AMETEK, Inc.

ladies and gentlemen thank you for standing by and welcome to the fourth 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 Amitek's fourth quarter 2020 earnings conference call. With me today are Dave Zepico, Chairman and Chief Executive Officer, and Bill Burke, Executive Vice President and Chief Financial Officer. Amitek's fourth quarter and full year results were released earlier this morning. and are available on market systems and in the investor section of our website. 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. 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 risks 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 and also excluding the gain from the sale of Reading Alloys in the first quarter of 2020 and the realignment charge taken in the first quarter of 2020. 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 with prepared remarks by Dave and Bill, and then open it up for questions. And I'll turn the meeting over to Dave.

Thank you, Kevin, and good morning, everyone. Ametek concluded 2020 with a strong fourth quarter, delivering record operating results despite ongoing challenges presented by the pandemic. Our businesses saw solid sequential sales and order improvements in the quarter, while year-over-year growth turned positive across several of our businesses. We also drove exceptional operating performance in the quarter, leveraging our broad set of operational excellence initiatives. These efforts led to record backlog margins, and cash flow, as well as the high quality of earnings that exceeded our expectations, positioning us extremely well as we look ahead to 2021. The safety of our employees remains our number one priority. We continue to adjust our practices and enforce our safety protocols across our businesses to help limit the possible spread of the virus. While we are cautious in the short term given COVID-19 and ongoing travel restrictions, We are highly confident in the strength of our businesses and our ability to deliver exceptional growth and shareholder returns over the long term. The Emetech growth model continues to provide the framework for long-term sustainable success, and our performance in 2020 was a testament to the strength and flexibility of the model. Now let me return to our results for the quarter. Sales in the quarter were $1.2 billion. down 8 percent compared to the fourth quarter of 2019. Organic sales were also down 8 percent, with the divestiture of Reading Alloys a three-point headwind, the acquisition of Intellipower contributing one point to growth, and foreign currency added two points. As we saw in prior quarters, our commercial aerospace business was the most impacted by the pandemic, with sales down approximately 35 percent in the quarter. Orders continued to improve, with our book-to-bill at 1.07 for the fourth quarter. This led to a record backlog of $1.8 billion, providing us with a positive line of sight into 2021. Operating income in the fourth quarter was $298.1 million, up slightly from the fourth quarter of 2020, and operating margins were a record 24.9 percent, up an impressive 210 basis points compared to the prior year period. EBITDA in the fourth quarter was a record, $360.7 million, and EBITDA margins were also a record of 30.1%, up a robust 300 basis points over the fourth quarter of 2019. This operating performance led to earnings per dilution share of $1.08, matching last year's fourth quarter results and comfortably ahead of our guidance for the quarter. Our businesses also delivered outstanding cash flow during the quarter. with operating cash flow up 13 percent to a record $386 million and free cash flow conversion exceptional 158 percent of net income. Now, let me provide additional detail of the operating group level for the fourth quarter. The electronic instruments group delivered superb operating performance despite challenging market conditions. EIG sales in the fourth quarter were $819.4 million, down 7 percent from the prior year and in line with our expectations of solid sequential improvement. Organic sales were down 10%, with the acquisition of IntelliPower contributing 2% and foreign currency contributing 1%. Commercial aerospace remained the largest driver of the sales weakness, while other EIG businesses saw improvements versus prior quarters. Our materials analysis division returned to growth in the fourth quarter, while other EIG businesses, including Zygo and Tellur, also generated year-over-year growth. Despite the overall sales decline, EIG's operating income in the fourth quarter increased 3% over the prior year to a record $236 million, and operating margins reached a new high of 28.8%, expanding an exceptional 270 basis points over the same period in 2019. Our electromechanical group also delivered strong operating results in the quarter. EMG sales were $379.5 million, down 11% from the fourth quarter in 2019, driven in large part by the divestiture of Reading Alloys. Organic sales were down 4%, with the divestiture an eight-point headwind and foreign currency adding two points. In addition to continued strong growth across our defense businesses, we were pleased to see our automation business generate solid organic growth in the quarter. Fourth quarter operating income for EMG was $79.8 million and operating margins expanded an impressive 110 basis points to 21%. Now for the full year results. Despite very difficult end market conditions and meaningful top line headwinds in 2020, Ametek was able to expand full-year operating margins while delivering record levels of operating and free cash flow. Truly outstanding performance. Overall sales for the year were $4.5 billion, down 12 percent from 2019. Organic sales declined 13 percent, with acquisitions adding 4 percent. The divestiture of Reading Alloy is a 3 percent headwind and foreign currency flat for the year. Operating income in 2020, was $1.1 billion and operating margins were a record, 23.6 percent, expanding 80 basis points over 2019. EBITDA for the year was $1.32 billion and EBITDA margins were a record, 29.2 percent, up 230 basis points from last year. This led to full-year earnings of $3.95 per diluted share, down 6 percent versus the prior year. As Bill will highlight, our businesses did a fantastic job managing their working capital, which helped drive a record level of cash flow, with full-year operating cash flow up 15% to $1.28 billion. In summary, while 2020 was very challenging, I'm extremely proud of the way Amatek colleagues managed through the pandemic and delivered tremendous results. Before I cover the outlook for 2021, I wanted to highlight certain key elements of the Amatek growth model. and how each positioned us for long-term success. First and foremost, Ametek's proven operational acumen stood out in 2020 with our businesses doing an incredible job driving our operational excellence initiatives. In the fourth quarter, we generated $60 million in total cost savings with $50 million in structural savings and $10 million in temporary savings. And for the full year, total incremental savings versus the prior year were $235 million with approximately $145 million in structural savings and $90 million in temporary savings, including furloughs, travel reductions, and temporary pay actions. As we look ahead to 2021, we expect a much more modest level of temporary savings versus 2020 as the economy continues to recover from the worst of the pandemic and we continue to add back these temporary costs. However, we do expect to drive meaningful incremental structural savings across our various operational excellence initiatives, including across our global sourcing activities. For the full year 2021, we expect approximately $140 million of incremental operational excellence savings. Shifting to new product development. Even through this downturn, we remain committed to investing in new products and solutions that help our customers solve their most complex challenges. In 2020, we invested $246 million in research, development, and engineering, approximately 5.5% of sales. These investments led to outstanding innovation and dozens of new product launches. In the fourth quarter, our Vitality Index, or the percent of sales generated from products introduced over the last three years, was an impressive 25%. In 2021, we expect to invest approximately $270 million, or 5.5% of sales, and research, development, and engineering to enhance our position as a global technology leader. This is a 10% increase over 2020 RD&E spend. Finally, I want to touch on our acquisition strategy. Prior to the onset of the pandemic last year, we acquired IntelliPower, a leading provider of high reliability, ruggedized, uninterruptible power systems for mission-critical defense and industrial applications. Intellipower is integrated nicely into our power systems and instruments division and is performing well. While deal flow in 2020 was impacted by the pandemic, we are seeing continued improvements in the M&A markets and are managing a strong pipeline of acquisition targets across a broad set of markets. As Bill will discuss shortly, Amitek has significant balance sheet capacity, and when combined with our robust cash flow generation, provides us with meaningful capital to support our acquisition strategy. which remains our number one priority for capital deployment. Now shifting to our outlook for the year ahead. While we remain cautious in the short term given the uncertainty of the timing and pace of the recovery, we are confident in the strength of our businesses and our ability to manage through these uncertain times. We continue to manage our businesses safely and prudently while ensuring continued investments in key growth initiatives. For the year, we expect both overall and organic sales to be at mid-single digits versus 2020. Diluted earnings per share for the year are expected to be in the range of $4.18 to $4.30, up 6 to 9 percent compared to 2020. For the first quarter, we anticipate continued year-over-year impact from the pandemic, with overall sales down low to mid-single digits, and first quarter earnings of $0.97 to $1.02 per share, flat to down 5% versus the prior year. In summary, the strength of the Amatek growth model, the asset-light nature of our businesses, our leading positions in attractive niche markets, and our world-class workforce will continue to drive long-term sustainable success. I am confident that we are emerging from this unprecedented economic environment even stronger than we were before. Again, I would like to thank all of our employees for their continued hard work and tremendous efforts as we manage the ongoing global crisis. 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?