AMETEK, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2020 Amatek Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. It is now my pleasure to introduce Vice President of Investor Relations, Kevin Coleman.

Thank you, Andrew. Good morning, and thank you for joining us for Amatek's first quarter 2020 earnings conference call. With me today are Dave DiPico, Chairman and Chief Executive Officer, and Bill Burke, Executive Vice President and Chief Financial Officer. Amatek's first quarter results were released earlier this morning. and are available on market systems in the investor section of our website. This conference 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. During the course of today's call, we will make forward-looking statements which 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 AMETEC's filings with the SEC. AMETEC disclaims any intention or obligation to update or revise any forward-looking statements. Any references made on this call to 2019 or 2020 results will be on an adjusted basis, excluding after-tax acquisition-related and tangible amortization. in excluding a pre-tax $141 million or $0.47 per diluted share gained from the sale of Reading Alloys in the first quarter, and also a pre-tax $44 million or $0.15 per diluted share realignment charge taken in the first quarter. Reconciliations between GAAP and adjusted measures can be found in our press release and on the investor section of our website. We'll begin today's call with prepared remarks by Dave and Bill, and then open it up for questions. I'll now turn the meeting over to Dave.

Thank you, Kevin, and good morning, everyone. Despite a challenging and highly uncertain economic environment due to the COVID-19 global pandemic, Amatek delivered solid first quarter results, highlighted by excellent operating performance with earnings in line with our guidance range. I will provide more details on the first quarter results shortly, but first, I wanted to extend my thanks to all my Ametek colleagues and recognize them for their amazing dedication and commitment through these difficult times. The courage and resilience I witnessed has been truly impressive. As Ametek has been deemed an essential or life-sustaining business at all our operating facilities, our employees continue to provide critical solutions and services to customers across many industries, including healthcare, defense, food and beverage, and laboratory research. The health, safety, and well-being of our employees as they support these essential customers is our highest priority. We've implemented numerous safety measures aimed at providing a safe work environment. Our Pandemic Response Plan provides a framework for our businesses to manage their facilities and workforce during this pandemic. Among other things, the plan establishes personal and workplace hygiene practices, a global communications network of site and country pandemic coordinators, and a supply chain logistics and operations team to provide solutions to help mitigate the impact of the pandemic on our business. Daily communication with local pandemic coordinators and senior management ensures we are complying with the Center for Disease Control and local government regulations. As part of the plan, we also implemented various safety measures including work from home requirements for those whose jobs allow, social distancing on our facilities and on our factory floors, daily temperature monitoring of employees reporting to work, use of personal protective equipment, and staggered work shifts. We remain vigilant as we return to a higher level of operating activity. Now, let me return to the first quarter results. First quarter sales were $1.2 billion, down 6.6% from the same quarter in 2019. Recent acquisitions contributed 4%. The divestiture of Reading Alleys was a two-point headwind. Foreign currency was a one-point headwind, and organic sales were down 8% in the quarter. The measures we took during the quarter led to strong operating performance, where operating income decreased 3% year-over-year to $276 million. operating margins expanded an excellent 100 basis points to 23%. Excluding the dilutive impact of acquisitions, operating income margins expanded 110 basis points over the prior year period. Decor mental margins in the quarter were approximately 10% showed our operating capability, reflecting our ability to reduce our cost structure as well as the strength and flexibility of our operating model. adjusted EBITDA in the quarter was $342 million, up 2% over the prior year, with the record adjusted EBITDA margins of 28.5%. The operating performance led to earnings of $1.02 per diluted share, up 2% versus the comparable basis in the first quarter of 2019, and in line with our guidance range of $1.01 to $1.04. The $44 million restructuring charge we took in the quarter is expected to generate approximately $85 million in annualized structural savings. We also generated strong cash flow in the first quarter, with operating cash flow up 38% to $271 million. Free cash flow conversion was also strong at 148% of adjusted net income, excluding the Redding Alloys gain. Next, I will provide additional details at the operating group level. Sales for our electronic instruments group were $774.2 million, down 4% over last year's first quarter. The acquisitions of Gatan and IntelliPower contributed 6%. Foreign currency was a modest headwind, and organic sales were down 9%. EIG's operating income in the first quarter was $194.1 million. down 4 percent versus the prior year. EIG operating margins were 25.1 percent in the quarter. Excluding the dilutive impact of acquisitions, operating margins expanded 20 basis points over the prior year period. The electromechanical group also delivered strong operating performance in the quarter, despite top-line weakness as a result of the coronavirus. EMG's first quarter sales were $428 million. down 11 percent versus the prior year. The acquisition of PDT added 3 percent, the divestiture of Reading Alloys was a six-point headwind, foreign currency was a one-point headwind, and organic sales were down 7 percent. EMG's proactive cost mitigation actions led to impressive margin expansion. Our operating income was down slightly to $97.5 million in the quarter, operating margins excluding acquisitions expanded 220 basis points to a record 22.8%. During the first quarter, we also completed the acquisition of IntelliPower, a leading provider of high reliability, ruggedized, uninterruptible power systems for mission-critical defense and industrial applications. Their products and solutions nicely complement our power systems and instruments businesses, and they deepen our expertise in high reliability power protection applications. Annual sales for Intellibower were approximately $40 million and we deployed $115 million on the acquisition. We also completed the divestiture of Redding Alloys to Chimera for $250 million. The closing of the transaction, which occurred near the end of the first quarter, was a positive outcome for all parties as Chimera is an outstanding strategic partner for Redding Alloys. For Ametek, Proceeds from the sales were deployed on our acquisition strategy, which remains our priority for capital deployment. While we are pleased with the first quarter results, the global economic environment has obviously changed since the start of the first quarter. In January, global demand was solid. In February, an extended Lunar New Year holiday due to the coronavirus resulted in disruptions in China-based activity for customers and suppliers. Later in the month, as China slowly reopened for business, Europe and the U.S. and other parts of Asia started to feel the impact of the virus. At that time, we started to limit discretionary spend and nonessential travel. In addition, each of our businesses developed detailed contingency plans to prepare for a potential slowdown. In March, the impact of COVID-19 on the global economy was broadening. Many countries, states, and counties started to impose travel restrictions, stay-at-home orders, and social distancing measures for all but essential employees. Supply chain delays started to emerge, and customers turned cautious given the building uncertainty. Although our facilities were operational throughout the first quarter given our essential business designation, we did see a direct impact on sales in the first quarter due to the virus. Worldwide travel restrictions limited our ability to provide support and installation services. This impacted our EIG process and power businesses most significantly in the quarter and a broad set of customer delayed shipments. Now a few comments on the demand environment in April. Demand in April was meaningly weaker than we experienced in March. Travel restrictions and social distancing mandates shut down all but essential activities as customers and suppliers Temporary closed or implemented furloughs for all or parts of April. This has inevitably led to significant disruptions and impacts on demand. Restrictions across many geographies are slowly being loosened. However, we remain cautious on the pace of recovery. Now let me provide some comments on what we're seeing in select end markets. Although we're seeing challenging conditions across most end markets, We're seeing solid demand continue across our healthcare, medical, and defense markets, which account for approximately 20% of our sales. Our most challenged markets are commercial aerospace and oil and gas, which combined account for approximately 16% of Ametek's sales. We expect meaningful weakness across these markets throughout all of 2020. In the balance of our markets, including power, industrial, semiconductor, research, metals, and automations, we expect weak conditions in the second quarter with sequential improvements during the second half of the year. Shifting now to the actions we are taking to proactively manage our business while ensuring we are supplying and supporting our key customers. As the spread of the virus expanded and restrictions widened in March, our business began to execute on contingency plans and implemented cost reduction actions. These contingency plans focused on maximizing cash flow, ensuring critical sources of supply, and protecting key investments, all while ensuring appropriate safety measures were in place. The cost reduction actions we're taking include structural actions, such as reduction in force and facility consolidations, as well as temporary reductions, such as discretionary spend reductions, furloughs, temporary facility shutdowns, short-time work weeks, and temporary pay reductions. Given the reduction in demand we are experiencing, we made the difficult decision to reduce our workforce. The total reduction of force is approximately 10 percent of our employee base across direct, indirect, and SG&A functions. In addition, in the second quarter, many of our businesses are implementing furloughs or temporary facility shutdowns. These furloughs generally range in length from one week to three weeks, depending on the operating location and their customer market dynamics. The decision to furlough operations was made to help mitigate the spread of the virus, to better align our cost structure with demand, and to position us to quickly respond when demand returns. The temporary pay reductions we implemented generally range between 15 and 20% for salaried employees, including all AMETEC officers, with a similar reduction of fees paid to our board of directors. As a result of these actions, we expect total cost savings in the second quarter of approximately $80 million, with approximately $50 million of these savings from temporary actions and $30 million from structural actions. As we proceed into the second half of the year, we expect the benefit from our structural cost actions to ramp up, with full-year structural savings targeted at approximately $125 million. We will flex our temporary cost savings either up or down in the third and fourth quarters based on volume levels. In addition to these cost savings initiatives, we also reduced our capital expenditures by over 25% from our initial plans in a year, with full-year CapEx now expected to be roughly $75 million. Before I provide commentary on our outlook for the quarter, I wanted to highlight the work Ametek is doing where we operate to assist in the fight against COVID-19. Through the Ametek Foundation, we have made more than $1.5 million in contributions to charitable organizations, many of whom are providing food and essential items to those in need, along with personal protective equipment to the men and women on the front lines of this pandemic. We are proud to partner with numerous organizations around the world where we have an operating presence to support the immense humanitarian crisis caused by the pandemic. I also wanted to highlight a few of Ametek's businesses are involved in the fight against COVID-19. Ametek Rolland, a leading provider of mission-critical communication and workflow solutions used in hospitals and other healthcare facilities, has developed the Rolland Rapid Response Kit. This solution allows nurses and healthcare providers to quickly triage patients, gather necessary supplies, and determine the appropriate clinical response, all while keeping a safe distance to minimize repetitive staff to patient contact. They are being deployed for use in temporary medical facilities and new patient care facilities within hospitals to meet the surge of additional patients. Ametek land is another great example. Land is a leading manufacturer of monitors and analyzers for industrial infrared non-contact temperature measurement. In March, they released their VIRALO solution, a temperature screening thermal imaging system designed for highly accurate human body temperature measurement. This technology can be utilized for screening at point of entry into key facilities such as offices, factories, schools, government buildings, and transportation hubs. They are seeing strong initial interest for the solution as temperature screening at this scale will play a fundamental role in helping to contain the spread of the COVID-19 and allowing the return to our normal daily lives. Ametek's Power Bar business is providing customized, uninterruptible power systems to a number of leading medical device diagnostic equipment providers used for coronavirus testing. These UPS systems are being deployed worldwide. And lastly, Ametek Advanced Motion Solutions is providing critical solutions to manufacturers of ventilators and laboratory diagnostic equipment used in the COVID-19 response. These are just a few examples of the critical roles our businesses are playing in combating this global crisis. We are proud to be part of the solution and committed to supporting our customers in these efforts. As we previously announced, Due to the uncertainties presented by the COVID-19 global pandemic, we have withdrawn our full year of guidance and will not be issuing quarterly guidance at this time. We will issue guidance as conditions stabilizes and visibility improves. However, I did want to provide some level of comments about the second quarter and the balance of the year, given what we know now. First, we expect that the quarter will be the low point in sales and earnings this year. given broad-based uncertainty and the impact on global demand from stay-at-home orders and travel restrictions. Second, we expect sequential improvements in sales and earnings in the third and fourth quarters as the economy slowly reopens. And third, we expect to manage full-year decremental margins in the 25% to 30% range, with the second quarter decrementals being between 30% and 35%. To summarize, Emetech delivered solid results in the first quarter on strong execution through unprecedented market dynamics. Bill will speak to this in a moment, but the actions we took in the first quarter strengthened our already strong balance sheet and liquidity, and we are poised to emerge from this economic crisis in a strong financial position, which will allow us to continue to deploy capital on acquisitions and invest in our growth initiatives. We are confident in the future of Ametek as our world-class talent and the adaptability of the Ametek growth model will continue to drive long-term sustainable success for our stakeholders. The message we've given to our employees is simply, while these are truly unprecedented times, Ametek has faced challenging and uncertain environments before. And each time, the collective strength and talents of all Ametek colleagues has allowed us to emerge stronger and better positioned. Together, we're working to make sure Ametek again emerged stronger and better position for the next Jack Burrow of our growth. I will now turn it over to Bill Burke, who will cover some of the financial details of the quarter. Then we'll be glad to take your questions. Bill.