AME - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen. Welcome to the Q2 2019 AMETEK, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-answer session, and instructions will be given at that time. Instructions] [Operator

like Vice for President, now Mr. conference your Coleman, Kevin Investor introduce would this host call, I Relations.

You may begin.

Kevin Coleman

Great. and thank AMETEK's Good morning, joining Kevin. earnings for XXXX second Thank us quarter call. you you, for conference everyone,

and me and Executive and Financial Bill With President Officer; Officer. Vice Chief Zapico, Executive are Dave Chief today Chairman Burke,

and AMETEK's available of and webcasted, systems Investors later section be on our also results This can in be released is made available this earlier our webcast were quarter on on market second morning our are call website. website. site and accessed will and the today. being The archived

and any may During expectations. is will results change cause the discussion make to that the of differ contained subject SEC. A we or risk to filing revise today's the forward-looking based intention are AMETEK course call, or forward-looking on detailed obligation AMETEK's statements, that in factors risks actual significantly our of may update results any with from affect which future disclaims various uncertainties the statements. uncertainties to and

references and XXXX finalization the Act. XXXX adjusted release our made the of in Investors the results and Tax impact section intangible adjusted and XXXX of acquisition-related Jobs or fourth excluding this between on be to on Also Reconciliations any found an call will basis, the website. press the our excluding GAAP amortization, Cuts and measures gain be after-tax, on of related quarter to can XXXX

Dave. now turn open Dave Bill, to then I'll for prepared up the by remarks begin meeting questions. with and today We'll the and

David Zapico

from earnings We organic growth, sales on an Kevin, operating and you, good Thank exceptional and solid had everyone. AMETEK guidance acquisitions performance. excellent quarter. second exceeded morning, contributions

adjusted process, we share. earnings per diluted and EBITDA, level the income sales, delivered In operating of record a

We also quarter. in in impressive operating growth flow cash the delivered

These outlook our for highlight shareholders. performance results our half year to earnings and results of AMETEK of consistent range. deliver increased strong the Model, again the ability guidance full year, and the Growth we strength our Given have the back continue strong our and the for to

Now foreign were a up X%; $X.XX XXXX. was the solid on Total to second X% to the sales quarter. Organic point the billion, of acquisitions quarter a and financial at for and was the quarter sales X%; XX% the $XXX at growth EBITDA highlights record added compared same a X period in million, currency record EBITDA second excellent headwind. margins over XXXX, XX%. in were was up

income quarter year XX to impact the a impressive excluding $XXX.X an a Reported operational strength our XXXX. record performance operating were period. over points income increase exceptional initiatives. of the This the Operating prior at margins basis million, up margins acquisitions, operating second operating of the was increase excellence basis points of reflects dilutive X% over XXX And XX.X%.

$X.XX diluted our range over record diluted a $X to XX% of year per share. share, up guidance per were the prior Earnings and exceeding $X.XX

Lastly, flow operating up to was million. superb XX% the quarter, in $XXX cash

to individual on operating Now groups. the

contributed acquisitions over Instruments Recent X was Electronic million, foreign currency organic were X%, second $XXX.X First, EIG the sales were year's Group. and up quarter headwind. XX% last X%, sales up second point quarter. a

customers Analysis high-end including introductions markets. Their complex quarter. solutions several Materials growth another solve Our attractive new helping instrumentation very in delivered analytical are business product challenges our solid increasingly

the across nicely, also has performed business as remains aerospace markets. and Aerospace defense demand Our very solid

XX%. income margins performance second top operating of income strong to delivered the line $XXX.X million quarter. with EIG reported XX% to growth, in operating addition Operating outstanding increased In the

Excluding acquisitions, the XX EIG's expanded margins dilutive of over basis points the year. impact prior

performance. sales organic Group quarter, The strong a and had Electromechanical operating also solid with impressive

point up same and foreign X sales headwind. was growth million, in EMG EMG's sales X% period for currency organic were quarter a over the Second X% XXXX. $XXX.X

record $XXX.X XXX a same EMG's year operating operating points sharply last basis performance XX.X%, quarter. X% period increased margins over million, was over EMG to the second year. up for prior up income, the Operating with excellent

AMETEK's in during results the second excellent. year of were quarter half the and first the

another results. for with strong positioned firmly are record and growth year We

differentiated growth model shareholders. for to AMETEK driving continue our execute highly long-term Our the value businesses sustainable

I'd like to on outlook highlight year. businesses, touch remainder guidance our then and some I'll accomplishments, updated of our and the the for recent of

Creaform Launched both their with the like enhanced XD First, I two features HandySCAN to scanners new SPARK design were new of a innovative design. BLACK would products. Dot Red winning and congratulate product ergonomic in at team April, for for awards Go!SCAN designed and sleek recently metrology

the optimized surfaces. XD has measurements to Now been repeatable accurate meet third-generation, in with design The most to the of HandySCAN BLACK effective a environments and manufacturing and professionals looking way accurate designs, meet objects. of highly physical for and provides complex the the HandySCAN needs acquire even difficult results in BLACK reliable metrology and

offers without Dot need the SPARK to texture is the flawless rich Red world-renowned offers competition setup, fastest products and product innovative in scanning Award acquisition The well the across palette. any scan object most as Go!SCAN and is a The new that identify for as XD details to experience Designed a market. geometry color most impressive it friendly categories. in several used

solution of global Industry automation to factory of our a end their Dunkermotoren solution. motion XX leader markets motor for winning a in dPro is like control also set applications. advanced broad Maschinenmarkt's including Dunkermotoren I serving award business congratulate medical, motor and servo the for BG laboratory, Best

are the new reliability. the improved sets operational dPro flexibility, the servo of precision teams. product and integrated our testaments Industry strength functionality, and new development XX Best motors and standard to and Red with Dot of awards of The these BG products Their success

Dunkermotoren Creaform outstanding and for So everyone recognitions. at to these congratulations

index leading customers. quarter. research expect vitality product seeing excellent edge a in our million and development efforts was our $XXX level, We strong and to a we innovative approximately XX% to up remain very provide to and the over spend to committed and on last XXXX, investing XX% we our RD&E, products technologies year's results new In are in

operational excellence. to Now shifting

adding for value Our businesses. our are operational significant tools excellence

during improvements drive to second the continue to was cash enhance We operating in our our quarter. improved operation profitability efficiency performance our flow, as evident across

we now from $XX savings for with For our excellence expect estimate generated the annual in sourcing. increase savings of all of $XX majority previous million initiatives This approximately from in our material is of operational these million XXXX, an savings.

Finally, very acquisition we remained active in disciplined efforts. our yet

opportunities. flow Our to teams strong cash manage acquisition value-enhancing continue of our strong business development a pipeline on free remains acquisitions. deploying focused on AMETEK

the for updated will I move to guidance XXXX. earnings now

in Given XX% This over second to new $X.XX range guidance of $X.XX of earnings. in near XX% quarter record our expect diluted the to $X.XX, previous up has we XXXX range from to our share per range diluted now share. and be our backlog, per XXXX earnings increased performance $X.XX the guidance to

the overall the quarter digit. to the single to with quarter to high year expect to high be the are organic We be X% to up in year in prior per $X for to up for continue single expected sales Earnings be sales share, of up up third third X%. sales XX% digit anticipated XX% range the $X.XX period. over are diluted to Overall

on We To through our focused well quarter the year and future. driving results. of second the growth summarize, are with end we continued into pleased the remain

and Model for strong technologies differentiated are their results stakeholders. AMETEK our execution driving leading market business' of Our the Growth

details over take be quarter. your glad the will turn of who Then, the now to will it Bill cover questions. Bill? Burke, I to we'll financial some of

William Burke

Dave. you, Thank

capping second had half record first Dave with an As the excellent results. AMETEK the year noted quarter, off of

Let for financial quarter. me highlights additional provide some the

expense in line Core with roughly was selling quarter. second the quarter second in last year's

level in same were administrative Second slightly quarter and were period X.X%. of sales of percentage the last up expenses year's XXXX, versus over as a general and X.X%

The last of quarter quarter rate the year's effective was XX.X%, down XX.X%. in tax tax from second rate

to now we rates XX%, past, as year in rate. can actual quarterly XXXX, dramatically full positively negatively effective be and from stated the tax we've estimated For expect differ either approximately this our or rate tax

in continue expenditures XX.X% million Capital quarter, first we quarter the XXXX expect second million be to capital and full were Working to of the the approximately expenditures capital year X.X% sales. quarter. essentially of the or from unchanged in $XX for $XXX was

$XX expense Depreciation million. and the was amortization in quarter

continue share. full approximately million million year, depreciation $XXX to to expect the amortization acquisition-related including and of we approximately or diluted For per intangible amortization $XXX be $X.XX

levels to cash generate Our strong of continue businesses flow. very

million, was last cash Second over and million, XX% up up flow quarter cash over free was XX% year's operating second quarter, $XXX $XXX last flow year.

and As net of to a XXX% percentage full was free free year we XXX% of flow cash flow cash continue conversion net income, approximately expect of income. conversion

noted, The pipeline our support acquisition efforts. continue primary and strategy. just we healthy, flow flexibility use remains is cash of as to our strong have financial And Dave significant our our to free acquisition

with our and is $X.XX June of as positioned Total ratio EBITDA of down times. end billion million, debt $X cash approximately to remain at billion, equivalents cash second debt cash $X.XX billion support of XXXX. of debt at quarter net Offsetting was initiatives of $XXX the well facilities. resulting from the credit end to and We of the a in XXth X.X growth existing this

To our businesses in quality with quarter. second the outstanding high delivered conclude, results performance

Our and outlook sheet excellent cash XXXX our balance remains the flows. positive half through strong of given back Kevin?

David Zapico

please Bill. for lines the Thank you, Great. we Kevin, open can questions.

Operator

first Matt [Operator comes with Instructions] from question Our Summerville Davidson. D.A.

Matt Summerville

questions. of Couple Thanks.

during you're business incoming the thus can about and July? organically choppiness sort a seeing were out the also just talk saw total color give on where First, your rates there, you business? in what of and order given for can in And little you quarter, what you company us macro far by linearity the

David Zapico

Sure, Matt.

terms EMG in were the sales X% with In growth very were order of our QX and positive. were orders the EIG up down a slightly In and organic the in line a business, flat, bit. were orders orders, quarter, orders the organic rates

order quarter near of trend. automation delays some a patterns in the businesses. ended they a of record And had we terms We and the And billion. quarter, the followed similar engineered sales $X.X backlog and in our during solution patterns with

but a up growth We than for bit typical is May, was than bit quarter. had very May April, month June as our was stepped past better more it business, was - a each the and than which subdued better

ramp. less So pretty a a little but typical, of

Matt Summerville

follow-up, on you in the then, maybe versus as And where were price Thanks. inflation? quarter a

David Zapico

and like of half We 'XX, bit of Sure. QX had X.X%. of was X an of tariffs Matt. across much Sure, entire price points less a quarter. the Total achieved quarter was excellent second inflation, 'XX. first than impact portfolio. the We our the

with had So spread we're the pleased a we results. very positive and

nature differentiated speak the of highly the AMETEK's you As results know, portfolio. product to

niche some We have around determination global really globe, a front have and we environment. of focus changing stay the markets in to make and sure in positions we leadership

with very the we're pleased So results.

Matt Summerville

you, Thank David.

David Zapico

Thank you, Matt.

Operator

Coe Our comes Nigel next from Research. question with Wolfe

Nigel Coe

Good a through perhaps I the the in thought end run morning. a detail? good bit to markets geographies time more and it Thanks. maybe

David Zapico

Sure Nigel. Right. thing,

sales businesses. up percentage the growth, and commentary, with on quarter excellent start market another had sales and basis, segment First, Scientific. organic on a mid our driven Telular overall by Spectro Forza, I'll teens They from our of contributions with single-digit acquisitions process low

As a sales in single I remarks, up process and introductions and product driven all prepared by to had their mentioned quarter for to organic continue mid instrumentation, for particularly we the strong new solid the growth high-end demand Materials business Analysis be digits. XX the expect solid organic

to across a diverse and set single and with our Switch defense the was in another quarter quarter aerospace Similar quarter, first growth This organic we platforms. second growth. reflects markets. broad excellent of aerospace, digit the aerospace based delivered defense our across attractive businesses positions different sales to high various the growth aerospace have

for mid notable balanced a organic expectations each market. expect solid aerospace start the year, growth all third-party MRO across OEM commercial We our given the increasing businesses. XXXX single had and digit sales for now with of high we're And to growth to and strength our in

second sales Our acquisition driven power and of digits, recent single the the low the industrial Organic quarter were were sales in expectations. quarter, by segment, line contribution down our with in in slightly from Motec. the up and

of For to given expect patterns organic mid continue solid businesses. order XXXX, digit growth all strength we and our backlog sales to in these of single low the

single comp. And finally, up sales businesses digits against year of the the solutions prior engineered our for quarter and were automation difficult low second

in seeing are low to engineered mid digit growth XXXX, order and expect for businesses. delays sales all automation certain solutions, now and For organic some the we single we

solutions So automation aerospace segment lowered from to mid to guide and mid, we bit engineered we increased or a to and so. that our low

expect to X% So organic I'll sales growth continue X%. of full just further year summarize the whole thing, to overall

I growth solutions. decreasing modestly forecast increased for while and As forecast growth modestly engineered aerospace, we said, for automation our have

and process to and OEM, performed industrial change power no they well really and process the And quarter, but very strong. and look in

Nigel Coe

of What David. very range. just And the gives if the end get just the confidence on to of the you Thanks, back you touch half year maybe X% X% of that comps year? accelerate some acceleration in seen what half Thank organic much. you've Great. high China. can you address back tougher to the in implies could the to on Perhaps that that in

David Zapico

sales guidance half Yes, And we guidance within ended Yes, sales sure. our X%. Right. within organic our had up up overall year, we range, at ended were range. and the at

in guidance. smack our that middle right So

in of U.S., across So growth Europe saw terms solid and geography, digit. was and down some we Asia mid-single the

So up down of about Asia mid XX% mid our you business business really which about of digits, is was have XX% single and our digits. single

bit digit. particularly digits, a see in We at gas, had single were in up down In were U.S. Europe, businesses. Asia broad-based was where process mid down had China oil strongest single growth than single aerospace we the was quarters. strong up digits, more mid aerospace mid and and we the our digits. single And was mid growth and We and

some more clearly So X% and we our trade growth, one but very of about a strong by two economies are the being of two down number and sales, after it's had in years bit war. the number impacted plus they

given headwind yet. So it that hasn't we're its closely, watching size, of been relative much too a but

Nigel Coe

David. Thanks,

Thanks

you. Thank

Operator

comes from Josh Stanley. Morgan next question with Our Pokrzywinski

Josh Pokrzywinski

Good Hi. guys. morning,

David Zapico

morning. Good

Josh Pokrzywinski

end are think, just question, we Dave, last end is that of a fair the up I about And a that thinking of aerospace softer. the some ones little it some the stuff to confidence on cycle better guess markets guide characterization I got say, or longer what to markets I follow half? in doing a point? automation also visibility you really back, quickly. the in turn what's cycle guess, gives fair and the a holding as And are, is shorter in process but Is can second that the you the the starting characterization

David Zapico

a they is cautious, didn't Yes, they're orders, I'd dealing We quarter. and but in and are healthy characterization. these there In placing we're orders our they fair customers automation order with that's delayed say businesses, the lose a delayed, pipeline. OEM

good in solid in that's So weakness a characterization with and strengthen with I we have some would say process aerospace and automation.

So that's summary. a good

Josh Pokrzywinski

in end that headwinds. in Or I So safe it's markets called up folks been to within orbit of space, kind automation electronics two that? the the the of lot guys? that's and there for biggest is auto cropped Is same say, have think has that something a else out you

David Zapico

to weaker automation there was that a that we're motive and was okay customers I some there have that so it are Yes, automation balance we would some that with, the say, medical were and and automation it's factor light. areas - some but there the and customers was was those food weaker, customers, -- industry OEM were motive bit and that factory and

Josh Pokrzywinski

gotten macro the then some a with in over one bit the a last And even acquisitions diversity performed string as last bit me. more Obviously growth how the it. years, niches, of has for and the or you Got portfolio change some of one performance have the deeper couple of the are in or those noticed choppier? rates just

David Zapico

Yes.

years held characteristics they U.S.-based, the of and did well. up largely the acquisitions two were over the past we they've were of very One

acquisitions are company the performing models they're meeting their results. performance as the and the of acquisition and is can So in well, see driving the you extremely

Josh Pokrzywinski

Great. Thanks. I'll there. leave it

David Zapico

Thanks, Josh.

Operator

next question Obin Andrew from America. Bank Our comes with of

David Zapico

Good morning, Andrew.

Andrew Obin

morning. Good Yes.

that if Just a hear the that. quarter? correctly China missed question, I apologize in I was I did down

David Zapico

down mid U.S., in up single mid me, mid was more Europe, Asia. through, up in went and mid-single in digit U.S., than down Europe, bit - single excuse single digits, the digits, we geographies up a digits, Asia the What in were Yes. down China in

Andrew Obin

Right.

or Chinese very the you And get initiatives have happened So turn a trying I'm us lot sense on the on in could you in my it that China, you call? sense China the business did was just quarter in have quarter nichey, granularity there. growth this question of because the what walk wondering, just when to a just if the

David Zapico

- We comps we has this China running do Yes. there. year. difficult that choppy have into we of the balance and inconsistent been very were had very through

a down the was of automation was saw we lot China it was weakness, where were in mainly businesses broad our - more but based, So it bit. business a in it

again, watching and I it we've our difficult fortunately, business. they're business and a dealing and X% just the with it of of been comp, a war, mid So, our closely, have we and growing And think uncertainty about was it's trade single digit. XX%

So it's Andrew. the been it, that's inconsistent, best to way describe

Andrew Obin

your No, and at to the If your things that most others organic Yes. growth between broader If And growth outlook. are of sort at imply does of different. to I guidance tried your look course. them look a just did industrial the I revenue think, actually get question, I of historical have peers, relationship question. production, cut

highlight couple of years. American acquisitions more did over North You the past

talk you what we folks, you But could impact that growth. highlighting, about they're the know also Dave, initiatives pivoting of growth will because growth quantify when Anyway the to the initiatives, profile AMETEK, be you. I meet doing growth with really the AMETEK to can you of of Thank cyclicality are terrific? how more

David Zapico

Yes, sure. past And aerospace care. the had over is When we have also well. portfolio, now of I think but the U.S.-based business we about health acquisitions our our about business year, is performing XX% our

all are improved look driving right at we And growth definitely things now. the -- our that have when capability. So those I organic are us

that quantify when it We're the cycle seeing are teams of you we visited growth. the get operation. is don't difficult will tools of excited There making point I -- be better and about through And have that. a organic we using the very will is way to great we results. But progress that, saw we're as and you positive some is the our think talked

current draw organic distinction and pretty So done a you growth results. what sure between we've not in can the I'm current It's environment. -- in the

Andrew Obin

much. very you Thank Terrific.

David Zapico

you, Thank Andrew.

Operator

Capital with comes Deane from RBC Markets. Dray next question Our

David Zapico

Deane. Hello,

Deane Dray

Good morning, start Thank had? did we price Hey, for everyone. in second expectations and the role half what cost quarter. out play How you. in tariffs can with that maybe the

David Zapico

think, the Yes, know, we're comprised start low design. of differentiated niche with as CapEx by we I'll I you have businesses Great. and tariffs. And

with model in dealing gives of situations. So our a those us flexibility lot

And in that tariffs we QX, the we impact completely about played direct price. with as from $X.XX situation out of had and offset We the predicted.

So of level second in a expecting the similar we're half -- of the year. activity and

had quarter And business, of EMG. entire both our 'XX achieved question, the first QX the half across the of 'XX, much We that's price to X% like EIG going and excellent back price was in quarter. 'XX. of second We an and

Total inflation and a was bit of together impact the than added tariffs less X.X%.

we good a we're margin price less very pleased contribution So, to our inflation from results. with had tariffs and the total and

Deane Dray

to in and I the you And great on that... verticals all and It's hear. gas? did the markets, then comment oil did end hear How

David Zapico

No, when yes, Oil in XX% up strong had Middle at a quarter the -- we and include didn't And we you in didn't comment. was and QX. Europe, whole it segment, the East gas Europe. look we particularly in

both we performance. So, pleased mid strong upstream were businesses, our good the organic and with and growth in and downstream

Deane Dray

Good. he have answer, might on And have about asked missed Matt, the I with had opening I might question, then the -- how looked? July

David Zapico

Yes, each right but on in our us. target. don't talked subdued we're we're quarter. And the about so on think and yes, but month, increased - it was Right. -- being over, July, we more We isn't covered plan, the July I quarter for

feels good. So July pretty

Deane Dray

you. Thank hear. to good All

David Zapico

Deane. you, Thank

Operator

with next Our Stephens. McCarthy Robert from comes question

David Zapico

Hello, Rob.

Robert McCarthy

me? hear you Can

David Zapico

Yes.

Robert McCarthy

have on might good your distortions first could time, a the incremental talk and excluding margins. guess we a for Thanks through some is see would I just On acquisition question core there? I around basis, quarter. congratulations the you of that, and the

William Burke

very quarter. our in margin pleased performance We're with the Right.

basis take Our up was the it points. where you and was excellent. basis there up core acquisitions out XXX were wasn't XX margins EMG, points, acquisitions, if EIG, The

XX%. showed in outstanding XX%, EIG margins, We outstanding the had and just and operating was So it incrementals about performance, about incrementals XX% also. core up was about of EMG

excellent world. the So operating performance around

Robert McCarthy

generation the have very just cash could more performance probably defense on you exposure. definitely, cycle back while of you and Now, little in cash speak the your and on aerospace, explicit stepping

there, or is and that But terms operating your in of cash free the you flow typically, in aerospace company of above cash do generation flow below terms conversion businesses how average? longer cycle or

David Zapico

The cash generator Yes. great is aerospace business us. a for

of So, I aerospace terms little higher they're with up capital, being of of ends various dealing as businesses. because they the and margin would in say, the higher percentage aftermarket components are -- it's a sales working - but a

higher it's the characteristic have of and and a been that time. way you capital, but margins, aerospace long working So higher for that's business,

Robert McCarthy

final organic you're to Yes, it's time the a environment and of kind looking have obviously of seeing Do just anticipate nice to XX it over kind contraction, XX led with The what right at went guys? rocky oil challenging restructuring to a restructuring, some right? incremental kind you now going and question 'XX gas growth right road and generation. deflation, through to think good cash months of seeing frame a the now, also 'XX months to we're from the some is next and we're you given

David Zapico

results. are doing various those operating and businesses. At in our We're in of AMETEK, the always are some reported we level restructuring

of realignment terms big company. entire In the activity restructuring, our affected our

we're we're at opportunities of reduction. if Right it, around confident the to half and then plenty change, cost we doing good pretty now drive year. second have of we're seeing the that, things But not

flow, expansion, AMETEK's sheet, backlog environment. and of margin deals, very I a solid with I generating a outperform of optimistic as businesses, here group robust about the with able feel cash strong current being sit balance performance So, to with a

Robert McCarthy

for your time. Thanks

David Zapico

you. Thank

Operator

Our Research. next Linzey Vertical question comes from Brett with

Brett Linzey

Hey, guys. morning, good

David Zapico

morning, Good Brett.

Brett Linzey

some if versus if assets how stickier know, to portfolio the in XXXX, the element actually question aftermarket legacy a mix down with or of we recurring recent that mixing of of element those mean, up just those revenue base… you the drill of the look were sales to You're the portfolio? as look percent Hey, businesses, pertaining recent, acquired and at a acquisitions, -- I and moves, XXXX does

David Zapico

our of business we out. two-thirds recurring mixing Spectro up, that's acquisitions and like XX%, Yes, baseline deals, the that. we're many businesses are we It when Telular the about those than stands been XX%, but is recent and we up the you recurring so but AMETEK, it have XX%, bit of announced the mixing know of a and was recurring, address was about revenue, more Scientific

Brett Linzey

Okay. XX%. downside Great. preservation up sales you've the of potential flip If think way about type on then do declining decremental you we see where industrial about we slowdown, what we And XX% see an of modestly? that get are talked and to environment this if continue historically incrementals to if into script

there, And a south cost then in any I you a place a quickly guess bit help relatively there follow-on can get are plans that countermeasure turn if things little do here?

David Zapico

Yes, up know, operating contribution that margins to have excellent in high Right. but businesses, we we both and our have general have profitable know and business, operate cycles. you we as in also down very how cycles seasoned capability, managers

clearly those plenty and of and good we our forward, ability we and cash. and lot into projects, And a very pull plenty opportunities of the generate cycle, capital a have down we're also of have to going managing at working

and basis, environment, experienced relative at it's will where this that environment not that. we right we're get into seeing we on perform an but if So we're well a point

Brett Linzey

motion, based some those what's or less I than think mean preserve you a in you actions margin on XX%? But do been of decremental much can

David Zapico

Yes.

happens, I something when and... again like on it but it comes depends where think definitely, that from it's

William Burke

it. of depth The

David Zapico

depth the good of And a degrowth is comment.

well. comes, it recession I'm If and manage that be will look I'm So another there at happens through our it. to sure we very sure way when have and we'll

Brett Linzey

Thanks. guys. Great, Okay.

David Zapico

Thanks, Brent.

Operator

from with comes Poliniak Allison Wells Fargo. question next Our

Allison Poliniak

morning. Good guys. Hi,

David Zapico

Good morning, Allison.

Allison Poliniak

of operational Just excellence want on along kind follow theme. to that

natural Can talk programs for is sort of excellence increase fallout with acceleration you ending some in some XXXX. these did your operation areas? where ended it certain or or of You of savings just a

David Zapico

excellence acceleration. about projects mean the it seeing the an at we the and we're million the from million had from million of what $XX of $XX side. $XX seeing we was of was on sourcing, And had. operational acceleration year, -- sourcing that is really of and I beginning We're savings, it other

the and teams So us outstanding our outstanding regions to world moving dealing doing mitigation and different are delivering job, of of incremental sourcing savings. of with the tariffs, absolutely job an

P&L drove excellence are So $XX was increased savings the a to savings and to -- kind very up from really the QX for that's $XX of incremental we're and million second in And ratable savings sourcing to $XX so operational that we saw QX, it we half that million. XXXX from saw $XX and million of from ramp million, that. increase confident from the the in thing,

Allison Poliniak

missed it, sector. have segment the there for may that's I expectations? then relative in driving aerospace growth there or increase your that Was specific that a And growth Great. sub region to increased

David Zapico

comp, it's Yes, if you the a look was a to jet we pretty coming have and business jet the digits, off double up business market, -- market low at easy but continuing perform.

But entire So military But quarter, the increased digits. second the we high that improved for the was the that year. market, into fantastic we it business, the market quarter mid entire continued single for look the up aerospace MRO so the details, in did the the business really a had ticked the business third-party commercial and you strong, guidance well. market jet to if

Allison Poliniak

Great. Thanks much. so

David Zapico

Allison. Thanks,

Operator

Glynn with comes Oppenheimer. Our Christopher question next from

Christopher Glynn

morning. Good you. Thank

David Zapico

Good morning, Chris.

Christopher Glynn

Hey, Dave.

and cash So I think you mentioned available $X billion credit.

just new about you don't couple I first in very of think I while talk bolt-ons, a update, every quarter, but the vibrant? know. They it's come an still pipeline quarter little the a didn't is

David Zapico

is. It is. It

a You know, XXXX, opportunities. Chris, of is had closed QX good, And our spent and million. in you balance know, when our sheet. have capability happen long-term and area, it's where in strong we number deals in pipeline short-term, a very confident the record about I predict a $XXX as to evaluating difficult but and we're going feel the we three very And this they're and to

we're being able free cash we're you flow on deploy So Right now, properties, on we're to deal, disciplined. to to going we're lot our the do of that we're acquisitions a long-term. we at very looking get and be going optimistic I capital. in return mean,

Christopher Glynn

clearly outlook, generally I for weakening, direct. macros understand you're much distribution, you the on the continuity Thanks calling for And that. more have don't versus much

a So that of into that's Just a to the current little conversion more around phase are clearly an advantage want picks environment. backlog we of you that. have organic preserve up where kind complexion kind But in moving continuity?

David Zapico

have gives us some half. some a of look second of backlog Yes, backlog, the into to we in convert if confidence opportunities it. billion, And some which there are you $X.X near-record that

the process U.S. we're growth, backlog confident we we aerospace and of in reasons got well, in solid half. got that one that's a So performing well, We're market has done business provides doing extremely that the well, conversion the opportunities. the our guidance and our is second

way about and we at we're good feel the that's So looking it it.

Christopher Glynn

Okay. for that. Thanks

David Zapico

you. Thank

Operator

comes from Joe question next with Cowen. Giordano Our

Joe Giordano

morning. good guys, Hey,

David Zapico

Joe. Hey,

Joe Giordano

in one going little I view just for I quick the on What's missed gave you but know it. tax specific Bill, quarter, anything Hey, full that? clarification. there? your The light was rate And the a year,

William Burke

Full now XX%. the from we rate well and tax about that quarter there saw stock some state in compensation, the down XXX points drive Benefits tax down to was in was from -- XX.X% changes basis as year benefits is some excess help quarter. second year-over-year. in that laws What us

Joe Giordano

use And out into XX% number to good the like forward model, too?

William Burke

back a at the of year, year. the the for XX% looking We're of the more of to in to number half XX% that's average probably it's get

Joe Giordano

year mean more number XX% a fair into forward a use? I full a going XXXX, like so like is to like

William Burke

get to working we'll level that -- That's next year. to be

Joe Giordano

Okay.

a couple kind we've this got asked ways. different of of So through times,

we're midpoint same broadly? look you year the lines, heavy take is midpoint teeing like markets early cost up starts organic line sourcing slow up, top probably -- Particularly are here truck in actions? more strong some year, some anything where maybe into but lower, maybe maybe opportunity And your maybe along we're a out like we're declines we're your year set same the higher. to talking really or the in the cost and what's like still next accelerating, for this bit out obvious coming As talking there in to range, or

David Zapico

to Right. The opportunity set times. all is very good at --

of strategic all go involve for everything. part our cost As process, our we consolidations planning some They through a three-year business. plan have and and reductions, with plant of sourcing

have projects set viable We from. to a pull of

mention and to sales some the So we is opportunities X% less now than you that of mix... trucking that. do really the business marker, have But when

William Burke

Definitely, yes.

David Zapico

is business in business, earlier Yes, bought good growing. and year the really actually we are Motec the that in and they

any So in mutes have of other we business. that it part the decline the

portfolio part of situation camera over the So business. software has have that of we've vehicles, we for a growth. really outlook good the and there we it algorithms, been the where changed And and a the the time, our modifying have and

and/or but high the half the we little bit the toward on, our of the work confident through the I midpoint in you middle of feel mean the at we of for maybe feel X% a portfolio is low point guide, the year. still right more year, good going half and second for end that's valid for So, we're have and and end, second half. your

Joe Giordano

perspective. guess, flat. at now not what macros a I know XX% you're you're or growing I on in growing I'm we're orders first know So, as sitting organically, getting your looking from weaken forward, and year -- -- to organically hands year, I XX% and at the Earlier that you're in like things that not quarter, start last orders the

like the now. guessing you are -- just I'm decisions somewhat how are So different

you a are differently So like acting you than maybe ago year that? something or were how

David Zapico

point Yes, in seasoned And they and to reacting are really I our operators have margins. to their just some businesses, we plan. you

in adjusting And when of saw were with excellent And they're are has deals. a up bunch incrementals excellent On you operating acquisitions, XX without saw XXX dilutive basis business after basis, quarter, a did points So core their we the points. at you -- reported we basis income. softened, cost their we our the structures.

is operational think really of plenty is runway there the room go working I and and to So AMETEK long to that. excellence you, for a

Joe Giordano

guys. Thanks, Great.

David Zapico

Thank you.

Operator

further call our time, back host. And the over I'm not like at this to turn to showing I'd questions any

David Zapico

our our reminder, replay Thank a available joining be will your for a everyone of and you, today's help, today. Kevin, call webcast as for Great. website on you. And you Thank thank all shortly.

Operator

Ladies and gentlemen, that concludes presentation. today’s

You And a day.+ may disconnect. have wonderful

AMETEK (AME) 30 Jul 192019 Q2 Earnings call transcript