阿美特克 (AME) 2008 Q4 法說會逐字稿

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

fourth-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.

Please go ahead, sir.

Thank you.

Good morning and welcome to Ametek's fourth-quarter earnings conference call.

Joining me this morning are Frank Hermance, Chairman and Chief Executive Officer, and Bob Mandos, Senior Vice President and Comptroller.

Ametek's fourth-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 February 13 by calling 888-203-1112 and entering the combination code number 824-7526.

This conference call is also webcasted.

It 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 historical in nature are to be considered forward-looking statements.

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

Those risk 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 will now turn the meeting over to Frank.

Good morning.

As Bill mentioned, we're joined on the call today by Bob Mandos, our Senior Vice President and Comptroller, who will be filling in today for John Molinelli.

Bob is a 20-year veteran of the Company and has been our Corporate Comptroller for the last 12 years.

John Molinelli, the Company's Chief Financial Officer, was injured in an accident.

He is currently recuperating at home and will be back with us when his recuperation is complete.

Turning now to our financial results, despite difficult economic conditions, Ametek had a very good fourth quarter.

Sales were up 7%, $623.7 million on the contributions from acquired businesses, offsetting a weakening core growth environment.

Internal growth in sales was a negative 2%.

If the effects of foreign currency are included, internal growth was a negative 6%.

Operating income, excluding our fourth-quarter restructuring charge, was up 18%, and operating income margins expanded 180 basis points.

Adjusted earnings were up 15%, and diluted earnings per share were up 16%.

As a result of the global economic downturn, order rates for our businesses slowed dramatically in November and December.

Orders were down 10% for the fourth quarter of this year versus less year's fourth quarter.

As we assess this slowdown and we put together our business plans for 2009, it became readily apparent that we needed to realign the Company's cost structure with expected market conditions.

In the fourth quarter, we recorded a pretax restructuring charge of approximately $40 million or $0.25 per diluted share to cover the cost of employee reductions, facility closures and asset write-downs.

At a group level, the charge was evenly split with approximately $20 million recorded in each group.

As part of the plan, we expect to reduce our headcount by more than 10%, close or significantly reduce 10 manufacturing facilities and reduce other spending throughout the Company.

While these actions are difficult, particularly for the colleagues and communities affected, they are necessary to maintain our financial and competitive position.

Importantly we do not believe these reductions will harm the long-term growth prospects of the Company.

As an example, research, development and engineering expense is planned to increase 3% in 2009.

We expect to generate approximately $75 million in annual savings from these cost reduction activities in 2009.

The benefits of these restructuring activities will have a greater impact in the second half of the year.

The following discussion will exclude the restructuring charge.

For a reconciliation to the applicable GAAP numbers, please refer to the press release we issued today or to Ametek's website.

Turning our attention to the individual operating groups, Electronic Instruments Group had a very good fourth quarter.

Sales were up 8% to $361.6 million, driven by strength in our power and process estimate businesses and the contributions from the acquisitions of Vision Research, Xantrex Programmable Power and California Instruments.

Core growth was flat in the quarter.

If the effects of foreign currency are included, internal growth was a negative 2%.

EIG's operating income was up 23% for the quarter.

Operating margins improved 300 basis points to 24.8% as compared to 21.8% in the fourth quarter of 2007.

For the full year, EIG sales were up 17% to $1.4 billion driven by growth in our aerospace, power and process businesses, as well as the contributions from acquisitions.

For 2008 EIG operating income was up 26% to $327.1 million.

Operating margins improved 160 basis points to 23.3%.

The Electromechanical group had a good fourth quarter considering the economic environment.

Revenues were up 6% to $262.1 million from the contributions from the Reading Alloys, Muirhead Aerospace, Drake Air, Motion Control Group, and the Umeco Repair & Overhaul acquisitions, more than offsetting difficult market conditions for our cost-driven motor business.

Core growth in EMG was a negative 6% for the quarter.

If the effects of foreign currency are included, internal growth was negative 10%.

Operating income for the quarter was up 4% to $44.1 million.

Operating margins were 16.8% this year as compared to 17.2% last year.

For the full year, EMG sales were up 20% to $1.13 billion, driven by the contributions from acquisitions and strength in our differentiated businesses.

For 2008 EMG operating income was up 16% to $194.6 million.

Operating margins were 17.2% as compared with 17.8% in 2007.

As many of you are aware, we're focused on four growth strategies to draw Ametek's growth and profitability -- operational excellence, global and market expansion, new product development and acquisitions.

At various points in the business cycle, individual strategies will assume a greater or lesser importance in moving the Company forward.

Today, as in the last economic downturn, our operational excellence and acquisition strategies will play the most prominent role in driving the success of Ametek as we aggressively address the impact of the current economic slowdown.

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.

As the economy weakened during 2008, we were proactively reducing cost.

The restructuring actions taken during the fourth quarter indicate our focus on making sure the cost structure is properly aligned with expected market conditions.

As well, at each business unit, Ametek colleagues are implementing initiatives to improve plant productivity, reduce costs and increase capital deficiency.

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 have been key drivers to increase profitability in 2008 and will be again in 2009.

We generated $21 million in incremental savings in 2008 from these activities.

For 2009 we expect to realize a similar amount of incremental savings.

We are continuing our migration to best cost manufacturing locales -- Reynosa, Mexico, Shanghai and the Czech Republic.

The restructuring actions announced today represent a continuation of these activities.

Revenues from these plants is expected to total approximately $330 million in 2009.

This reflects an increase of $20 million in differentiated products offset by a decline in our cost-driven motor business, which primarily produces in these facilities.

As a result of the very aggressive overall cost reductions we have initiated, which include the restructuring activities, we are very well-positioned to handle the weakening economic environment in both 2009 and 2010.

The restructuring alone will have over a $100 million positive operating income impact in 2010.

Turning to acquisitions, in 2008 we acquired seven companies, representing approximately $300 million in annualized revenue.

Last week we made our first acquisition of 2009, acquiring High Standard Aviation.

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

In November we announced the acquisition of Muirhead Aerospace Limited, a leading manufacture of motion technology products and a provider of avionics repair and overall services for the aerospace and defense markets.

With annual sales of approximately $54 million, UK-based Muirhead expands Ametek's penetration in Motion Control products for the aerospace and defense markets, including actuators and other specialized linear motors complementing our existing technical motor capabilities.

As well, Muirhead further expands and strengthens Ametek's position as a leading independent provider of MRO services to the European aviation industry.

It provides avionics repair services to a wide variety of commercial, business jet and defense customers.

Last week we acquired High Standard Aviation, a Miami-based provider of aftermarket repair services to the aerospace industry.

The privately held High Standard Aviation has annual sales of approximately $31 million.

High Standard Aviation strengthens our capabilities in electrical, electromechanical and hydraulic repair and provides us with a valuable presence in Miami, a key MRO hub for the Southeastern United States, as well as Latin America.

It also adds to our position in the air cargo segment of the MRO business, broadening our base with a number of key customers.

We continue to look to add differentiated businesses to Ametek and will remain a very disciplined yet aggressive acquirer.

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

Turning our attention now to the outlook for 2009, we expect that 2009 will be a challenging year given the continuing economic downturn.

Based on our current understanding of market conditions, which has a more than normal level of uncertainty, we anticipate that 2009 revenue will be down slightly from 2008.

Contributions from acquisitions will more than offset -- will be more than offset, excuse me, by mid single digit negative core growth in each group and currency headwinds.

Consistent with our announcement last week, we expect our earnings to be in the range of $2.40 to $2.60 per diluted share.

This estimate includes an additional $23 million in pension costs or $0.14 per share.

Given the weak order input in the fourth quarter of 2008, we expect that we will have a weak first quarter of 2009.

Sales are expected to be down slightly from last year's first quarter.

We expect our earnings to be approximately $0.54 to $0.58 per diluted share as compared to last year's first quarter of $0.62 per diluted share.

This estimate includes approximately $0.035 from additional pension costs in 2009.

In summary, we're pleased with our performance in the fourth quarter.

We grew our top line by 7%.

In the face of a weakening core growth environment, we increased operating margins by 180 basis points and diluted earnings per share by 16%.

We have aggressively realigned our cost structure to deal with the current market expectations.

We expect 2009 will be a very challenging year given the continual global economic downturn, but we believe that Ametek's strong portfolio of businesses, proven operational capabilities, lower cost structure and a successful focus on strategic acquisitions will enable us to outperform in 2009.

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

Bob Mandos will now cover some of the financial details, and then we will be glad to answer your questions.

Thank you, Frank.

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

The cash portion of the $40 million restructuring charge is approximately $32 million, primarily related to severance cost.

Excluding the restructuring charge, selling expenses were up 9% in the fourth quarter.

Excluding the effective acquisitions, selling expense was down 2%.

Corporate G&A was essentially unchanged from last year's fourth quarter in absolute dollars and fell to 1.8% of sales as compared to 2% of sales in last year's fourth quarter.

After excluding the charge related to the accelerated vesting of restricted stock in Q2, G&A spend for the full year of 2008 decreased to 1.7% of sales versus 1.9% of sales for 2007.

The effective tax rate for the quarter was 32.3%, slightly higher than last year's fourth quarter of 31.7%.

For the full year, the effective tax rate was 32.5%, in line with our expectations.

We're planning on a similar tax rate of 32.5% for 2009.

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.

Like most other defined benefit pension plans, our defined benefit pension plan's returns were impacted by the performance of the stock and bond markets last year, reducing their funded status.

Just prior to year-end, we made a contribution of approximately $74 million to our defined benefit plans.

With this contribution, our US defined benefit plan is 100% funded at year-end.

Despite this large contribution, in 2009 pension costs will be a significant headwind.

Total pension costs for Ametek will increase approximately $23 million or $0.14 per diluted share.

These additional costs are included in the earnings guidance that we have given for 2009.

On the balance sheet, working capital defined as receivables plus inventory less payables was 21.4% of sales for the year, down from last year's level of 21.5%.

We continue to see an opportunity to reduce our working capital investment and plan to reduce this overall percentage in 2009.

Capital spending was $13 million for the quarter and $44 million for 2008 or 1.7% of sales.

Expenditures for capital in 2009 are expected to be at approximately the same level.

Depreciation and amortization was $17 million in the quarter and $63 million for 2008.

From 2009 depreciation and amortization is expected to be approximately $67 million.

Our operating cash flow for 2008 was $247 million.

Adding back the pension funding of $74 million, operating cash flow was approximately $321 million.

Total debt was $1.1 million -- excuse me, $1.1 billion at December 31, down $46 million from September 30.

Offsetting this debt is cash and cash equivalents of $87 million, resulting in a net debt to capital ratio at quarter-end of 45%.

That is compared with 42% at the end of the third quarter.

These ratios reflect a contribution to our defined benefit plans of $74 million in the fourth quarter and $64 million paid for acquisitions.

Over the past 18 months, we have expended a significant amount of effort to improve the Company's capital structure to ensure that adequate liquidity was available to support our growth plans.

The result of this work is that Ametek has plenty of liquidity available and no significant debt maturities in 2009.

At quarter-end we had approximately $550 million of cash and credit facilities to fund our growth initiatives.

Clearly liquidity is not an issue for Ametek.

In summary, we continue to manage our cost structure and balance sheet effectively, maintaining a strong liquidity profile and positioning ourselves to navigate through the current economic downturn.

That concludes our prepared remarks.

Alan, we would be happy to take questions now.

(Operator Instructions).

Jim Lucas, Janney Montgomery Scott.

The first question is a housekeeping one.

Accounts Payable in the quarter?

That is $204 million.

$204 million, okay.

Great.

Thank you.

And then switching gears to bigger picture, one of the things that really jumped out in the quarter was the performance of EIG, notwithstanding the flat core business, which speaks to the acquisitions that I guess -- I guess it speaks to the acquisitions you made.

Can you talk about the margin profile of the Company given the busy acquisition campaign in 2008?

Yes, we are actually very pleased with the margins of the Company.

As I mentioned in the fourth quarter, operating income margin was up 180 basis points, so a very, very strong performance, and EIG was obviously the key contributor.

In the fourth quarter in particular, EIG had some strong mix in the portfolio, but more importantly than that, the cost improvements that we put in place earlier in the year had a very positive impact on EIG, and that was a key factor in driving those margins.

And now with the restructuring that we have put in place for next year, we think our margin performance is going to hang in there pretty good.

Okay.

And taking a look at the longer cycle businesses, can you speak to what you're seeing, how they exited the year?

You talked about orders being down 10%, but in particular one of the focuses lately at least from a lot of questions from investors is on the process side in particular.

And it might be helpful if maybe you could walk us through where exactly the Ametek exposure is on the process side?

Likewise within aerospace, if you can comment about the mix and what you're seeing in there, particularly in light of Cessna's news yesterday.

Okay.

Well, why don't I walk through both the aerospace part of business and the process part of the business and give you a flavor for what happened in Q4 and how we see 2009.

In aerospace those markets remain healthy.

Yet they are not as robust as last year, Jim.

If you look at the military side of our business, which for all of aerospace is roughly half of the business, due to our focus on helicopters, coupled with numerous military retrofit and upgrade programs, as well as our focus on electronic cooling, our military markets remain strong and are expected to be strong in 2009.

I noticed this morning in the Wall Street that L3 and Raytheon are talking about a very strong performance in 2009, which was encouraging to me because it supported our feeling that military is going to be good.

Different dynamics going on in commercial aircraft versus business and regional jet aircraft.

The backlog at Airbus and Boeing remain healthy, and commercial OEM shipments in 2009 should be up.

As a matter-of-fact, if you look at what is occurring, Airbus is expected to be flat in terms of shipments, and Boeing just recently increased their shipments for 2009.

Prior to the time they increased those shipments, they were going to be up about 15% because of the strike last year.

They did not ship as many aircraft last year, so they are going to ship more.

And now they are saying they are going to be up about 28% in shipments, so that bodes quite well for our commercial aircraft business.

And if you look at it in your specific question around business jets, there is no question that business and regional jets are going to be down.

The numbers are expected to be 10% to 15% if you include the Textron recent announcement.

We are very fortunate in that particular area that we have excellent content on the new Embraer and Cessna aircraft, which should allow us to outperform the market.

So when you sum all of that up -- one other point, Jim, is that the third-party MRO business, we expect to actually be up double-digits based on the large wins at Delta and American Airlines, which we recently consummated, and also the benefit of the ramp-up of our service center in Singapore.

So when you look at that whole picture, the order intake was down, it was not good in the fourth quarter.

Business just kind of stopped for everything in November and December.

But the backlogs here are strong, and we are thinking and feeling pretty good that we're going to show probably mid single digit growth in aerospace for 2009.

Switching to the process businesses, there is no question that our process businesses are beginning to weaken.

If you look at overall market expectations for instrumentation for oil and gas, including upstream, midstream and downstream, the market itself is expected to be down 5% to 10% for instrumentation.

If you look at the broader analytic instruments market, we expect similar negative growth rates.

So we've started to see that in the fourth quarter where our internal growth was essentially flat, and what we're budgeting next year and what is included in our estimates is a negative mid single digit organic growth.

So a quick summary, aerospace still looks pretty good, not quite as robust as last year.

Process business is beginning to weaken, and we believe we have covered that in our estimates.

Okay.

Thank you very much.

Christopher Glynn, Oppenheimer.

I just want to parse out some of the pieces of the restructuring cost savings, and I think you had $14 million from the third Q actions, $21 million from sourcing again and $75 million from the new actions.

I just want to clarify if the sourcing is at all a subset of the 75.

Maybe proportionally by segment where the savings is and --

Yes, okay.

In terms of the first part of your question there with the $21 million or $20 million of savings, only a little bit of that is included in the actual restructuring.

So most of that is outside of the restructuring itself.

In terms of, if we look at the full restructuring, the $75 million of cost benefit in 2009 and in excess of $100 million in 2010, the breakdown of that in terms of savings is roughly two-thirds in EIG and one-third in EMG.

A further breakdown that might be helpful to you, if you look at that savings in the year 2009, rough numbers $25 million is in the first half of the year and about $50 million is in the second half of the year.

and obviously increasing throughout the year with the exit run-rate being above that $100 million annualized rate.

Okay.

That is certainly very helpful.

And then -- that is all I have got.

My other questions were answered.

Thank you.

John Baliotti, FTN Midwest Securities.

Frank, looking at aerospace -- I don't know if it's enough of an offset -- but do you see it -- would you expect a dynamic shift between the MRO aftermarket versus new builds that if people are just keeping the aircraft they have longer, does that manifest itself in more aftermarket, or does that just take too long to show up?

Yes, I think that takes awhile to show up.

If you look at the dynamics right now in the MRO business on a worldwide basis, the US is obviously weakening.

But when you look at it on an international basis, it is still quite good.

And as I mentioned in my opening remarks, we have had major wins with two airlines.

So we're actually pretty bullish on the MRO business overall and also our Singapore repair facility, which is now up and running.

It has been approved by the FAA.

We see great growth opportunities there.

So we actually feel that the third-party, third-party MRO will be one of our strongest segments in aerospace this year.

You can benefit by some coms where there is opportunity, you just did not underline what you have last year?

That is exactly right.

That is exactly right.

So there is a difference between the market and how we're going to perform.

Right.

And in this market, or let's say last year, this year and maybe next year kind of thinking long-term, is there any kind of a shift in thinking between research and development versus M&A, or do those two strategies just run on their own course?

They are going to run on their own course, but as we did in the last economic downturn, our management focus is going to shift more towards operational excellence and acquisitions.

We think the environment for acquisitions is going to become increasingly attractive.

That is one of the reasons that we got the extra cash last year, and as those prices come down and with the talent we have now put in place where we substantially increase the M&A side of the business, we're going to really focus on that.

Now that is not to the detriment of RD&E.

As I mentioned in my opening remarks, we're going to spend actually more money on RD&E in 2009 than 2008, and we've got those systems pretty well in place, and that is going to flow.

So there's not going to be a retrenchment.

There's just going to be increased focus on the M&A side of the business.

Ned Borland, Next Generation Equity Research.

Just following up on the last question on acquisitions, do you think that -- what are your acquired revenue goals for 2009?

Well, as we have always said, we focus in that $100 million to $150 million region.

Obviously we had a great year last year with over $300 million or roughly $300 million in acquired revenue.

So it is not like there is a specific -- you know, if we make X, we're going to feel good, and if we make Y, we are not.

It is more of, are there good companies available?

Do they meet our strategic thrust?

Is the pricing right, and we have got plenty of cash where we could do more than $300 million if the right opportunities came up.

So it is very difficult for me to give you a number and say that is what we're going to do because I just don't know.

But the environment has not shifted enough that it would not be inconceivable to match last year's total?

No, not at all.

Not at all.

The environment slowed a little in the fourth quarter, which you can imagine.

It seemed like the whole world slowed in the fourth quarter.

But it definitely has come back now after the first of the year.

We have got lots of activity, lots of possibilities.

We have already closed one as you know, and we're going to be aggressive.

That does not mean we're going to get $300 million.

It means we are going to be aggressive and do the right things.

Okay.

And then second question on raw materials tailwinds, what do you have baked into your forecast for that if any?

Well, you know as I think you know in terms of commodities, as commodity prices went up, we did not have any major problem on the P&L.

Similarly, as commodities go down, we have it balanced, and we essentially pass that on through the way we price, etc.

So there also is not going to be any major positive that comes out of this.

There will be some where we have fixed-price contracts, but it is not going to be significant in the positive direction as it wasn't in the negative direction as commodities were going the other way.

Overall in terms of inflation, we have put in roughly -- I have got it written down here -- about $0.21 of cost increase just due to general inflation, wages, materials, everything.

Okay.

Thank you.

(Operator Instructions).

Richard Eastman, Robert Baird.

I just wanted to double check, what is your currency forecast for '09 at this point given the current level of the dollar?

Yes, it is a headwind of in the 3% to 4% region.

Okay.

And then Frank, you had mentioned the core growth forecast for '09 being kind of down mid singles.

That is correct.

How does that lay out just core EIG or EMG?

About the same in each.

About the same in each.

Okay.

And then the operating profit on EIG, this 24.8% number, given the comments you made earlier about cost improvements and mix, is that -- should we perceive that now to be kind of a base level of profitability?

It seems pretty structural.

Yes, no, I don't think you should.

As I said, the mix was unusually good in the fourth quarter both in aerospace and in our process businesses.

So we just had a really good fourth quarter.

So I would not assume that is the launch point going into 2009.

Okay.

And then just the last question, in EIG, that flat kind of core growth, you had mentioned the process piece of EIG.

I think you just commented it was strong or strength.

Those four segments, subsegments of EIG, how did they perform relative to the flat number, flat total?

You're talking about for Q4?

Yes, just for the fourth quarter.

Let's see, in aerospace we were down slightly, in process we were flat, and in power and industrial, we were up.

Okay.

Industrial was actually up?

Well, power was the driver.

Okay.

I see you are combining those two?

I'm combining those two, yes.

I understand.

Okay.

Thank you.

Matt Summerville, KeyBanc.

Base on the acquisitions you have completed to date, how much of your business is now MRO for the Aerospace?

It is -- there's two parts to the MRO question.

The third-party MRO is about $150 million.

And then, of course, we have MRO that is associated with our OEM business, and that is, let's see, that is about a third -- it is about $100 million.

It is about $100 million now, so the total would be $250 million.

Okay.

I believe you stated that orders were down for the fourth quarter in the range of 10%.

Can you give any sort of monthly progression, and then what your experience has been to the first weeks in January where you have data?

Sure, I can do that.

Obviously it declined during the fourth quarter, which was one of the key factors in us doing the restructuring.

To give you a flavor, it was on the order of $190 million in October, and in December we were down to -- in the range of $155 million.

And January, although obviously not finished, is better than December.

So that was somewhat encouraging, although I surely do not want to call it robust.

Okay.

And then early on in the Q&A, you provided pretty good detail around aerospace and process.

Can you give that same color for power industrial and then the differentiated versus cost-driven motor businesses?

Sure, I would be glad to do that.

So let's look at power and industrial.

Our power business continued to be strong in the fourth quarter, while the industrial business has been impacted obviously by the economic slowdown.

Q4 was up low single digits organically, driven by strength in power, and industrial saw weakness.

If we look forward due to weakness in the heavy truck market, which is actually projected at a negative 22% for 2009, we're also anticipating a slowing of our power business, even though we did not see that in the fourth quarter.

And also we are concerned about the general industrial business.

We're actually projecting a negative high single organic growth for this part of our business in 2009.

So it is actually we're saying our weakest segment, we may be somewhat conservative there, but we want to make sure we get under this thing and not be too optimistic.

So if you sum up for EIG what I talked about previously for aerospace and process and now power and industrial, we are saying all of EMG -- excuse me, all of EIG, we're expecting this negative mid single digit organic growth in 2009.

The second part of your question switching to EMG, the differentiated part of EMG continues to be very strong.

It is now about 77% of EMG sales, and that is why you're seeing such strong performance in us since out of EMG overall.

The aerospace part of this business, which has a higher military content than the EIG part of the aerospace business, is continuing to be strong, and it is expected to be strong in 2009.

However, the economic slowdown in this particular segment impacted our technical motor and emit businesses.

Because these are not as long-cycle focused in terms of the customer concentration.

So when you summed all that up, Q4 internal growth was down a bit, not significantly but down a bit, and we essentially expect the fourth-quarter trends to continue, and we're budgeting 2009 sales down slightly.

And then the problem part of EMG was cost-driven motors.

We struggled in the fourth quarter given the current economic climate.

Q4 organic growth was down midteens.

Not unanticipated for this kind of business in the sense that its organic growth is going to be down more than our more differentiated types of businesses, and we are expecting the fourth-quarter trends to really continue throughout 2009, and we're budgeting down midteens organically in 2009 for this part of our business.

So if you sum that up with slightly down in the differentiated part and down substantially in cost-driven, that is how we get to this negative mid single digit organic growth for all of EMG.

Great.

Just one final question.

In terms of your oil and gas business, obviously the majority of that is going to be in process instrument.

How should we think about that?

I know you talked overall process being down at a mid single digit rate.

How much -- I guess how big is that business in terms of revenue now, and how much of that do you think is driven by the underlying commodity price versus aftermarket versus kind of maintenance I guess?

Yes, that is a complex question that you are asking.

Let me see if I can provide some color for it.

Of our full process business, about a third is actually directly related to what I would say oil and gas, and therefore, price of oil is a factor.

And no question we're starting to see some impact of that, and that is why the organic growth in process was weakening in the fourth quarter.

But just as important in that is the fact that the other parts of that process business, which are the remaining two-thirds, are also expected to be weak, and we saw some weakening in those businesses.

And what tends to happen in these segments to your point on MRO is that as for instance in the oil and gas business when exploration tends to come down, the aftermarket tends to go up.

And the reason for that is that plants are looking to increase their productivity.

They are focused more, as we are as a Company, on operational excellence, and therefore, they want to upgrade the instrumentation in their plants so that they can get better productivity in what is going through it.

So there is somewhat of a counterbalance in that business that is going to be helpful to us.

Have you seen that dynamic, in fact, start to play out already, Frank, in that business?

I would say yes.

We're starting to see more aftermarket kind of sales in the US in particular and on the refining areas, etc.

So it is starting.

I would not say it is significant yet, and also the downturn in exploration has not really ceded at this point either.

So I think that dynamic is sort of in process.

(Operator Instructions).

It appears there are no further questions at this time.

Mr.

Burke, I would like to turn the conference back over to you for any additional or closing remarks.

All right.

Thank you, Alan.

I would like to thank everyone for joining the call, and we will talk to you soon.

And that does conclude today's conference.

We thank you for your participation.

Have a great day.