阿美特克 (AME) 2013 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the AMETEK fourth-quarter 2013 earnings conference call.

(Operator instructions)

As a reminder, this conference is being recorded, Wednesday, January 29, 2014 I would now like to turn the conference over to Kevin Coleman, Vice President of Investor Relations.

Please go ahead, sir.

Thank you, Tina.

Good morning.

Welcome to AMETEK's fourth-quarter earnings conference call.

Joining me this morning are Frank Hermance, Chairman and CEO; and Bob Mandos, Executive Vice President and Chief Financial Officer.

AMETEK's fourth-quarter results were released earlier this morning.

These results are available electronically on market systems and on our website at the investor section of AMETEK.com.

A tape of today's call may be accessed until February 12 by calling 800-633-8284, and entering the confirmation code number 21703244.

This call is also webcasted.

It can be accessed at AMETEK.com and streetevents.com.

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

As a reminder, 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.

A detailed discussion of the risks and uncertainties that may affect our future results is contained in AMETEK's filings with the Securities and Exchange Commission.

AMETEK disclaims any intention or obligation to update or revise any forward-looking statements.

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

We will begin today with prepared remarks, and then we will open it up for questions.

I will now turn the meeting over to Frank.

Thank you, Kevin, and good morning.

AMETEK had an excellent fourth quarter to complete another strong year.

In the quarter, we established records for sales, operating income, net income, diluted earnings per share, and operating cash flow.

We were also very active on the acquisition front during the quarter, acquiring a number of highly strategic businesses.

For the full year, we established records for essentially all key financial metrics including sales, operating income, operating margin, diluted earnings per share and operating cash flow.

Sales were up 8% for the year.

Operating income was up 9%.

Operating margins expanded 30 basis points to 22.7%, and diluted earnings per share ended at $2.10, a 12% increase over 2012's diluted earnings per share.

Focusing on the fourth quarter, sales increased 12% to $942.5 million.

Organic growth was very strong, up 7% on broad-based strength across most of our businesses, while acquisitions added 4% and currency added 1%.

Operating income for the fourth quarter increased 11% to $210.5 million.

Operating income margin in the quarter was 22.3%, compared to 22.6% in the fourth quarter of 2012.

Net income was up 13% to $135.7 million, and diluted earnings per share of $0.55 were up 12% over last year's fourth quarter.

Both net income and diluted earnings per share were records.

Operating cash flow was excellent.

It was $210 million for the fourth quarter and $661 million for the year, both up 8%.

Free cash flow was very strong at 135% of net income in the fourth quarter, and 116% of net income for the full year.

Working capital management was outstanding, at 16.7% of sales in the quarter.

This represents a record level.

Orders in the quarter were $912 million, up 3% organically on an adjusted basis.

Now turning to the individual operating groups.

The electronic instruments group had a strong fourth quarter and an excellent year.

For the quarter, sales were up 15% to $566.9 million on broad-based strength across our process businesses, plus the contributions from the acquisitions of Control Southeast, Creaform and Powervar.

Internal growth was strong, up 7% while acquisitions added 7%, and foreign currency added 1%.

EIG's operating income increased 13% to $151.9 million, and operating margins were 26.8%.

Excluding the impact of recent acquisitions and the additional growth investments made in the quarter, EIG's operating margins were 27.5%, up 20 basis points versus last year's fourth quarter.

The electromechanical group also had a very good quarter.

Sales were up 8% to $375.6 million on strong growth across all of our differentiated businesses, as well as excellent growth in our floorcare and specialty motors business.

Organic sales were up 7%, and foreign currency added 1%.

EMG's operating income increased 8% to $70.5 million, and operating margins were 18.8% in the quarter.

Now turning to our four growth strategies of operational excellence, global and market expansion, new product development and strategic acquisitions.

First, I will touch on acquisitions.

We had a very active quarter with the acquisitions of Creaform and Powervar.

In addition, we acquired Teseq in early January.

Combined, we deployed approximately $340 million on these acquisitions, and acquired approximately $175 million in revenue.

For the full year, including Teseq, we acquired four businesses, deployed approximately $500 million in capital, and acquired $[225] million in revenue, excuse me.

I will provide some highlights of Powervar and Teseq.

Powervar and Teseq are both excellent acquisitions for AMETEK.

Their products, technologies and markets are highly complementary with our existing power businesses.

Equally important, these acquisitions expand the size and capabilities of our power business.

As I have highlighted in the past, we view our power business as a very attractive platform from which we can grow significantly, both internally and through strategic acquisitions like Powervar and Teseq.

With these two acquisitions, our power business now totals approximately $500 million in sales.

Our businesses have market-leading positions in power quality instruments for power generation and transmission and distribution, back-up power systems for highly ruggedized environments, and test and measurement power solutions for a range of test applications.

We remain very excited about the opportunities within our power business.

Powervar is a leading provider of power management and UPS systems used in medical, life sciences, industrial and retail applications.

They provide highly-engineered and customized power conditioning and UPS products, designed to deliver reliable, high quality power to critical applications.

Powervar's strong presence in medical and life sciences provides our power business with excellent new growth opportunities in these attractive market segments.

Additionally, their products and technologies are highly complementary with our existing power quality and UPS systems.

Powervar was privately-held, and has annual sales of approximately $70 million.

The business is headquartered in Waukegan, Illinois.

Teseq is a leading manufacturer of electrical test systems and instruments for use in electromagnetic compatibility emissions and immunity testing.

Products include a broad line of conducted and radiated EMC compliance testing systems and RF amplifiers used for a wide range of industries including aerospace, automotive electronics, medical equipment, telecommunications and transportation.

Teseq is a good addition to our electrical test and measurement business.

Their products and markets are complementary with our EM test business, which we acquired in 2011.

In addition, Teseq provides us with opportunities for accelerating product innovation and market expansion worldwide.

Teseq was privately-held, with annual sales of about $53 million, and the business is headquartered in Luterbach, Switzerland, and has additional facilities in the UK, Germany and the US.

Acquisitions will continue to be a key focus for us during 2014, as we see this strategy as a key driver for the creation of shareholder value.

We have the financial and managerial capacity and disciplined approach to support this acquisition focus.

Our pipeline of deals is excellent.

Our balance sheet is strong, and our cash flow and financing facilities provide us with ample liquidity to pursue this strategy.

Now turning to global and market expansion.

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

In the fourth quarter, international sales represented a record 57% of our total sales.

This strong performance was driven by excellent organic growth in our international markets, and the benefits from recent acquisitions.

Sales growth in the BRIC regions was also very strong, up 11% organically in the quarter.

These results also reflect the continued investments we are making to develop and expand our sales channels, service capabilities and manufacturing footprint, in order to position our businesses to capitalize on the attractive growth opportunities in these international markets.

In the fourth quarter, AMETEK's Micro-Poise Measurement Systems business, which we acquired in 2012, secured a number of large orders for their modular tire measurement systems within the BRIC regions.

Overall orders for Micro-Poise in the BRIC regions were up over 50% in the quarter, with $7 million worth of orders in China and India for these modular measurement systems.

Micro-Poise's tire measurement systems combine uniformity, balance, and geometry measurement capability in a single machine.

We have seen strong demand in emerging markets for these systems, as a result of ongoing expansion of tire manufacturing capacity in these markets.

In addition, we have made a number of investments and improvements in the global sales, service and distribution structure within Micro-Poise since the time of acquisition.

Moving on to our third strategy.

New product development remain key to our long-term health and growth.

We have consistently invested in RD&E.

In 2013, we spent $179 million, which was up 16% from 2012.

In 2014, we expect to spend approximately $200 million, a 12% increase over 2013.

We are excited about some recent new product introductions.

Vision Research, the leader in high-speed digital imaging, unveiled the latest edition to its Phantom line of ultra high speed cameras, the Phantom v2010.

The Phantom v2010 delivers more than 22,000 frames per second at full mega pixel resolution, and is the world's fastest high resolution digital camera.

With the v2010, Vision Research brings a new level of performance to scientists, researchers and engineers who need to capture high speed digital images, and further reinforces our commitment to offering the most innovative products in the digital high speed imaging market.

AMETEK's Atlas Material Testing & Technology business launched the Xenotest 440, a new weathering instrument suitable for accelerated weather testing of a variety of materials.

The instrument incorporates a new twin lamp operating technology that allows it to achieve higher radiance levels that can significantly reduce test times.

It also utilizes a new technology for extending the surface life of the instrument xenon lamps, increasing the instrument's up time, and reducing lamp's operating costs by more than 30%.

From an overall perspective, revenue from products introduced over the last three years was 21% of sales in the quarter, reflecting the excellent work of our businesses in developing the right products to serve their customers.

Lastly, I will touch on operational excellence.

We continue to see tremendous results from our various operational excellence initiatives.

Our management teams and employees continue to do an excellent job, driving continual operational improvements through their businesses by leveraging the numerous operational excellence tools we have put in place in our company.

Key tenets of our operational excellence activities include lean manufacturing, Six Sigma in our factories and back office operations, design for Six Sigma in our new product development efforts, global sourcing and strategic procurement initiatives, movement of production to low cost locales, and value engineering.

Through our global sourcing and strategic procurement activities, we recognized $16 million in savings in the fourth quarter, and $62 million in savings for all of 2013.

Overall, we realized approximately $100 million in total cost savings in 2013 through our various operational excellence initiatives.

For 2014, we expect approximately $90 million in total cost savings through our operational excellence initiatives, including $60 million in savings through our global sourcing and strategic procurement initiatives.

Turning to the outlook now for 2014, we expect our businesses overall to show solid growth during 2014, with balanced organic growth across both operating groups.

We anticipate 2014 revenue to be up high single-digits on a percentage basis from 2013.

Organic growth is expected to be up 2% to 4% for all of AMETEK, and for both operating groups.

Earnings for 2014 are expected to be in the range of $2.30 to $2.35 per diluted share, up 10% to 12% over 2013 reflecting the leveraged impact of core growth, our operational initiatives, and the benefit of contributions from recent acquisitions.

First quarter 2014 sales are expected to be up high-single digits from last year's first quarter.

We estimate our earnings to be approximately $0.55 to $0.57 per diluted share, up 8% to 12% over last year's first quarter.

Our solid backlog, strong portfolio of businesses, proven operational excellence capabilities and a successful focus on strategic acquisitions should enable us to perform well in 2014.

So in summary, our overall businesses performed very well in the fourth quarter and in 2013, producing records for essentially all key financial metrics.

Although the macroeconomic conditions created a more challenging environment in 2013 than we expected, our team did an excellent job, and we were able to deliver exceptional operating results through a focus on executing our four growth strategies.

We have a strong balance sheet, and generate significant cash flow that provides us with plenty of liquidity to operate the business, and pursue our acquisition strategy.

In addition to acquisitions, we continue to make sizable investments in new product development, as well as global and market expansion to position ourselves for future growth.

We look forward to another successful year in 2014.

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

Thank you, Frank.

As Frank noted, we had an excellent fourth quarter with strong operating performance.

I will provide some further details.

In the quarter, core growth and selling expenses was in line with core growth and sales.

General and administrative expenses were 1.2% of sales, in line with last year's fourth quarter.

The effective tax rate for the quarter was 27.2%, down from last year's fourth quarter rate of 29.8%.

The full year tax rate was 28.7%, versus last year's rate of 30.7%.

We are very pleased with the success of our ongoing international and state tax planning initiatives, and our fourth quarter and full year rates reflect the positive impact of these initiatives.

As a result, for 2014, we estimate our tax rate to be between 28% and 29%.

As we have said before, actual quarterly tax 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 16.7% of sales in the fourth quarter.

This record low level of working capital positions AMETEK as one of the top performers in our peer group, and is a direct reflection of the tremendous strides our business units have taken in driving towards operating excellence.

Strong working capital management will remain a key priority.

Capital spending was $26 million for the quarter, and $63 million for the full year.

Full year 2013 capital expenditures were 1.8% of sales.

2014 capital expenditures are expected to be approximately $70 million.

Depreciation and amortization was $32 million for the quarter, and $119 million for the full year.

2014 depreciation and amortization is expected to be approximately $134 million.

Our cash flow was excellent in the quarter, and for the full year.

Operating cash flow for the fourth quarter and full year were records.

In the fourth quarter, operating cash flow was $210 million, up 8% over last year's fourth quarter.

Full year operating cash flow was $661 million, also up 8%.

Free cash flow was excellent at $183 million in the quarter, representing 135% of net income.

For the full year, free cash flow was $597 million, approximately 116% of net income, continuing our strong free cash flow generation.

Our cash flow was the pulley to support our acquisition strategy, where we expended $414 million on transactions in 2013.

Total debt was $1.42 billion at December 31, down $39 million from 2012 year end.

Offsetting this debt is cash and cash equivalents of $295 million, resulting in a net debt to capital ratio at December 31 of 26%, down from 34% at the end of 2012.

At December 31, we had approximately $880 million of cash, and existing credit facilities to fund our growth initiatives.

Subsequent to the end of the fourth quarter, we acquired Teseq.

Capital deployed on this acquisition was approximately $90 million.

Our highest priority for capital deployment remains acquisitions.

In the fourth quarter, we extended the term of our $700 million revolving credit facility back to its original five year period.

Our revolver now extends until December 2018.

All the terms of the revolving credit facility remain unchanged.

In summary, we had an outstanding 2013, establishing records for essentially all the key financial metrics.

We are well-positioned for further growth, both organically and through acquisitions with a strong balance sheet and cash flows.

Great.

Thanks, Bob.

We will now open it up for questions.

(Operator Instructions)

And our first question comes from Matt McConnell of Citi Research.

Please go ahead.

Thank you, good morning.

Good morning, Matt.

So if I could start with incrementals, they were a bit below trend.

I know there might be mix issues with floorcare being stronger and obviously a couple of deals recently, but were there any other drags that are worth calling out?

And maybe could you quantify the impact of floorcare in the acquisitions?

Yes.

If you look at the impact, we started in EIG, there was definitely an impact from the acquisitions because that is where we did those deals.

And also, we made incremental growth investments there, and they were on the order of $3 million there.

And then in terms of EMG, there was a fairly significant mix shift of floorcare and specialty motors, it was actually up organically mid-teens.

So very strong performance in the quarter.

And although the differentiated part of EMG continued to be strong, there was that mix shift and that caused margins to be flat, where they probably would have been up 20 to 30 basis points.

Okay, great.

Thanks.

That is helpful.

And what is your expectation for margin expansion in the 2014 guidance?

And then, maybe my final question would be, did you quantify the growth investments that you anticipate for 2014?

Sure.

In terms of margin performance that is included in our guidance, we are assuming about 20 to 30 basis points of margin enhancement on the operating income line.

In terms of the growth investments that we are putting into the business in 2014, it is approximately $40 million.

And those growth investments are going to go into continued expansion of our sale service and distribution channels, largely in international locations, but not solely.

And also, as I mentioned in my opening remarks, we are going to increase RD&E spending from roughly $179 million, up to just around $200 million, which is a 12% increase in RD& E.

So we are definitely going to continue to make investments in the growth of the business organically.

And then, obviously we will use our free cash flow to deploy on acquisitions.

Okay, great.

Thanks very much.

You bet, Matt.

Thank you.

And our next question comes from Allison Poliniak of Wells Fargo.

Please go ahead.

Hello, good morning.

Hello, Allison.

Just going on Matt's question, can you, with the margin expansion that 20 to 30 basis points, can you quantify maybe what the acquisition impact is of what you have just done?

I don't actually have a number to exactly what it would be, but roughly on the order of 30 basis points.

Okay.

Perfect.

And then just touching on emerging markets, it sounds like select businesses, or your BRIC regions are getting some orders.

But how are you thinking about that for 2014?

Obviously, there has been a lot of noise in the news about challenges over there?

Yes, it is actually amazing.

We were very delighted in the quarter, when we looked at our international businesses -- actually, believe it or not, both in Europe and Asia.

In Asia, the organic growth was up about 25% in Asia, so a truly outstanding quarter.

And as I mentioned in my opening remarks, in the BRIC countries, it is up about 11%.

And as we are looking into 2014, in the BRIC regions, we are assuming a low double-digit type of growth rate.

Obviously, that growth rate is higher than the intrinsic growth in those markets, and is a direct reflection of the investments that we have been putting in that part of the world.

And the fact that our shares in particular, in BRIC and to even a larger extent throughout Asia, are a bit less than in other parts of the world.

So we are able to gain reasonable share.

So a very good quarter, and we are feeling fairly good about the next year in those regions.

As I mentioned, surprisingly, Europe was strong for us.

It was up, actually in the double digits organically, and it was fairly broad-based.

You may recall in some of our previous calls, where I talked about it being driven by aerospace and oil and gas.

Now they were still very strong, but we also saw reasonable strength in many of our businesses, actually throughout most of the process businesses, and also some in our power segments.

So things feel a little bit better in Europe, and that is a good thing.

That's great.

Thank you.

You bet, Allison.

Thank you.

Our next question comes from John Baliotti of Janney Capital Markets.

Please go ahead.

Good morning.

Frank, I was wondering maybe for -- now that you -- you have clearly moved into the large cap arena, and there may be more people that are attracted to the Company, I was just wondering if you could -- you have done a lot of deals over the years, and maybe if we could just take a look at though -- just talk about the ones you have done, sort of the last 12 to 14 months?

Could you kind of -- if you want to sort of summarize how these complement the growth strategy?

I know you touched on Powervar and Teseq, but along those lines, maybe touch on what kind of operators that you have been developing over the years to run these platforms?

Yes, you are hitting on a very key point, John.

And that is, the key to our strategy is to basically have first-class operating managers, that can not only identify acquisitions, but be able to accurately predict and execute what synergies we can get from the deals that we acquire.

And our operating teams have just done an incredible job of taking the businesses that we have acquired, over the time frame you are talking about, or even over a longer time period, and being able to get really good synergies, both on the cost side, as well as the distribution and growth side.

And what we have done is put in place a methodology, so that we are continually growing the talent and doing cross-training in our businesses.

So that the talent continues to grow, and can get involved in more and more deals as the Company gets bigger.

I often joke inside the Company, that if I go back 15 years ago when I first became CEO, I was basically doing all the deals.

And now, the teams do the deals.

They just do a great job, and they know how to do them.

They know how to get them done.

Talking about some of the other deals that I didn't specifically highlight in my talk, the deal before Powervar and Teseq was Creaform.

Creaform, just a super deal, a very high technology company, basically involved in ultra precision, mobile measurement capability.

This company is located in Quebec.

The management team has come in to AMETEK, and I am sure some of them are listening, and I will compliment them.

They have done an excellent job getting used to our operating philosophies, and the business is growing, and it is exceeding the model that we put in place for that business.

The deal before that was Control Southeast.

That particular deal was an augmentation of our O'Brien deal, which we did a couple years -- or maybe a year before that, which is involved in sort of the aftermarket part of our process businesses.

So all of these deals were in an area that we know something about them.

It is not like we are doing deals that are outside of our knowledge base.

So that we take very little risk from the market viewpoint, when we do the deals, and then we can leverage those deals with our operating capabilities.

Yes, it seems -- I know it is relatively small compared to the other ones, but it -- Creaform seems like a very interesting acquisition.

And given your -- what you have been able to do with some of your other businesses that are more traditional and being able to grow them, it should be interesting to see how you leverage that acquisition.

Yes.

We see that definitely as a high growth type of business for us.

As I mentioned, very strong management team, and we are just going to support them in growing that business, because we think it has got phenomenal opportunity.

Great.

Thank you.

You bet, John.

Thank you.

Our next question comes from Matt Summerville of KeyBanc.

Please go ahead.

Morning.

Frank can you disclose what orders and backlog look like?

And then, what organically, you saw from an incoming order rate standpoint?

Yes, orders overall were $912 million.

Correct me -- I am doing it from memory -- they were actually down a bit.

They were down about 5%.

However, we had some very large orders last year that were one-time orders.

So we normalized those orders, and when you look at that, the organic growth on orders was up about 3%.

So in the quarter, 3% organic growth on orders, 7% organic growth on sales.

And then, you mentioned targeting $90 million worth of cost reduction, $60 million from sourcing.

One, can you sort of talk about where you are getting the other $30 million?

And then, this $90 million, if we were to subtract out the incremental investments you are making in growth in R&D, and what you typically incur from just an inflationary standpoint, is there still some net cost reduction left over?

Oh, yes, definitely.

I mean, probably the best metrics that I can give you is that you also have to include pricing in this equation.

And the metrics that we look at are, that basically in the budget for 2014, we have about 1.5% to 2% in terms of price.

And we believe that the inflation that is going through the P&L is about a little bit less than 1%.

So there is definitely incremental amount that is there.

And then, as you indicated, the $90 million, there is about $60 million which is part of the material side of the business.

But there is another $30 million that is just the normal operational excellence initiatives, and it is really a large number of items.

Things -- actually I mentioned some of them in my opening talk.

Value engineering is becoming more important to us.

There is a movement in production to low cost locales.

We are going to move, and have about $500 million of volume in our low cost facilities in 2014, which is up from about $450 million in 2013.

There is the normal types of synergies that we are going to get from the deals, that I just talked about in answer to John's questions.

There is international distribution consolidation that we are continuing to do, not only with recent acquisitions, but with deals we did a number of years ago.

So it is -- this is really a continual process for us.

So when you roll all of that up, it is basically, definitely we are getting sizable leverage.

And it is obviously a balance between the growth investments, which are going to be the $40 million, the cost reductions, inflation, and pricing that allows us to get the kind of earnings performance that we are talking about.

Excellent color.

Thanks, Frank.

You bet.

Thank you.

Our next question comes from Christopher Glenn of Oppenheimer.

Please go ahead.

Please go ahead.

Thanks.

Good morning.

So Frank, you are -- excuse me, rolling in about four deals now at EIG.

I wonder if you can comment on, what are the strains and gating factors on organizational capacity to absorb those?

And also, how is EIG's pipeline looking?

In terms of any gates, the biggest issue is that, as we are all aware, the pricing on some deals has definitely gone up.

So we are prioritizing our deals to where the multiples we are paying are very reasonable.

So that when we bring the deals in and put our improvements in the deals, the returns are higher than our -- obviously, the cost of capital.

So that is sort of the driver there.

In terms of the deal backlog, it is quite good.

We are working on other deals as we speak.

It would not surprise me if you heard from us in the relative short future about another deal that we are going to close.

And I think our ability, to both source deals and also get them closed is a core competency of this Company.

And as I mentioned before, we are continually growing the talent, so that we have the capacity to do deals.

Right now, we believe we can do 10 to 12 deals a year.

That is the infrastructure that we have put in place.

We think it is the capability that we have intrinsic in the organization.

And that essentially assumes we would not do two deals within a same -- the same subsegment of our business, because then the risk profile goes up.

So we will spread them, even if it is in the same -- like for instance power, they will be done in different parts of the power business.

So that in essence, we are not increasing our risk, as we bring those deals in.

Thank you.

And then, on the organic growth outlook of 2% to 4%, I think your price approach is 2%.

Sounds like BRIC is going to give you 1 point, you just did 7%, and the comps don't get tougher for several quarters.

So I am wondering if that is maybe a little conservative, or just to call that -- one quarter is too early to call a trend?

Yes, one quarter is definitely too early to call a trend.

We are just taking a cautious outlook going into the year, and hopefully we will be able to report better numbers as we go through the year.

But basically, that 2% to 4% is what we have rolled up in our guidance.

Thanks.

(Operator instructions)

Our next question comes from Scott Graham of Jefferies.

Please go ahead.

Hello, good morning.

Hello, Scott.

I just wanted to ask about this $90 million, maybe in a little bit of a different way than was asked previously.

I don't know if you are counting this differently, because I remember you were saying at some point in the last two years, that $60 million was the baseline target.

And when things were -- the economy was better, that was the number, and when the economy was weaker, you pushed that number up.

Are you -- did you at that point not include acquisition cost takeout?

Or is this $90 million just a big acceleration off of some of the value engineering, and other things you talked about?

Now basically, Scott, we have included acquisitions continually, in terms of providing that metric.

I think the key answer to your question is that the Company has just gotten larger, so that there are more opportunities to take costs out, and we view this cost journey as a never-ending kind of activity.

That we expect our businesses every year, independent of where they are on the maturity curve, to be looking at cost improvements in their business.

And the number is definitely larger, but I think if you stood it up aside the growth of the business, it is not that much different than what it has been historically on a percentage base.

That is fair.

Okay, thank you.

My next question is regarding the EIG margin.

Could you tell us maybe specifically what the acquisition dilution to the margin was in the quarter, and whether there were purchase accounting charges within that?

Yes, the full dilution on the margin was on the order -- you have got it there, Kevin.

What was -- ?

What [50] million -- 50 basis points for EIG.

50 basis points for EIG.

Okay, and were there purchase accountings in there?

Yes.

Yes.

Okay.

I guess, my last question would be the -- the one, somebody always asks, Frank, if you wouldn't mind going through the divisional, it would be helpful?

Sure, Scott.

I would be glad to do that.

So I will start with EIG.

I don't think there is any real surprises here.

For EIG aerospace, we had a very strong year.

Sales were up mid single-digits, and that was driven by strength in commercial, and our business and regional jet business.

In the fourth quarter EIG aerospace orders were up high-single digits, and that obviously reflects the continued growth in commercial OEM build rates, and also our success in winning content on new platforms.

Looking to 2014, we expect continued solid growth for our EIG aerospace business.

And again, that is based on the trends in the OEM build rates.

Boeing and Airbus, the combination of those two, are predicting they are going to be up about 6% in terms of deliveries.

So that will obviously have an impact on our business.

And we also expect solid growth in business and regional jets, but not so much from the market dynamics there, as from the fact that we have won sizable content on a number of the newer aircraft.

So when we sum all of that up for 2014, we are expecting organic growth in EIG aerospace to be up in that mid single-digit arena.

Moving to our process businesses, the process businesses had a super fourth quarter, and also for the full year with really growth across most of our businesses.

In the fourth quarter, overall sales were up high teens on a percentage basis, with organic sales up high-single digits.

The core growth was broad-based, with particular strength in our measurement and calibration technology and advanced measurement technology divisions, and overall growth was obviously driven also by the contributions from the Control Southeast and Creaform acquisitions.

And for 2014, we expect our process businesses to grow high-single digits overall, with organic growth of low- to mid-single digits.

And in response to one of the other questions, there might be a bit of conservatism in that organic growth rate for 2014.

We do expect balanced growth across most of our process businesses in 2014.

And then the last part of EIG, is power and industrial.

They had a solid fourth quarter, with overall sales up high-single digits.

Growth was driven by mid single-digit organic growth, as well as the contribution from the acquisition of Powervar, which we have discussed.

And we view power as a highly attractive growth area for us.

With the acquisition of Powervar and Teseq, our overall power business now is about $500 million in sales.

And as a result of the acquisitions in 2014, we expect overall sales for power and industrial to be up over 30%.

So very strong overall sales, and we are predicting organic growth to be up low- to mid-single digits.

So if you sum those three parts of EIG, for all of 2014, we are estimating EIG total sales will be up low teens on a percentage basis, with organic growth up low- to mid-single digits.

Moving to the other part of the Company, in EMG, our differentiated EMG businesses had a strong fourth quarter.

Sales were up mid-single digits in the quarter, really driven by broad-based strength, again across most of the businesses in this subsegment.

For 2014, we expect our differentiated EMG businesses to be up low- to mid-single digits.

And the last part of our Company, floorcare and specialty motors, they just had a great fourth quarter and a great year.

Sales were up mid teens organically in the quarter, as I mentioned in response to one of the questions.

And also, they were up very strong for the entire year -- up I guess, it was high-single digits.

So they had very good growth.

And for 2014, we expect sales for this business -- we are saying up low-single digits, and that is really based on a very high strength that we had in 2013.

So if you sum those two for EMG, we are expecting overall growth of low- to mid-single digits for EMG.

You sum those two parts of the Company, and that gets back to my overall guidance of the Company being up high-single digits overall, with organic growth up that 2% to 4%, Scott.

Frank, thank you very much.

That was helpful, as usual.

You bet.

Thank you.

Our next question comes from Rob Mason of Baird.

Please go ahead.

Yes, good morning.

Frank, I want to see if you could just circle back to aerospace real quick.

The military portion of aerospace, I was just curious how that finished the year, and what the planning assumptions embedded in aerospace are for military?

Excellent question.

It is -- we had just a phenomenal quarter in the military segment.

We are actually up mid-single digits organically, for that part of the business.

It was driven by the international part of our military segment, not the US piece.

But even the US piece was not down sizably, so very strong performance.

And what is included in my guidance in 2014 is for that business to be roughly flat.

And that is the way we went into this year, assuming it was flat.

Actually, I think we assumed it was going to be down a bit, and it turned out to be even better than that.

So we are feeling pretty good, in that this is not going to be a major drain on the Company.

Okay.

Very good.

And back to your geographic comment, I know you commented on the outlook for the BRIC regions.

I was just going to see if you could flesh out the geographic outlook for 2014 for the other major regions?

Yes, we are saying, basically the US piece is going to be flattish.

Europe, we think is going to be up a little bit, maybe a little bit different than some of the large macro trends.

And obviously, we think Asia is going to be the strongest part of this, and I am speaking from an organic basis.

Is there any particular portion of the business you would call out in the US, that is working against you in 2014?

Well, I would say -- as you heard from -- what I just went over with Scott, the weakest piece we are going to say, is floorcare and specialty motors part of the business, where we are saying it is only going to be up low-single digits.

So that is probably the weakest, but it is also coming off a very strong year.

So I think we are going to be back to a more normal trend with that floorcare specialty motors business, than what we saw throughout all of 2013.

But aside from that, the growth is fairly balanced in our budget.

I look at our process businesses, and you heard us speak throughout 2013, a lot about the oil and gas part of that business.

And what is happening there, is that, with CapEx not sort of as strong as it has been in the oil and gas part of the business, that growth is coming down a little bit.

But countering that, our other process businesses are doing extremely well.

So it is a much more balanced picture of what we saw in the fourth quarter, and what we expect to see going into next year.

Very good.

Appreciate the color.

Thanks.

Sure.

Thank you, gentlemen.

There are no further questions at this time.

I will turn the call back over for any closing remarks.

Great.

Thanks, Tina.

Thanks, everyone, for joining the call today.

As a reminder, a replay of the call may be accessed at AMETEK.com and streetevents.com.

And as always, I am available all day for any follow-up questions.

Thank you so much.

Ladies and gentlemen, that does conclude the conference call for today.

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