Good day everyone and welcome to this AMETEK Incorporated Third Quarter Earnings Conference Call. This call is being recorded. For opening remarks and introductions, I would like to turn the call over to Mr. Bill Burke, Vice President of Investor Relations and Treasurer. Please go ahead sir.

Thank you, Rochelle. Good morning everyone and welcome to AMETEK's third quarter earnings conference call. Joining me this morning are Frank Hermance, Chairman and Chief Executive Officer and John Molinelli, Executive Vice President and Chief Financial Officer. AMETEK's third quarter results were released before the market opened today and are 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 November 5th by calling 888-203-1112 and entering the confirmation code number 5111340. This conference call is also webcasted 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 factors and uncertainties that may cause actual results to differ significantly from expectations. Those 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'll begin today with some prepared remarks and then we'll take your questions. I'll now turn the meeting over to Frank.

Thank you, Bill. AMETEK had an excellent third quarter. Sales were up 22% to $647.4 million and strong internal growth of 6% and the contributions from acquired businesses. If the effects of foreign currency are included, internal growth and sales was 7%. Also, internal growth in orders was very strong at 7%. Operating income was up 25% and operating income margin expanded 30 basis points. Net income was up 24% and diluted earnings per share were up 25%. Overall we're delighted with these results. Our key markets remain strong. Our strategy of acquiring differentiated businesses is working well and our focus on operational excellence continues to drive profitability. Turning our attention to the individual operating groups. Electronic Instruments Group had an excellent quarter. Sales were up 20% on strong core growth of 8% and the contributions from the acquisitions of Cameca, California Instruments, Vision Research and Xantrex Programmable Power. If the effects of foreign currency are included, internal growth was 9%. The EIG's operating income was up 28% for the quarter. Operating margins improved 140 basis points to 22.4% as compared to 21% in the third quarter of 2007. Electromechanical Group also had a strong quarter with revenues up 26%, solid internal growth of 4% and the contributions from the Reading Alloys, Umeco Repair and Overhaul, Motion Control Group and Drake Air acquisitions drove the revenue growth. The effects of foreign currency are included, internal growth was 5%. Operating income for the quarter was up 17% to $50.4 million. Operating margins were 17.4% this year as compared to 18.7% last year with a diluted impact of acquisitions, the key driver for the change. In addition to our excellent financial results, we continue to make significant progress in the implementation of our four growth strategies; operational excellence, global and market expansion,…

Thank you, Frank. The results we are reporting today demonstrate a high quality of earnings, strong margins, and a balance sheet well equipped to support our growth plans. As Frank has covered our results at a high level, I will focus on certain areas of interest. Selling expenses were up 21% in the third quarter. Excluding the effect of acquisitions, selling expense increased in line with our core growth. Corporate G&A fell to 1.6% of sales, as compared to 1.9% of sales in last years third quarter. After excluding the charge related to the accelerated vesting restricted stock in the second quarter, we expect our G&A spend for the full year 2008, to be about the same as last year in absolute dollars with 2008 decreasing to 1.6% of sales versus 1.9% of sales for 2007. The effective tax rate for the quarter was 31.1%, inline with last year's third quarter. We expect the effective tax rate for the full year 2008 to be approximately 32.5%. As we have said before, this is a full year rate and actual quarterly rates can differ dramatically, either positively or negatively from this full year rate. On the balance sheet, working capital, defined as receivables plus inventory less payables, was 21.8% of sales for the third quarter, down from last year's third quarter level of 22.7%. We continue to see an opportunity to reduce our working capital investment and we plan to reduce this year's overall percentage going forward. Capital spending was $11 million for the quarter and $31 million for the year-to-date. Depreciation and amortization was $16 million in the quarter and the year-to-date amount is $46 million. For the full year of 2008, we expect the capital expenditures will total approximately $45 million, while depreciation and amortization is expected to be…

Thanks John. That concludes our prepared remarks. Rochelle we'll be happy to take questions now. Question And Answer

Thank you. [Operator Instructions]. We will take our first question from Wendy Caplan with Wachovia Securities.

Thank you. Good morning.

Good morning Wendy.

Frank, when you received your Thursday sheets from your business... from the management team, can you talk about whether there has been any kind of a reportable change in those sheets in terms of how they are viewing there businesses?

Well I would say for the key parts of our business there has not been a reportable change. The markets that I talked about in my opening remarks continued to be strong and I would say not a significant change. However, in some spotted areas I would say of the company, we are definitely seeing some impacts of the global slowing. And I'll speak to a few of those to put the proper color on what I mean. For instance, our heavy vehicle business which is a relatively small part of AMETEK, it's about $20 million in volume, the turnaround in that business is clearly moving out in time. The estimates for next year have comedown some from the viewpoint of the agencies that basically look at a number of heavy vehicles that are going to be produced. It's still up year-over-year, but not as strong as predicted just a few weeks ago. Also, we've seen some slowing in our Chemical Products division; again a relatively small part of the company. But they do have some exposure to the automotive markets and that business is weaker. And in a few selected spots internationally as well, we've seen some weakening with Brazil for instance has had some weakening currency related and also of our four care businesses in Western Europe have shown a little bit of slowing. However, in almost all of these cases, it's been offset by a very strong business in other parts of the globe, for instance in this European's softening I was mentioning we've had very strong growth in Asia which offset it. So you don't' see it in a numbers. So I would say in these sorted of very spotted areas we've seen some weakening but overall the business remains very healthy and very strong.

Okay. And just to follow-up with that, you've talked about the heavy vehicle business in the past and how you've encouraged the management to seek other markets for the same product or similar products. Can you help us understand at this point in time which businesses are you kind of keying into, in terms of the ones that would suggest a further slowdown for the company? And can you talk about some of the contingency plans for those businesses?

Yes, absolutely. The key bell leather for us would be our cost driven businesses, where the dynamics in those businesses are essentially cost not as much based on differentiation. So I look very, very keenly at what is happening to our cost driven businesses on a global basis. And the very encouraging thing is in the third quarter they were essentially at about the same level as they were in the second quarter. We didn't see any real deterioration on those businesses globally. As I mentioned, it was a little bit of a slowdown in Europe but offset by strength in Asia. But that is also happened when the economy has been strong we'll see those kinds of tweaks. But that is the leading indicator I would say that I... my focus on in the company. There are a few, a shorter cycle businesses and our instruments group that I' looked at, but they're not as significant in mass. So it's not as critical to AMETEK. In terms of contingencies, we really view ourselves right now as being ahead of the cross curve. As I mentioned in my opening remarks, we basically put a $5 million precautionary bill tightening in place at the beginning of the year and then during the third quarter we added another $14 million in profit improvement programs which are... that didn't include the price increase I mentioned which was another 1% or a $20 million plus. So, if you sum all that up, there's about $40 million of improvement we've already put in with in essence no significant change in our market... the key markets I would say. As we go forward, we're going to be very aggressive on the cost side. We're rolling our budgets up right now. We've asked our operating entities to assume lower core growth and they will decide what they mean or what we mean by lower core growth. And I'm sure we'll discuss that during the budget cycles themselves and to be very aggressive on the cost side of the business. So I would expect when we release our earnings at the end of the year, you'll hear from us another round of cost cutting to line ourselves up with the realities of the global economy.

Thank you. And final thing then I'll jump off, could you quantify the impact of the Boeing strike this quarter? And what you are seeing, what you're thinking about it, please?

Yes, I can. Basically, the Boeing strike in sales will cost us $4 million to $5 million a month starting on November 1st. So that means that the impact of the Boeing strike if it continued through year-end, could be up to $8 million or $10 million in terms of revenue. The estimates we gave you cover that downside. So in other words, if the strike lasts till the end of the year, our earnings estimates we feel are still solid. In addition, you may have heard this morning that Boeing is going to resume talks tomorrow actually with their union. And I would hope that this strike would be handled well before the end of the year. But that's obviously speculation on my part.

Thank you.

You bet Wendy.

And next we move on to Jim Lucas with Janney Montgomery

Thanks. Good morning guys.

How are you Jim/

John, first house keeping question payables end of the quarter?

Sure Jim, $223 million.

Alright, thank you. And two questions today Frank. First, the price increase that you put through in your comment with regards to commodity inflation. Can you just speak to what you're seeing out there specifically what commodities were impacting you? And given what is evolving in the world today, what do you see in terms of price versus inflation going forward? That's the first question.

Sure, okay. We started at the beginning of the third quarter to become concerned about various commodities that we're increasing, with the primary one being steel. At that time the price of steel was about twice what it was, say a year before that. And we use about 42 million pounds of steel. And when you couple that with the fact that we saw the economy starting to slow, we decided that we would put a pricing increase in place. So we went out all of our operating use, it wasn't just those that were affected by that particular commodity. And we said this is the time to get aggressive on pricing. We put that extra 1% in, and then of course what we have seen across the general level of commodities we use is a price weakening, where the price of copper has come down substantially. I saw in the paper this morning, it was $2.11 a pound. Nickel has come down; at one point nickel was about $22 a pound and it's now about $5 a pound. So, what I would hope is that the result of this price increase as we go forward, would actually more than offset the cost of commodities, and we'd actually see some bottom line improvement across. Of course that's going to be tampered by a likely scenario of reduced organic growth next year.

Okay. And in terms, of... cause that kind of begged the question that there started to be... some people have started talking about potential deflationary pressure are starting to come back and asking for price cuts in the phase of things like copper and nickel coming down, that's why I was a little bit of a shocked to hear price increase.

Right. Well again it's the timing of when we did it Jim.

Okay. And then secondly, as the portfolio have evolved and we hear piece mill through the quarter is about aerospace and energy, could you maybe just spend just a moment talking about where specifically the sweet spots for AMETEK is on and both the aerospace and energy side/ And particularly with the price of oil coming down, what your outlook there is?

Okay. Well it's very difficult to predict to what is going to happen obviously next year. If we look at aerospace first, the backlogs in aerospace are extremely high. Boeing and Airbus combined have about an $800 billion backlogs, 70-500 aircraft. So, it's clearly possible that you'll see some backlogs shrinkage. But even with fairly large or significant amount of backlog shrinkage, the production rates for our next year are still forecasted to be very healthy. Airbus came out and talked about, basically they were not going to increase their production as much as they had originally indicated. And we foresaw those numbers, we got concerned, we went and looked and they're still talking about producing even with that 9% more aircraft next year than this year. So, I think it's reasonably safe to say that for next year, the commercial aircraft production is going to be okay. You could see a weakening in 2010 or 2011. But I think next year at least at this point in time, looks fairly secure. From the viewpoint of the Military Aircraft business, it is just humming for us. And as a result of the fact that we decided to invest in cooling and electronic systems and our orders and that business has actually strengthened through the third quarter. So, very, very good performance, and I don't want to really predict what is going to happen next year. We'll get into that in the budgeting process. But I've seen no indications of weakening. So, and I'm still fairly bullish on aerospace; there is going to be some weakening as the capacity cuts on the MRO side next year. But again, our exposure in particular to the U.S. side of that which is one that's announced the most significant cuts is pretty small, it's…

Okay. And finally on acquisition multiples, have you seen any sort of realities starting to creep in there?

Yes. I would say that's a good way to word it. We have seen some reality come to play in the acquisition environment and I'll call it the pre-bubble. We were... we are paying multiples in the 7.5 time frame during the bubble when financial debt was very, very easy to give. We saw those multiples go up to the nine times region and I actually did a calculation last night. And what we have bought this year has averaged about eight. And I think we're starting to see that move down and hopefully within the next quarter or two we'll be back to sort of that pre-bubble of level. So we view this is an opportunity. John did a great job and Bill, getting the financing for the company right before the Wall Street blew up in essence. So, we've got the cash and we're going to be aggressive in the acquisition and take advantage of the fact that these multiples are going to go down.

Okay, great. Thank you very much.

You're bet.

And next, we move on to Amit Daryanani with RBC Capital Markets.

Thanks all. Just a quick question guys on the 225 headcount reduction, I think you have something about 14 million in annual saving. How much of the seven stars that you had to take for that? And did it flow to the P&L this quarter?

Yes, basically we have taken a philosophy as pay as go as you're well aware of the restructurings that we have done. And in essence we have paid for this out of our earnings stream and the amount was not a material amount.

Alright. And then I think you talked about some potential bill typing measures going forward as well. Is there a dollar amount in terms of costing that you are potentially looking at?

No, we have not at this point put a specific target on the additional cost reductions that we expect to incur or look at for the fourth quarter and going into next year. We're basically going to go through the entire company. We have a very sophisticated budgeting process. And as I mentioned, we're going to ask our businesses to keep the top-line at a low level in comparison to what they think from an organic growth viewpoint. And we'll put significant pressure on the cost side of the business. And as I mentioned, I would expect that in the January conference call, we'll update you on exactly what we have done in the magnitudes where et cetera.

Fair enough folks. One other follow-up question for you guys. If you were talking about price increases a while earlier was about 2% in Q2, 1% this quarter that's as a tailwind, given the deflect... commodity deflation you're seeing. I'm curious do you see a scenario where those may reverse? And actually may become a headwind so you may have to give back those price increases to the customers?

Yes. Let me just talk to your numbers for a moment. Actually in the third quarter, the pricing increases were 2.2%. That was the total for the quarter. And during the quarter we put another 1% in place. So going forward into the fourth quarter that would amount to a number like the 3% price increase, in total. Yes I would definitely expect that our customers overtime will put pressure on us to reduce pricing there's absolutely no question about that. As a matter of fact some of our contracts basically change the pricing as the result of commodities where we cannot in essence put somebody's price increases through. So, we'll definitely have pressure back. However, we believe we're ahead of the curve here. We believe that we struck just at the right time on price increases that to go out today and try to do them would be much more difficult than it was when we put them in place, beginning at the start of the third quarter. And we think we're ahead of the curve and that's where we like to be.

Fair enough. Thanks a lot.

You bet.

We'll move on to John Baliotti with FTN Midwest Securities.

Good morning. Frank, if I can just a quick question on the deals that, kind of like the business that you're looking at going forward. Are you seeing any change in the over... sort of in very general terms to help of some of those... I mean historically on average the businesses that you buy are smaller. Any dynamic changes in terms of their help?

Well I think you're going to see that as time goes on. You're going to see probably a bifurcation where there definitely will be companies out there that I would classify as not good companies that are having major, major earnings problems. And we tend to stay away from those companies. We like to look at companies that are under managed to use our words where in essence the pre-tax profitability of those companies was in the 10% region. And I think we're going to see of more of those available, but I also think you're going to see a lot more companies that almost half the sell because of the economic environment. And in general, we will stay away from the, I'll call them bankrupt companies.

Yes. On the other side, on the customer side, obviously given you're the strength to your margins, overall your products are obviously being viewed as more valuable. And I'm wondering in this environment is there any change in customers as they make some head count cuts and some cost cuts, are they leaning on you more for more of the work they might have been doing in the past? Is that a dynamic change at all that you're seeing now? Or is that been... is that the same thing that's been going on for a while?

No, I haven't seen that dynamic to any large degree, I mean I'm sure some of our business, we are seeing some of that. But it's not a meaningful factor in our performance at least at this point.

Has it been in terms of AMETEK being more of doing more some would say, some of the development work for them that maybe in the past let's say 5 or 10 years ago, they may have been doing themselves?

Well I think we've seen a general trend in that direction over the last 5 or 10 years. But I don't think it's... we haven't seen it accelerate in the last few months.

Right.

I don't think the full impacts of what's happened in the last few months are obviously still embedded in our customers yet. But that very well could happen and we could see more of it. We've seen that in aerospace in the past where when things weakened, they'll basically have more outsourcing of their engineering activities and we will benefit from that.

Alright. Okay, great. Thank you.

Okay.

And our next question, we'll hear from Chris Glynn with Oppenheimer.

Thanks, good morning.

Good morning.

Just would love a little detail on the underlying operating margins at the business especially with the Xantrex in at the Instruments Group maybe not much of an impact this quarter maybe a month. But what's active and underlying? And going forward, what kind of impact from Xantrex would we be think about?

I can't specifically answer your question on Xantrex. I haven't run those numbers. But I can give you this detail that when I spoke to the margins in the company being up 30 basis points, there was about 85 basis points of dilution due to all the acquisitions that we have done. That's the calculation that we have run. So we are definitely... and we'll continue to see a dilution on the margins. But obviously our overall margins are up, which means the core business, the margins are superlative. And we think this is the right model, because the return on invested capital when we buy these companies at a 10% pre-tax, even though there's some dilution on the margins themselves, the actual return because we'll take these 10% companies. And as you know in a very short period of time make them 20% companies. The return on invest of capital is just off the charts and that's the right utilization of cash from our view point. And we'll accept some dilution on the top-line due to those acquisitions.

Okay. And then any chance of getting the 85 base points dilution at the segment level? Or at least directionally assume greater impacted EMG obviously?

Actually not. It was about the same in each of those our businesses. So there was not a substantial change. Remember we've got a bunch of acquisitions, some last year, some this year. There's probably 8 to 10 acquisitions rolling through those numbers. So the total amount was about the same on each part of the company.

Okay. And then lastly, the oil and gas stuck with the $50 or $55 barrel threshold, if that's the literal level, what's the anticipatory factor if arguably and freefall or at least prospects that, is that investment anticipates well ahead of that literal level of oil?

That's a question that I can't answer in reality. I mean, it's very difficult and it's going to vary from customer to customer. But, I don't think that there's going to be panic in the major change in the investment levels until you get down near that level.

Thanks. I appreciate it.

You bet.

And next we move on to Matt Summerville with KeyBanc.

Just a couple of questions. Frank, can you remind us back in 2001 to 2002 how much of your business you would characterize as cost driven/ And then where that run rate was in the third quarter?

From my recollection, it was on the order of a third of our business. And now, it's on the order of approaching 10% of our business.

Okay, great, thanks. And then you typically go into a little bit more detail on the division performance by segment for the quarter, can you go into that please?

I mean take a walk through the company?

Yes.

Is that what you're asking Matt? Sure. Yes I have some notes here that I'll read from. If with start with EIG, as in mentioned in my opening remarks, sales were up 20% for all of EIG in Q3 with very good organic growth of 8% and if the currency is included, that organic growth would have or just 9%. I've already mentioned our long cycle aerospace business, the markets remain strong. Boeing and Airbus again have very strong backlogs, Session this backlog as $15.6 billion, that's up $3 billion since last year end. And they are sold out for three years at the 2009 bill trade, and Session is a very large customer of our. So we're going to enjoy a continued strength with them. As I mentioned, the military business was very, very strong in the quarter, again given our focus on electronics and helicopters. Organic growth for aerospace was up high single-digits in the quarter and for the full year we expect internal growth to be up high single-digits. So very, very good performance. Our Process businesses remain strong during the quarter, in particular, three of our divisions in this area; Process and Analytical Instruments Measurement Calibration Technology and our Advance Measurement Technology divisions were very, very strong. The new products are doing well. Q3 internal growth and the process businesses was up high single-digits. Total growth with acquisitions was up high teens on a percentage basis and for the full year organic growth should be up mid single-digits. And the last part of the Instruments Group which is power and industrial continues to do well. Q3 was up high single-digits organically driven by strength in power. With acquisitions it was up about 40%. So very, very strong performance here. Full year organic sales are expected to…

As you look across going through, progressing through the quarter, did you see any major change in order rates as the quarter progressed?

No. Actually we had a fairly strong September. And the orders were essentially flat, steady. Yes, John words are better, steady.

Great. Thank you.

You bet.

[Operator Instructions]. Next, we move on to Richard Eastman with Robert Baird.

Could you give us an order number for the quarter for the third quarter? And how the core orders performed year-over-year?

I'm doing it from memory John. Look if it I think it's 641, $641 million, is that right? John's looking it up. And the core growth was 7%.

So okay. So matched, okay.

641 the right number, Rick.

I'm sorry?

It was 641.

Okay. Thank you. And then also Frank, when you look at the margin profile of the business overall and really by segment as well, as we move forward it appears as though the EMG margins maybe have flattened out around the 17.5% mark. And EIG perhaps as well in the 22... low 22% range. And it's the strategy here, we're bumping price to get ahead of the cross curve. We also have some mix influence in the business. But if the volumes fall off, I mean, should we be thinking that margins remain flat here at this reasonably high level? Probably you're kind of looking at this over the next 12 months. We're taking cost out, we're raising prices, we've got a mixed influence. But again if we start to look a lower core growth rate, are we putting extreme effort into trying to maintain the margins here?

There's no question there's going to be a significant energy put into not only maintaining our margins, but trying to improve. And it surely it's going to be more difficult as the organic growth of our business as we see it which is going to happen as we go forward. However, having said that, this really speaks to the strength of AMETEK. We are really good at the cost side of the business, and we're going to be very aggressive on the cost side. And I'm not going to predict next year exactly what the margins are going to be. It would be impossible for me to do that right now, given the dynamics that are going on. But that will be a key focus in our budgeting process. And I feel I've got a lot of levers to pull to not only to keep the margins where they are, but hopefully even show some improvement. The biggest issue we're going to have on margins is the dilution impact of acquired companies.

Okay alright. And then just a last question, geographically, you talked a bit about the growth rate. I think you said 48% or 49% of sales were international. But obviously the concern these days is about international business perhaps slowing down, especially in Europe. And did you see any change in your order pattern geographically during the quarter? Or are you more concerned going forward about your international operations?

The order patterns were good. We looked at it on a worldwide basis and in essence orders were up and relatively healthy in all parts of the world. There was this spotty business I talked about in answer to one of the previous questions regarding some of the cost driven businesses in Europe showed some weakness in the quarter. But that was an essence offset in Asia. And yes I'm obviously concerned about the whole worldwide economy not just in any specific part of the world. I mean the cover of the Wall Street Journal this morning was with China's growth was basically moving from the 10% kind of growth area kind of 11% down to 8% to 9%. So I don't think there's any question about what we're going to see a slowing global economy. And we're just going to have to deal with it as it happens.

Okay. Well thank you.

Sure.

And there are no further questions at this time. I would like to turn the call back over to Mr. Burke, for any additional or closing remarks.

Thank you Rochelle. I'd like to thank everyone for joining our call. As a reminder, a replay of this call can be heard be calling 888-203-1112 and entering the conformation code number 5111340. It'll also be archived on the Internet at ametek.com and at streetevents.com. Thank you.

And that will conclude today's call. We thank you for your participation. .