Welcome to the AMETEK Incorporated 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 & Treasurer. Please go ahead, sir.

Thank you. Good morning everyone and welcome to AMETEK's fourth 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 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 conference call may be accessed until February 9th by calling 888-203-1112 and entering the confirmation code number 4746267. This conference call is also webcasted and can be accessed at ametek.com and at streetevents.com. The conference call will be archived on both of these websites. I will remind you that any statements made by AMETEK during the conference 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 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.

Thank you, Bill. All of the comparisons I will discuss in my prepared remarks will be made against the 2008 results excluding the fourth quarter restructuring charge. Our press release tables detail our 2008 results with and without this charge. AMETEK had a good fourth quarter. As anticipated we saw sequentially higher sales in a number of key markets, improved earnings and continued excellent cash flow generation. Perhaps more importantly we saw significantly higher order rates from our customers. Orders in the fourth quarter were strong totaling $577 million, a 20% sequential improvement over the third quarter 2009 and a 4% increase over the fourth quarter of 2008. Sales increased 5% sequentially and operating margins expanded 140 basis points to 17%. Cash flow was excellent for both the fourth quarter and the full-year 2009. Operating cash flow was $109 million for the quarter and $365 million for the year, up 155% and 47% respectively. Free cash flow was 161% of net income for 2009. When compared against the fourth quarter of 2008 sales were down 16% to $523.5 million. Internal growth was negative 20%. Acquisitions and foreign currency translation each added another 2% to sales. Operating income declined to $89.2 million from $122.3 mil last year reflecting the impact of the reduced sales, partially counterbalanced by our cost reduction activities. Net income was $51.9 million or $0.48 per diluted share. Turning our attention to the individual operating groups. The electronic instruments group performed well in the fourth quarter. As anticipated, sequential sales of instruments for research and metals applications improved while our oil and gas related businesses stabilized. EIG sales were up 5% sequentially and orders were up low double digits. Operating margins were strong at 19.6%, a 200 basis point sequential improvement over the third quarter. Compared against last…

Thank you Frank. As Frank has covered our results at a high level I will focus on some particular areas of interest. Similar to Frank, all comparisons will be made against the 2008 results excluding the fourth quarter restructuring charge. Selling expenses were down 14% in the fourth quarter in line with the sales decline. Corporate G&A was down 34% from last year’s fourth quarter in absolute dollars and fell to 1.4% of sales as compared to 1.8% of sales in last year’s fourth quarter. The effective tax rate for the quarter was 27.5% and was 30.2% for the full year, both in line with our expectations and driven by worldwide tax planning initiatives. We anticipate a rate of between 31-32% for 2010 with the first quarter having, as is typical, the highest rate of the year. Our defined benefit plans are overfunded as a result of excellent investment performance and contributions we made in 2008 and 2009. We expect that the 2010 contributions to our defined benefit plans will be minimal, totaling about $3 million. On the balance sheet, working capital, defined as receivables plus inventory less payables, was 21.2% of sales for the fourth quarter; a sequential improvement and down from last year’s level of 21.8%. We continue to see an opportunity to reduce our working capital investment and this will be an area of focus for us in 2010. Capital spending was $12 million for the quarter and $33 million for 2009 or 1.6% of sales. Expenditures for capital in 2010 are expected to be about $40 million. Depreciation and amortization was $17 million in the quarter and $66 million for 2009. For 2010 depreciation and amortization is expected to be approximately $70 million. Operating cash flow for the quarter was $109 million up from $43 million…

Thanks John. Operator, that completes our prepared remarks and we would be happy to take questions now.

(Operator Instructions) The first question comes from the line of Jamie Sullivan - RBC Capital Markets.

I wonder if you could talk a little bit more as we think sequentially with the first quarter guidance revenues flat to up sequentially, what some of the puts and takes are on the cost side we should be thinking about?

If you look at the first quarter as you indicated sales will be relatively flat from the fourth quarter. With those essentially flat sales our cost reductions are in place and the main change in earnings is due to the tax rate John talked about where the first quarter tax rate is going to be higher as is typical in any first quarter for AMETEK. So that is the prime driver as to what is causing that.

I wonder if you could talk about the orders in the quarter improving pretty significantly. Where you saw particular strength in the orders?

It was very broad based which was actually a delight for us to see. Prior to the fourth quarter we had seen a few pockets that were encouraging but in the fourth quarter it was very, very positive across the company. As I mentioned in my prepared remarks, in EIG orders were up low double digits and in EMG they were up about 30%. If you look at the sub-segments they were really up in each of the major sub-segments we talked about. It was good performance.

Any sense for how much stimulus spending or incentives may have contributed to those end markets?

It is very, very difficult to quantify that. I would say the one area where we definitely as anticipated saw some impact of not just the stimulus spending but also the government spending activity was in the research part of our process businesses but that wasn’t the prime driver of why we saw this increase. I believe we are seeing a global improvement in our businesses.

The next question comes from the line of Jim Lucas - Janney Montgomery Scott.

A couple of quick housekeeping questions. Payables at year-end?

$192 million.

When you talked about liquidity what was the total available under the revolver you referenced?

The total I gave you was $700 million which combines cash and the revolver. It is a combination of everything. We have nothing drawn against our revolver.

I wanted to ask a couple of strategic questions here. We have seen a couple of the acquisitions including Sterling this morning and this kind of more of a distribution related type. Has there been any change in terms of how you are looking at some of the smaller, bolt-on acquisitions? Could you give us any color on what you are seeing out there? I would also be interested if you could give any color what specifically came up in the due diligence that made you walk away from the deal in the fourth quarter.

In terms of the bolt-on’s first there is no real change in our strategy. We are continuing to pursue those acquisitions that are in the $50-150 million annual sales types of levels. But yes we do see opportunity within that strategy to do some of these smaller deals that basically expand our distribution capabilities. Several of the acquisitions we recently announced, particularly the one in India, is a real attempt to gain sales and distribution infrastructure in places where we don’t have it. The Sterling announcement this morning, this was a company we have worked with for a number of years and this gains us direct access to their customers. This is not a change in our strategy but really an opportunity to gain distribution capability around the world. As a matter of fact when we look at some of the added investments we are going to put in place in 2010 one of the areas we are going to substantially invest in is the BRIC countries and in particular distribution. We will be spending money to expand in India, to continue our expansion in China and do some expansion in Russia, etc. because we see great opportunities to gain share and take advantage of the market growth rates in some of those countries. In terms of what we are seeing in the backlog, the backlog and the deal environment has definitely improved. I think I referenced that in my third quarter conference call and I feel even more strongly about it today. It is not back to where it was before the downturn but it is much better than what it was during the beginning of 2008. While 2008 we didn’t do any deals of the size and quantity we would like it wasn’t because we didn’t want to. Those deals simply weren’t available or as I mentioned we did run into some issues with a couple of those deals at the end of the year. So to expand a little bit on the last part of your question one of those deals fell out of bed simply because the private seller decided he did not want to sell the business. There were really no problems with in essence the negotiation or the approach that was taken by actually either party. That was just a personal decision. The second one, as you know we do very extensive due diligence work on the deals we look at. I don’t think it is appropriate to get into the details of that but we found some fairly significant problems that would have not been in the best interest of our shareholders. They were significant enough that we felt that even a sizeable price reduction on the deal was not the right approach. Although we were disappointed on the other hand it is the right decision and I think it shows our disciplined approach that we are not afraid to walk away if in essence something is not in order.

One quick follow-up, you mentioned some increase in 2010 and on the BRIC you have spoken in the past of Russia, India and China. Any updates you can give us on your Brazil strategy?

That is an excellent point. We spent some time at the end of last year on our strategic acquisition and strategic marketing work and we Brazil there is opportunity for us. We have an operation in Brazil and we see an opportunity to expand that. In fact, as we speak we are looking at another one of those smaller acquisitions that would in fact expand our capability there and some of the investments I have talked about will go in to adding additional sales and resources in that part of the world. We have prioritized over the last several years where we want to make these investments. China was clearly number one because of the growth there. We then went to the Middle East and Russia mainly because of our concentration in oil and gas. We think next is obviously India and we are making those sizeable investments. We did it last year and we are going to do more this year. Not because the opportunity isn’t there but Brazil is the next one on the list. We are going to do some investments there but as time goes on you will hear more and more from us about Brazil.

The next question comes from the line of Mark Douglass - Longbow Research.

Could you drill down into the sub-segment details in the quarter? Then as well, what you are baking into your 2010 for those sub-segments?

Let’s start with aerospace. Our aerospace markets are relatively healthy. As anticipated in Q4 our overall aerospace business was flat with respect to Q3. With respect to the fourth quarter of 2008 aerospace saw mid single digit negative growth due primarily to the weakness in commercial aircraft and business and regional jet markets. Very importantly I would say for 2010 we expect aerospace to be roughly flat predominately as our military and third-party MRO businesses counterbalance weaker commercial and business and regional jet markets. So it is pretty much what we outlined for you at the end of the third quarter. I think we are even more convinced now the performance of aerospace for 2010 is not going to take a major dip as is pretty much characteristic of previous downturns in aerospace. We are actually very delighted that we are looking at growth that is roughly flat for 2010 and obviously with the sizeable cost reductions we put in place we are going to see improved earnings out of our aerospace businesses. In terms of the process markets, our process markets performed as we expected in the fourth quarter with sequential improvement in sales of instruments to the research and metals market while our oil and gas businesses stabilized. I think when I was asked about risk in the third quarter conference call we had anticipated the oil and gas businesses to stabilize but there was some risk in that and in essence it has happened. We are very encouraged by that and our order intake as I mentioned in response to a previous question was also very strong. So we are feeling much better about this segment. In terms of numbers, sales are up high single digits sequentially in the quarter. On a quarter-over-quarter basis sales were down…

A question on your profitability. If you look at the fourth quarter versus second quarter 2009 sales are on par yet your earnings were down but there was restructuring in between the two quarters. Can you explain, was it mix?

There was definitely a mix shift that I think were not picked up by some people on the street. We were shipping from backlog for aerospace and our process businesses which in essence got weaker as the year went on and now we are building up the backlog in those businesses again and they are obviously very high margin businesses for the company. So that is the predominant driver for that shift. There may have also been…is there any tax right there?

A little bit, yes.

So not a lot on tax rate. So predominately it was the aerospace and process businesses.

Just looking at operating margin it declined 80 basis points from second quarter.

That is driven, and obviously with the sizeable cost reductions we have put in place the impact would have been significantly more if those improvements were not put in place.

On process, I guess I was a little surprised you are thinking low single digits in 2010. Are you just not seeing the instrumentation getting picked up by oil and gas as strongly as maybe would be implied with oil back to $70-80?

I think the best way to answer that question is we are not yet declaring victory. We have had one very good quarter of order intake. We feel better about next year and we want to just see another quarter of performance at that level before in essence we consider raising what we think we can do next year. Hopefully if things continue the way they have we will be in a position to possibly improve our outlook as we go through the year.

The next question comes from the line of Christopher Glynn - Oppenheimer Funds.

I was going to go further into the orders and top line outlook. I think if you extrapolate the orders it leads to much higher run rates. So I am just wondering if particularly in EMG with a lot of OE customers maybe you experienced a significant restocking? Then maybe any color on the January follow through?

That is a great question. There definitely was some restocking impact but that was not the predominate driver. I think one thing you do need to keep in perspective is that when we look at any given year and you look at our historical performance with last year I would say being an exception, typically our first quarter in terms of EPS is the weakest quarter that we have. We are definitely seeing some of that impact here. There is also, as I mentioned, some potential conservatism in the fact that in essence we have only seen a quarter of this sort of order improvement and we want to make sure that it is real. I think that is the best way I can answer your question.

January follow through, any comments there?

Yes it was quite good. So far very good.

As far as some of the cost factors into next year, if you could kind of run a little laundry list in terms of pension corporate expense, any temporary cost cuts coming back?

Let me give you a flavor of this. In essence we are saying the organic growth is going to be somewhat minimal in the full year. Basically if you look at the cost improvements that we are looking at in our budget they total about $75 million. About roughly $45 million of that is the impact of the restructuring charges that we had previously outlined and done in 2009 that are essentially carryover to 2010. The pension impact is about $10 million. In terms of add back, there is sort of on the other side of the ledger we are going to see some improvement from the fact the FTI and LTI compensation levels were in essence much lower in 2009 than they will be in 2010. But you also have inflationary impacts that are in here and some of the added investments that I talked about where we are going to make additional investments in China, India, etc. So that should give you a rough feel as to the kind of numbers we are looking at and we are going to focus on that $75 million of cost reductions.

The next question comes from the line of Matt Summerville – KeyBanc.

You mentioned two deals sort of got tabled in the fourth quarter. Was there any cost that kind of flowed through the P&L that is meaningful to talk about related to those deals not getting done?

There is probably a little less than a cent a share working through the fourth quarter.

I guess I just want to make sure I understand this. When I go back and look historically the first quarter for AMETEK is typically higher than what you have in Q4 and again understanding that you probably want to be conservative with your guidance, you are looking for something relatively flat. I guess I am trying to get a feel for the backlog you are building, the orders that aren’t going to ship near term, how does that duration of backlog look and should we expect further backlog build in Q1 based on where your order intake level is currently?

Yes, I would say that is the case. We would expect that in essence we would see higher backlog build in the first quarter. Remember my comments before where we were taking backlog down in our longer cycle businesses. So what is happening is that backlog is being restored in those businesses so you will see shipments out of that beginning in the second quarter and going through the rest of the year. With respect to your comment on volume, my comments before were really focused on EPS. What tends to happen and it is pretty much our historical pattern is that tax rate goes up in the first quarter as we are anticipating in 2010 and therefore if you look at our EPS on a historical basis it is typically lower in the first quarter.

I apologize if you talked about it and I missed it but what was your average price realization in 2009 versus 2008 and then what are you expecting for 2010 in terms of pricing?

In terms of 2009 with respect to 2008 the effective pricing was up about 1%. We are shooting for the same number in 2010. What we have actually budgeted is flat. So we are shooting for a point and we are budgeting flat.

The next question comes from the line of Richard Eastman - Robert W. Baird.

Could you just talk for a second or two about the gross margin, not only in this quarter but for all of 2009. It is lower. Is that a function of volumes and mix? How much does mix play into the gross margin and how should we think about that as we move into 2010?

That is a good question. We are going to probably have to get you an answer offline to the detail but in general your observation is correct that this is an impact of the volume and the mix of what is occurring. Again it is flavored by those longer cycle businesses which we expect are going to pick up in the second half of next year and that position is more strongly felt right now given the strong order performance in the fourth quarter. That is definitely what you are seeing. I don’t have a quantification of it here.

But the backlogs maybe given the shipping cycle and the order book to ship cycle seems to favor maybe the backlog seems to favor the higher margin businesses? Process and maybe aerospace?

Absolutely.

In the past you have maybe gotten a little bit granular on maybe what you consider to be your earlier cycle businesses? For instance the specialty metals business. Did those respond any different from the overall order number in the fourth quarter?

Yes. They were extremely strong. The short-cycle businesses when I look across the company did extremely well. The one you picked, specialty metal in particular had a dynamite quarter. One of the bellwethers I use is our chemical products division. I call it our double derivative business because when the economy comes back we just get usually a really strong pop and that business also had a phenomenal fourth quarter and when I look at one of the process businesses that is shorter cycle, our measurement calibration and technology division, that one also had a very, very strong fourth quarter. So when you look at this what we are seeing is actually what you would expect in a normal cycle. AMETEK held in longer on the front end of the downturn because of the long cycle businesses when our short cycle businesses were falling off very rapidly and now as the economy improves the short cycle businesses are coming back first and the indications are there that our long cycle businesses would follow.

When you look at the sub-segments within EIG and EMG and you gave the calendar 2010 guidance there, which of those maybe five broad segments would you say maybe poses the greatest revenue risk to that guidance? Is it possible the aerospace business it is still questionable whether it be flat? Which of those businesses would you feel lease comfortable with the guidance on?

Well it probably is aerospace, the way you have worded your question. Let me give you some rational for our comfort level with aerospace which has dramatically improved over the past 5-6 months. If we look at the sub-segments within aerospace we are basically saying the military business which is about 40% of our overall aerospace business is going to be up mid single digits. The third-party MRO business which is about 25% of our business is going to be up high single digits and that growth is going to counterbalance if you will commercial which is now about 20% of our business and the business of regional jets which is about 10%. So if I then quantify that risk within those various sub-segments of aerospace, the predominant one we were concerned about was commercial aircraft. Our estimates assume a 15% decline in that 20% of our business which is commercial. If you look at the estimates by Boeing which will come out tomorrow and it will be interesting to see what they say but their previous estimates were flat on aircraft. Airbus has come out and said their shipments are going to be flat. So in essence they are assuming flat and we are assuming down 15%. The reality may be somewhere in between. We may even be on the conservative side but because we have focused on that sort of sub-element of the risk, we feel pretty good the downside risk on volume is pretty minimal.

The next question comes from the line of Elana Wood – Bank of America/Merrill Lynch. Elana Wood – Bank of America/Merrill Lynch: I have some follow-up questions on orders. So EIG orders sequentially up low double digits. EMG up 30%. How would that compare to more historical patterns? The sequential build fourth quarter versus third quarter.

Substantially more. Substantially more. We normally see a little bit of improvement from Q3 to Q4 in our cost driven motor business mainly because many of our operations are in Europe. But that is not the predominate driver here. This was a broad based change I would say. John do you have another point?

I would make the point that in addition to what Frank said that in the fourth quarter the month of December was the strongest month which is unusual for us. We tend to really go into December wondering what is going to happen because of the obvious impact of vacations and holidays. We didn’t see any of that this quarter. December was a very strong month for us and we were very pleasantly surprised with that and it was across the board as Frank said. Elana Wood – Bank of America/Merrill Lynch: Your guidance, are you assuming any currency translation benefit in 2010?

Very minimal. It is about 1%.

On the top line. Nothing on the bottom line. Elana Wood – Bank of America/Merrill Lynch: I was just looking at corporate expense in the fourth quarter down sequentially by about $1 million. I am wondering what that was attributable to?

That is the continuation of our cost reduction activities. We had said we would get more cost reductions sequentially in the fourth quarter than in the third and in fact that was part of it but we also saw some in our other operations as well. Elana Wood – Bank of America/Merrill Lynch: RD&E, how much of an increase are you budgeting for 2010?

The budget right now for RD&E is $109 million and this year we are expecting to spend about $101 million so that is an $8 million change. Hopefully if the year improves as we go along we would probably even increase that further.

The next question comes from the line of Allison Poliniak - Wells Fargo.

A quick question on the oil and gas market. I know you are pretty broad based there and you talk about it stabilizing. Are there any areas within that market that you still have some concerns about?

There is still some concern predominately in the US. If you look at this business about 65% of it is outside the United States. That business did not go down as much during the economic malaise and also is really showing signs of improvement right now where in essence a lot of the longer contracts that are needed outside the United States which were shifted way to the right are now coming back into play so I feel some energy, if you will, in that international part of the business. So the US is the part that is feeling better but there is still some risk. No question there is still some risk. Although the price of oil has clearly stabilized in that mid-$70 a barrel level the price of US natural gas, although higher than what it was in the summer months is still substantially lower than what it was a year ago. So if there is any risk it would be in that part of the business. Again, we think we have balanced that. The international side we think can offset any of that risk.

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.

Thank you. Folks thank you for joining our call. As a reminder a replay of this call can be heard by calling 888-203-1112 and entering the confirmation code 4746267 or on the Internet at AMETEK.com or Streetevents.com. Thank you.

That does conclude today’s conference. Thank you for your participation.