AMETEK, Inc. (AME) Q4 2013 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the AMETEK Fourth Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded Wednesday, January 29, 2014. I would now like to turn the conference over to Kevin Coleman, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Tina. Good morning. Welcome to AMETEK's fourth quarter earnings conference call. Joining me this morning are Frank Hermance, Chairman and CEO; and Bob Mandos, Executive Vice President and Chief Financial Officer. AMETEK's fourth quarter results were released earlier this morning. These results are available electronically on market systems and on our website at the Investors section of ametek.com. A tape of today's call may be accessed until February 12 by calling (800) 633-8284 and entering the confirmation code number 21703244. This call is also webcast-ed. It can be accessed at ametek.com and streetevents.com. The conference call will be archived on both of these sites. As a reminder, any statements made by AMETEK during the call that are not historical in nature are to be considered forward-looking statements. As such, these statements are subject to change based on various risk factors and uncertainties that may cause actual results to differ significantly from expectations. A detailed discussion of the risk and uncertainties that may affect our future results is contained in the AMETEK's filings with the Securities and Exchange Commission. AMETEK disclaims any intention or obligation to update or revise any forward-looking statements. I will also refer you to the Investors section of ametek.com for a reconciliation of any non-GAAP financial measures used during this call. We'll begin today with prepared remarks, and then we'll open it up for questions. I'll now turn the meeting over to Frank.

Thank you, Kevin, and good morning. AMETEK had an excellent fourth quarter to complete another strong year. In the quarter, we established records for sales, operating income, net income, diluted earnings per share and operating cash flow. We were also very active on the acquisition front during the quarter, acquiring a number of highly strategic businesses. For the full year, we established records for essentially all key financial metrics, including sales, operating income, operating margin, diluted earnings per share and operating cash flow. Sales were up 8% for the year; operating income was up 9%; operating margins expanded 30 basis points to 22.7%; and diluted earnings per share ended at $2.10, a 12% increase over 2012's diluted earnings per share. Focusing on the fourth quarter, sales increased 12% to $942.5 million. Organic growth was very strong, up 7% on broad-based strength across most of our businesses, while acquisitions added 4%, and currency added 1%. Operating income for the fourth quarter increased 11% to $210.5 million. Operating income margin in the quarter was 22.3% compared to 22.6% in the fourth quarter of 2012. Net income was up 13% to $135.7 million, and diluted earnings per share of $0.55 were up 12% over last year's fourth quarter. Both net income and diluted earnings per share were records. Operating cash flow was excellent. It was $210 million for the fourth quarter and $661 million for the year, both up 8%. Free cash flow was very strong at 135% of net income in the fourth quarter and 116% of net income for the full year. Working capital management was outstanding at 16.7% of sales in the quarter. This represents a record level. Orders in the quarter were $912 million, up 3% organically on an adjusted basis. Now turning to the individual operating groups. The Electronic Instruments Group had a strong fourth quarter and an excellent year. For the quarter, sales were up 15% to $566.9 million on broad-based strength across our Process businesses, plus the contributions from the acquisitions of Controls Southeast, Creaform and Powervar. Internal growth was strong, up 7%, while acquisitions added 7% and foreign currency added 1%. EIG's operating income increased 13% to $151.9 million, and operating margins were 26.8%. Excluding the impact of recent acquisitions and the additional growth investments made in the quarter, EIG's operating margins were 27.5%, up 20 basis points versus last year's fourth quarter. The Electromechanical Group also had a very good quarter. Sales were up 8% to $375.6 million on strong growth across all of our differentiated businesses as well as excellent growth in our Floorcare and Specialty Motors business. Organic sales were up 7%, and foreign currency added 1%. EMG's operating income increased 8% to $70.5 million, and operating margins were 18.8% in the quarter. Now turning to our 4 growth strategies of operational excellence, global and market expansion, new product development and strategic acquisitions. First, I will touch on acquisitions. We had a very active quarter with the acquisitions of Creaform and Powervar. In addition, we acquired Teseq in early January. Combined, we deployed approximately $340 million on these acquisitions and acquired approximately $175 million in revenue. For the full year, including Teseq, we acquired 4 businesses, deployed approximately $500 million in capital and acquired $225 million in revenue. I will provide some highlights of Powervar and Teseq. Powervar and Teseq are both excellent acquisitions for AMETEK. Their products, technologies and markets are highly complementary with our existing power businesses. Equally important, these acquisitions expand the size and capabilities of our Power business. As I have highlighted in the past, we view our Power business as a very attractive platform from which we can grow significantly, both internally and through strategic acquisitions like Powervar and Teseq. With these 2 acquisitions, our Power business now totals approximately $500 million in sales. Our businesses have market-leading positions in power quality instruments for power generation and transmission and distribution, back-up power systems for highly ruggedized environments and test and measurement power solutions for a range of test applications. We remain very excited about the opportunities within our Power business. Powervar is a leading provider of power management and UPS systems used in medical, life sciences, industrial and retail applications. They provide highly engineered and customized power conditioning and UPS products designed to deliver reliable, high-quality power to critical applications. Powervar's strong presence in medical and life sciences provides our Power business with excellent new growth opportunities in these attractive market segments. Additionally, their products and technologies are highly complementary with our existing power quality and UPS systems. Powervar was privately held and has annual sales of approximately $70 million. The business is headquartered in Waukegan, Illinois. Teseq is a leading manufacturer of electrical test systems and instruments for use in electromagnetic compatibility emissions and immunity testing. Products include a broad line of conducted and radiated EMC compliance testing systems and RF amplifiers used for a wide range of industries, including aerospace and automotive electronics, medical equipment, telecommunications and transportation. Teseq is a good addition to our electrical test and measurement business. Their products and markets are complementary with our EM Test business, which we acquired in 2011. In addition, Teseq provides us with opportunities for accelerating product innovation and market expansion worldwide. Teseq was privately held with annual sales of about $53 million, and the business is headquartered in Luterbach, Switzerland and has additional facilities in the U.K., Germany and the U.S. Acquisitions will continue to be a key focus for us during 2014 as we see this strategy as a key driver to the creation of shareholder value. We have the financial and managerial capacity and disciplined approach to support this acquisition focus. Our pipeline of deals is excellent, our balance sheet is strong and our cash flow and financing facilities provide us with ample liquidity to pursue this strategy. Now turning to global and market expansion. Global and market expansion continues to be an important driver for AMETEK's growth. In the fourth quarter, international sales represented a record 57% of our total sales. The strong performance was driven by excellent organic growth in our international markets and the benefits from recent acquisitions. Sales growth in the BRIC regions was also very strong, up 11% organically in the quarter. These results also reflect the continued investments we are making to develop and expand our sales channels, service capabilities and manufacturing footprint in order to position our businesses to capitalize on the attractive growth opportunities in these international markets. In the fourth quarter, AMETEK's Micro-Poise Measurement Systems business, which we acquired in 2012, secured a number of large orders for their Modular Tire Measurement Systems within the BRIC regions. Overall, orders for Micro-Poise in the BRIC regions were up over 50% in the quarter with $7 million worth of orders in China and India for these modular measurement systems. Micro-Poise's tire measurement systems combine uniformity, balance and geometry measurement capability in a single machine. We have seen strong demand in emerging markets for these systems as a result of ongoing expansion of tire manufacturing capacity in these markets. In addition, we have made a number of investments and improvements in the global sales, service and distribution structure within Micro-Poise since the time of acquisition. Moving on to our third strategy, new product development remains key to our long-term health and growth. We have consistently invested in RD&E. In 2013, we spent $179 million, which was up 16% from 2012. In 2014, we expect to spend approximately $200 million, a 12% increase over 2013. We're excited about some recent new product introductions. Vision Research, the leader in high-speed digital imaging, unveiled the latest addition to its Phantom line of ultra high-speed cameras, the Phantom v2010. The Phantom v2010 delivers more than 22,000 frames per second at full megapixel resolution and is the world's fastest high-resolution digital camera. With the v2010, Vision Research brings a new level of performance to scientists, researchers and engineers, who need to capture high-speed digital images, and further reinforces our commitment to offering the most innovative products in the digital high-speed imaging market. AMETEK's Atlas Material Testing Technology business launched the Xenotest 440, a new weathering instrument suitable for accelerated weather testing of a variety of materials. The instrument incorporates a new twin-lamp operating technology that allows it to achieve higher irradiance levels that can significantly reduce test times. It also utilizes a new technology for extending the service life of the instrument's xenon lamps, increasing the instrument's uptime and reducing lamp's operating cost by more than 30%. From an overall perspective, revenue from products introduced over the last 3 years was 21% of sales in the quarter, reflecting the excellent work of our businesses in developing the right products to serve their customers. Lastly, I will touch on operational excellence. We continue to see tremendous results from our various operational excellence initiatives. Our management teams and employees continue to do an excellent job driving continual operational improvements through their businesses by leveraging the numerous operational excellence tools we have put in place in our company. Key tenets of our operational excellence activities include Lean Manufacturing, Six Sigma in our factories and back-office operations, Design for Six Sigma in our new product development efforts, global sourcing and strategic procurement initiatives, moving our production to low-cost locales and value engineering. Through our global sourcing and strategic procurement activities, we recognized $16 million in savings in the fourth quarter and $62 million in savings for all of 2013. Overall, we realized approximately $100 million in total cost savings in 2013 through our various operational excellence initiatives. For 2014, we expect approximately $90 million in total cost savings through our operational excellence initiatives, including $60 million in savings through our global sourcing and strategic procurement initiatives. Turning to the outlook now for 2014. We expect our businesses overall to show solid growth during 2014 with balanced organic growth across both operating groups. We anticipate 2014 revenue to be up high single digits on a percentage basis from 2013. Organic growth is expected to be up 2% to 4% for all of AMETEK and for both operating groups. Earnings for 2014 are expected to be in a range of $2.30 to $2.35 per diluted share, up 10% to 12% over 2013, reflecting the leveraged impact of core growth, our operational initiatives and the benefit of contributions from recent acquisitions. First quarter 2014 sales are expected to be up high single digits from last year's first quarter. We estimate our earnings to be approximately $0.55 to $0.57 per diluted share, up 8% to 12% over last year's first quarter. Our solid backlog, strong portfolio of businesses, proven operational excellence capabilities and a successful focus on strategic acquisitions should enable us to perform well in 2014. So in summary, our overall business has performed very well in the fourth quarter and in 2013, producing records for essentially all key financial metrics. Although the macroeconomic conditions created a more challenging environment in 2013 than we expected, our team did an excellent job, and we were able to deliver exceptional operating results through a focus on executing our 4 growth strategies. We have a strong balance sheet and generate significant cash flow that provides us with plenty of liquidity to operate the business and pursue our acquisition strategy. In addition to acquisitions, we continue to make sizable investments in new product development as well as global and market expansion to position ourselves for future growth. We look forward to another successful year in 2014. Bob will now cover some of the financial details, and then we'll be glad to take your questions.

Thank you, Frank. As Frank noted, we had an excellent fourth quarter with strong operating performance. I will provide some further details. In the quarter, core growth in selling expenses was in line with core growth in sales. General and administrative expenses were 1.2% of sales, in line with last year's fourth quarter. The effective tax rate for the quarter was 27.2%, down from last year's fourth quarter rate of 29.8%. The full year tax rate was 28.7% versus last year's rate of 30.7%. We are very pleased with the success of our ongoing international and state tax planning initiatives on our fourth quarter and full year rates reflect the positive impact of these initiatives. As a result, for 2014, we estimate our tax rate to be between 28% and 29%. As we have said before, actual quarterly tax 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 16.7% of sales in the fourth quarter. This record low level of working capital positioned AMETEK as one of the top performers in our peer group and is a direct reflection of the tremendous strides our business units have taken in driving towards operating excellence. Strong working capital management will remain a key priority. Capital spending was $26 million for the quarter and $63 million for the full year. Full year 2013 capital expenditures were 1.8% of sales. 2014 capital expenditures are expected to be approximately $70 million. Depreciation and amortization was $32 million for the quarter and $119 million for the full year. 2014 depreciation and amortization is expected to be approximately $134 million. Our cash flow was excellent in the quarter and for the full year. Operating cash flow for the fourth quarter and full year were records. In the fourth quarter, operating cash flow was $210 million, up 8% over last year's fourth quarter. Full year operating cash flow was $661 million, also up 8%. Free cash flow was excellent at $183 million in the quarter, representing 135% of net income. For the full year, free cash flow was $597 million, approximately 116% of net income, continuing our strong free cash flow generation. Our cash flow was deployed to support our acquisition strategy, where we expended approximately $414 million on transactions in 2013. Total debt was $1.42 billion at December 31, down $39 million from 2012 year end. Offsetting this debt is cash and cash equivalents of $295 million, resulting in a net debt-to-capital ratio at December 31 of 26%, down from 34% at the end of 2012. At December 31, we had approximately $880 million of cash and existing credit facilities to fund our growth initiatives. Subsequent to the end of the fourth quarter, we acquired Teseq. Capital deployed on this acquisition was approximately $90 million. Our highest priority for capital deployment remains acquisitions. In the fourth quarter, we extended the term of our $700 million revolving credit facility back to its original 5-year period. Our revolver now extends until December of 2018. All other terms of the revolving credit facility remain unchanged. In summary, we had an outstanding 2013, establishing records for essentially all the key financial metrics. We are well positioned for further growth, both organically and through acquisitions, with a strong balance sheet and cash flows.

Great. Thanks, Bob. We'll now open it up for questions.

[Operator Instructions] And our first question comes from Matt McConnell of Citi Research.

So if I can start with incrementals. They were a bit below trend. I know there might be mix issues with Floorcare being stronger and, obviously, a couple of deals recently. But were there any other drags that are worth calling out? And maybe, could you quantify the impact of Floorcare and the acquisitions?

Yes, if you look at the impact, we started in EIG, there was definitely an impact from the acquisitions because that's where we did those deals. And also, we made incremental growth investments there, and they were on the order of $3 million there. And then in terms of EMG, there was a fairly significant mix shift. Floorcare and Specialty Motors was actually up organically mid-teens. So very, very strong performance in the quarter. And although the differentiated part of EMG continued to be strong, there was that mix shift, and that caused margins to be flat where they probably would have been up 20 to 30 basis points.

Okay, great. That's helpful. And what's your expectation for margin expansion in the 2014 guidance? And then, maybe my final question would be did you quantify the growth investments that you anticipate for 2014?

Sure. In terms of margin performance, that's included in our guidance. We are assuming about 20 to 30 basis points of margin enhancement on the operating income line. In terms of the growth investments that we are putting into the business in 2014, it's approximately $40 million. And those growth investments are going to go into continued expansion of our sales, service and distribution channels, largely international locations but not solely. And also, as I mentioned in my opening remarks, we're going to increase our RD&E spending from roughly $179 million up to just around $200 million, which is a 12% increase in RD&E. So we are definitely going to continue to make investments in the growth of the business organically, and then, obviously, we'll use our free cash flow to deploy on acquisitions.

And our next question comes from Allison Poliniak of Wells Fargo.

Just going on Matt's question, can you -- with the margin expansion, that 20 to 30 basis points, can you quantify maybe what that acquisition impact is and what you've just done?

I don't actually have a number to exactly what it would be, but roughly on the order of 30 basis points.

Okay, perfect. And then just touching on emerging markets. It sounds like select businesses are -- in your BRIC regions are getting some orders. But how are you thinking about that for '14? Obviously, there's been a lot of noise in news about challenges over there.

Yes, it's actually amazing. We were very delighted in the quarter when we looked at our international businesses, actually, believe it or not, both in Europe and in Asia. In Asia, the organic growth was up about 25%, in Asia. So a truly outstanding quarter. And as I mentioned in my opening remarks, in the BRIC countries, it's up about 11%. And as we're looking into 2014, in the BRIC regions, we're assuming a low double-digit type of growth rate. Obviously, that growth rate is higher than the intrinsic growth in those markets and is a direct reflection of the investments that we have been putting in that part of the world and the fact that our shares, in particular in BRIC and, to even a larger extent, throughout Asia, are a bit less than in other parts of the world. So we're able to gain a reasonable share. So a very, very good quarter. And we're feeling fairly good about next year in those regions. As I mentioned, surprisingly, Europe was strong for us. It was up actually in the double digits organically. And it was fairly broad based, you may recall in some of our previous calls where I talked about it being driven by aerospace and oil and gas. Now they were still very strong, but we also saw reasonable strength in many of our businesses, actually, throughout most of the Process businesses and also some in our Power segment. So things feel a little bit better in Europe, and that's a good thing.

Our next question comes from John Baliotti of Janney Capital Markets.

Frank, I was wondering maybe for -- now that you've clearly moved into the large cap arena and there may be more people that are attracted to the company, I was just wondering if you could -- you've done a lot of deals over the years, and maybe if we can just take a look at the -- or just talk about the ones you've done sort of the last 12 to 14 months. Could you kind of -- if you want to sort of summarize how these complement the growth strategy? I know you touched on Powervar and Teseq. But along those lines, maybe touch on what kind of operators that you've been developing over the years to run these platforms?

Yes, you're hitting on a very, very key point, John. And that is the key of our strategy is to basically have first-class operating managers that can not only identify acquisitions but be able to accurately predict and execute what synergies we can get from the deals that we acquire. And our operating teams have just done an incredible job of taking the businesses that we've acquired over the time frame you're talking about or even over a longer time period and being able to get really good synergies, both on the cost side as well as the distribution and growth side. And what we have done is put in place a methodology so that we are continually growing the talent and doing cross-training in our businesses so that the talent continues to grow and can get involved in more and more deals as the company gets bigger. I often joke inside the company that if I go back 15 years ago when I first became CEO, I was basically doing all the deals. And now, the teams do the deals. They just do a great job, and they know how to do them and they know how to get them done. Talking about some of the other deals that I didn't specifically highlight in my talk, the deal before Powervar and Teseq was Creaform. Creaform, just a super deal. Very high-technology company basically involved in ultra-precision mobile measurement capability. This company is located in Quebec. The management team has come in to AMETEK. And I'm sure some of them are listening, and I will compliment them. They've done an excellent job getting used to our operating philosophies. And the business is growing, and it's exceeding the model that we've put in place for that business. The deal before that was Controls Southeast. That particular deal was an augmentation of our O'Brien deal, which we did a couple of years, again -- or maybe 1 year before that, which is involved in sort of the aftermarket part of our Process businesses. So all of these deals were in an area that we know something about them, it's not like we're doing deals that are outside of our knowledge base, so that we take very little risk from the market viewpoint when we do the deals, and then we can leverage those deals with our operating capabilities.

Yet it seems -- I know it's relatively small compared to the other ones, but it's -- Creaform seems like a very interesting acquisition. And given your -- what you've been able to do with some of your other businesses that are more traditional and being able to grow them, it should be interesting to see how you leverage that acquisition.

Yes, we see that definitely as a high-growth type of business for us. As I mentioned, very strong management team, and we're just going to support them in growing that business because we think it's got phenomenal opportunity.

Our next question comes from Matt Summerville of KeyBanc.

Frank, can you disclose what orders in backlog look like and then what organically you saw from an incoming order rate standpoint?

Yes. Orders overall were $912 million. Correct me, guys. I'm just doing it from memory. They were actually down a bit. They were down about 5%. However, we had some very large orders last year that were onetime orders. So when we normalized those orders and when you look at that to your organic growth on orders, it was up about 3%. So in the quarter, 3% organic growth on orders, 7% organic growth on sales.

And then you mentioned targeting $90 million worth of cost reductions, $60 million from sourcing. One, can you sort of talk about where you're getting the other $30 million? And then this $90 million, if we were to subtract out the incremental investments you're making in growth, in R&D and what you typically incur from just a inflationary standpoint, is there still some net cost reduction left over?

Oh, yes, definitely. I mean, probably the best metrics that I can give you is that you also have to include pricing in this equation. And the metrics that we look at are that basically, in the budget for 2014, we have about 1.5% to 2% in terms of price, and we believe that the inflation that's going through the P&L is about a little bit less than 1%. So there's definitely incremental amount that is there. And then, as you indicated, the $90 million, there's about $60 million which is part of the material side of the business. But there's another $30 million -- and that is just the normal operational excellence initiatives, and it's really a large number of items, things that -- actually, I mentioned some of them in my opening talk. Value engineering is becoming more important to us. There's a movement of production to low-cost locales. We're going to move and have about $500 million of volume in our low-cost facilities in 2014, which is up from about $450 million in 2013. There's the normal types of synergies that we're going to get from the deals that I just talked about in answer to John's questions. There's international distribution consolidation that we are continuing to do not only with recent acquisitions but deals we did a number of years ago. So it's -- this is really a continual process for us. So when you roll all of that up, it's basically definitely we're getting sizable leverage. And it's obviously a balance between the growth investments, which are going to be the $40 million, the cost reductions, inflation and pricing that allows us to get the kind of earnings performance that we're talking about.

Our next question comes from Christopher Glynn of Oppenheimer. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: So, Frank, you're rolling in about 4 deals now at EIG. I'm wondering if you could comment on what are the strains and gating factors on organizational capacity to absorb those. And also, how is EIG's pipeline looking?

In terms of any gates, the biggest issue is that as we're all aware, the pricing on some deals has definitely gone up. So we are prioritizing our deals to where the multiples we're paying are very reasonable so that when we bring the deals in and put our improvements in the deals, the returns are higher than our -- obviously our cost of capital. So that's the sort of the driver there. In terms of the deal backlog, it's quite good. We are working on other deals as we speak. It would not surprise me if you heard from us in a relative short future about another deal that we're going to close. And I think our ability to both source deals and also get them closed is a core competency of this company. And as I mentioned before, we are continually growing the talent so that we have the capacity to do deals. Right now, we believe we can do 10 to 12 deals a year. That's the infrastructure that we've put in place. We think it's the capability that we have intrinsic in the organization, and that essentially assumes we would not do 2 deals within a same -- the same subsegment of our business. Because then, the risk profile goes up. So we will spread them. Even if it's in the same, like for instance Power, they will be done in different parts of the Power business so that in essence, we're not increasing our risk as we bring those deals in. Christopher Glynn - Oppenheimer & Co. Inc., Research Division: And then on the organic growth outlook of 2% to 4%, I think your price approach is 2%. Sounds like BRIC's going to give you 1 point. You just did 7, and the comps don't get tougher for several quarters. So I'm wondering if maybe that's a little conservative or just to call that 1 quarter is too early to call a trend.

Yes, 1 quarter is definitely too early to call a trend. And we're just taking a cautious outlook going into the year, and, hopefully, we'll be able to report better numbers as we go through the year. But basically, that 2% to 4% is what we have rolled up in our guidance.

[Operator Instructions] Our next question comes from Scott Graham of Jefferies.

Just wanted to ask about this $90 million maybe in a little bit of different way it was asked previously. I don't know if you're counting this differently because I remember you were saying at some point in the last 2 years that $60 million was the baseline target. And when things were -- the economy was better, that was the number; and when the economy was weaker, you pushed that number up. Or -- did you at that point not include acquisition cost takeout? Or is this $90 million just a big acceleration off of some of the value engineering [ph] and other things you talked about?

Now basically, Scott, we have included acquisitions continually in terms of providing that metric. I think the key answer to your question is that the company has just gotten larger so that there are more opportunities to take cost out. And we view this cost journey as a never-ending kind of activity that we expect our businesses every year, independent of where they are on the maturity curve, to be looking at cost improvements in their business. And the number is definitely larger, but I think if you stood it up aside the growth of the business, it's not that much different than what it has been historically on a percentage basis.

That's fair. My next question is regarding the EIG margin. Could you tell us maybe specifically what the acquisition dilution to the margin was in the quarter and whether there were purchase accounting charges within that?

Yes, the full dilution of the margin was on the order -- you've got it there, Kevin? What...

Yes. It was around -- it was $50 million for -- 50 basis points for EIG.

50 basis points for EIG.

Okay. And were there purchase accountings in there?

Yes.

Yes.

Yes.

Okay. I guess my last question would be the one that would -- somebody always asks, Frank. If you don't mind going through the divisional, it would be helpful.

Sure, Scott. I'd be glad to do that. So I'll start with the EIG. I don't think there's any real surprises here. For EIG aerospace, we had a very strong year. Sales were up mid-single digits, and that was driven by strength in commercial and our business in regional jet business. In the fourth quarter, EIG aerospace orders were up high single digits, and that, obviously, reflects the continued growth in commercial OEM build rates and also our success in winning content on new platforms. Looking to 2014, we expect continued solid growth for our EIG aerospace businesses. And again, that's based on the trends in the OEM build rates. Boeing and Airbus, the combination of those 2, are predicting they're going to be up about 6% in terms of deliveries. So that will obviously have an impact on our business. And we also expect solid growth in business in regional jets, but not so much from the market dynamics there as from the fact that we have won sizable content on a number of the newer aircraft. So when we sum all of that up for 2014, we're expecting organic growth in EIG aerospace to be up in that mid-single-digit arena. Moving to our Process businesses, the Process businesses had a super fourth quarter and also for the full year with really growth across most of our businesses. In the fourth quarter, overall sales were up high teens on a percentage basis with organic sales up high single digits. The core growth was broad based with particular strength in our Measurement and Calibration Technology and Advanced Measurement Technology divisions. And overall growth was obviously driven also by the contributions from the Controls Southeast and Creaform acquisitions. And for 2014, we expect our Process businesses to grow high single digits overall with organic growth of low to mid-single digits. And in response to one of the other questions, there might be a bit of conservatism in that organic growth rate for 2014. And we do expect balanced growth across most of our Process businesses in 2014. And then the last part of EIG is Power and Industrial. They had a solid fourth quarter with overall sales up high single digits. Growth was driven by mid-single-digit organic growth as well as the contribution from the acquisition of Powervar, which we discussed. And we view Power as a highly attractive growth area for us. With the acquisition of Powervar and Teseq, our overall Power business now is about $500 million in sales. And as a result of the acquisitions in 2014, we expect overall sales for Power and Industrial to be up over 30%. So very strong overall sales. And we're predicting organic growth to be up low to mid-single digits. So if you sum those 3 parts of EIG for all of 2014, we're estimating EIG total sales will be up low teens on a percentage basis with organic growth up low to mid-single digits. Moving to the other part of the company, in EMG, our differentiated EMG businesses had a strong fourth quarter. Sales were up mid-single digits in the quarter, really driven by broad-based strength, again, across most of the businesses in this subsegment. And for 2014, we expect our differentiated EMG businesses to be up low to mid-single digits. And the last part of our company, Floorcare and Specialty Motors, they just had a great fourth quarter and a great year. Sales were up mid-teens organically in the quarter, as I mentioned in response to one of the questions. And also, they were up very strong for the entire year, up -- I guess it was high single digits. So they had very, very good growth. And for 2014, we expect sales for this business -- we're saying up low single digits, and that's really based on a very high strength that we had in 2013. So if you sum those 2 for EMG, we're expecting overall growth of low to mid-single digits for EMG if you sum those 2 parts of the company. And that gets back to my overall guidance of the company being up high single digits overall with organic growth up about 2% to 4%, Scott.

Our next question comes from Rob Mason of Baird. Robert W. Mason - Robert W. Baird & Co. Incorporated, Research Division: Frank, I want to see if you could just circle back to aerospace real quick. The military portion of aerospace, I was just curious how that finished the year and what the planning assumptions embedded in aerospace are for military.

Excellent question. It's -- we had just a phenomenal quarter in the military segment. We're actually up mid-single digits organically for that part of the business. It was driven by the international part of our military segment, not the U.S. piece. But even the U.S. piece was not down sizably. So very strong performance. And what's included in my guidance in 2014 is for that business to be roughly flat. And that's the way we went into this year, assuming it was flat. Actually, I think we assumed it was going to be down a bit, and it turned out to be even better than that. So we're feeling pretty good in that this is not going to be a major drain on the company. Robert W. Mason - Robert W. Baird & Co. Incorporated, Research Division: Okay, very good. And back to your geographic comment. I know you commented on the outlook for the BRIC regions. I was just going to see if you could flesh out the geographic outlook for '14 for the other major regions.

Yes, we're saying basically the U.S. piece is going to be flattish. Europe, we think, is going to be up a little bit, maybe a little bit different than some of the large macro trends. And obviously, we think Asia is going to be the strongest part of this. And I'm speaking from an organic basis. Robert W. Mason - Robert W. Baird & Co. Incorporated, Research Division: Is there any particular portion of the business you'd call out in the U.S. that is working against you in '14?

Well, I would say, as you heard from -- what I just went over with Scott, the weakest piece we're going to say is the Floorcare and Specialty Motors part of the business, where we're saying it's only going to be up a low single digits. So that's probably the weakest. But it's also coming off a very, very strong year. So I think we're going to be back to a more normal trend with the Floorcare and Specialty Motors business than what we saw throughout all of 2013. But aside from that, the growth is fairly balanced in our budget. I look at our Process businesses, and you heard us speak throughout 2013 a lot about the oil and gas part of that business. And what's happening there is that with CapEx not sort of as strong as it has been in the oil and gas part of the business, that growth is coming down a little bit. But countering that, our other Process businesses are doing extremely well. So it's a much more balanced picture of what we saw in the fourth quarter and what we expect to see going into next year.

Gentlemen, there are no further questions at this time. I'll turn the call back over for any closing remarks.

Great. Thank you, Tina. Thanks, everyone, for joining the call today. As a reminder, a replay of the call may be accessed at ametek.com and streetevents.com. And, as always, I'm available all day for any follow-up questions. Thank you so much.

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect all lines. Thank you, and have a good day.