Ladies and gentlemen, thank you for standing by. Welcome to the AMETEK first quarter 2014 earnings conference call. [Operator Instructions] I would now like to turn the conference over to Mr. Kevin Coleman, Vice President of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning, and welcome to AMETEK's first 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 first quarter results were released earlier this morning. These results are available electronically on market systems and on our website at the Investors section of AMETEK.com. A tape of today's call may be accessed until May 20 by calling (800) 633-8284 and entering the confirmation code number 21713620. 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. I’ll 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. A detailed discussion of the risks and uncertainties that may affect our future results is contained in the 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 Investors section of AMETEK.com for a reconciliation of any non-GAAP financial measures used during this call. We'll begin today with prepared remarks, and then we'll open it up for questions. I'll now turn the meeting over to Frank.

Thank you, Kevin, and good morning. AMETEK had a really fine first quarter. We established quarterly records for orders, sales, operating income, net income, and diluted earnings per share. We also remained very active on the acquisition front, acquiring Teseq and VTI Instruments in the first quarter and on April 11, we announced the definitive merger agreement to acquire the outstanding shares of Zygo Corporation. I will touch on our continued strong acquisition performance in more detail later, but let me first provide the financial highlights for the quarter. Sales in the quarter were up 10% to $975.3 million. Organic sales increased 3% while acquisitions added 7% and currency added less than 1%. Operating income for the first quarter increased 12% to $221.6 million from $197.2 million last year, reflecting the impact of the higher sales and our operational excellence activities. Operating income margin in the quarter was 22.7%, a 40-basis point improvement over the first quarter of 2013. Net income was up 12% to $140.6 million and diluted earnings per share of $0.57 were up 12% over last year’s first quarter and at the top end of our guidance range. Orders in the quarter were a record $998 million, up 14% overall from the prior year, driven by solid organic growth and contributions from the recent acquisitions. The book-to-bill ratio in the quarter was 1.02. Operating working capital was 17.9% of sales. Turning our attention to the individual operating groups, the electronic instruments group had a very strong first quarter. Sales were up 18% to a record $572.4 million on strength in our longer-cycle aerospace and process businesses as well as strong growth in our heavy truck business. Overall, growth was also driven by the contributions from the acquisition of Controls Southeast, Creaform, Powervar, Teseq, and VTI. Organic sales…

Thank you, Frank. As Frank noted, we had a great first quarter, with very strong overall results. I will provide some further details. Core growth in selling expenses was in line with core growth in sales in the quarter. General and administrative expenses were roughly flat versus last year. On a percentage basis, G&A was 1.3% of sales, down slightly from last year’s first quarter level of 1.4% of sales. The effective tax rate for the quarter was 29.3% versus last year’s first quarter rate of 29.1%. For 2014, we expect 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 17.9% of sales in the first quarter, up slightly from last year’s first quarter. Strong working capital management will remain a key priority. Capital expenditures were $14 million for the quarter. Full year 2014 capital expenditures are expected to be $70 million. Depreciation and amortization was $33 million for the quarter. 2014 depreciation and amortization is expected to be approximately $137 million. Operating cash flow was $161 million, up 3% over last year’s first quarter. Free cash flow was $147 million for the quarter, representing 104% of net income. For the full year, we expect free cash flow to be approximately 110% of net income. Total debt was $1.41 billion at March 31, essentially unchanged from the 2013 year-end. Offsetting this debt is cash and cash equivalents of $265 million, resulting in a net debt to capital ratio at March 31 of 25.9%, down slightly from 26.3% at the end of 2013. At March 31, we had approximately $865 million of cash and existing credit facilities to fund our growth initiatives. During the quarter, we acquired Teseq and VTI Instruments. Total capital deployed on these acquisitions was approximately $165 million. On April 11, we announced a definitive merger agreement to acquire the outstanding shares of Zygo Corporation. Total capital to be deployed on this acquisition will be approximately $280 million, taking into account net cash to be acquired. Our highest priority for capital deployment remains acquisitions. In summary, we had a very strong first quarter, establishing record levels of orders, sales, operating income, net income, and diluted earnings per share. We are well-positioned for further growth, both organically and through acquisitions, with a strong balance sheet and cash flows.

Great. Thank you, Bob. Operator, we’ll now open it up for questions.

[Operator instructions.] And our first question comes from the line of Matt Summerville with KeyBanc.

Frank, if you could just sort of do the deeper dive that you typically do on the call with respect to the operating groups, what you saw during the quarter and what your expectations are for the year?

We’ll start with EIG. Our EIG aerospace business had a strong quarter on continued strength in commercial aerospace. Sales were up approximately 10% organically in the quarter and orders were also very strong, up high single-digits. And as we look to the remainder of 2014, we expect continued strength in our EIG aerospace business. Trends in OEM build rates support really good commercial sales, while the continued ramp up of key business and regional jet platforms also will provide solid growth. As a side note, if you look at Boeing and Airbus, their production this year, the sum of the two is expected to be up about 6%, with Boeing actually up about 12% and Airbus up about 1%. So very good, solid performance here in terms of the aerospace market itself. So for all of 2014, we are estimating EIG aerospace would be up mid-single digits and we may very well be conservative on that outlook. Moving to our process businesses, the overall performance of our process businesses was superb. Sales were up midteens on a percentage basis, with organic sales up high single-digits. Organic growth was broad-based across our process businesses, with strength in our Micro-Poise, UPT technology, measurement and calibration technology, and our material analysis operations. So this is a bit of a change, where if you look at the beginning of last year, this business was being driven by oil and gas. Oil and gas is still fine, but now we’re really seeing broad-based recovery in the process businesses. The overall growth was also driven by the contributions from the Controls Southeast, Creaform, and VTI acquisitions. So for the full year, we expect our process businesses to grow high single-digits overall, with organic growth up low to mid-single digits. The last part of EIG is power…

Thank you so much. And then just one quick follow up. Organic bookings in the quarter, and then where your backlog ended?

Backlog ended at $1.2 billion. It was up from $1.1 billion as I mentioned. Orders were up about 14% overall to $998 million, and organically, that was up about in line with sales. It was 2.5% organically.

Our next question comes from the line of Allison Poliniak with Wells Fargo.

On acquisitions, Frank, you touched on managerial capacity. And you’ve done a number of acquisitions here. Are there any management constraints that are causing you to maybe refocus near term what you’re thinking of acquiring?

No, not at all. One of the advantages of the way we have evolved the company is we have a number of what I would call sublegs in the company, where we can put deals in. And as we look at our deals, I surely don’t want multiple deals being driven by the same management team, but because we have these other legs, we can continue to do this. And one of the really positive things here is a number of our divisions now have risen in their capability, where in essence they can handle the deals, where if you go back in time, they were more handled by us at the corporate level. So we can continue to do this, we can continue to roll them up. Obviously, we’re not doing the megadeals, which then this strategy wouldn’t work. But by buying these companies that are in the $50 million to $200 million in sales region, we can continue this, and we really don’t have any significant management constraints.

And just going on to the sourcing area, you’ve talked about you were a bit ahead in your goals, but you kept the total year the same. Did you move programs up? Is it acquisitions? How should we be thinking about that number?

I think what you’re probably going to see is that we will raise that number as we go through the rest of the year. Actually, Bob, I think when we rolled it up, it was really $92 million?

Yes.

It was actually $92 million, but we decided not to sort of put that extra $2 million in. But I would expect, as we go forward, that the team is doing a really superb job here and so I would expect that number to increment up as we go through the year.

Our next question comes from the line of Mark Douglass with Longbow Research.

Quickly, payables?

$370 million.

Frank, looking at the slight increase in your EPS guidance for 2014, you’re keeping organic growth expectations the same, so is this, with this slightly improved margin, a little better performance on the cost takeouts or the operational excellence?

Yeah, I think that’s an accurate way of talking about it. And also, if you look at the trend of organic growth in the company, the trend is definitely in a positive direction looking over the last three quarters or four quarters. So we’ve been probably a bit conservative on our sales outlook. And if that organic growth does continue to creep up more towards the higher end of our guidance range, that also is going to obviously provide some more earnings. So we’re actually feeling pretty good right now, that although this recovery is a bit slow and painful, we definitely can feel it and see it in the numbers, that there is improvement as you go quarter to quarter. It’s not monumental, but it’s still there, so the trend is in the right direction. So we felt pretty confident in raising the estimates that couple cents.

Camping out on the organic growth then, I’m a little surprised, given how Q1 performed, that you’re still expecting 2% to 4% for each segment. Q1 is actually an easier comp, I think, for both. Q4 becomes a pretty tough comp for both. But you had 5% organic in EIG and flat organic in EMG. With the strong start in EIG, I’m surprised you kept that at 2% to 4%, and with the slower start EMG, that it’s still 2% to 4%.

One of the areas of weakness that you heard me talk about was power and industrial, and that’s sort of the one large segment in our business where the organic growth just is not as strong as we had hoped. And even though aerospace is doing great and our processes businesses themselves are doing very, very well, power and industrial is a bit of a drag. But what we’re hoping is we’re going to see incremental improvement in that as we go forward. But we haven’t put that in our forecast, and that’s probably the reason that we’ve held that guidance a bit low on the EMG side. On the EMG side, we were flat in the first quarter, but we are predicting that we’re going to be in that low to mid-single digits. So we do expect that to definitely improve, and that’s why hopefully we’re going to end up at the higher end of our overall guidance for the company of a 2% to 4% kind of number.

Were the orders in EMG better than the sales?

No. Orders were not as strong in EMG. Organically, they were down a bit and they were up about 6%, if I recall correctly, in EIG. But you have to be careful, when you look at orders for our businesses, because we’ve got many long cycle businesses that basically you can have ups and downs in any quarter, so I wouldn’t focus too much on the order intake in a given quarter. But I do think you’re going to see EMG organic growth improve, and we may be conservative on EIG organic growth. That’s probably the best way I can answer your question.

Our next question comes from the line of Matt McConnell with Citi Research.

Could you talk about the EMG margin a little bit? You’ve had a pretty nice increase on virtually no revenue growth, so is that where you saw the upside from the cost savings, or is there something else in there that is worth calling out?

No, it’s exactly what you said, and we have been saying for a long time when we look at overall margin growth for the company, that EMG will be a key driver. Because if you look at the absolute levels of the margin between EIG and EMG, EIG was the 26.3%, I think it was, and EMG at around 20.8%. So there’s two drivers for that. There’s definitely the cost reductions and some of the improvements that we have put through the business have definitely been in EMG. There’s also a natural effect that as the portion of EMG moves more to the differentiated businesses versus the floor care and specialty motors or cost driven side of that business, there will be a natural positive movement in those margins. And as you know, we’re not buying companies or investing heavily in the floor care or specialty motors business, where we are in the differentiated EMG businesses, so you’ll continue to see that basic change in the portfolio, which will also be a positive for margins.

And then if I could touch on the M&A pipeline, it seems from your prepared remarks that clearly there’s some activity there. So if you could highlight any particular areas where you’re seeing a lot of activity? And maybe deal size. I know Zygo, at $280 million, it’s a little bigger than the range that you mentioned in response to an earlier question. So do you think that is within your sweet spot now? Or maybe give us an update on what you think the sweet spot for deal size is for AMETEK now?

Obviously the deal sizes are going to increase a bit as our overall size increases, but it’s not monumental. And we have really been looking in this $50 million to $200 million in sales arena. Zygo is in the $165 million arena, so I consider that in the sweet spot. But if you look at the two other deals we did this quarter, the first one, Teseq, was I think $50 million. VTI was $40 million, so that’s sort of the range that we’re looking in. In terms of the backlog, I’m delighted with the backlog right now. Our team both in corporate and the M&A people that we have put in our businesses have done just an excellent job of getting deals up on the table. And some of these deals are proprietary, where we have gone out and talked to these companies, sometimes for many, many years, and then when they are ready to sell, they will come to us, and in some cases not even go through an investment banking kind of process. So we have a really, I would say, solid backlog. I can tell you I’m working on a deal just as we speak. I don’t know whether we’re going to get the deal or not, but in terms of capital deployed, that particular deal would be larger than Zygo. But not, again, monumentally larger, but it would be a larger deal. So if I said something in my opening remarks that implied a major change, that, I don’t think, is the case. It’s really I would say an incremental sort of change to be looking at a little bit bigger deals, but nothing fundamental in terms of looking, for instance, for a merger of equals. That’s not even in our paradigm. You’re unable to get the synergies and unable to going to the returns that you guys enjoy.

Our next question comes from the line of Scott Graham with Jeffries. Scott Graham - Jefferies & Company : Just wanted to ask about the progression of orders in the quarter. Were you weather affected in any way? Was March stronger? Could you lay that out a little bit?

I would say incrementally we improved during the quarter. March was very, very good. We can’t assign a major sort of factor to weather. I know a lot of companies have come out and said January and February were weaker because of weather. I really can’t say that there was any substantial change due to that factor. What I’m seeing, and what I’m just feeling in the business, to my comments before, is we’re just seeing a gradual improvement in the business, and we definitely saw that, I would say, through the quarter, with a pretty strong March. Scott Graham - Jefferies & Company : So the March reference that you’re making here, that’s on a year over year basis? That’s not seasonal, right?

Well, I was actually talking sequentially through the quarter. I wasn’t talking quarter over quarter when I was making my remarks. Scott Graham - Jefferies & Company : That’s actually what I was referring to, because obviously I think we all get stronger as the quarter progresses. I was just wondering on the year over year basis.

Oh, I’m sorry, I misinterpreted your question. On a year over year basis, yeah, it’s better, there’s no question. As I said, we were up just about 3 points organically in the quarter on orders. And if you look at the order progression and the sales progression, any organic growth is getting stronger. It’s not monumental, but you can feel it getting stronger. Scott Graham - Jefferies & Company : : There’s $92 million and potentially heading higher. Obviously EMG is seeing a lot of that, but where are you finding this type of a number? Where are the heaviest concentrations of productivity right now?

I would say it’s probably more on the global sourcing side, and it’s pretty broad-based across the company. We keep looking for new opportunities. We’re expanding our footprint, not just in China, but we move in other low-cost regions. Our teams work very effectively together, and we see those opportunities and we push pretty hard, as you can imagine. We’re getting leverage on just the pure procurement side, but we’re also getting it in the value add and value engineer. And that’s a key part of how we are growing these savings. As we’ve acquired companies with higher levels of technology, there’s more opportunity there.

If I could just augment what Bob said, we find when we acquire companies there’s significant leverage in just procuring parts from international, so that a good part of the leverage comes from the companies that we’ve recently acquired. If we look at more of our mature businesses, where they are already procuring a large amount of their material from low-cost regions, that’s where the value analysis and value engineering that Bob mentioned comes into play. And we have really put, across the company, the training that is necessary to do value analysis and value engineering, and these are very short term projects that basically you can improve the cost of the product, largely through materials, but not solely through materials. That’s more the value analysis piece, and then the value engineering piece is more in the sense of making some changes in the product so that you can get incremental sales. And we are now allocating a portion of our engineering talent to this VA/VE activity, so that we can just keep this number rolling. So it’s just a super strategy, and it’s working extremely well for us.

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

Frank, you talked about the margin impact from acquisitions in EIG, which is obviously typical of new deals. But you also pointed out that EMG had very impressive margins. I think if I went back in my model, I don’t think they were ever this high in the first quarter going back 15 or 20 years. So I’m wondering, it seems like that bodes very well for the things you’ve been talking about, of global sourcing, just integrating the cost structure of the businesses, not to mention the revenue leverage on future EIG margins.

I think that’s right. I think your analysis is correct, and I think as we do deals, you’re going to continue to see some dilutive impact on our margins, because we purposely want to buy companies where their margins are below ours, so that we can, over time, improve those businesses. And if you look historically, we’ve always been able to outgrow that dilutive impact. So even with the dilutive impact that you’ve talked about, even though we talked about it just in EIG, if you look at it at a company level, it was about 50 basis points. So we showed 40 basis points of improvement, and if you add that dilutive impact, our overall company margins would have been up 90 basis points instead of 40 basis points. So your discussion and what Scott just talked about and asked a question on are really the core of AMETEK. We’re just really good at basically managing our businesses effectively and if our businesses come in with a budget that doesn’t show sizable cost improvements, we have a long discussion about that, because we feel you’ve got to be continually improving your business and continually improving your margins. And yes, I think you’re going to see more improvement in EIG and EMG just because of the level of absolute margins in the EMG side of the business.

You talked about obviously that you expect a lot more improvement out of EMG given the delta between the two, but it seems like you’re probably going to keep raising the bar on EIG, given the near term headwinds that it faces as you do more of the M&A on that segment.

That could be, but now remember, the Zygo acquisition, if we close it, is going to come in and it’s going to go in EIG. So it’s public, and therefore there’s going to be a dilutive impact. But we look at that positively, because we’re going to get a super return on invested capital on a deal like that.

I guess the conclusion was that you clearly haven’t peaked on the profitability of EMG on a core basis.

Absolutely. That’s absolutely right. We have not peaked. That’s absolutely right.

And our next question comes from the line of Jamie Sullivan of RBC Capital Markets

On the geographical look, I know you talked about midteens organic growth in Asia. Can you maybe talk about what you’re seeing in other geographies and maybe how you see some of the regional patterns playing out for the year?

If you look at the organic growth by region for the first quarter, the organic growth largely came out of Asia. It was up about 17%, actually, in Asia. The U.S. was flat, but that’s actually an improving trend if you look at this by sequential quarters. The U.S. is continuing to improve and we think that will continue as we go through the year. Europe was organically up about 1%, and that’s a lower number than what we had been talking about. But there was an abnormality in Europe in that as I mentioned in my remarks, the MRO business basically, which is largely European based, had a very tough comparison. And so if you actually extract that from the Europe organic growth, it would be similar to what we’ve seen in the last few quarters, up in that mid-single digit region, and improving. I mean, again, you can feel some improvement in Europe. It’s not monumental, but the improvement is there. And then Asia, up very, very strong. And this was across Asia that we saw this. And I think I can say it’s a key result of the investments that we have been putting into Asia. A large portion of our incremental growth capital or growth expense has gone into that region, and we saw broad-based performance with very strong performance in Japan, for instance, very strong performance in Singapore. Strong performance in China. Korea, Bob just mentioned, which is absolutely right. We saw strong performance there. You know, the markets are not great, but on the other hand, the GDPs in those countries are still higher than they are in other parts of the world. And you couple that with our lower share and investment levels, and it’s doing just find for us. So we were very pleased. So I think the expectations are, incremental improvement in the U.S., Europe will, I think, pop back a bit, just because of that tough comparison. And Asia is going to be good. Is it going to be 17% growth for the next few quarters on a quarter over quarter basis? Probably not quite that strong, but it’s going to be good.

And then maybe just a quick one on EIG margins. You broke out the 130 basis point impact from acquisitions. Will the impact be a little bit heavier in Q2, given the activity Zygo?

It obviously depends on when Zygo closes, and that’s going to close at the end of the quarter. So if it happens then, it’s not going to have a major impact on Q2. You would see it more in Q3 than Q2. I think probably the soonest would be the second week in June. That probably won’t happen, but that’s the soonest. So as I’m thinking about your question, there probably is not going to be any major impact, even if it closes a bit earlier in the second quarter. But you can expect to see it in the third quarter.

And there are no further questions at this time. Please continue with your closing remarks.