Good day, ladies and gentlemen, and welcome to the First Quarter 2018 AMETEK, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, today's conference may be recorded. I would now like to turn the call over to Mr. Kevin Coleman, Vice President of Investor Relations. Sir, you may begin.

Thank you, Victor. Good morning, and thank you for joining us for AMETEK's first quarter earnings conference call. With me this morning are Dave Zapico, Chairman and Chief Executive Officer, and Bill Burke, Executive Vice President and Chief Financial Officer. AMETEK's first quarter results were released earlier this morning and are available electronically on market systems and on our website in the Investors section of ametek.com. This call is also being webcasted and can be accessed on our website. The webcast will be archived and made available on our site later today. Before we start, I want to 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 risk and uncertainties that may affect our future results is contained in AMETEK's filings with the SEC. AMETEK disclaims any intention or obligation to update or revise any forward-looking statements. Please refer 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 by Dave and Bill and then we'll open it up for questions. I'll now turn the meeting over to Dave.

Thank you, Kevin, and good morning, everyone. AMETEK had an outstanding first quarter. We generated record levels of sales and orders backed by strong broad-based organic growth and significant contributions from recent acquisitions. We delivered tremendous operating performance, resulting in record-level operating income, impressive margin expansion, strong cash flow generation, and robust earnings per share growth. We announced our second acquisition of 2018 this morning, continuing to successfully deploy capital on strategic acquisitions. And lastly, given our strong first quarter results and the positive backlog and order momentum, we've raised our full year 2018 sales and earning guidance; so overall an excellent high-quality quarter. Now onto the financial highlights of the quarter. Total sales in the first quarter were a record $1.17 billion, up 16% compared to the first quarter of 2017. Organic sales growth was exceptional, up 8% in the quarter. Recent acquisitions added 5% and foreign currency was a 3% benefit. We continued to see broad-based organic growth across each of our businesses and key geographies. Our businesses are capitalizing on their leading niche positions in attractive markets, while also benefiting from our initiatives to improve organic growth. We also continue to see sustained and robust orders growth. Overall orders were excellent, up 20% in the quarter, with organic orders up 12%. As a result, we ended the year with a record backlog of $1.6 billion, providing us with excellent visibility. Operating income was a record at $258.2 million in the first quarter, up 19% compared to the first quarter in 2017. Reported operating income margins were 22%, up 40 basis points over last year's first quarter. On a core basis, operating margins were a very strong 80 basis points versus the prior year, reflecting the outstanding operating leverage we generate from strong organic sales growth. Diluted earnings…

Thank you, Dave. As Dave noted, AMETEK started the year with an outstanding quarter, generating record results and a high quality of earnings. Let me provide some additional financial highlights. In the first quarter, core selling expenses were up in line with core sales growth. General, administrative expenses in the first quarter were flat compared to 2017 and as a percentage of sales were 1.4% down from last year's first quarter level of 1.6% of sales. The effective tax rate for the first quarter was 23.1% versus last year's rate of 27.4% and in line with our expectations. The year-over-year reduction in our effective tax rate was due to the benefits of tax reform. We continue to estimate our 2018 tax rate to be approximately 23% and as we've stated in the past, actual quarterly rates can differ dramatically, either positively or negatively, from this full year rate. Working capital was excellent at 16.8% of sales in the first quarter, reflecting the outstanding performance of our businesses. Capital expenditures were $12 million for the quarter and we expect full year capital expenditures to be approximately $85 million or 1.8% of sales. Depreciation and amortization for the quarter was $49 million and for the full year, we expect D&A to be approximately $200 million. First quarter operating cash flow was $177 million, up 25% compared to the first quarter of 2017, and free cash flow in the quarter was $165 million, up 28% over the prior year. Free cash flow conversion was 91% in the quarter, slightly better than our expectations and we continue to expect excellent full year free cash flow conversion of 120% of net income. As Dave mentioned, we've been very active on the acquisition front, deploying approximately $275 million on the acquisitions of FMH Aerospace and SoundCom thus far in 2018. Total debt at March 31 was $2.21 billion, up from $2.17 billion at the end of 2017. Offsetting this debt is cash and cash equivalents of $557 million, resulting in a net debt to capital ratio at March 31 of 28.2%. Following the acquisitions of FMH Aerospace and SoundCom, we have more than $1.5 billion of cash and existing credit facilities to support our growth initiatives. In summary, our businesses performed exceptionally well in the first quarter, delivering record-level results and a high quality of earnings. We remain well positioned to support our growth initiatives with our strong balance sheet and excellent cash flows. Kevin?

Great, thank you, Bill. Victor, can we please open the call up for questions?

Yes, sir. And our first question comes from the line of Scott Graham from BMO Capital Markets. You may begin.

Hey, good morning, all.

Good morning, Scott.

Good morning, Scott.

Hey. I wanted to – I know you said, Dave, that you expect price/cost to be positive on a full-year basis. Could you maybe be specific with us for at least the quarter, sort of what price was versus what inflation was?

Sure, Scott. In Q1, we achieved price of about 1.4% and total inflation was about 1.2%. We were able to more than offset inflationary cost with increased pricing and I think the results speak to the differentiated nature of our product portfolio and our leadership position in our niche markets and our outstanding supply chain capability, and we expect that to continue for the year and we'll be able to offset inflation with price.

Got you. However, those numbers should both drift up a little bit after what we saw with commodities inflation in the first quarter?

Yeah, I think you could see them both going up through the course of the year.

Great. Also, could you sort of do your typical by division synopsis of what's happening and what you expect? Thanks.

Sure, Scott. I'll start with the process business. Our process businesses had an outstanding start to the year. Overall sales were up 20%. High-single-digit organic growth and contributions from the Rauland and MOCON acquisitions were the key drivers. Continuing the trend from last year, we saw strong broad-based organic growth in the quarter with particularly solid growth across our Zygo, Creaform, TMC, Precitech and Energy & Process Instrumentation businesses. And for all of 2018, we continue to expect broad-based strength with our organic sales up mid-single digits. Overall aerospace sales were up low-teens in the quarter, driven by contributions from recently acquired FMH and mid-single-digit organic growth. Growth remained strong across our military businesses as we are seeing solid demand both in the U.S. and internationally, and we're also seeing continued solid growth across our commercial aerospace and aftermarket businesses. They had a very good quarter. For all of 2018, we continue to expect organic sales growth for aerospace businesses to be up mid-single digits with solid growth across each market segment. Our power and industrial businesses saw strong growth in the first quarter with overall sales up 10%, driven by mid-single-digit organic growth and contributions from recently acquired Arizona Instrument. Growth was solid in both our power and industrial segments with notable strength across our power test and measurement business, including programmable power and VTI. And for 2018, we now expect power and industrial organic sales to be up mid-single digits. And finally, our automated (sic) [automation] and engineered solutions business had an excellent start to the year, with low-double-digit organic sales growth in the first quarter. We continued to see strong sales and order strengths across both our automation businesses and our engineered solutions business. In 2018, we now expect mid to high-single-digit organic sales growth for all of our automated (sic) [automation] and engineered solutions businesses. That's around the horn, Scott.

Got you. Thank you very much.

Thank you.

Thanks, Scott.

Thank you. And our next question comes from the line of Christopher Glynn from Oppenheimer. You may begin. Christopher Glynn - Oppenheimer & Co., Inc.: Thank you. Good morning.

Good morning, Chris. Christopher Glynn - Oppenheimer & Co., Inc.: Hey, Dave. So, SoundCom's kind of interesting. It sounds like a little more of a services business than we're used to. So, just curious how much of that is tied to Rauland and maybe a little deeper dive on how you view the bolt-on runway in the communication systems arena.

Right, right. SoundCom is a value-added reseller for Rauland and they actually represent about 5% of Rauland's sales, and they're in high-density healthcare markets of Ohio and Michigan. And Rauland – the VARs are very important to the Rauland model. So, they've had a long-term business relationship and Rauland has VARs in some regions that they own. I mentioned Florida and California, and this was a natural logical adjacency. So, they have customers that include large healthcare systems like the Cleveland Clinic, Mercy Health, educational facilities like Ohio State, Michigan State, and they're really key to Rauland because they provide the deep technical expertise in designing and integrating the advanced solutions that Rauland delivers. They have integrated solutions that move Rauland closer to the end customer. So, it positions really the value-added resellers, Rauland is a natural acquirer for those type of companies in high-density population areas and they also make Rauland a natural acquirer for attractive adjacent markets, because the VARs also represent those products. So, we see that as a very attractive way for Rauland to expand because Rauland has their own VARs, they have optimized the processes, so there's a lot of synergies in these regional VARs. And then in addition to that, it provides closer customer contact and growth opportunities. This particular business has grown low-double digits average compounded annually over the last five years. So, it's a very good grower. Low-double-digit EBITDAs and it's a nice opportunity for Rauland to expand their footprint and get closer to the customers. In less dense parts of the country, parts of the world, value-added resellers still make sense, but in some places it makes sense for Rauland to get closer to the customer. Christopher Glynn - Oppenheimer & Co., Inc.: Great. And then on the organic 8%, it's very good obviously. I'm just wondering how you're measuring and gauging your progress on channel and new product introduction, execution into the addressable markets versus what's the cyclical lift here?

Yeah, with 8% organic growth and 12% organic growth in orders, we're certainly seeing some tangible success from our organic growth initiatives. Our focus on improving the front end of our business and continuing success from new product development efforts is driving market share gains. We've talked before about our growth kaizens and we're seeing very tangible benefits from specific actions and we're very optimistic with this effort and there's more to come. But also the general economic improvements is certainly a key driver, and it's really difficult to distinguish between the two. But what I can say, we see no slowdown at all in the way we're looking at the world right now. We see strong growth across all of our product groups. We're growing in all geographies and we're feeling really good. Christopher Glynn - Oppenheimer & Co., Inc.: Sounds good. Thanks for the color.

Thank you.

Thank you. And our next question comes from the line of Robert McCarthy from Stifel. You may begin. Robert Paul McCarthy - Stifel, Nicolaus & Co., Inc.: Good morning, everyone.

Good morning, Rob. Robert Paul McCarthy - Stifel, Nicolaus & Co., Inc.: Congrats on a very strong start to the year. Maybe we could talk about price on two spectra. One is just pricing overall over the next couple years because you're a firm that definitely just the nature of your business, the market structure, the value add should be garnering a pretty nice price benefit and particularly in the context of a price spread. So, would you expect price/cost to be positive going forward for the full year and how should we think about just conceptually into 2019 because you're a company that historically, I think, has – part of your incremental margin lift has come from kind of structurally strong pricing. Could you talk about that a little bit?

Right. Great question, Rob. We expect to maintain a positive price inflation spread for the whole year, and we're talking about price inflation, we're just talking about inflation, we're not talking about productivity. That's just a pure total inflation number. And with our differentiated businesses and our closeness to the customer, we have a wide moat around our businesses. We can pass on the increased cost for inflation. So, we really expect a positive price inflation spread in the 20 to 30 bps range and we expect to hold that this year and there's no reason that that won't continue into 2019. Robert Paul McCarthy - Stifel, Nicolaus & Co., Inc.: Great. And then maybe switching to price in terms on the acquisition front because clearly you've deployed some capital nicely. We would like to see probably more size and scale, but you can't have everything. But could you just talk about the state of your balance sheet, your firepower? And maybe just comment on – it's an interesting environment because you've probably seen a pullback in the public environment, but sellers' expectations still probably remain elevated here. Do you think you could reach kind of a bid/ask issue in terms of people thinking of their companies as still very dear and being able to transact is going to be tough, or do you think you could shake some pretty big deals this year?

Those are all great questions, Rob. I mean the current M&A environment is very similar to what we've been experiencing the past couple of years. Pricing is elevated. There is plenty of cash-chasing deals. Now with the public market coming back again, that will eventually flow into the private market, but despite this market we've been successful in deploying our free cash flow on acquisitions. I mean, since the – I mentioned in my prepared remarks, since the beginning of 2017 we acquired five companies and deployed nearly $835 million in capital and we're off to a great start in 2018. And our pipeline remains very active. You never know if something is going to transact in the short term, but I expect you'll be hearing from us again this year on M&A. Our strong pipeline along with the M&A processes gives me confidence. And mentioned the larger deals or the size deals that we've been doing, we're going to execute our – we can do either one to execute our strategy. We've opened up our pipeline to slightly larger deals in the $200 million to $300 million revenue range, there will be deployments of capital of $1 billion, but we can keep doing the smaller deals and we can still get the earnings growth because of the way we structured the business and our acquisition process. So, I'm feeling really good about it. And you mentioned finally our firepower, I think Bill mentioned our existing cash and credit facility was about – we have about $1.5 billion in firepower and most importantly, we'll generate another $865 million, $870 million in free cash flow in 2018. So, we really have the firepower. Our net debt-to-EBITDA is about 1.35. Our gross debt-to-EBITDA is 1.85. So, we could deploy 2-plus billion in capital this year, and really the strategy is not capital limited, it's finding those key acquisitions that we can add value to, so we can maintain a return on invested capital of 10% in year three. That's the key hurdle for us. That gives you the return on total capital for the whole business, and AMETEK has extremely strong return on total capital for an acquisitive company, and we maintain that discipline and that discipline is the limiter right now. But we are clearly looking at things and our pipeline's full, and we'll be clear to select the deals that we can make the most – that we can approve the most, but I think the – I'm very optimistic about what I see in our pipeline right now. Robert Paul McCarthy - Stifel, Nicolaus & Co., Inc.: If I could sneak one more in, just amortization, any update on looking on that and studying that, whether you want to make a move to cash earnings.

Yeah. Our EBITDA was a record $306 million this quarter. It's 26% of sales, so a very good number. Our D&A was about $49 million, and as I said in our last call, that we looked at that at the beginning of the year and we decided not to do it. And we'll look at it again next year. But that's the decision we made for 2018. Robert Paul McCarthy - Stifel, Nicolaus & Co., Inc.: Thanks for your time.

Thank you.

Thank you. And our next question comes from the line of Allison Poliniak from Wells Fargo. You may begin.

Hi guys, good morning.

Hi, Allison.

So, could you talk a little bit about conversations with customers broadly across the group. I know you said the outlook's pretty strong, but are there any areas where customers are maybe becoming more cautious or even maybe accelerating the orders ahead of the likely price increases? Any thoughts there.

It's pretty much bullish across our whole portfolio. We were in Asia this quarter, the executive office went for our annual regional review in Asia, and that region was incredibly bullish, and we're seeing strength in the U.S., continuing strength in Europe, and all of our product groups are very positive. We're even seeing some of the longer cycle elements of our portfolio, like the mid and downstream oil and gas, the military parts of our business, they're very bullish about bigger projects breaking later in the year and into 2019. So, our automation businesses are firing on all cylinders. So, we're not seeing any slowdown and we feel really good about the year. We feel really good about how the year's playing out.

Great. And then just not to beat the sort of price inflation issue up a little bit, but are there any specific businesses, could you remind us, that are maybe more susceptible to the inflation and your thoughts on passing that through in terms of pricing?

Yeah, I think we've had a strategy for a long period of time to acquire businesses that are really leaders in niche markets and that puts us in a position – we're providing more value, these are markets that are sticky customer relationships. And we're providing a lot of value to these customers and we get in situations like this, we view it as only fair that we can pass those prices on to customers. So, we feel really good about our portfolio and we feel really good about achieving price out of inflation in 2018 and 2019.

Great, thank you.

Thanks.

And our next question comes from the line of Deane Dray from RBC Capital Markets. You may begin.

Thank you. Good morning, everyone.

Good morning, Deane.

Hey. Like to follow that train of thought on customer dialogue and do you have any color on whether tax reform and CapEx incentives are playing through in any of the demand that you're seeing.

Deane, we were seeing it. We saw an uptick in our business in 2017 in the second half and that was pretty measurable. But into 2018, we have not seen an incremental increase from tax reform. It's just remained strong. So, I can't say that we've seen an increase specifically tied to tax reform and with specific customers with regard to tax reform. It's just really good and it's staying that way.

And then just other color on the price/cost dynamic. You didn't mention tariffs, do you feel as though that's any impact including what could be on the horizon here?

Yeah, it's a great question, Deane. We do not import much steel and aluminum, so really a minimal impact from that. We are watching the entire situation closely as you can imagine, including secondary impacts. We have very good supply chain capability and flexibility and we're doing some planning on the supply chain side, if we need to react quickly. And the same point that goes to pricing, we're leaders in niche markets and we have sticky customer relationships and have the ability to pass on cost increases to customers. So, we're examining numerous countermeasures, just something be enacted. Right now we don't see a measurable impact to our business, but it's uncertain and we're closely monitoring it.

Got it. And just last question for me, can you – and were there any growth investments in the quarter that you would highlight along either digital marketing or sales force investments, anything along those lines?

Yeah, it's all the above. We're investing about $75 million this year in growth investments and heavy investments in digital marketing, heavy investments in a lot of selling tools and also heavy investments in product development. So, we're feeling really good about the investments. We think we're getting a great return and we're optimistic about that in the future.

Do you have a sense of how much in this quarter and would that be spread across the segments? Is there any of that in corporate?

Most of that is in the segments and it's spread out through the year.

Got it. Thank you.

Thank you.

And our next question comes from the line of Brett Linzey from Vertical Research. You may begin.

Hi, good morning, all.

Good morning.

Good morning, Brett.

Hey, just wanted to come back to EMG and specifically on incremental margins. Given strong volume, I would have thought incrementals would have been a little bit better in quarter and I realize FX dropped – the drop-through there (36:28) incrementals, but anything else in terms of mix or excess cost, I mean deliveries, price/cost that impacted you here in the quarter within EMG?

Brett, EMG had a great quarter. I mean, sequentially, the margins were up 170 basis points and on a core basis, they were up 30 bps. So, we're pretty pleased with the performance.

Okay. And I guess how should we think about incremental margins within EMG for the balance of the year?

Yeah, I think we've guided to the incrementals in the low-30s, 35% and I think in general, the Instruments side of our business has little bit higher incrementals, so I would say in the 35% to 40% range, and EMG is a little bit lower in the 25% to 30% range.

Okay, great. And then just shifting back to your comment on long cycle, I guess in the context of visibility, obviously you've been deploying a lot on deals here. If you were look at the pro forma construct of the portfolio, including some of these recent deals, how would you size what you would characterize as longer cycle (37:52) a percent of the total portfolio today?

I would characterize the bulk of the portfolio in mid and longer cycle businesses. We don't have many short cycle businesses, but the vast majority of the portfolio is in mid and longer cycle businesses.

Okay. And then maybe just one more, in terms of recent acquisitions, so FMH, Arizona, SoundCom, how are we thinking about incremental earnings accretion as we look into 2019 and some of the (38:30) starts to abate? Any framework you can list there?

Yeah, we haven't done the work for 2019 yet, but I can tell you that in our plan for 2018, we saw a net benefit of M&A of about $0.06.

Okay, great. Great quarter, guys. Thanks.

Thanks, Brett.

And our next question comes from the line of Richard Eastman from Baird. You may begin. Richard Eastman - Robert W. Baird & Co., Inc.: Yes, good morning.

Good morning, Richard. Richard Eastman - Robert W. Baird & Co., Inc.: Could you just speak for a minute, Dave, perhaps to the order strength? I think you've mentioned core orders were plus 12%. Could you just talk to maybe a couple end markets that might be driving order growth above that kind of average core number? And I'm thinking specifically to some of the more cyclical, maybe speak to oil and gas.

Yeah. Richard Eastman - Robert W. Baird & Co., Inc.: And then also on the aerospace side, I mean, are you seeing outsized order growth there, maybe regional biz jet? Or maybe just a little color around the 12% number.

Sure. I mean, regarding oil and gas, in the first quarter, our sales were up low-double digits and orders outpaced that a bit. And in terms of the aerospace business, we saw very strong performance in our commercial business. So, it was up low-double digits in the first quarter, both OE and aftermarket. And also the military business stands out. There was a very strong orders performance in military, and our automation business stands out. There was very strong orders in automation and across all regions of the globe, so it was a really good quarter from the viewpoint of orders. Richard Eastman - Robert W. Baird & Co., Inc.: Does your oil and gas – given how the first quarter started out, I think there was an expectation for oil and gas to be up kind of mid-single digits this year, kind of led by, I think it was upstream. Does that number drift higher now with your comments around downstream orders, and also maybe how the first quarter shook out?

Yeah, the first quarter performance, our upstream business was up, the upstream is only 25% of our oil and gas presence, and that's about a $280 million exposure. But it was up very strongly. It was up about 30% in the first quarter and the mid/downstream was up in the mid high-single-digit range. So, we haven't changed the year guidance yet for that. It's still mid-single digits for the year, but what we're seeing now is the planning work for some orders in the second half of the year that'll ship in 2019 for the bigger projects in the mid and downstream markets. Richard Eastman - Robert W. Baird & Co., Inc.: Okay. Understood. And then just the last question, around the acquisition SoundCom, I'm a little bit curious, is the service element of Rauland-Borg's business – does the service element flow through the VARs? In other words, there's a big service component to SoundCom Systems, and hence the advantage of owning a few of the VARs in key markets, does that bring the recurring revenue stream to Rauland?

It does bring some. I mean, the recurring revenue stream is from spare parts, from software upgrades, and also from the direct service of the client. So, the acquisitions of the VARs does augment the recurring revenue business for Rauland. Richard Eastman - Robert W. Baird & Co., Inc.: Okay. Understood. Thank you. And great start to the year.

Thank you.

And our next question comes from Joe Giordano from Cowen. You may begin. Joseph Giordano - Cowen & Co. LLC: Hey, guys good morning.

Good morning.

Hey, Joe. Joseph Giordano - Cowen & Co. LLC: Curious on components for your parts, you're not really seeing it in the inventory levels you have on your balance sheet, but are you seeing a little tightness in that market and there's been some commentary about people trying to buy ahead of that and kind of keep some safety stock and increase the levels of that. Are you seeing that in the market or are you doing some of that yourself?

We're not doing much of it, but there is some tightness. We're seeing some tightness in the electronic supply chain and we're also seeing some increased inflationary cost in the transportation that we talked about last quarter, but there is some tightness out there, but we're managing through it and we have excellent supply chain capability, but there is some tightness. Joseph Giordano - Cowen & Co. LLC: Okay. And then your businesses exposed on the specialty metals side, have they been tracking pretty closely with price movements in those markets? And is that kind of a consistent – something that's been progressing throughout the quarter and like kind of at high run rates right now versus maybe the beginning of the quarter?

Yeah. That business, you recall the way we have that business structured is we pass the material prices on to the customer. And we're adding value to the materials. But it is progressing and that business is doing very well. Joseph Giordano - Cowen & Co. LLC: Great. Thanks, guys.

Thank you.

Thank you. And I'm actually showing no further questions at this time. I would like to turn the call back to Mr. Kevin Coleman for closing remarks.

Great. Thank you, Victor. Thank you everyone for joining us today. And as a reminder, a replay of today's webcast may be accessed in the Investors section of ametek.com. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.