $0.03 off the remaining three quarters in 2008.

Is that the correct way to look at it, or am I missing something?

You're missing something.

The first quarter was about (multiple speakers)

Our guidance was $0.56 to $0.58, and we came in at $0.62.

So we're about $0.05 above the midpoint for the first quarter.

From an acquisition perspective, could you talk about -- you've done, obviously, quite a few deals in the last three or four months.

Is the focus more just kind of back -- taking a step back in terms of doing (inaudible) deals and integrating the ones we already have done?

(multiple speakers)

Absolutely not.

We view a slowing economy as an opportunity to become more aggressive on acquisitions.

You may recall that last year we substantially increased the M&A capability in the Company so that we would be able to take on more acquisitions.

And in fact, we've now proven that we can do three or four deals simultaneously, and our ability to integrate them I'm very, very comfortable with.

As we grow the Company, we've been increasing the operating management in the Company significantly.

And since -- we've got a lot of appendages in terms of different business units and different acquisition -- different divisions, we're able to bring them on and integrate them without significant difficultly.

What we won't do is bring multiple acquisitions into the same business unit area.

Because we've got enough different parts of the Company, we just don't see that as a problem and continuing aggressiveness that we've shown in the first four months.

Finally, Frank, I think, already talked about a new program that you guys won on the counter measurement IED product line.

I think six or seven quarters ago, you guys were providing cooling fans (inaudible) comparable product.

Is this just the resurrection of the old one, or is this a new one (multiple speakers)

(multiple speakers) totally different technology and a different approach, and it's actually used to find IEDs in the ground.

So it is more of an infrared-type technology, and I can't speak to the particulars of the program in any more detail than that.

But, obviously, the whole IED environment is the most significant issue that we're having in the wars in Iraq and Afghanistan, and the military is just looking for significant technology to be brought to bear to those issues.

And this most recent contract that I mentioned is just another foray into that activity.

Thanks a lot.

(OPERATOR INSTRUCTIONS).

Wendy Caplan, Wachovia.

First, you mentioned belt tightening in '08.

Can you give us some color on that in terms of what exactly you're doing and what you expect to spend this year?

Yes.

As part of the budgeting process, we decided, as I mentioned in my opening remarks, to do some belt tightening.

It totaled about $5 million in terms of the benefit that we expect in 2008 due to those belt-tightening measurements.

They include things like the closure of some plants, predominantly in the United States; basically, looking at areas in SG&A -- you may have noticed that our SG&A was very, very good for the quarter.

So we just decided to take some actions on the SG&A to keep it more in line with what we see might be happening in the US economy.

The cost to do this -- I don't actually remember the number, but they were not substantial.

It was less than $1 million to make that happen.

Thank you.

The incremental margin in your core businesses this past quarter?

It was just excellent.

We were greater than 40% on the contribution margin in the first quarter.

Is it fair, Frank, to say that in terms of margin going forward, that there's no reason why we shouldn't see margin expand in your two segments?

I think as we go forward, there's still the opportunity to continue to increase margins.

I see no reason why it isn't going to happen in both segments.

One thing you should recognize is that a number of the acquisitions we brought on this year are in EMG, so there'll be a little bit of dilutive impact in EMG due to those acquisitions.

But still, we believe we're going to expand margins as the year goes on, essentially offsetting that dilutive impact.

Thank you.

Finally, you mentioned that you had core order growth in the quarter of 7%.

That's correct.

Was that excluding currency?

Yes.

That's excluding currency.

Is there anything particular that was in there, any large contracts, or anything that would be out of the ordinary?

No.

I would say it was fairly normal.

We did get a couple contracts in aerospace of 7 or $8 million, but that's very typical.

Thank you very much.

Scott Graham, Bear Stearns.

We'll move to Richard Eastman, Robert Baird.

A couple questions, Frank.

When we look at the EIG piece of the business, with that core growth of 6%, could we just walk through the four pieces there, what was perhaps above that and what may have been below that?

Let's start with aerospace.

Aerospace was in essence well above it.

We had low double-digit growth in the aerospace part of EIG.

The process businesses were about at that rate, mid single-digits.

And power and industrial, the combination of both of those, was about that level, maybe just slightly below.

And in essence, if you look at the breakdown between power and industrial, power was up low double-digits, and industrial was flat, as we had anticipated.

The heavy truck market continued to be down in the first quarter, although we're expecting that's going to improve substantially as the year goes on.

In fact, the power and industrial segment for the remainder of the year, actually, for the full year, even including the first quarter, we're expecting to be up high single-digits in terms of organic growth.

I guess maybe I'm sensing a little more optimism there from a core growth rate standpoint than we heard, say, at the end of the fourth quarter overall.

I'm feeling, actually, much more comfortable right now than I did at the beginning of the year, because I didn't exactly know what the impacts of the economy were going to be.

Now that we're a quarter in, and we've had, obviously, an excellent quarter, and we've really polled our operating units to see if we could find any substantial areas of weakness, and we simply can't find those, I'm pretty optimistic.

So you're probably hearing that in my tone and in my voice.

And I am feeling better; no question about that.

When I look at the sales guidance for the full year up high teens, the Q1 flurry of acquisitions that you did pretty much put us there.

So, are we still, again, kind of staying reasonably conservative on the core growth rate with some upside there?

Yes.

No question the numbers we've given you are on the conservative side, and we would expect to beat them.

Could you just talk to raw material costs and pricing, and the variance there that you're seeing?

Has that changed during the quarter in the first quarter?

It is.

It's moving around; no question about it.

But let me start by saying -- and I think you've heard this from me before -- that in essence, we're relatively impervious to what happens on that commodity price increase.

We do an excellent job of passing the cost of commodity material increases onto our customers, and also rebalancing and buying the materials from different parts of the world, so that, in essence, it's not a major factor to our bottom-line.

If I could sort of walk through the materials, copper has tended to go up.

It's approaching $4 a pound right now, and it probably was more at $3.50, roughly, at the beginning of the year.

I'm not sure I'm exactly right on that, but it's in that ballpark.

Steel, which started to show some improvements last year, has gone up a bit again.

And the other commodity would be nickel.

Nickel has actually come down; that's gone the other way.

Nickel, the end of last year, say, the third and the fourth quarter, we were up above $20 a pound, and it's now floating down in the $13 a pound region.

So it's been sort of a mixed bag as to whether they're going up or whether they're going down.

But again, in terms of our profitability, it's been a very minor factor.

With all the puts and takes at the gross profit line, has pricing been a positive for you?

Yes.

Pricing has been definitely a positive.

We were up in the 1% to 2% area in the quarter.

For sales?

Of sales.

Thank you.

Matt Summerville, KeyBanc.

With respect to EIG, I think operating margins in the quarter set a new record, if I remember correctly.

Can you talk about if there's anything going on as far as product mix, if that type of margin run rate, I guess, Frank, is sustainable?

We don't see any reason why that would not be sustainable, and it basically is driven by a couple of things.

One is the fact that we've really changed the diversification of that business to much more highly technology-driven businesses.

And as we do that, the profit margins in those businesses are higher than the norm, and the margins keep incrementing up.

The second thing is the operational excellence activities of the operating managers in that group have been nothing short of superlative.

They just continue to really do a great job of managing their cost structure.

So I think the biggest detriment to margins will be if the economy does in fact weaken, and the internal growth doesn't stay up in that 6, 7% kind of region.

And that will have an impact over time.

But we're simply not seeing that now, nor do I anticipate it for the rest of this year.

Sticking with EIG, if you look at just the process group of businesses, do you have a geographic breakdown in terms of how much of that is US versus non-US?

Can you talk about the momentum you're seeing again in your domestic process group of businesses versus non-US?

Bill's looking it up, but I'll give you my off-the-top thought process here.

I think it's about 65% outside the United States for those process businesses.

There is a difference between the growth rates outside the US and those inside the US.

There's a lot of new plant construction going on outside the US in both the Far East, as well as in Russia and the CIS states.

And as you know, we put a sales office in Moscow to capitalize on that, and we're seeing that as we speak.

We're very, very strong performance there.

In the US, it's more of a replacement business.

So, the growth rates aren't quite as high, although they're very good.

It's a great area to be in right now.

And, obviously, the price of oil at $117 a barrel is not a detriment to the growth.

With respect to EMG, can you do a little bit of a walk-through in terms of the core growth rates you saw across the different businesses there?

Did you say EMG?

Yes, please.

Sure.

Well, if we look at total EMG, sales were up 22% in the quarter.

And as I indicated, organic growth was 5%.

7% of currency is included.

So, if we look at the two parts of that business, the differentiated part of EMG continues to be very, very strong.

It's actually now 72% of EMG's sales are in differentiated businesses.

So this sort of change that we've made across the entire company is really becoming significant now in the Electromechanical Group as well.

The aerospace and defense-related businesses were very, very strong in the quarter.

Q1 internal growth was up high single-digits in the differentiated part.

Total growth with acquisitions was up approximately 30%.

So, very strong performance, and we see no reason why we're not going to have good performance as the year goes on.

If we look at cost-driven motors, that was doing fine.

Basically, in the first quarter, the growth was flat, as anticipated.

I think you're well aware that we run that business for maximum profitability versus growth.

We've been continuing to move production to low-cost locales, and we have a strong focus on lean and efficient manufacturing.

I think you heard some of my metrics in the opening talk, where we basically expect to have 40 to $50 million more of sales in these low-cost regions during the year, and also some very, very strong performance in the sourcing area.

And as a result, for this cost-driven segment, we expect profits to be up double-digits for the year.

So we're expecting another very, very good year in cost-driven motors, although not, obviously, with the same organic growth we see in the differentiated part of the business.

Thanks a lot.

Ned Armstrong, FBR.

I believe I heard you when you were going through your acquisitions, the one, Motion Control, served the medical market.

Is that a greater area of focus in your acquisition targeting now, or is that just more happened to be coincidental that the deal flowed your way?

There's definitely a desire on our part strategically to move our businesses, basically, in the instrument and the motor side of the business, to have a higher concentration in both medical instrumentation and electromechanical devices for the medical markets.

Also pharmaceutical, not just medical.

It's really the combination of both of those.

Our TIP division already had fairly sizable concentration in the medical environment, and when we saw MCG available in the market, it's just a perfect fit with TIP.

And it further expands the concentration of our business into that arena, so we're going to continue to expand out.

Are you seeing in the pharmaceutical and medical markets proportionately the same number of opportunities that you may be seeing in some of your more core traditional markets?

I would say I'm not seeing as many in the medical environment as I am seeing in more of the core businesses.

Thank you.

(multiple speakers) but we're not.

(OPERATOR INSTRUCTIONS).

Jim Lucas, Janney Montgomery Scott.

Frank, your aerospace business now -- could you bring us up to date on what the mix is there when you put the EMG and EIG exposure of commercial, etcetera?

The mix is commercial is about 50%, military is about 35%, and business and regional aircraft is now about 15%.

So, there has been a shift in the dynamics of that business resulting from several things.

First, the super growth in the commercial side has made it a larger pace piece of the business.

And secondly, some of the acquisitions we have done have favored more commercial and military than business and regional aircraft.

Within both commercial and military, the OE versus aftermarket?

If you look at the total business now across AMETEK, it's about 45% MRO.

And of that 45%, about half is third-party MRO, and about half is MRO work we do on our OEM products, if that makes sense.

Yes.

Within military, still weighted much more toward the helo versus plane sight?

I would say the growth is definitely very, very good in the helo side.

The overall business, I would say, is not weighted that way; it's probably weighted more the other way.

But in terms of growth, yes.

Back in your prepared remarks, you had talked about roughly 25% of sales short cycle.

Besides the cost-driven motors, what else would be included in there?

If you look at some of our instrument businesses, for instance, we have a division, US Gauge, that's involved in gauges that cost $1, $2 each.

And those businesses we would include in that also.

Actually, the TIP division we were just talking about a few moments ago has largely a US concentration, and largely tends to be in that arena.

Finally, given the very busy last couple of years you've had on the acquisitions front, and most recently, any surprises, positive or negative, on the integration of the more recent deals?

No, I would say it's going pretty much to plan.

If I step back, we've been very, very fortunate.

And I think it really relates to the operational excellence culture that's embedded in AMETEK.

Our division managers are able to take these acquisitions and integrate them, etcetera.

John is smiling a little bit here next to me, because he and I used to be so ingrained in every deal that we do, and we no longer have to be.

Because in essence, the operating management in the Company is strong enough that they are able to bring them in.

And as they gain experience in doing these acquisitions, the second or third time they do them, obviously, they're much better than the first time.

So it's going along pretty good.

John, do you want to add something?

Jim, you've probably heard us say this before, but we rigorously track our acquisitions' performance through the first year, through their birthday, so to speak, with AMETEK.

I do that for all of our acquisitions, and they're spot on.

Just taking a look at some of the ones that will close out in the second quarter of this year, they're spot on in terms of what we projected, with a slight upside bias.

So we're, in the aggregate, very, very comfortable with the performance of our acquisitions.

If you're getting John to smile, you must be doing something right.

Thanks a lot.

Richard Eastman, Robert Baird.

Frank, could you just talk for a second or two about the percentage of AMETEK sales that are true export-driven?

And by that I mean US to international markets.

And is that business -- first of all, is it sized so that it can be meaningful?

And secondly, has it responded to the weaker dollar?

These guys are looking up the numbers, but I think it's around 30% is the right number that would be considered export sales.

And, yes; obviously, the currency is impacting -- actually, it's probably impacting us more here in a positive way than the way all of our peer companies and us talk about the external numbers, because you've got a sizable pricing advantage because of, particularly in Europe, because of where the Euro is right now.

It's very, very difficult to quantify, very difficult to quantify how much of the increase in sales is due to new products, how much is due to basically the increase in the distribution networks that we're putting in place, and how much is due to this pricing advantage.

But it's there; there's absolutely no question about it.

Presumably it would favor -- given the mix, it would favor aerospace and the process instrument side of the business.

Very heavily the process side, because that has a more significant impact on what we call export sales.

There's something sort of hidden below the numbers here in that a good part of our, for instance, production that we give to Boeing, we call that US business, where in fact a lot of that ends up outside the United States when it's put in planes.

And we don't have really an accurate breakdown of that.

And it's 30% of total sales?

I'll have to get back to you (multiple speakers) total export sales, I don't have the number with us in here (multiple speakers)

That's where my gut is, but I could be off some.

Thank you.

There are no further questions.

I'd like to turn the conference back over to you, Mr.

Burke, for any additional or closing remarks.

Thank you, Jessica.

We'd like to thank everyone for joining our call.

As a reminder, a replay of the call can be heard by calling 888-203-1112, and entering the confirmation code number 722-8440, or on the Internet at AMETEK.com or StreetEvents.com.

Thank you.

This concludes today's presentation.