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AMETEK, Inc. (AME)
Q4 2008 Earnings Call
January 30, 2009 8:30 am ET
Bill Burke - Vice President of Investor Relations
Frank Hermance - Chairman and Chief Executive Officer
Bob Mandos - Senior Vice President and Comptroller
Jim Lucas – Janney Montgomery Scott
Christopher Glynn – Oppenheimer
John Baliotti – FTN Midwest Securities
Ned Borland – Next Generation Equity Research
Richard Eastman – Robert Baird
Matt Summerville - Keybanc
Previous Statements by AME
» AMETEK Inc. Q3 2009 Earnings Conference Call
» Ametek Inc. Q3 2008 Earnings Conference Call Transcript
» AMETEK, Inc. Q2 2008 Earnings Call Transcript
Good morning and welcome to AMETEK’s Fourth Quarter Earnings Conference Call. Joining me this morning are Frank Hermance, Chairman and Chief Executive Officer and Bob Mandos, Senior Vice President and Comptroller. AMETEK's fourth quarter results were released before the market opened today and have been distributed to everyone on our list. These results are also available electronically on your market systems and on our website at www.AMETEK.com/investors.
A tape of today's conference call maybe accessed until February 13th by calling 888-203-1112 and entering the confirmation code number 8247526. This conference call is also webcast and can be accessed at AMETEK.com and at StreetEvents.com. This conference call will be archived on both of these websites.
I will remind you that any statements made by AMETEK during the call that are not historical in nature are to be considered forward looking statements. As such these statements are subject to change based on various risk factors and uncertainties that may cause actual results to differ significantly from expectations. Those risk factors are contained in our SEC filings. I will also refer you to the investor's 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'll take your questions. I will now turn the meeting over to Frank.
As Bill mentioned we are joined on the call today by Bob Mandos our Senior Vice President and Comptroller who will be filling in today for John Molinelli. Bob is a 20 year veteran of the company and has been our corporate comptroller for the last 12 years. John Molinelli the company’s Chief Financial Officer, was injured in an accident. He is currently recuperating at home and will be back with us when his recuperation is complete.
Turning now to our financial results. Despite difficult economic conditions AMETEK had a very good fourth quarter. Sales were up 7%, $623.7 million on the contributions from acquired businesses offsetting a weakening core growth environment. Internal growth in sales was a -2%, if the effects of foreign currency are included internal growth was a -6%. Operating income excluding a fourth quarter restructuring charge was up 18% and operating income margins expanded 180 basis points. Adjusted earnings were up 15% and diluted earnings per share were up 16%.
As a result of the global economic downturn order rates for our businesses slowed dramatically in November and December. Orders were down 10% for the fourth quarter of this year versus last year’s fourth quarter. As we assess this slowdown and put together our business plans for 2009 it became readily apparent that we needed to realign the company’s cost structure with expected market conditions.
In the fourth quarter we recorded a pre-tax restructuring charge of approximately $40 million or $0.25 per diluted share to cover the costs of employee reductions, facility closures and asset write downs. At a group level the charge was evenly split with approximately $20 million recorded in each group. As part of the plan we expect to reduce our headcount by more than 10%, close or significantly reduce 10 manufacturing facilities and reduce other spending throughout the company.
While these actions are difficult particularly for the colleagues and communities affected they are necessary to maintain our financial and competitive position. Importantly we do not believe these reductions will harm the long term growth prospects of the company. As an example, research development and engineering expense is planned to increase 3% in 2009. We expect to generate approximately $75 million in annual savings from these cost reduction activities in 2009. The benefits of these restructuring activities will have a greater impact in the second half of the year.
The following discussion will exclude the restructuring charge. For a reconciliation to the applicable GAAP numbers please refer to the press release we issued today or to AMETEK’s website.
Turning our attention to the individual operating groups. In the Electronic Instruments Group had a very good fourth quarter. Sales were up 8% to $361.6 million driven by strength in our power and process instrument businesses and the contributions from the acquisition of Vision Research, Xantrex Programmable Power and California Instruments. Core growth was flat in the quarter. If the effects of foreign currency are included internal growth was -2%.
EIG’s operating income was up 23% for the quarter. Operating margins improved 300 basis points to 24.8% as compared to 21.8% in the fourth quarter of 2007. For the full year EIG sales were up 17% to $1.4 billion driven by growth in our aerospace, power and process businesses as well as the contributions from acquisitions. For 2008 EIG operating income was up 26% to $327.1 million. Operating margins improved 160 basis points to 23.3%.