Good day, ladies and gentlemen. And welcome to the Q1 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. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now like to turn the call over to Kevin Coleman, Vice President of Investor Relations. Sir, you may begin.

Thank you, Sidney. Good morning and thank you for joining us for AMETEK’s first quarter 2019 earnings conference call. With me today are Dave Zapico, Chairman and Chief Executive Officer; and Bill Burke, Executive Vice President and Chief Financial Officer. AMETEK’s first quarter results were released earlier this morning and are available on market systems and in the Investors section of our website. This call is also being webcast and can be accessed on our website. The webcast will be archived and made available on our site later today. During the course of today’s call, we will make forward-looking statements, which are subject to change based on various risk factors and uncertainties that may cause actual results to differ significantly from expectations. A detailed discussion of the risks and uncertainties that may affect our future results is contained in the AMETEK’s filings with the SEC. AMETEK disclaims any intention or obligation to update or revise any forward-looking statements. Any references made on this call to 2018 or 2019 results will be on an adjusted basis, excluding after-tax acquisition-related intangible amortization and excluding the fourth quarter 2018 gain related to the finalization of the impact of the 2017 Tax Cuts and Jobs Act. Reconciliations between GAAP and adjusted measures can be found in our press release and on the Investor section of our website. We will begin today’s call with prepared remarks by Dave and Bill, and then open it up for your questions. I will now turn the meeting over to Dave.

Thank you, Kevin, and good morning, everyone. AMETEK began 2019 with an outstanding first quarter, establishing records for sales, orders, backlog, EBITDA and operating income. Our businesses delivered strong overall sales growth, with solid organic growth and meaningful contribution from the six acquisitions we completed in 2018. Our business has also deliver fantastic operating performance, with impressive operating income growth in core margin expansion leading to 15% adjusted earnings growth which nicely exceeded our expectations. We also generated strong cash flow, with operating cash flow increasing 11% year-over-year. Given these strong results, we have increased our earnings guidance for 2019. Now onto the financial highlights for the quarter. Total sales in the first quarter were $1.29 billion, up 10% compared to the first quarter of 2018. Organic sales growth was again strong at 5%, with acquisitions adding 7% and foreign currency at 2-point headwind. We also generated a record level of orders in the first quarter, with another quarter of positive book-to-bill. Our record backlog of $1.7 billion provides a solid visibility as we move through 2019. EBITDA in the first quarter was a record $337 million, up 10% over the same period in 2018 and EBITDA margins were excellent at 26.2%. Operating income in the quarter was a record at $283.3 million, up 10% over the prior year period, with the reported operating margins of 22%. Excluding the dilutive impact of acquisitions, operating margins increased an impressive 70 basis points over 2018 first quarter. Adjusted earnings were $1 per share, up 15% over the comparable basis for 2018, exceeding our guidance range of $0.95 per diluted share to $0.97 per diluted share. Now turning to the first quarter results of the individual operating groups. First, the Electronic Instruments Group, EIG sales in the quarter increased 13% to $806.9 million.…

Thank you, Dave. As Dave just mentioned, AMETEK began the year with excellent performance delivering record results that exceeded our expectations. I will now provide some additional financial highlights for the quarter. Core selling expenses in the quarter was up in line with the core sales growth. First quarter general and administrative expenses were up $2.4 million over the same period in 2018 due largely to higher compensation costs. As a percentage of sales, general and administrative expenses were 1.4%, in line with last year’s level. The effective tax rate in the quarter was 20.5%, down from last year’s first quarter rate of 23.1%. In 2019, we expect our effective tax rate to be approximately 21.5%. And as we have stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively from this full year estimated rate. Working capital on the quarter was 18.2%, up versus the prior year due to large parts of the impact from the acquisitions in 2018. Capital expenditures were $21 million for the first quarter. And for 2019, we continue to expect capital expenditures to be approximately $100 million, or 1.9% of sales. Depreciation and amortization expense in the quarter was $58 million. And for the full year, we continue to expect depreciation and amortization to be approximately $235 million, including acquisition related intangible amortization of approximately $130 million, or $0.43 per diluted share. Operating cash flow in the quarter was $196 million, up 11% over last year’s first quarter and free cash flow was $175 million. Total debt at the end of the quarter was $2.47 billion, down $160 million from $2.63 billion at the end of 2018. Offsetting this debt is cash and cash equivalents of $368 million, resulting in a net debt-to-EBITDA ratio as of March 31 of 1.6 times. We remain well positioned to support our growth initiatives with more than $1.8 billion of cash and existing credit facilities. To conclude, our businesses started the year with outstanding performance delivering high quality results. Our outlook for 2019 remains positive given our strong balance sheet and excellent cash flows. Kevin?

Great, thank you, Bill. Sydney, we are now ready to open the lines for questions.

[Operator Instructions] And our first question comes from Matt Summerville with D.A. Davidson. Your line is open.

Good morning, Matt. How are you there?

Sydney, why don’t we move on to the next call?

Hello

Matt are you there?

Yes. Can you hear me?

Yes, now, yes.

Yes. I am sorry. I don’t know what have them there. Anyways, Could you maybe comment as to the linearity you saw in your business throughout the quarter, anything unusual across the three regions? And then maybe give a little regional color around the 5% organic growth sort of what was better, what was worse?

Right. I will start with the geographic update. And there was a dynamic in one of our regions that was a little bit different, so I will talk about that also. In the U.S., there was a strong high single-digit growth. It was a broad-based growth, particularly in our Aerospace business, our Process businesses and our EMIP business. It really fired on all cylinders. Europe was a pleasant surprise, up mid-single digits, a solid growth in automation and Process businesses drove that growth. And Asia was roughly flat. And also there was a dynamic where the activities seemed to slow in February, but it picked up very strongly in March. So some of our folks were speculating that some of the uncertainty or the Chinese New Year may have slowed our business activity. But again in March, we ended up with a record order input for Asia. So it was flat, but going forward, we haven’t changed any of our outlook for the region. So across-the-board, it was pretty good quarter.

And then just lastly, Dave, can you maybe comment on where you were in Q1 with price realization and how that compared to inflation?

Yes. Matt, I didn’t answer your linearity question. I mean, we strengthened through the quarter and our strongest month was March, which is not atypical for us. And related to the price inflation, Q1 ‘19 was much like the second half of 2018. We had an excellent quarter. We achieved about 2 percentage points of price across our entire business. Total inflation was a bit less than 1.5%. So we are very pleased with these results, and we think we are well positioned to continue this for the balance of 2019. That speaks to the, as I said before, the highly differentiated nature of our product portfolio on our leadership positions in these niche markets. And also our focus and determination to stay ahead of the inflation in a changing global economic environment.

And our next question comes from the line of Andrew Obin with Bank of America. Your line is open.

Yes, Just maybe a basic question, but just looking at the seasonality, given what the first quarter was, usually first quarter for you is quite a bit couple of percentage points less than 25%. And I guess, second quarter guide and the annual guide implies that on a seasonal basis, second half is going to be weaker than usual, just looking back 10 years. And I was just wondering if you are seeing any yellow flags that are driving this kind of caution, or you are just being conservative?

Yes, it’s a great question, Andrew. I mean, the first point is, in quarter 2, our guide is higher than quarter 1. So we typically -- from Q1 to Q2, it’s a bit higher. And we grew sales organically at the high-end of our guidance range. And in the first quarter, we had excellent core margin performance. And we raised our guidance letting the entire Q1 earnings to be flowed through to the new guide. But to your final point, it’s still early in the year. And we feel good about how the quarter played out, but we are being a bit prudent. And the uncertainty of the economic environment and we feel that we are very comfortable with our guidance.

And just a follow-up question. I guess since 2014, we have been sort of waiting for big come back for your Energy business. And if you can just comment what WTI being north of 60, are you seeing any change in tone from your customers to that point that maybe it would finally really take off where it’s just going to be steady climb as it used to be?

Sure. The Energy business is probably a bit smaller as a percentage of total AMETEK because of some of the organic growth we have had in other areas and our M&A. It’s about 6% of the company and in the first quarter, it was up low single digits and for the full year, we are expecting it to be up mid-single digits. And we are looking at our -- for the full year, we are looking at our upstream business to be high single digits and the mid-downstream to be up mid-single digits. And we have about 75% of our business in the mid and downstream. And what we are starting to see is typical recovery, that part of the business, our largest part of businesses starting to gain momentum. So we feel very good about our energy business. We feel really good about the market positions we have and the businesses continuing to grow. We had a great year last year and it looks like it’s on target for another good year this year.

But any near-term change in behavior as the oil price rallied in the past 3 months?

We have solid backlogs, but I can’t say that there was a change -- a notable change in behavior when the price of oil raised the last few months and there wasn’t a change of behavior when it dropped precipitously in Q4. We just had a steady increasing level of business and it’s a global business about 2/3 of outside the U.S. and it just feels really solid. And as I said, the mid and downstream business is picking up nicely.

And our next question comes from Nigel Coe with Wolfe Research. Your line is open.

This is Bhupender here sitting in for Nigel. So Dave, you mentioned about the core orders in the quarter, can you give us some color on the core orders numbers for the whole company as well as EIG and EMG? And just wanted to talk about some of the end markets, which kind of strengthened or weakened during the quarter or you actually see from a color especially in April what we are seeing here?

Sure, Bhupender. The first thing would be the organic orders. They were up 3.5% for the quarter. That’s actually -- remember against a very difficult comp at -- we were up plus 12% in Q1 of 2018. So really solid orders performance, we had excellent book-to-bill. Our book-to-bill was 1.07. I think this mark 10 straight quarters with a positive book-to-bill. We ended the quarter with a record backlog of $1.7 billion. So we are feeling really good about environment we are operating in and from what we are hearing from our businesses, and we continue to see a solid underlying demand. We are really well positioned to perform well in this environment. And regarding April, I haven’t seen the data as of today, but I have seen it as of yesterday, and we are right on track. So no change in pace in April, and we are feeling good about Q2.

And just a question on your guidance for the second quarter. The sales are going to grow up high single, do you have the organic growth number? Like what of kind of organic is built in those numbers?

The organic growth would be the same level at the 3%, 4%, 5% that we have guided for the year for AMETEK.

So it’s within the range, okay, got it. And lastly, on the -- you talked a little bit about the M&A pipeline, you guys did a great job like deploying up, Bill, more than $1 billion here over the last -- in 2018. Any color on the size, at least the pipeline, EIG, EMGs, how it’s kind of mix wise as well as maybe just give us around the hone kind of color on M&A.

Yes, sure on M&A. Our M&A pipeline is very active. As always, we are evaluating a number of opportunities. And we have a very broad pipeline, it needs to be broad. Because we are in the environment with the oil pricing up and with the competitiveness of the environment, we have to select the deals from our broad pipeline, which will give us a solid return on capital. So the M&A environment is similar to what we have been experiencing in the past few years, and we are looking at deals across both of our groups. And I am very encouraged with the progress on the pipeline. And you can’t predict in the next quarter if the deal is going to close, but I feel very confident on the long term with our process capability in M&A and with our tremendous pipeline. So I am very bullish about M&A.

And lastly, it’s on the Aerospace, I just want to leave at this. Any -- if you can explain the exposure on the 737 Max here, anything on that front? And any pressure from the down tick on the production especially from the Boeing?

Right, as you know, AMETEK is not dependent on any one platform. So we are on lot of or on just about every platform, but we are not overly dependent on anyone. So when you look at the 737 issue, first of all, Boeing hasn’t reduced the orders forecast and production plan that we are seeing here. So we are still going along meeting that demand. The second point would be for the full year of 2019, the 737 Max accounts for about $15 million in revenue. So that puts it in an order of magnitude. It’s a small part of the company, I think, probably about 0.25% of revenue. So we are not overly dependent on it. We certainly want to see the problem fixed and want to keep producing at the rate we are producing on. But we had in the quarter strong OEM business. The commercial business was very solid. Our Aerospace business was up high single digits in the first quarter, and we are forecasting it to be up mid-single digit for the year. So strong growth in all segments and maybe there’s a bit of conservatism there, but we feel really good about our Aerospace business in all of our market segments.

And our next question comes from Brett Linzey with Vertical Research. Your line is open.

Just wanted to come back to margins. Obviously, a lot of noise with FX and deal impacts moving through the reported margins, what were the core incremental margins that you saw in the quarter at the total company level and at the segment level?

Okay. At the AMETEK level it was 35% and at the EIG level it was 50% and at the EMG level it was 25%. So pretty typical performance, very strong performance and that we are very pleased.

Okay, good. And then just a follow-up on the order question. Appreciate the color on the 3.5%. What does that look like at the segment level, were both positive or was the complexion, one negative, one up. And then within that order number, should we assume that that includes roughly two points of price, similar to what you realized that the sales line in the quarter? Thanks.

Yes. You probably should assume that because our pricing is been pretty consistent.At the group line, EIG was up 5% organically in orders and EMG was up 1% organically in orders. And EMG had the toughest hurdle, because last year we had a very difficult comp at 12% and EMG was a bit stronger than EIG. So really all of our businesses have solid order performance and we have, as I said before, an excellent book-to-bill and record backlog. So we are feeling really good about the orders and it’s really across the board.

And then maybe just one last one on pricing, very good pricing power all year really as you guys look out into the balance of the year and you have seen some of these commodities and raw material start to moderate here. Is there a period of give back and maybe you could just update us remind us how you are pricing mechanisms work, specifically within the metals business?

Yes, I’d say in AMETEK, except for the metals business. There isn’t a period of give back. I think within the metals business. We don’t really count that is price. So that’s just the commodity fluctuations that get passed on to the customer. And what you really have there is a lot of the metals have stabilized, but the price of vanadium is one metal that’s important to us that’s trough as strong recently. So that will have a modest impact as we go forward on EMG’s specialty metals business, but I don’t expect much of an impact at the AMETEK level.

And our following question comes from Robert McCarthy with Stephens. Your line is open.

It’s nice to have a boring AMETEK, right. And yeah, but I guess from that perspective in some of the excellent questioning that was ahead of May. I think it is a question about kind of the guide the cadence for the year. Could you talk about that in the context of you have entered a kind of slightly different range for the kind of deals you are looking at terms of growth and potentially valuation and even, and even underlying margins. Do you think given what the properties you are looking at now just dictated by the market environment, the pricing environment. Do you think that some of the accretion is being blunted, so that we might see a little bit more next year or another way to saying it is of the deals you have announced so far. What would you expect for kind of accretion in 2020, given the fact that it sounds like do have a lot of puts and takes for 2019?

Yes, I think in 2018, we said that was about $0.12 of benefit. In 2019, there is about 12% of -- $0.12 of benefit from an M&A and we had a lot of deals, sluggish deals at the end of 2018. So those deals are working their way through the system and there are certainly a lot of integration activities going on. So yes, from those deals the timing wise will be though I have a potentially bigger, bigger benefit in 2020. But we are still seeing good margins now with our core business, and that’s very positive on those deals and the integrations are progressing very well. So they are spread out amongst our operating units and we feel good about them.

And, and forgive me for another kind of impolitic question, but it’s easier ask these questions, when your stock has rallied as significantly as it has in the investor perception has changed radically as it has over the last three years. But if you were so critical about yourself and the organization over the past three years to four years in terms of M&A, how do you miss on a transaction? Or how do you grade yourself on where you are pitfalls are with AMETEK strategic style in terms of going after assets?

I think our style was one that equates to returns. And we look for a cash-on-cash, after-tax, return on invested capital, 10% in year three on all these deals and we haven’t changed that. And we are getting that kind of return on the deals were getting done and we are not chasing deals that we can get a return on. So our per take maybe that we are not paying the inflated prices, but we feel very comfortable in the long run that there’s a lot of discipline in our system, we want to maintain that discipline, and we look at the return on total capital on our balance sheet. The return on capital is about 13% in the first quarter. Our cost of capital is more like 8.5% and we think the difference between the two as what we are creating a value for our long-term shareholders and we look at that very closely. So that’s the key driver behind our acquisition strategy. We have a lot of discipline and we don’t plan to change that.

And our following question comes from Deane Dray with RBC Capital Markets. Your line is open.

Just like to go into some of the variables and puts and takes in the quarter, if I could. Some of the dynamics that the industrial companies have been contending with any puts and takes that you have seen regarding tariff? The second one is pull-in. Some of the companies saw cases where they actually had bigger demand pulled out of the first quarter to the fourth quarter. Did you see any of that? And then anything about - you are not typically someone to complain about the weather, but was there any factor there too? Just start there too, please.

I guess I will start with the weather and it didn’t have a measurable impact on our business. So what the tariff, Q1 2019, there was situation played out as we predicted. We had about $0.01 from the direct impact from tariffs and we offset that totally with price and our sourcing activities have been successful in reducing growth tariffs and we are active and continuing to those sourcing plan. So price actions completely offset tariffs and we feel good about that. And your last question there regarding the pull-ins, we look very hard at the pull-ins and, there is always some things pulled into Q4 before the end of the year maybe to avoid a price increase. But it wasn’t any different than any other prior year. So we are not saying we put a lot into Q4 2018. We really looked at it hard. And looked, about the same thought. So those are answered.

That’s all. Good. Yes, those are all good to hear. And just going back to the record backlog and just could you remind us how much of your backlog would convert in 2019? What percent of that and just talk about that visibility that gives you?

Yes, Deane. I think it’s about 85%. It comes out in the next year. So it gives you some very good visibility. But quite frankly there were a number of our businesses that are our book and ship that in the month of the quarter. So we don’t want to take it too far. But 85% of that $1.7 billion is going to go up this year.

And then last question from me. Was there any growth investments in the quarter that you would call out? What just remind us what the growth investment budget is for 2019?

Right. I highlighted the product development and EDAX and also the product development in the adjacent expansion roll-on. Those were the highlights. And regarding investment for the year, we are investing about $80 million of incremental investments in sales, marketing and engineering activities. As $80 million more than we invested in 2018. So, and that spend is relatively linear through the year and we are getting a good return on it. So certainly, we are investing heavily but our businesses are really focused on getting a return and we are very pleased with our new product development activities and also the work we are done in commercial excellence, and improving our capability to go to market.

Thank you. [Operator Instructions] Our next question comes from Richard Eastman with Baird. Your line is open.

Yes. Good morning.

Good morning.

Dave, just looking at the core growth rates in the quarter, the 3% for EIG and the 7% for EMG against really a tough comp. I am curious as the revenue shook out in the quarter, was there any movement between segments, was EMG maybe a bit of a positive surprise and maybe think -- anything in EIG that maybe became an order that didn’t ship or is there -- was there any movement between the segments here relative to the first quarter macro?

Yeah. The -- one first point there, I will make a small correction that what you said. EIG organic growth was 4% in Q1, not 3%.

Okay. Fair enough. Same question then applies.

Same question applies and it really played out as we thought. I mean, we had a forecast that was -- and both sides of the business met their forecast. So it’s pretty much a…

Okay.

…very, very -- from the sales execution side, it was a very predictable quarter for us.

Okay. And the one thing that steps out from a margin perspective, your core margin in EIG of, I think, you said it was up 110 basis points on the core side.

Right.

Was that primarily, I mean, what are the dynamics there, was it -- is it mix, was there more price there in EIG product lines or mix or just seems like a very positive variance.

Yeah. You are right, Rick. It is a positive variance and you have the cost reduction factored in also. But our pricing that we got 2% in the quarter was broad based across our portfolio, but it’s a little bit higher in EIG than EMG and we definitely had a positive mix. I mean, at this stage of the cycle, people are buying our fully option products. They have money to spend and our mix is positive. So those are the two -- really three factors. We managed cost well, we have got good price in EIG and the mix was positive.

Okay. And then just last question around the M&A and the deals that they are kind of in your pipeline or potential deals in the pipeline, a couple of things. One, are they skewed the prospects, are they skewed towards either EIG or EMG and is there a theme in your pipeline around the type of businesses or the products? Maybe you could just address that perhaps?

Yes. EIG is about two-thirds of our business and EMG is about a third. So I think the pipeline reflects that skewing. We are looking on a lot of our business is broad based. Looking at the differentiated products, the secular versus cyclical markets would be a…

Yeah.

… priority, so it’s a lot of what you have seen recently. There is healthcare, there is more process, instrumentation, there’s an automation business, there is some very good properties we are looking at, the Power and Industrial segment. So the Aerospace business, I mean, across the Board, we are looking and...

Okay. Yeah. Is there a healthy element of this kind of connectivity theme or any type of software extensions to the hardware? Is that representative in there as well?

A little bit.

Yeah.

You see a little bit, it’s around in a little bit with telearm and things like that, that’s certainly…

Yeah.

…a theme we are looking at. But it’s not -- doesn’t define our entire pipeline for sure.

Yeah. Okay. Very good. Thank you.

Thank you, Richard.

Thank you. And our following question comes from Joe Giordano. Your line is open.

Good morning, guys.

Good morning, Joe.

Hey. So, if you have a guess, if you spend the same amount in 2019 on M&A, you did in 2018. Is it more likely that in six deals, more than six deal, less than six deals, like how you skewing the size that’s in your pipeline right now?

I don’t want to guess, Joe. Because the pipeline has some more sizable deals and it also has some smaller deals and with our disciplined approach, you don’t know what you are going to find. So we could spend the same as we spent last year. We could spend a lot more. We can spend less and the deals could be a lot of different sizes. So I don’t want -- that’s pretty hard to predict at this point of the year.

Fair enough. Dave, one of the things you have focused on when you came on to CEO role was kind of spending to reinvigorate organic growth and on the front end of the business. And certainly that’s shown through on results but part of that is also in your underlying market is getting better. So how would kind of break that down between success internally at AMETEK relative to just your markets getting better over the last couple of years here?

Yeah. That’s -- we just finished our ninth quarter in a row with our average organic growth of 6%. So we are really pleased with that. But, clearly, the economic environment helped us, but certainly the focus and work that we are doing is improved also. Our customer facing capability is really improved and our teams are excited and we are seeing positive results from growth Kaizens and digital marketing, and our sales force is much more effective. We are driving aftermarket growth and it’s becoming part of our culture and important part of our business system. So it’s very difficult to bifurcate between the market growth and the company specific growth. But I can just tell you that we are making great progress and we will let the numbers speak for themselves.

And then maybe last, if you could do your kind of wrap up of everything on year?

Sure. Yeah.

Yeah.

Yeah. If I go around the horn with market segment commentary, our process -- I will start with process. Our process businesses had outstanding start to the year. Overall sales were up mid-teens. The growth was mid single-digit organically and contributions from the acquisitions of SoundCom, Forza, Telcellular and Spectro Scientific. Our Materials Analysis business did saw particularly strong and broad-based growth and they are continuing to see solid demand for their high end analytical instrumentation. So that team has done an excellent job. For all of 2019, we continue to expect organic sales to be up mid-single digits. Our Aerospace and Defense business delivered excellent results as I talked about before, high single-digit organic growth for the quarter. Our growth remains solid across our various Aerospace markets with notable strength across our Military and Commercial OEM businesses. For all of 2019, we continue to expect mid single-digit organic sales growth with balanced growth across each market. For our Power and Industrial sub-segment, we saw mid single-digit growth in the first -- we saw mid single-digit growth in the first quarter and that was driven by the recent acquisition of Motec. Organic sales were flat in the quarter for Power and Industrial in line with our expectations. We had a difficult prior year comparison in our Power Test and Measurement business. And for all of 2019, we continue to expect low-to-mid single-digit organic growth, driven by the strength of our backlog and the solid order patterns that we are seeing across these businesses. And finally for our Automation and Engineered Solutions, we saw growth across those businesses. They remain solid with mid single-digit organic sales growth in the quarter. We continue to see excellent growth from our Dunkermotoren business tied to the automation macro trend in serving. In addition, we saw notable strength across our Engineered Medical Components businesses in the quarter. That team is really doing a fantastic job, the EMC business. And for all of 2019, we continue to expect solid mid single-digit organic sales growth for our Automation and Engineer Solutions business. So, thank you, that’s a walk around the horn, Joe.

Thank you.

Thank you.

Thank you. And our following question comes from Steve Barger with KeyBanc Capital Markets. Your line is open.

Hey. Good morning, guys. This is Ken Newman on for Steve.

Good morning, Ken.

Good morning.

Good morning. Hey. I just wanted to clarify, so the hurdle rates within your M&A pipeline haven’t changed in terms of deal size and return metrics and multiples versus what you have said on prior calls. Is that correct?

No change.

No change. So, on the larger end then that $300 million to $500 million in revenue type size or deal size is probably at the upper echelon?

Correct.

Okay. And then it does seem, as my follow-on, it seems that you are pretty positive on the end markets outside of maybe some uncertainty from trade policy, but given maybe some of the conservatism in your guidance. I am curious to hear what your view is on the cycle, where do you think -- what inning do you think we are in right now and how much more legs does this cycle have you think?

They are very difficult to predict. As we communicated early in the year, we expect solid growth this year, but it’s -- the growth is going to moderate a bit. And it’s driven by the trade tensions, the global macro uncertainty, and additionally, we have some very difficult comps. And we are staying close to Asia, because of the trade difficulties, but overall, it feels pretty good and where our guys typically a bit conservative. And we are waiting to see things play out, but we feel good about the year.

Got it. Last one from me and I am sorry if I missed it, how much of the $80 million in OpEx savings have been realized in the first quarter?

$18 million of the $80 million, right on our plan…

Okay.

… and that accelerate a bit as we progressed through the year.

Thanks a lot.

Thank you, Ken.

Thank you. And our next question is from Robert McCarthy with Stephens. Your line is open.

You can’t get rid of me it’s more like a bad penny. So just a couple of more since we are round it out for the hour. Touching on your Asia comments, I mean, obviously, you are not exactly a bellwether like three in terms of broad octopus touching every different end market, but you did highlight kind of some incremental softness coming in the February some uncertainty, even the March rebounding. And I think you made a comment about Asia as a whole, right, versus China specifically. So maybe you could just amplify your comments there in terms of what you are seeing -- in terms of what’s going on?

Yeah. So the -- as I said, Asia was roughly flat. China sales were down mid-single digits, against a difficult comp. We have done very well over there for the better part of two years. And while the China orders were up, low-single digits for Q1, so similar to Asia, we had tremendous order input in China in March. I mentioned the dynamic of slow February tied to the Chinese New Year. The other thing our MAT business our Materials Analysis business had a great quarter in China and some of our project businesses with difficult comps were off a little bit. So when you look at China as a whole, we had the good orders in line with low-single digits for Q1 and for the full year for China, we expect the growth to be in line with the 3% to 5% of all of AMETEK. So it’s moderating from the double-digit growth for past couple of years, but still solid and we are still staying close of that, but there was a bit of uncertainty. It’s the one uncertainty that we are watching closely because of the global trade situation.

Two more if you will forgive me. One you were mail wanted to ask about Brexit, any kind of impact there that we should be thinking about?

Yeah. The U.K. accounts for about 4% of AMETEK sales. We are preparing for our Brexit. So we are not assuming there is a political solution. Now the can’s been kicked down the road, it’s delayed until the fall. Certainly there maybe some administrative issues that may cause delays in getting product in and out of Europe into the Mainland, but our businesses are very in tune with the issue. We probably are carrying about a million pounds of inventory to different preposition to make sure them that we are going to be able to sustain a short-term problem, but we -- our businesses from the U.K. to a lot of exporting already not to the Mainland. So we not from the U.K., there may be some administrative issues in the short-term and we are hoping for a solution, but again preparing for hard Brexit.

And then finally just on the M&A environment, obviously, what you guys ultimately do, you go out and buy these private companies, closely held companies, some public companies, but ultimately make them a heck of a lot better and create a lot of value, which is wonderful. And as you know got work as a compounder. But I guess the question I have is for given the prevailing environment, where valuations are, where funding is an optionality. How do you think about the potential for select divestitures in the portfolio and how do you think about the repurchase option which you obviously hit the ignition on over the last six months?

Yeah. Our number one priority for capital allocation is to support our capital and acquisitions, and buy good businesses and make them better, that’s generated long-term return for our shareholders and it’s a clear priority. At the end of last year, we have an opportunistic approach to buybacks. Our stock and a significant market dislocation and we deployed a significant amount of capital and bought back some shares in the low ‘70s that will take a good move at this time. And then the priority three for the capital allocation will be a modest consistent dividend. In terms of your other question about our portfolio, we are in process of completing our annual strategic review. This is where we closely look at all elements of our portfolio. In the review last year, we concluded that we are very comfortable with our portfolio and we are clear profitable growth opportunities for each of our businesses. So our strategy is to focus on a broad diverse set of niche markets and we don’t want to become exposed to any one single market customer, technology and but we haven’t completed our review that you share. We do it every year and we go through that review and may come to a different decision we will let you know, but we are comfortable with our performance.

Thanks again for your time.

Thank you.

Thanks, Rob.

Thank you. And our next question comes from Scott Graham with BMO Capital Markets. Your line is open.

Hey. Good morning, Dave, Kevin and Bill. How’s it going?

Whatever -- wherever that in.

Yeah. I mean I was napping there. I don’t know what happened on the queue here, but I saw -- I just took a nap, but Rob was right, the quarter was boringly comfortable.

I am wondering how Rob got two questions and before you got one.

I think, Rob, got about nine in, but that’s…

That’s said.

That’s good. He -- this is good questions as usual. I do have three more, believe or not. So I just want to understand the cadence of organic that you are thinking this year. Obviously you kind of came in at the high end this quarter on the organic. But also obviously if you look at the stack comp, your second half comps kind of jump up 200 basis points versus the first half. So would -- are you guys kind of thinking that 3 to 5 kind of comes a little heavier in the first half and in the second half?

Not really. I mean, I wouldn’t read too much into it. I mean, we grew sales at organically at the high end of our guidance range and it’s still early in the year and we want to be prudent. So that will be the biggest driver. As we mentioned before, we do have some tough comps and that’s driving some moderating growth, but we are feeling good with how the year is playing out nicely one more behind us.

And I guess this is next. One is a question for both you and Bill. As I know from his history, you typically can really get some good working capital out of your acquisitions after that first, six to 12 months kind of thing. Could we expect an acceleration in free cash flow as the year progresses?

I would say that the free cash flow probably be a little more heavily weighted into the back half of the year than it is in the front half. And I think it’s, as you, as you mentioned, we were able to drive the benefits from businesses that are now inside the AMETEK portfolio for a longer period of time as well as getting after improving working capital performance across all of our base businesses.

Got it. Thank you, Will. So my last question is kind going back to an earlier question on M&A, but more specifically, on the segments. There has been a profound difference in M&A, in EIG versus EMG. And I am just trying to wonder why that is I mean I am looking at the organics from electromechanical over the last couple of years they have been outstanding. And I am also thinking that I know you are into the connectivity saying and Dunkermotoren is on that side of the house. So kind of like what’s going on there that is not where we are not seeing more M&A on that side of the house?

Yes. We are seeing some M&A have set out. We did major aerospace last year and we are actively looking in all of our businesses, put together a strategic plan and we look at those opportunities. And when you look at the characteristics of differentiation, we have very differentiated businesses with Dunkermotorenwith our aerospace presence. So our aerospace business had an outstanding quarter. So we are looking at that both sides of our house. And I think over the past 10 years, there’s one point EIG and EMG were about the same size and EIG is just grown a little bit bigger. So there is clearly a strong desire to do acquisitions on either side of the business.

Would you maybe as a corollary to that, would you say that this is my speculation of course, aerospace particularly aftermarket oriented as well as connectivity assets, which are on the electromechanical side of the house that the prices for those deals are a little higher than what you would want for your ROIC or is that just a bad guess…

I wouldn’t say that - I wouldn’t say that. The pricing is really dependent on the niche market that we are looking and the expectations of the sellers. So I wouldn’t say that I mean, there is a big difference between EIG and EMG from the product portfolio. EIG has a lot of direct and aftermarket with the end users and EMG in large part is a OEM supplier, except for the aerospace business. So, but really we are looking on both sides and I wouldn’t draw anything from your prior point.

Thank you. And I am showing no further questions at this time. I would now like to turn the call back to Kevin Coleman for closing remarks.

Great, thank you, Sydney. Thank you everyone for joining today. And as a reminder, a replay of today’s webcast can be accessed on our website later today. Have a great day.

Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.