Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter 2020 AME TEK Inc. earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you required further assistance, please press star zero. It is now my pleasure to introduce Vice President of Investor Relations, Kevin Coleman. Thank you, Andrew. Good morning, and thank you for joining us for AMETEK's fourth quarter 2020 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 fourth quarter and full year results were released earlier this morning and are available on market systems and in the investor section of our website. This call is also being webcasted and can be accessed on our website. The webcast will be archived and made available on our site later today. During the course of today's call, we will make forward-looking statements which are subject to change based on various risk factors and uncertainties that may cause actual results to differ significantly from expectations. A detailed discussion of the risks and uncertainties that may affect our future results is contained in 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 2019 or 2020 results will be on an adjusted basis, excluding after-tax acquisition-related intangible amortization, and also excluding the gain from the sale of Reading Alloys in the first quarter of 2020, and the realignment charge taken in the first quarter of 2020. Reconciliations between GAAP and adjusted measures can be found in our press release and on the investor section of our website. We'll begin today with prepared remarks by Dave and Bill, and then open it up for questions. I'll now turn the meeting over to Dave. Thank you, Kevin, good morning, everyone. AMETEK concluded 2020 with a strong fourth quarter, delivering record operating results despite ongoing challenges presented by the pandemic. Our businesses saw solid sequential sales and order improvements in the quarter, while year-over-year growth turned positive across several of our businesses. We also drove exceptional operating performance in the quarter, leveraging our broad set of operational excellence initiatives. These efforts led to record backlog, margins, and cash flow, as well as the high quality of earnings that exceeded our expectations, positioning us extremely well as we look ahead to 2021. The safety of our employees remains our number one priority. We continue to adjust our practices and enforce our safety protocols across our businesses to help limit the possible spread of the virus. While we are cautious in the short term, given COVID-19 and ongoing travel restrictions, we are highly confident in the strength of our businesses and our ability to deliver exceptional growth and shareholder returns over the long term. The AMETEK growth model continues to provide the framework for long-term sustainable success, and our performance in 2020 was a testament to the strength and flexibility of the model. Now let me return to our results for the quarter. Sales in the quarter were $1.2 billion, down 8% compared to the fourth quarter of 2019. Organic sales were also down 8%, with the divestiture of Reading Alloys of 3.1, the acquisition of IntelliPower contributing one point to growth, and foreign currency added two points. As we saw in prior quarters, our commercial aerospace business was the most impacted by the pandemic, with sales down approximately 35% in the quarter. Orders continued to improve, with our book-to-bill at 1.07 for the fourth quarter. This led to a record backlog of $1.8 billion, providing us with a positive line of sight into 2021. Operating income in the fourth quarter was $298.1 million, up slightly from the fourth quarter of 2020. Operating margins were a record 24.9%, up an impressive 210 basis points compared to the prior year period. EBITDA in the fourth quarter was a record $360.7 million, and EBITDA margins were also a record of 30.1%, up a robust 300 basis points over the fourth quarter of 2019. This operating performance led to earnings per diluted share of $1.08, matching last year's fourth quarter results and comfortably ahead of our guidance for the quarter. Our business has also delivered outstanding cash flow during the quarter, with operating cash flow up 13% to a record $386 million, and free cash flow conversion exceptional, 158% of net income. Let me provide additional detail at the operating group level for the fourth quarter. The Electronic Instruments Group delivered superb operating performance despite challenging market conditions. EIG sales in the fourth quarter were $819.4 million, down 7% from the prior year, and in line with our expectations of solid sequential improvement. Organic sales were down 10%, with the acquisition of IntelliPower contributing 2%, and foreign currency contributing 1%. Commercial aerospace remained the largest driver of the sales weakness. While other EIG businesses saw improvements versus prior quarters. Our Materials Analysis Division returned to growth in the fourth quarter, while other EIG businesses, including Zygo and Telular, also generated year-over-year growth. Despite the overall sales decline, EIG's operating income in the fourth quarter increased 3% over the prior year to a record $236 million, and operating margins reached a new high of 28.8%, expanding an exceptional 270 basis points over the same period in 2019. Our Electromechanical Group also delivered strong operating results in the quarter. EMG sales were $379.5 million, down 11% from the fourth quarter in 2019, driven in large part by the divestiture of Reading Alloys. Organic sales were down 4%, with the divestiture an eight-point headwind and foreign currency adding two points. In addition to continued strong growth across our defense businesses, we were pleased to see our automation business generate solid organic growth in the quarter. Fourth quarter operating income for EMG was $79.8 million, and operating margins expanded an impressive 110 basi s points to 21%. Now for the full year results. Despite very difficult end-market conditions and meaningful top-line headwinds in 2020, AMETEK was able to expand full-year operating margins while delivering record levels of operating and free cash flow. Truly outstanding performance. Overall sales for the year were $4.5 billion, down 12% from 2019. Organic sales declined 13%, with acquisitions adding 4%, the divestiture of Reading Alloys a 3% headwind, and foreign currency flat for the year. Operating income in 2020 was $1.1 billion, and operating margins were a record 23.6%, expanding 80 basis points over 2019. EBITDA for the year was $1.32 billion, and EBITDA margins were a record 29.2%, up 230 basis points from last year. This led to full-year earnings of $3.95/ diluted share, down 6% versus the prior year. As Bill will highlight, our businesses did a fantastic job managing their working capital, which helped drive a record level of cash flow, with full-year operating cash flow up 15% to $1.28 billion. In summary, while 2020 was very challenging, I'm extremely proud of the way AMETEK colleagues managed through the pandemic and delivered tremendous results. Before I cover the outlook for 2021, I wanted to highlight certain key elements of the AMETEK growth model and how each position us for long-term success. First and foremost, AMETEK's proven operational acumen stood out in 2020, with our businesses doing an incredible job driving our operational excellence initiatives. In the fourth quarter, we generated $60 million in total cost savings, with $50 million in structural savings and $10 million in temporary savings. For the full year, total incremental savings versus the prior year were $235 million, with approximately $145 million in structural savings and $90 million in temporary savings, including furloughs, travel reductions, and temporary pay actions. As we look ahead to 2021, we expect a much more modest level of temporary savings versus 2020 as the economy continues to recover from the worst of the pandemic, and we continue to add back these temporary costs. However, we do expect to drive meaningful incremental structural savings across our various Operational Excellence initiatives, including across our global sourcing activities. For the full year 2021, we expect approximately $140 million of incremental Operational Excellence savings. Shifting to new product development. Even through this downturn, we remain committed to investing in new products and solutions that help our customers solve their most complex challenges. In 2020, we invested $246 million in research, development, and engineering, approximately 5.5% of sales. These investments led to outstanding innovation and dozens of new product launches. In the fourth quarter, our vitality index, or the percent of sales generated from products introduced over the last three years, was an impressive 25%. In 2021, we expect to invest approximately $270 million, or 5.5% of sales, in research, development, and engineering to enhance our position as a global technology leader. This is a 10% increase over 2020 RD&E spend. Finally, I want to touch on our acquisition strategy. Prior to the onset of the pandemic last year, we acquired IntelliPower, a leading provider of high-reliability, ruggedized, uninterruptible power systems for mission-critical defense and industrial applications. IntelliPower has integrated nicely into our power systems and instruments division and is performing well. While deal flow in 2020 was impacted by the pandemic, we are seeing continued improvements in the M&A markets and are managing a strong pipeline of acquisition targets across a broad set of markets. As Bill will discuss shortly, AMETEK has significant balance sheet capacity, and when combined with our robust cash flow generation, provides us with meaningful capital to support our acquisition strategy, which remains our number one priority for capital deployment. Now shifting to our outlook for the year ahead. While we remain cautious in the short term, given the uncertainty of the timing and pace of the recovery, we are confident in the strength of our businesses and our ability to manage through these uncertain times. We continue to manage our businesses safely and prudently while ensuring continued investments in key growth initiatives. For the year, we expect both overall and organic sales to be up mid-single digits versus 2020. Diluted earnings per share for the year are expected to be in the range of $4.18-$4.30, up 6%-9% compared to 2020. For the first quarter, we anticipate continued year-over-year impact from the pandemic, with overall sales down low to mid-single digits and first quarter earnings of $0.97-$1.02/ share, flat to down 5% versus the prior year. In summary, the strength of the AMETEK growth model, the asset-light nature of our businesses, our leading positions in attractive niche markets, and our world-class workforce will continue to drive long-term sustainable success. I'm confident that we are emerging from this unprecedented economic environment even stronger than we were before. Again, I would like to thank all of our employees for their continued hard work and tremendous efforts as we manage the ongoing global crisis. I will now turn it over to Bill Burke, who will cover some of the financial details of the quarter. We'll be glad to take your questions. Bill? Thank you, Dave. As Dave highlighted, AMETEK had an outstanding finish to 2020 with record operating performance and a high quality of earnings in the fourth quarter. I would also like to thank and recognize all of my AMETEK colleagues for their significant contributions in 2020. The way our teams persevered through the challenges of the past year was truly impressive. With that, I will provide additional financial highlights for the fourth quarter and the full year, and will also provide some additional guidance for 2021. Fourth quarter general and administrative expenses were $17.7 million, up modestly from the prior year. For the full year, G&A was down 11% from 2019 due to lower compensation costs and other discretionary cost reductions, and as a percentage of total sales was 1.5% in both years. For 2021, general administrative expenses are expected to be up approximately 10%, due primarily to the return of temporary costs, including compensation. The effective tax rate in the fourth quarter was 20.1%, up from 17.6% in the fourth quarter of 2019. The difference in tax rate was due primarily to the finalization of tax returns in each of the years. For 2021, assuming the current tax regime, we anticipate our effective tax rate to be between 19% and 20%. As we've stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively, from this full-year estimated rate. Our businesses continue to manage their working capital exceptionally well. Operating working capital was an impressive 14% in the fourth quarter, down 330 basis points from the 17.3% reported in the same quarter last year, reflecting the outstanding work by our teams. Capital expenditures were $37 million in the fourth quarter and $74 million for the full year. Capital expenditures in 2021 are expected to be approximately $110 million. Depreciation and amortization in the quarter was $65 million, and for the full year was $255 million. In 2021, we expect depreciation and amortization to be approximately $260 million, including after-tax acquisition-related intangible amortization of approximately $117 million, or $0.50/ diluted share. As Dave highlighted, our businesses continue to generate tremendous levels of cash flow. Operating cash flow in the quarter was a record $386 million, up 13% over last year's fourth quarter. Free cash flow was also a record at $349 million, up 16% over the same period last year, resulting in a free cash flow conversion of 158% of net income. Cash flow for the full year also set new record levels. Operating cash flow for 2020 was $1.28 billion, up 15% over the prior year, and free cash flow was $1.21 billion, a year-over-year increase of 19%. Full year free cash flow conversion was 158% of net income, adjusted for the Reading Alloys gain. Total debt at December 31st was $2.41 billion, down from $2.77 billion at the end of 2019. Offsetting this debt is cash and cash equivalents of $1.2 billion. Our gross debt-to-EBITDA ratio was 1.8x, and our net debt-to-EBITDA ratio was 0.9x at year-end. We enter 2021 with approximately $2.6 billion in liquidity to support our growth initiatives. This liquidity, along with our strong balance sheet and no material debt maturities until 2024, enables us to manage the continued effects of the economic downturn, while also deploying meaningful capital on strategic acquisitions. To conclude, our businesses performed exceptionally well in the fourth quarter and throughout the year, delivering a high quality of earnings in a very challenging environment. Our outlook for 2021 and beyond remains positive, given our strong financial position, our proven growth model, and our world-class workforce. Kevin? Thank you, Bill. Andrew, we're now ready to take questions. Certainly. As a reminder to ask a question you will need to press star one on your telephone. To withdraw your question press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Allison Poliniak with Wells Fargo Hi, guys. Good morning. Good morning, Allison. Obviously ending the piece on the $2.6 billion of liquidity. As you think of that M&A pipeline today, 2020 and even the beginning of 2021, there's been a lot of noted challenges. Has that caused you to alter sort of what's attractive in your mind towards the AMETEK's portfolio? That's a great question, Allison, not really. M&A remains our top priority for capital allocation. We feel there is going to be substantial opportunity for us. As you mentioned, with the liquidity in our cash flow, we have a very strong balance sheet. We're really positioned to use that as a lever to increase our earnings. We're seeing an uptick in pipeline opportunities. You started to see some of the pent-up demand happen in Q4. The market's very hot. We're maintaining our discipline. We're working on deals of all sizes. We have some larger deals we're working on. We have some AMETEK typical size deals. We even have a couple of small technology acquisitions we're looking at. I would say we've never been busier on M&A. We're looking at it the same way. We think deploying our capital on M&A is the best way to get our shareholders return. Within that, are there any verticals that have, I guess, increased in importance in your view, just given what's happened? Yeah, I think we have 42 business units, and they all develop an acquisition plan, and we're looking at all of those. We're certainly seeing properties come available in all areas. We're also looking at some places where we can get a high return on capital. I'd say that our bias is toward more technology deals, but not necessarily a vertical market. We're looking at all of them right now. Oh, great. Just last, on that temporary cost savings, I know, Bill, you talked about G&A being up 10%. Should we layer that in more so in the back half? How should we think of that cadence of that coming back? Yeah, I'd say, primarily the temporary costs with some small exceptions in the first quarter, as we continue to see the effects of the pandemic. They're going to be coming back basically, I'd say evenly across the year, a little bit lower in the first quarter. Great. Thank you. Thank you. Thank you. Our next question comes from the line of Deane Dray with RBC Capital Markets. Thank you. Good morning, everyone. Morning, Deane. Hey, nice strong finish to the year. I would like to hear what the approach was this time to providing guidance. There's still so much COVID uncertainty in the macro. What was different this time as you framed guidance? Maybe give us some insight into how the cadence of the monthly sequential improvement that you saw this year. Sure. Thank you for your comments on the quarter. We sat back near the end of the year and into January, there were situations that occur where you're having to close down your plant for a couple of days, get everyone tested, clean it, and people were bringing the virus to work, I'll say. It created a difficult operating environment, and certainly it made us think through giving guidance for the quarter and for the year. As we fought through it and we were executing well, so well that we got confident that we're able to operate and execute with the virus, and we have good processes and protocols in place, and we're mid-cycle and long-cycle businesses, and we're seeing those demand pick up later in the year, we're assuming. That all went into a discussion. We talked about it several times, but we feel comfortable with the guidance that we're giving, and we feel comfortable we're going to be able to execute, and we feel the processes and procedures we've developed are allowing us to operate safely. We also feel we're feeling an uptick, and we're looking to those short cycle businesses and markets and seeing them trend up, and we're assuming that's going to happen for us a couple of quarters later. That's helpful. If we're looking at the first quarter guide, is there any of the usual seasonality in effect? Just with COVID, it's uncertain how much is a reaction to coming back, the recovery, but is there any of the usual seasonality in effect? What happens to us usually in Q1 is that our process businesses are stronger in Q4 and not as strong in Q1. That's the seasonality. You have a drop in revenue there. Then on the bottom line in Q1, along with the contribution margin effect of that, you have a lack of RD&E, and you also have us resetting some compensation G&A type costs. You add that all together, and our top-line guide for Q1 is down low to mid-single digits, and we gave the earnings range of $0.97-$1.02. That's the way that we got to that. You also asked about the cadence, and I didn't answer that in the first part of your question. The cadence throughout the quarter was a pretty typical trend for us. Orders grew sequentially every month, with December being the strongest month of the year, and in fact, the strongest month of 2020. In terms of sales, we had a similar pattern with growing sequentially. December was strong and also the strongest month of the year. That was good. In January, orders and sales, they ended up at a level supportive over Q1 and our full-year guide. I would characterize them as solid, so continuing the positive trend. When you think about the low- to mid-single digit guide, back in Q2, we had organic growth of about minus 22%, and that improved in Q3, which I believe was minus 14%. Then you see the last quarter, Q4 completed was minus 8%. To go from that minus 8% organic to a minus low- to mid-single digit organic, you see a continuing improvement. We have a calendarization seasonality issue, but underlying it is a continuing sequential improvement of the business. Yeah, that really sounds and looks like a V-shaped recovery to us, and know there's a lot of hard work in getting that done. I appreciate, and you also answered what would have been my question about January, so I'm all set. Thank you very much. Thank you, Davidson. Thank you. Our next question comes from the line of Josh Pokrzywinski with Morgan Stanley. Hi, good morning, guys. Hey, Josh. Dave, just on the incremental margin expectation, I know there's a lot of moving pieces, some of which you touched on, and probably chief amongst those is maybe to start the year, organic growth. No need to get out ahead of yourself on expectations. As the year progresses or as growth starts to accelerate, what should we think of as kind of the underlying incremental margin for AMETEK right now? I know that with small numbers on the growth, it kind of gets distorted by other items. What's the real number as we move forward? Yeah, I think that's a great question. You'll recall that we talked about it last quarter. We had about $90 million of temporary costs that we're going to have to fit back in to the budget model this year. What it turns out is that we got really strong OpEx cost reductions of $140 million. On top of that, we have continued stronger pricing. When you take the organic growth combined with the OpEx structural savings combined with the pricing, we're able to absorb the temporary costs coming back to the P&L and end up with an incremental margin of about 35%. Typically, AMETEK would have a bit higher incremental margin, but the 35% is a solid number, and it includes absorbing all the temporary costs. We feel comfortable with the margin forecast that we have for 2021. We think core operating margins will be up about 40 basis points, and we believe the incremental margins will be up about 35%. Got it. That's helpful. Just on the end markets themselves, obviously, a pretty heady cocktail of businesses inside the portfolio. Just given that this has been such an atypical downturn and recovery, anything that you would call out as maybe being ahead of normal kind of recovery trajectory or behind, for that matter, relative to some of these early, mid, and late cycle markets that you guys participate in? Not really. I think the military market's been very strong for us. We've talked about that. We think that'll continue into 2021. We are seeing a tick up in the semiconductor market. That's not atypical. A lot of people are seeing that, but we have some technology that's more tied to the EUV, which is the next technology in semiconductors. We're seeing some research demands in that area. That business looks solid for us. In general, everything's behaving as we would think it would, and we do have the mid- and long-cycle businesses. The aerospace business where not assuming it's not gonna, the commercial aerospace business, we're not assuming a recovery. It's flat to up a bit. Flat to up low single for 2021. Most of the other markets are up mid-single digit. Yeah, that's great detail. Thanks, Dave. Sure. Thank you. Our next question comes from the line of Nigel Coe with Wolfe Research. Good morning. I wanted to really pick up on the FY 2021 sort of puts and takes, and you obviously talked about aerospace. Looking for a very modest recovery there, semi, et cetera. Anything by geography that you'd call out for next year in your plan process? I'd be particularly interested in what your views are on the U.S. and China markets. Yeah. Good question. Yeah, I'll start with Q4. In Q4, there were really mixed trends across geographies, and with Asia returning to strong growth and Europe and the U.S. seeing continued sequential improvements, but still showing negative organic growth. When we talk about Asia first, we had a great quarter in Asia. We were up low double digits, and we had strong growth in both our process and automation businesses. China, in particular, grew 22% with us in the quarter. Really big pickup there, both process and automation. If we talked about prior quarters, automation picking up, the process business followed, and that had a big impact on EIG margins, as you can see in the accounts. When you think about the U.S., we were down low double digits on broad-based weakness other than the defense market. The defense market was strong. When you think about Europe, we were down mid-teens on broad-based weakness other than the automation business. In the U.S. and in Europe, it was down except for small parts of our portfolio that were bright spots. In China, we really knocked it out of the park. In Asia, we did well. What we're thinking, the incremental improvements in 2021 are going to continue in Europe and the U.S. The sequential improvements that we've been seeing are going to continue. We think that Asia, or our quotation activity, Asia is going to maintain strength. I'm not sure we're going to go up 22% in China every quarter. Certainly, we're seeing strength in the pipeline in China and broader Asia. Great. Thank you. Regards to the M&A pipeline, you talked about a variety of different sizes in there. How are bid multiples, finance multiples right now? Obviously, we're seeing the public market multiples are obviously very high. How confident are you you can still do deals that ROIs make sense for you? Yeah. We've been able to do it so far, and we have a very strong pipeline. I'm pretty confident that we're going to be able to keep doing that. There's a lot of deals. The thing that's happened is we're able to derive more synergy than we were a few years, or five or 10 years ago. We have a great synergy capability to improve businesses and we're disciplined. Returns matter to us, and I'm confident that we're going to be able to deploy the cash on M&A. Great. Thanks, Dave. Okay. Thank you. Our next question comes from the line of Brett Linzey with Vertical Research. Hey, good morning, everybody. Morning, Brett. Hey, I wanted to come back to the structural cost programs. Obviously, you guys have done quite a bit over the last couple of years to navigate the pandemic, but also integrate acquired businesses. As we think about the programs in 2021, do those continue on a structural basis, or do you think you've got the businesses where they need to be from a cost structure standpoint? I think there's still structural programs that we're going to execute in 2021, and it's ongoing because we're combining businesses and we're implementing acquisition synergies, and we got that $140 million in structural costs, and there's $80 million of structural savings. There's $80 million of OpEx savings in that. Remember, we have a spillover from 2020, but there's ongoing programs. The way I look at it is we have over 150 operating facilities, and we have strategic plans on OpEx, and we take the advantages to combine and make things more efficient all the time, and 2021 will be no different. Got it. That's great. Just on back to the price cost question, what are you embedding for gross price realization for 2021? How are you thinking about freight, steel, other raw mat inflationary pressures against that? Any items in terms of supply chain that are a worry point that we should be thinking about or constraining your ability to serve customers? Good question. For all of 2020, we had about 1.5 points of price, and total inf lation was about 1 point. We had a 50 basis point spread for all of the year, but actually in Q4 of 2020, our pricing ticked up a bit. It was a little higher than 1.5%, that added to margins. For 2021, we see slightly higher pricing than 1.5%, but we're going to have slightly higher inflation. If you think about it as a 50 basis point spread, a little higher price, a little higher inflation. We are seeing commodity price inflation. We are seeing transportation costs, but we got them under control. We have very good supply chain people, and we've got that factored in. With our highly differentiated portfolio and our leadership position in these niche markets, when we have those kind of costs, we're typically able to pass them on to the customer. I've been very pleased to see our pricing hold up well through the pandemic. In terms of material shortages, there are issues in the semiconductor market that have been in the press where you see the automotive industry having some issues now, and our supply chain people are on top of that and working it, but it hasn't caused us any missed shipments or anything like that. It's just something to manage, and it's an issue we're working on. Just one more on price. Is it fair to say with the exit of Reading that your volatility on price up and down has dampened somewhat as part of the total portfolio? Is that fair? That's exactly right, Brett. You're right on. Got it. Okay, great. I'll pass it along. Thanks. Thanks. Thank you. Our next question comes from the line of Christopher Glynn with Oppenheimer. Hey, thank you. Good morning, everybody. Morning, Chris. Nice numbers. I think the balance sheet might look the most ample I've ever seen. My understanding, having covered you a long time, usually guide kind of base case revenue with some hedge in the implied margin outlook, and you went through that with Josh's question. In this case, you're entering 2021 with record backlog and a -13% organic comp for the full year. I think it sort of suggests mid-single digits is pretty in the bag, barring significant macro disruptions. Just want to reconcile the organic comp with the backlog number, if you could. Yeah. The backlog number is customers feeling confident in placing orders for the year. Those aren't just one quarter. The customers are getting their orders in for the first couple of quarters of the year. I think that AMETEK, if I've covered a long time, we're mid and long cycle businesses, so we typically see the uptick couple of quarters later. Our automation business is seeing it now, the long cycle businesses in aero and oil and gas are not seeing an uptick. The fact that we have a negative organic growth in Q1, and there's 4 numbers to the year, when you have one number that's negative and you add them up, you're at mid-single digits. Got it. Thanks for that. Okay. Thank you. Our next question comes from the line of Scott Graham with Rosenblatt. Hey, good morning. Good morning, Scott. Great job on the cost side as usual with supply chain. Thank you. I wanted to ask maybe a little bit more on the cost add backs. Dave, is the plan to add back the entire $90 million that you took out? And if so, how does that go into the segments? I don't think we'll add back the entire $90 million, but I'll give you an example. We left the temporary cost savings in Q4 were $10 million. We really ramped down by that point. In Q1, it's significantly lower than that. We'll adjust that as we go through the year, but I think the temporary costs are going to become so small as we go throughout the year, they're not meaningful anymore. It's really the structural savings that drive the margin improvement. Got it. Maybe, Bill, one for you. The working capital numbers were pretty incredible. I was just wondering, it's going to have to go the other way this year. What would you think the working capital percentage increases by in 2021? As you think about it, yeah, our businesses did a fantastic job on working capital, taking inventories down. Receivables performance was the best I've seen in my 30 years with the company, 30 years plus. It was fantastic. Will that continue? Well, I don't know. We're going to work real hard to make sure it does, and our businesses are focused on that. Will there be some give back next year? I'd expect there'd be a little bit, but we're very much focused on trying to keep that at the levels we've seen in this fou rth quarter in the full year. Okay. Thank you. The key point for us, Scott, is I think we had 158% free cash flow to net income conversion in 2020. For 2021, we're targeting 110%. Above 100% even this environment. Certainly we're going to have to put some cash back on the balance sheet, but we're operating very efficiently and we're going to put it back on the balance sheet gradually. Got it. Thank you. Would you mind if I squeeze in one more? Yeah, sure. Sure. In terms of the liquidity number, Christopher's comment was like, "I haven't seen this level of liquidity in the balance sheet in my time." Is there room in there for some share buybacks if the first half of the year is maybe a little bit slower on M&A than you're hoping? I know how disciplined you are there. Yeah. Is there room for share buybacks in that? Clearly, our number one priority is M&A. I really think we're going to be able to deploy the capital in M&A. If we can't, we'll find a way to get the cash back to you, either through buybacks or dividends. We have a consistently increasing dividend. We've been opportunistic on share buybacks. I'm not feeling that way right now. I think there's an incredible acquisition opportunity for us. We're positioned at a level, to your point, a liquidity position that we haven't been at before. It's very exciting to me. I'm very excited about the pipeline. Great. Thank you. Thank you. Thank you. Our next question comes from the line of Richard Eastman with Baird. Yes. Good morning. Hey, Rick. We don't hear you. Andrew, why don't we go to the next question? Certainly. Our next question comes from the line of Andrew Obin with Bank of America. Yes. Good morning. Morning, Andrew. Hey, congratulations on another great quarter. Thank you. Just a question for you on orders. We sort of try to back into the number from your book-to-bill, and I think we sort of calculated something like down around 8%. I was wondering if we could talk about the order rates and just maybe give us color by market. I think you sort of highlighted China, you highlighted aerospace. Right. Maybe a little bit more color there. Yeah, I'll give you the numbers. Our overall orders were down 8%, but organic orders. Of course. Were down 2%. Oh, okay. EIG organic were down 2%, and EMG organic were down 1%. What you backed into were the overall orders was correct, and we had a good organic month at -2%. Got you. That makes a lot of sense. Thank you. Can you just talk about how you guys are thinking about your own CapEx spending into 2021, and how you have changed, in any way, shape, or form, how you think about where you spend CapEx on, what you spend CapEx on in the aftermath of the pandemic? Right. Yeah. CapEx is, we plan on $110 million this year. We have opportunities that are going to provide excellent returns for growth CapEx, efficiency improvements, expanding our footprint in emerging markets. If you recall, in 2020, we talked about at mid-year, we had some expansion projects in emerging markets, and we couldn't get people there. We needed to get some expertise from different regions to the emerging markets. We couldn't travel, we delayed them. We spent $74 million in 2020, and our original plan was $102 million. We ended up spending a little less than 2% in 2020. In 2021, we're going to spend a little over 2%. We're going to make up a bit of those projects because they're still there, and there's great opportunity in other areas. We're still longer term, 2% of sales is the CapEx number, and we have a little bit of make up this year with projects. These efficiency projects and growth projects have very high internal rates of returns. Rates of returns like 30%, 40%, 50%. This is the kind of stuff that you want to fund, you want to get done, and we have a whole slew of projects that we're getting after. Just, are you spending anything different on what kind of equipment you're buying? Are you spending more on software? Are you changing your suppliers? I think there's a mix of all that in there, and it's bottoms up from the businesses. I think definitely software, our digital strategy is driving a lot of that. I think the emerging market infrastructure that we're putting in place is driving that. You're right on in the areas, and we just have a particularly large group of projects, and we're going to get those done this year, and we've got great returns on them. Fantastic. Great to hear. Thank you very much. Thank you, Andrew. Thank you. Our next question comes from the line of Andrew Buscaglia with Berenberg. Morning, guys. Good morning. I wanted to talk a little bit more about M&A, because I'm curious what your philosophy is out of the pandemic. Obviously, you have the capacity to do some larger size deals. First off, do you see more medium, large size deals as likely? Secondly, is there sort of philosophy here to buy stuff that's kind of beaten down, beaten up that you're buying at a low here or are you going to go after certain assets that, I don't know, whatever's opportunistic at the time? Wherever there's a good deal to be had. Right. I think it's both. It's all of the above. When I think about the, we expanded our revenue targets at acquisitions we're looking at. You could see deals in that $200 million, $300 million, $400 million range. Those are considered big. We're not talking about acquisitions that would be the size of AMETEK or even half the size of AMETEK. We think those bigger deals, it's much harder to create value. There's smaller deals, but the size growing with the size of the company. We're a bigger company now. Like I said, there's technology deals we're looking at that will augment our organic growth. There's deals in our sweet spot, very close to our existing positions that will get a very high return on capital on. There's some bigger deals that fit with us but are in adjacent markets. There's multiple deals in each one of those categories. We're busy. We're prudent in approach, but I'm optimistic that we're going to be able to deploy our capital and add very strong businesses to AMETEK. Okay. Can you remind us what was medical as a percentage of sales this year in 2020? Yeah. Can you just remind us what that area I think is pretty interesting as a budding platform for you guys? What are you thinking about that going forward? Yeah. Medical sales 2021, 2020 are in the range of 15% of sales. That's approximately $700 million. We have businesses that are doing very well in that area, and they're niche positions like all of AMETEK, and there's expansion opportunities there. We're actively looking in that healthcare medical space, and we'd like to see that be a bigger percentage of the company. All right. Thank you, guys. Thank you. Thank you. Our next question comes from the line of Joseph Giordano with Cowen. Hey, guys. Good morning. This is Francisco on for Joe. Hello, Francisco. Good morning. Hey, can you guys talk a little bit about your expectations on aerospace? Do you think this is coming to be bottoming out soon? What are the mix implications going forward? Yeah, it's a great question. The first point is our aerospace business is one of our more profitable businesses. It's definitely greater than the company average. That was before the pandemic and right now. The team has done an excellent job of realigning the cost structure. Lower volume, but still very profitable and more profitable than the average AMETEK business. We think any change in volume is going to result in high contribution margins because we've so leaned out the cost structure. The second point is there's a distinctly different demand pattern that we've been talking about all along. About half of our business in aerospace and defense is in the military space. That business was up mid-teens in the fourth quarter. We think we still see growth in 2021, but it'll be more mid-single digits. In the commercial space, that business was down about 35% in the fourth quarter, down about 30% for the entire full year. For 2021, the commercial aerospace business we're seeing is flat to up low single digits. The commercial aerospace business is impacted by many variables impacting demand, including government support, airline capacity decisions, and overriding in all is the confidence of the flying public. It's very difficult to predict those things when the pandemic is raging. We're pretty conservative how we're looking at that. The management team we have in aerospace is outstanding. Eventually, the commercial business is going to come back. I don't think it's going to be 2021. I think it's going to be beyond that, and our guidance reflects that. We've really done a hard work and done the right thing in our aerospace business. We're poised even for small incremental sales growth to deliver good margins, and eventually, that long cycle business will pick up and drive the earnings of the company. Great. That's extremely helpful. Thank you very much. Okay. Thank you. Our next question comes from the line of Richard Eastman with Baird. All right. Thank you. Try this. Try one more time. Yeah. Not sure what happened there. Hey, just a quick thought. Dave, when we talk. Rick. Rick, I think we lost you again. What the heck? Yeah. Rick, we got you now. Okay. Hey, just when we try to reconcile our segment growth to the AMETEK core growth outlook for 2021. Yeah, I see it. Yeah. We're kind of 3%-5%. My question is, EIG, I presume EMG with process coming back stronger, does EMG on the high end of maybe a 3%-5% core 2021 growth rate? Yeah. We gave a mid-single digit range. For me, that says between 4% and 6%, not 3%-5%. In that 4%-6% range, both of the businesses are going to be in that range. Certainly, EMG is going to probably start out a little better in the year. We think when we end the year, they're both going to be plus mid-single digit growth. Hey, Dave, when I kind of run that math through the numbers here, I look at both segments of the business perhaps being at a revenue rate at the end of 2021 that's below 2019. I guess my thought is there that the longer cycle, aerospace would be below, then would oil and gas still be projected to be below 2019s level? Yeah, oil and gas is projected to be lower, and oil and gas is going to have, the way it looks for us, a strong 2022 right now. If you think about where we're at right now in the fourth quarter, the businesses that showed positive organic growth were our defense business in process. Some of our research businesses, like our materials analysis division, that division was all positive organic. Our UPT business, Zygo, was positive organic. The Telular business was positive organic, and our automation business was positive organic. As we go out through the year, that'll change. The fact of the matter is with our mid and long cycle exposure, we'll have a strong second half, and for some of our markets, we will not get back to 2019 in 2021. Yeah, fair enough. When you talked defense, Dave, is that? Rick, I think we lost you in your question there. Yeah, Andrew, why don't we wrap it up? Rick, we hear you now, I think. I don't understand that. Okay. Hey, with defense, Dave, when you speak to defense, that's all aerospace defense. Is there anything else that you're capturing in that? No, it's aerospace defense, but we do have some land-based programs within aerospace, but it's all the A&D business. That's right. Okay. Hey, thanks again. Okay. Thanks, Rick Thanks for tolerating the problems. Thank you. No problem. Thank you. I will now turn the call back over to Vice President of Investor Relations, Kevin Coleman, for any closing remarks. Great. Thank you, Andrew. Thanks, everyone, for joining our call today. As a reminder, a replay of today's webcast may be accessed in the investor section of ametek.com. Thanks, and have a great day. Ladies and gentlemen, this concludes today's conference call. Thank you for pa rticipating, and you may now disconnect.