Welcome to Pall Corporation's Conference Call and Webcast for the Fourth Quarter for Fiscal 2011. Today's call is being recorded and simultaneously webcast. [Operator Instructions] We'd like to remind you that the company's fourth quarter press release is available at www.pall.com. Management's remarks this morning will include forward-looking statements. Please refer to Slide 2 or request a copy of the specific wording of this qualification of the company's remarks. Management also uses certain non-GAAP measures to assess the company's performance. Reconciliations of these measures to their GAAP counterparts are included in slides at the end of the presentation. At this time, I will turn the call over to Eric Krasnoff, Pall Corporation's CEO and President. Please go ahead, sir.

Good morning. Thank you all for joining us for our fourth quarter and year-end conference call. I'm here this morning with Lisa McDermott, our Chief Financial Officer, and Frank Moschella, our Corporate Controller. Now 2001 overall was a decent year. Life Sciences turned in another excellent performance. Pall Industrial faced challenges in the fourth quarter of the year. This morning, we'll provide an exposition of the factors that, despite achieving targeted top line growth, combined to place Pall Industrial profit below our expectation. Along with that, we will outline actions that were taken to address those issues. We'll also talk about what we saw as we exited the year and the current outlook for fiscal 2012. And, of course, there will be ample time for your questions. We're not going to make excuses for the disappointing finish to the year. We will keep some perspective. To paraphrase an English aphorism, one swallow does not a summer make, and for Pall, one quarter does not a trend make. The hard work we have done has produced solid results over time, and the company is well positioned to capitalize on tomorrow's opportunities and continue to deliver sustainable profitable growth. Now let's start with overall fiscal 2011. Sales grew by double digits in both Life Sciences and Pall Industrial, as all of our markets grew. While the earnings per share we achieved were not what we wanted, they are 32% better than a year ago. This quarter's results show there are still some bumps in the road, but they are basically either discrete, onetime issues or correctable. Now this is my 68th earnings call, earnings cycle. As you know, it is also my last call. I'll be retiring shortly as CEO. Our management transition is well under way, and I'm confident that our next CEO, Larry Kingsley, will build on our solid foundation and strong culture to take Pall Corporation to ever-greater heights. So now, let's turn to the business. Life Sciences, which represents just over half of sales and 63% of segment operating profit, had a good year. Sales increased 11%, and operating margin rose to 24%, achieving a 34% incremental margin year-over-year. BioPharmaceuticals, the largest and most profitable piece of Life Sciences, grew about 16%. Medical sales increased 5%, and Food & Beverage was up 10%. Industrial also had strong top line growth of 11% on good performance from all markets. Microelectronic sales increased over 14%. Aerospace sales grew 11%. And Energy & Water, the largest of the Industrial markets, was up almost 9%. Pall Industrial's operating profit, while less than we expected, increased 19% over fiscal '10. It's clear we still have work to do, and Lisa will discuss this in more detail later. Now going to the fourth quarter, sales came in at $780 million, and this is up 15% over last year on an as-reported basis and 6% in local currency. Life Science sales grew by 8%, and Industrial moderated to turn at 5% growth. Sales in the Western Hemisphere increased 2% after 4 consecutive quarters of double-digit growth, and Europe posted its third consecutive quarter of 10%-plus growth. Asia grew about 6%. A better measure for that is to exclude Japan, and then we see Asian sales increasing 14%. Q4 orders were up 1% compared to 19% a year ago. Orders in Life Sciences increased about 1.5%, and Industrial orders were flat, reflecting 29% growth in systems, offset by a 5% decline in consumables. Almost all submarkets showed a decline in consumable orders, with the exception of M&A within Industrial. So what's happening with orders? On the full Industrial side of the business, we are seeing signs of contraction in Microelectronics. In the Western Hemisphere, OEM activity, a leading indicator for this industry, slowed. We also saw a slowing in Asia. Microelectronics orders in August continued to be down. We believe some of the slowing in orders, particularly in the more lumpy Energy & Water markets, is due to timing. Some is the comparison to the prior period. This is the case with Aerospace, where orders were flat in Military compared to last year's 41% increase. In August, we saw Military orders almost double compared to August of last year. Now looking at Life Sciences. Pharmaceutical consumables orders grew by mid-single-digits after double-digit growth all year. Systems were down in the quarter, and this is the lumpy part of BioPharmaceuticals' business. Lab orders were also down high single-digits. In August, BioPharmaceuticals orders rebounded to double-digit growth, actually 45%, and order growth at Food & Beverage was driven by systems in the quarter, and this continued into August. Both consumables and systems orders were up in August. Clearly, we are in a period of economic uncertainty that is unlikely -- is likely to drive some cautious customer behavior. We have all seen this movie before, and I believe that this has impacted our Q4 orders, but by how much, it's hard to say. Many of our customers across markets are now carrying less inventory, perhaps a lesson from the last financial crisis. Assuming customer production levels keep up, full consumable orders should continue to flow. We started fiscal '12 with a backlog of over $800 million, which is up almost 15% from the prior year end. Not all of this will shift in fiscal '12, but it is a very good place to start the year. Now let's look at the markets with an eye toward specific trends or issues that we factored into our fiscal year '12 performance, starting with Life Sciences. BioPharmaceuticals, representing a quarter of total Pall Corporation sales, grew over 9% in the quarter. Sales, which are derived from both classic Pharmaceuticals and the biologicals markets, outpaced annual growth rates in the biotech market. 3/4 of BioPharm sales are now derived from the filtration-intensive biologicals markets, that is biotech drugs, vaccines and plasma derivatives. Consumable sales grew almost 12% in the fourth quarter. Biofilters and single-use technology did particularly well, and all regions grew, led by Europe. These results reflect our broadening presence on a growing number of biotech drugs and vaccines that are now in full production. They also reflect increasing adoption of single-use technologies and a strong new Pall product pipeline. We have good reason to believe fiscal '12 will be another sound year for BioPharmaceuticals, with growth in the high single-digit range. That said, economic uncertainty may hamper customers' capital investment plans, which would likely impact system sales, while consumables are tied more closely to drug production. Medical grew almost 5% in the quarter, and this growth reflects the impact of adoption of new products. Approximately 1/4 of Medical sales for the year came from products introduced within the last 5 years, such as the RC2D blood filters, Acrodose and our Aquasafe water filters. We expect Medical fiscal '12 performance to be in the low single-digits. Food & Beverage grew 10% in the quarter with all regions up. Pall is now pacing market growth by helping producers economically realize their quality and yield targets. New products and applications for emerging regions have been driving growth. Q4 orders grew 10%, driven by systems, and the backlog here is up 37% over fiscal '11. A strong order rate is carried over into the early days of fiscal '12. August, in fact, was over 30%. The fact that system sales remained strong is encouraging to us. So based on what we see today, Food & Beverage sales could be up mid-single-digits in 2012. Now to switch gears for a review of Pall Industrial. Energy & Water accounts for about 20% of Pall's 2011 sales and is composed of 3 submarkets: Fuels & Chemicals, the largest; the sister market, Power Generation; and Municipal Water. These markets combined grew 7% in the quarter and almost 9% for the year. They share common imperatives for high yield, protecting customer infrastructure and leading increasingly stringent environmental rigs. They're also the most capital-intensive parts of Pall's business. Fuels & Chemicals serves as a backbone industries of oil and gas production refining, alternative energy and chemical production. And customers in these industries are investing aggressively to increase output. This is particularly the case in the oil and gas industry in the Middle East and in other developing regions. In the context of this CapEx boom, Fuels & Chemicals had a record fourth quarter, outpacing expectations, largely in system sales and capital goods. Sales were $105 million, 1/3 of the year's revenues on broad market and geographic strength. Sales were up 27% for the quarter, and full year sales increased 8%. In addition to the $105 million of shipments in the quarter that I mentioned, systems orders were strong in the quarter. Capital equipment is sold at lower margins. We saw the effect that this can have in the fourth quarter, when gross margins were pulled down by higher-than-forecast demand for capital goods later in the fiscal year. When we talk about capital goods in this context, we're not just referring to systems. In general, capital goods are also metal housings and a pertinent hardware that hold or support filters. Gross margins for this product typically range from 20% to 30%. And we shipped a great deal of housing from the fourth quarter, with enough of them in the 20%-or-lower gross margin range to hurt performance. Housings generally do bring with them a long-term consumables stream, and we see capital equipment margins as an opportunity for operational improvement. Lisa will, again, discuss this in more detail in a minute. So depending upon the application, housings can be several feet in diameter, more than 15 feet tall and weigh more than a ton. A good news is that they are packed with filters. Some can hold more than 100 filter elements that ultimately all need to be replaced. Like systems, they do create long-term annuity potential. Large housings can generate $1 million to $2 million in annuity sales at Pall's average gross margins once the equipment is operational. This is the silver lining to the high volume of capital goods shipped in the quarter. Switching briefly to Power Generation, sales were down 2% in the quarter, up 10% for the year. This is generally among the most resilient of the Industrial markets. There are 2 caveats that we factored into our outlook of low single-digit growth for 2012. If Industrial production worldwide contracts, so will demand for power. We've also factored in lost sales due to the fact that Japan, which derives 30% of its power from nuclear reactors, has taken many of those offline. This has an immediate and potentially longer-term effect as new nuclear projects, understandably, will receive closer scrutiny. Now overall, the Energy backlog exceeds $200 million. Not all of this is shippable this year. This is more, though, than a 23% increase over fiscal '11's order backlog. Our forecast for the year for Energy overall is for mid-single-digit growth. This assumes strong demand in emerging markets, such as MENA and Brazil. Now let's focus on the $120 million Municipal Water business, a market with high longer-term growth potential. Fourth quarter sales were down 20%, largely on shipment timing, but increased 8% for the year. This is almost an entirely systems business, and the volume is lumpy quarter-to-quarter. The backlog now exceeds $100 million, which is almost last year's sales. 60% of this business is in the U.S., where a large portion of sales are driven by regulations and funded through cash flows from taxpayers -- from rate-payers rather than taxpayers. And in our experience, U.S. orders usually come through, even when the economy is flagging. Muni Water sells have been softer in Europe throughout the year, and I think we can attribute much of this to sovereign debt and general financial concerns. Project activity is accelerating in Asia. We received almost $20 million in orders in Asia in the second half of the year that came too late to ship in fiscal year '11. So as things now stand, we're expecting mid-single-digit sales growth from Municipal Water in fiscal '12. Now going on to Aeropower, which accounts for 17% of total Pall sales and is composed of Machinery & Equipment and Aerospace markets. These combined grew slightly in the quarter and 11% in the year. This is another area where we saw a growth in low-margin capital goods. Machinery & Equipment, which represents more than half of Aeropower, grew up 17% for the year. Sales were flat in the quarter after 5 consecutive quarters of double-digit growth. Q4 orders for consumables were strong. They increased about 11%, making 7 straight quarters of solid orders growth. Mining, steel and automotive production have been driving sales growth. And the mining industry is expected to remain strong in calendar '12 while some of the other submarkets may cool off. We have decided to exit the market for filtration for onboard passenger automobiles and light-duty trucks. Now this will represent about $8 million in low-margin business in 2012. We estimate a growth of mid-single-digits for the Machinery & Equipment markets in '12. Aerospace, a combination of commercial and military, grew slightly in the quarter and 5% for the year. Commercial Aerospace represents half of the business that drove -- and that drove the growth. We're expecting a strong 2012 from Aerospace, driven by military sales and high-single-digit growth. And despite concerns surrounding severe military budget cuts, particularly in the United States, we enter 2012 with a $100 million military backlog. This is the equivalent of our total military sales in '11, and the backlog is up 36% over last year. This includes $14 million in orders for the U.S. Army CH-47 helicopter fleet that is scheduled to ship starting in December. We are not expecting any of the potential major program cancellations in 2012 out of the U.S. budget to affect Pall significantly. The total backlog for Aeropower now is over $200 million. And finally, Microelectronics. MicroE grew almost 5%, and full year sales increased, as I said before, 14%. Orders contracted in the quarter for the first time in 6. Despite the ubiquity of semiconductor chips and consumer electronics, this market is extremely sensitive to changes in the economy. Some in this market remain bullish, while others, including Pall, have a more cautious outlook. The most recent external data on fab utilization shows a declining rate, and we are expecting volatility in this market this year. Our outlook for Microelectronics sales is that they will be flat to down middle single-digits. Regardless of what happens in the short term, the electronics industry remains the engine of modern society, and it runs on high-tech sophisticated filters. Now so with that, Lisa will provide her financial report, including more granularity on the current outlook for fiscal '12.

Thank you, Eric, and good morning, everyone. I'll begin with a discussion of each of the businesses results and will then move on to a recap of Pall's financial results for the quarter and year and conclude with our current expectations for fiscal year 2012. So let's start with the profit issues in Pall Industrial. While sales growth of 5% in the quarter came in at about our expectations, mix was different than forecast. Why? Fuels & Chemicals and Aeropower sales contained lower-margin capital goods, including both systems and housings, which outperformed in volume but underperformed in profit. Looking year-over-year, systems and capital goods sales in Pall Industrial grew by over 20%, or about $25 million. Taken together, these comprised over 40% of sales in the fourth quarter compared to about 35% in last year's fourth quarter. Moreover, as Eric mentioned earlier, the gross margins of these incremental sales were 20% or less. The combination of negative mix and suboptimal gross margins were a headwind of about $10 million, or 270 basis points compared to last year. Now Pall Industrial's profitability profile can be lumpy with the timing of systems and capital goods. This is the nature of much of that business. That said, we won't sugarcoat it, this was sloppy execution on several fronts, including contract execution, pricing and forecast of capital timing. We are taking measures to improve margins on capital goods and the annuity pull-through. This includes improving our contract risk assessment, pricing and costing review and approval processes to enhance governance and transparency. It also includes exiting from certain low-margin product lines, such as the example that Eric cited earlier. Unfavorable absorption from lower production levels were offset by the favorable impact of foreign currency, driven mainly from Asia but also in the eurozone. Margin degradation was also related to 3 key operational performance challenges: first, inflation eroding continuous improvement cost savings; second, excess cost for the closure of our plant in Ireland and transfer of manufacturing lines to a sister plant; and lastly, suboptimal processes at several plants, resulting in write-off to such things as scrap and obsolescence. Now the excess plant closure costs and write-offs are not expected to be recurring items. Inflation of oil-based commodities we use in our manufacturing processes such as resins, plastics and steel is a reality. Our continuous improvement initiatives are geared up to offset inflationary pressure, just as we did in the full year of fiscal 2011. Industrial SG&A grew by $10.6 million, or 12% in local currency, in the quarter, and this exceeded spend expectations by about 4%. Sales and marketing-related expenses were up 18.5%, reflecting second half additions of sales-related personnel of approximately 8%, principally in emerging markets, as we've seen in the third quarter. Increases in the variable compensation and selling-related activities also contributed to the dollar increase year-over-year and exceeded forecasts. These items are expected to remunerate in the first quarter, consistent with our expectations for a different sales mix and activity level as well as measures we are taking to rein them in. G&A was up about 3.5%, including some additional spends for the ramp-up of Pall Industrial's European and Asian supply chain consolidation into our regional headquarters in Switzerland and Singapore. SG&A as a percentage of sales in the quarter was 27.4% compared with 25.3% last year. For the full year, SG&A increased 8% in local currency and as a percentage of sales was 28.8%, a 90-basis-point improvement over last year. To improve Pall Industrial's profit leverage, we are implementing several restructuring initiatives in fiscal year 2012. While these initiatives are expected to be dilutive to fiscal 2012 net earnings, the ROI estimates are compelling. We will discuss them in more detail as we move through the year. One I will mention now is the restructure of the sales and marketing management of Aeropower and Energy & Water. This will result in cost savings by rationalizing the structure globally and enhance contract administration in these capital-intensive sectors. To wrap up, Pall Industrial's operating margins were 13.4% in the quarter compared to about 20.4% a year ago. This reflects a decline in operating profit of $18 million, or 26%. We are disappointed with this result and are taking the measures I described to bring about timely improvement. Switching now to Life Sciences. Local currency sales grew 8% in the quarter. Consumable sales increased almost 8%, with BioPharmaceuticals leading with 11% growth. Systems grew over 11%. Food and Beverage system sales were up over 32%, while Pharmaceutical system sales declined almost 10%. And system sales represented 11.1% of sales compared to 10.8% of sales last year. Life Sciences gross margins increased 150 basis points to 53.4%. And this primarily reflects the benefit of exchange rates from foreign-currency-denominated source goods, primarily in the eurozone, and improved pricing. This was offset by lower overhead absorption from reduced manufacturing output as inventory levels continued to be adjusted as well as the inflationary pressure I mentioned a moment ago in my remarks about Pall Industrial. SG&A increased $7.5 million, or 8.5% in local currency, in the fourth quarter. And consistent with Pall Industrial, investments in sales and marketing underlie the increase, with a 6% increase in customer-facing employees in the quarter, primarily in emerging markets, as well as marketing expenses and inflation. G&A was up 3.5%. And SG&A as a percentage of sales in the quarter was 26.2% compared with 26% last year. And for the full year, SG&A was up 6% excluding FX and as a percentage of sales was 26.2%, down from 27.5% last year. Operating profit came in at $92 million for a 24% increase. And operating margin came in at 23.3%, a 130-basis-point improvement. Now looking at total Pall Corporation for both the quarter and year, sales increased 15% in the quarter and 14% in the year compared to the same periods in fiscal 2010. In local currency, sales were up 6% in the quarter and 11% for the year. The dollar impact of FX [ph] was a benefit of about $60 million and $76 million in the quarter and the year, respectively. Overall pricing gains contributed approximately $4 million to the top line in the quarter and $14 million in the year, namely in Life Sciences. Gross margins for the year came in at 50.1%, down 10 basis points year-over-year as the slight improvement in Life Sciences was offset by the decline in Industrial. Excluding FX, overall SG&A expenses increased about 10% in the quarter and 7% for the year. And as I've mentioned earlier, almost all of the increase in SG&A was driven by the business segment selling-related spending I discussed a moment ago. This year also reflects increased costs related to investments in our regional headquarters in Switzerland and Singapore as well as our IT infrastructure. SG&A as a percentage of sales in the year declined to 29.7% compared to 30.8% in 2010. Now excluding foreign exchange, R&D spending rose 20% in the quarter and 15% in the year, reflecting increased spending in both Life Sciences and Industrial as we allocate more capital to investment in core technology innovation. R&D was 3.2% of sales in both the quarter and the year, on par with the same period last year. Excluding the benefits of FX, the company's operating profits were down by 11% in the quarter but up approximately 15% for the year. Turning now to income taxes, the effective tax rate, or as-reported rate, was 10.3% for the quarter and 24.8% for the year. This reflects the benefit of the resolution of the U.S. tax audit mentioned in our release last night, partly offset by tax costs related to the repatriation of foreign earnings. This year also includes tax costs associated with the establishment of the company's Asian headquarters. Excluding these discrete items, the underlying rate of 26.7% for fiscal year 2011 reflects the achievement of a sustainable reduction of about 4% year-over-year. The reduction in the rate has contributed almost $19 million, or about $0.16, to the bottom line last year. This is attributable to the supply chain reorganization in Europe within Life Sciences. Net earnings in the quarter were $97.4 million, or $0.82 per share, compared to $55 million, or $0.46 per share, last year. And pro forma EPS as defined in the appendix to the slides were $0.76 compared to $0.72 per share, an increase of about 6%. And this was propelled by the benefit from foreign currency translation of about $0.08 and the reduction in tax cost. Net earnings in the year were $315.5 million, or $2.67 per share, compared to $241.2 million, or $2.03 per share, last year. Pro forma EPS was $2.77 compared to $2.12 a year ago, an increase of almost 31%. Foreign currency translation increased earnings per share by $0.13 in the year. Now looking for a moment at our performance in the fourth quarter compared to the third quarter, sales in the fourth quarter increased by almost $71 million, or 10% sequentially. And local currency sales grew about 8%, 3% in base and 48% in systems. Life Sciences grew 7%, 5% in local currency. This was driven by 20% sequential growth in Food & Beverage and 6% in Medical. Q4 sales in BioPharmaceuticals were flat compared to a strong third quarter. Industrial sales grew over 13% sequentially, 12% in local currency. This was driven by growth of approximately 25% in Energy & Water, 4% in Microelectronics and 3% in Aeropower. Compared to quarter 3, overall gross margins were down, and this reflects a decline in the Industrial segment of 290 basis points relating to the items I covered earlier. And SG&A sequentially increased 5%, or about $10 million, and this is -- the 5% is in local currency. This largely reflects increases in variable-based compensation and sales-related activities in both businesses. G&A sequentially remains flat. Overall, company operating profit was about 4%, reflecting a sequential decline in corporate expenses, while both businesses were up about 2.5% to 3%. Turning now to cash flow. Operating cash flow in the year was $430 million, an increase of $52 million, or 14%, compared to fiscal year 2010. This was driven by increased earnings and continued improvement in working capital management, particularly days in inventory. Significant uses of cash during the year included $161 million in capital spending, $89 million in net repayments of debt and $228 million return to shareholders, with dividends of $78 million and stock repurchases of $150 million, and this leaves approximately $200 million of our current authorization. Now wrapping up the discussion of our liquidity, our cash position for the $558 million at July 31 and our net debt to net debt plus equity was 9.1%, down from 19.4% at July 31, 2010. Now looking at 2012, we expect local currency sales growth of mid-single digits in both businesses. At current rates, we expect foreign currency translation to be about 1% positive to revenue. In Life Sciences, we expect low-single-digit growth for Medical, high-single-digit growth in BioPharmaceutical and mid-single digit growth in Food and Beverage. In Industrial, we expect Energy, Water and Machinery & Equipment to grow by mid-single-digits and Aerospace to deliver high-single-digit growth, driven by military spending, largely, as Eric mentioned, already in backlog. Finally, our current thinking on Microelectronics is flat to down 5%. Gross margins are estimated to be in the range of 50% to 51.25%, and EBIT margins in the range of 17% to 18.5%. The forecasted underlying income tax rate for 2012 is approximately 24.5%, reflecting incremental benefit of the headquarters in Switzerland as well as the impact of going live in our Singapore headquarters last month. Our current organizational changes are likely to generate restructuring and other charges of between $30 million to $40 million, most of which will be cash items. Pro forma earnings per share is expected to be in the range of $3.07 to $3.32. And this contemplates a slight benefit from foreign currency translation at current rates, a stock buyback of approximately $150 million accretive to earnings by about $0.03 to $0.04 and finally, the benefit of our reduction in tax rate of approximately $0.10. Operating cash flow is expected to be in the range of $490 million to $540 million. And capital expenditures are expected to be in the range of $175 million to $185 million as we continue to invest in our IT infrastructure, manufacturing capabilities and laboratory. That concludes my report. Before handing this back to Eric, I want to make it clear that the company remains strong, and we already begun addressing the events that impacted our fourth quarter earnings. The main issues in the quarter related to Industrial and had to do with mix, profitability of capital goods and SG&A spending levels. Pall Life Sciences again performed well. To reiterate some key points from our action plans, we're enhancing internal transparency around the timing of capital goods. We're taking measures to improve margins on capital goods as well as the attendant annuity pull-through. And finally, we're preparing to take significant costs out of the organization. Looking forward, we are well positioned to navigate a turbulent economy, as we've done before, and are focused on achieving our 24 goals. As I turn the call over to Eric for one final time, I would like to take a moment to express on behalf of all Pall Corporation's employees our appreciation for everything he has done for the company and over a long and distinguished career. It has been a rewarding experience to work alongside of him these past 5 years for me. Eric, we'll miss you, and we wish you well.

Well, maybe I'll stay, then, Lisa. No, I appreciate that very much, and, certainly, what you accomplish in your career is very important, but if you leave that career without having sound personal relationships and a deep affection for those that really did most of the work, then you've left with nothing. Fortunately, I leave with everything. Thank you. And we've covered a lot of ground this morning and appreciate your patience. In closing, I want to say that it has been an honor and a privilege to nurture Pall from a $700 million enterprise to its current size and stature. I've also enjoyed meeting with so many of you as CEO and sharing our plans and progress over 17 years. Larry Kingsley takes over as CEO and President on October 3. The transition is going to plan, and our Board of Directors deserves a great deal of credit for what will be a very smooth management succession process. So at next quarter's earnings call, I look forward to joining you in the audience and sharing on Pall's progress. And now with the help of the conference operator, we are ready for your questions.

[Operator Instructions] Your first question comes from the line of Jon Groberg with Macquarie capital.

This is actually Dane in for John. So maybe we could just start with what happened in the Industrial production margins in the quarter. You mentioned mix profitability of capital goods and SG&A kind of in the context of onetime in nature. But looking at the order growth rates that were probably negative across the board for Industrial segment, and I recall that a significant portion of your recorded overhead utilization in a given quarter is a function of forward demand. I guess, how do you get comfortable that these utilization rates will come back in the next quarter or as we go ahead further into fiscal 2012?

Well, the underutilization rates or the underabsorption mainly related to some plants in the U.S. for Microelectronics, which we are forecasting to be down or flat to down, what we saw in orders in the quarter. That having been said, we are forecasting growth in some of our other markets, particularly Aerospace, M&E, which is one of the higher-margin quick consumable marketplaces that we serve, and our forecasts contemplate higher absorption in those areas, offset by continued challenge in some of our Microelectronics facilities.

Okay. But looking at the slides from the presentation, you kind of have out there that orders in Aerospace were down, MicroE was down, like you just mentioned. What -- you're forecasting mid-single-digit growth, but even in BioPharma, which is one of the largest segments in the Life Sciences side, orders were down there as well. So I'm just trying to understand what's baked in your assumptions that's going to change going forward? Why is this just a onetime hiccup with the decline in order rates?

Well, like we said, we think Microelectronics is a secular trend, but -- or cyclicality of that market. But for BioPharmaceuticals, one quarter does not a year make, and we are forecasting that BioPharmaceuticals will continue to grow. August was up solid double-digit in orders...

Orders were fairly strong in a number of the key segments in August.

Through to September, down to date. So some of what we saw in the quarter was timing, and some of it was just some difficult comps in terms of when you're talking about growth year-over-year. When we look at Industrial in the fourth quarter of '10, some of it was just timing. We are forecasting growth for next year.

Okay. It's just -- so there's no real fundamental concern that a drop-off in consumable growth rates could lead to a drop-off in CapEx demand. Is that the message?

That is the message.

Right. And I think we're also -- we're scaling our structures for 2012 for a much more conservative outlook, so we're prepared and preemptive in it.

Okay, great. Can you just provide a little color on the geographic segments? With the, I guess, the Western Industrial business, the decline there just purely MicroE? Or some -- there are some other parts of that decline?

Microelectronics and the water business and Industrial were the drivers for decline in the Western hemisphere.

And for water, that's more of a timing issue that you expect to make up later in fiscal 2012?

Yes.

Yes, the backlog is strong, orders are coming in. So we're confident in that sector. Asia, as we said, was, in general, up 14% when we take Japan out of the equation. So with Japan coming back online and a lot of government spending on capital there and getting production running for this year, that can be an upside as well.

Okay. And finally, for me, just in the ROTC estimate for next year. I think some of the comments over the course of fiscal 2011 was that, that expense would trend lower going forward, and it seems to be just at the same rate as it's always been. Was there a change in the NAV restructuring that management plans to do going forward?

Yes, there's been a change. And quite frankly, it's trending higher than fiscal 2011 because we will be taking some significant actions directed at not only reducing cost but putting together the groups of businesses that are very capital-intensive, that good [ph] growth is very directed towards the emerging market. So there will be -- and plus we'll be taking -- we'll be investing in emerging markets by redeploying out of our mature markets, so there will be significant restructuring costs to do that.

Your next question comes from the line of Jon Wood with Jefferies.

Lisa, my math may be wrong, but it looks like systems were about 16.5% of REVs in the fourth quarter, is that correct?

I think it was about 18% in the quarter.

Okay, 18%. And does that -- so that mix is actually at the bottom end of kind of what you guys talked about, the 18% to 20% last quarter. So I'm assuming that the mix shift is more on the capital goods side. So can you give us some parameters around the capital goods piece that's outside of the systems piece, what that did in terms of the P&L mix year-over-year?

Well, the capital goods piece was an incremental 5% in Pall Industrial, which is primarily where it resides. And the capital goods were very low-margin as well as some of the systems book of business was very low-margin. And like I said, those things taken together cost us about $10 million in the quarter in terms of against expectations. That's the parameter.

Okay. Did you actually make money on systems in capital goods in the fourth quarter? I know you've mentioned the gross margin, but what do you estimate that did on the OP line? And I'm talking overall Pall.

Well, it made money, not a lot, and it cost us on operating profit probably about 10%.

Okay. And then what have you assumed in terms of mix in your 2012 outlook? How does the mix look between systems and consumables?

For 2012, focusing on Pall Industrial, where it's more relevant, the systems mix is fairly comparable to fiscal year '11. The capital goods will be a little bit higher but offsetting that, so we'll have positive mix relating to the increase in sales and M&E, which those consumables are the highest margin consumables now in Pall Industrial. So overall mix will be slightly positive, we're forecasting, for Pall Industrial next year.

Okay, great. And then just in terms of the discretion on the outlook here, curious to know if kind of the new leadership here has had some sort of input into the guidance you guys have given, or is this -- should we look at this guidance as y'all's only?

The new CEO has had significant meetings with all of the Pall management. He's done a lot of diligent homework, and we've kept him appraised of what the quarters look like and what we're planning to say today. So I think he is fully understanding and cognizant of it and is coming in with this being part of the game plan.

Your next question comes from the line of Jeff Zekauskas with JPMorgan. Jeffrey J. Zekauskas: Your estimate of your cash outlays for restructuring next year is $30 million to $40 million. I assume that at least half of that is people reduction. Will the people reduction come at the beginning of the year or the end of the year or the middle? And are there any plants that are going to be closed next year? And if there are, in which areas?

Much of -- most of that is people reduction in terms of the restructuring. Yes, there are also 1 or 2 facilities that we're looking at closing. Ireland, we've already announced, that'll actually be -- it's actually being closed now. There's another facility that we're looking at, more to come on that. But most of, as I said, the restructuring is cash and people. Jeffrey J. Zekauskas: So is that -- are these people leaving early in the fiscal year or late in the fiscal year?

The plan is earlier rather than later. Some of it is challenging, because we have to deal with some statutory and internal matters. But we would look for it as early in the year, first half.

Yes, and it's really the -- it's the tale of the activities that we're taking to build up, selling people and infrastructure in the major emerging regions, which are getting us 22%-plus compounded annual growth rate. Once those are established and we're getting much more traction, we need to then reduce in the areas that are being slow to grow. But you can't do it on day one cut off A and add B, because you need some additional support in training and transition, so I think we're through that. And as Lisa said, early in this fiscal '12, we'll be able to start showing the benefits of focusing our manpower in the faster-growing markets and faster-growing regions. Jeffrey J. Zekauskas: Okay. And then just as my follow-up, can you talk about why the returns in Industrial look so good for the first 3 quarters and look so much weaker for the fourth quarter? That is, what was it about your systems that didn't allow you to perceive that there was an issue till everything became apparent in the fourth quarter? And then have you changed higher-level managers? Or is the restructuring that you're talking about at a lower level? Or are people who are leading large divisions changing? And who are they, if they are?

It's certainly premature to start naming names. By and large, we're very satisfied with the people who are leading the business, and they've done quite a good job over the last few years. The June and July, which were the months where we had the major industrial issues, July is the largest month of the year, the fourth quarter is the largest quarter of the year. So there's certainly ample time for things that could be as they happen that are not fully forecast. Unlike our large systems, capital goods ship fairly quickly, and so you don't necessarily get on top of it. We are enhancing our systems both to -- as we did with the systems business, if you recall, as we got better at it, we developed ways to improve margins. We had to create 500- or 600-basis point improvements on our systems business over a 2-year period of time, and, in fact, we're going to apply that same rigor into capital goods now that it’s become a more significant mover and certainly one that surprised us with its volatility and its ability to affect this fiscal year.

Your next question comes from the line of Tracy Marshbanks with First Analyst.

Eric, I look forward to your questions on the next call, I figure they could be pretty interesting.

Yes. I'm going to say what the hell's going on?

You get to be on the other side. A couple of quick questions. Lisa, you sort of quantified the mix impact as $10 million, but I didn't catch it when you were talking about what I would call the operational issues, closing of the plant, commodity price increases, processes and the like. How do you break that out, or can you quantify that? And those, obviously, particularly on the pricing and even some of the process issues, aren't onetime. So how long do you think before you sort of get back to where you feel like you should or could be?

Well, I agree that the mix and the processes surrounding the capital business, they're not onetime. There are underlying process challenges that we need to address, including what's in our backlog currently. So we are very focused on improving those processes going forward. And it may take us a few months to have complete visibility and improve those processes. We're working on it now. We've put in immediate remediation plans. The other items in the quarter were a number of cuts, if you will, that aggregated a few million dollars, which just exacerbated an already challenging situation.

It's like being late driving into the city, and you get every red light. It doesn't always happen, but sometimes it does. And it is, it's death by 1000 cuts. There's no one really big thing in the quarter that fell apart.

On the commodity pricing. Was it -- they ran up faster than you think you really can accommodate, or you're not used to accommodating a run-up, and so you couldn't keep up, but you think you can in the future? I just wasn't quite sure how that might play through.

Well, on systems, we price these system based upon locking in procurement of the outside purchase components. In the capital goods area, we generally have not done that to that extent. So that's one discipline that we can get much better at quickly. And the reason is the customer generally wants a quote immediately, he wants the product immediately, because he wants to use a filter, as opposed to a system which can be part of a large process that's being developed, and the plant's going to take years to build.

Also on the quarter, you may recall that, there was a very rapid run-up in the price of oil, where it went from being in the $80s to over $100. And it that has a knock-on effect to some of our raw material goods. It's receded rapidly equally, and so we don't see that kind of impact going into fiscal year '12. But one of the things that we need to look at internally is our long-term contracts for some of these commodity purchases.

Okay. I think before, you provided a strong -- some insight on volume and price and your local currency growth rates. Could you do that, do you have it available?

Price was about 1% in the quarter.

Okay, thank you. And then, last question on R&D. I know as a percent of sales, it didn't really sort of stand out, but your sales are pretty substantial, so looking at just sort of even the sequential change, it was pretty dramatic in absolute dollars and a chunk of it in Industrial. Was there anything unusual? And is that sort of the type of level we should think about on a go-forward?

Certainly, we've established a Chief Technology Officer at the beginning of this fiscal year and have ramped up the R&D project pipeline as well as added some significant quality into the organization. So we're not going to get back to the levels we were at before. Having said that, the major consumers of R&D; BioPharmaceuticals; to some extent, Medical; but certainly Microelectronics; have been showing the overall -- the past levels of growth and the most growth attributable to new products. So I think we're getting closer into what you might call our peer group sweet spot for R&D.

Okay. And the fourth quarter absolute number, I forgot, the $24 million and some. That is sort of the level we should think about?

That's about the level, yes. We're forecasting R&D to be, year-over-year, up about 15% going into 2012.

Your next question comes from the line of Hamzah Mazari with Credit Suisse. Christopher S. Parkinson: This is Chris Parkinson on behalf of Hamzah. Just 2 quick questions. The first is, can you just talk about a little of what you've seen in the Food & Beverage market and then your assumptions for mid-single-digit revenue growth and when the increase in system sales should lead to more aftermarket revenues?

Well, we are always seeing it lead to more aftermarket, particularly in that business. So consumable sales were quite decent in the year and should be next year as well. What we're seeing overall in the market, the 2 major markets for us are wine production and beer production, beer being primary. The major developed regions, wine production was actually down a little bit this last year, beer production was up maybe 1.5%. Where it's growing much more rapidly are in the emerging regions. Brazil and Latin America is high. China beer production increased 6% in the last year. I think that's increasingly going to be the trend that we'll see, lower-cost producers producing high-quality wine for international markets and using our products. It's also, I should have mentioned when talking about new products as well, that Food & Beverage has an extensive line of new products that are helping us grow above or outpace the markets. Christopher S. Parkinson: Perfect, thank you. And then also just a quick follow-up. You mentioned a few costs regarding the factory closure in Ireland as you transition over to the U.K. Can you break down some of the cost in the quarter and kind of particularly on any effect it had on the SG&A within the Industrial segment?

The move to the cost in Ireland moving to the U.K. really didn't have impact on SG&A. It was all impact on margin, and that was within that few million dollars when I -- the death by 1000 cuts that Eric mentioned before. That was excess spend to get that done.

Your next question comes from the line of Brian Drab with William Blair.

Just wanted to ask -- maybe it's premature to ask this question, but when you look at the 2013 goals that you've laid out, I think as recently as some conferences this spring and maybe in the summer, do you rethink those at this point? And the reason I ask, of course, as I look at the fiscal 2012 outlook and guidance, for example, EBIT margin of 17% to 18.5% relative to long-term goal of 19.5% to 22%. Is that something that is going to have to be revised downward?

Well, as we look at fiscal year '12, we certainly see a challenge relative to achieving 2013, and that's something that the senior management team with our new CEO are going to have to look at and address. I don't really think that it would be appropriate right now to comment further.

Your next question comes from the line of David Rose with Wedbush Securities. David L. Rose: I was wondering if you can clarify a little bit more on your assumptions for the tax rate for next year and what's that risk to that number? And then secondly and lastly, if you can maybe review a little bit more detail of what needs to be done on the forecasting side to provide us with a little bit more confidence for the rest of the year?

Okay. On the tax rate, from a structural perspective, we are where we need to be to achieve that rate. I would say as with any multinational company, what would put that rate at -- potentially at risk would be the jurisdictional mix of earnings. Clearly, BioPharmaceuticals is a big business in Europe, very profitable there, and contributes largely to the tax rate, the benefits that it throws off. Similarly, Microelectronics in Asia. So the overall operating performance of the company and the various jurisdictional tax -- jurisdictional jurisdictions could put that at risk. In terms of the visibility on forecasting, when it comes to capital goods, there's a broad range of when items can ship. Some are very short, order to ship, and some are very long. And we are putting a lot of focus on with the commercial or sales and marketing team, working with our operational/manufacturing team to make sure with finance that we're all aligned on the visibility of order versus forecasted shipment and actual shipment. David L. Rose: So to be clear, what took place in the fourth quarter, you clearly had as you indicated, the mix shift was a factor. But on absolute basis, your core product, your consumables and system ex the capital goods was actually below your forecast?

Yes, it was. David L. Rose: Okay, and so how long is this going to be -- how long would you say would take to feel really comfortable with the changes that you're implementing?

As I said, I think it's going to take us... David L. Rose: 2 quarters, 3 quarters?

No. One quarter.

Your final question comes from the line of Rob Mason with R. W. Baird. Robert W. Mason: Lisa, I may have missed this, but in terms of your fiscal '12 outlook, what have you baked in for pricing?

We've baked in 50 to 100 basis points in pricing next year. Robert W. Mason: Okay. And how would you assess the success on the pricing front for this past year, fiscal '11?

I would assess it differently across various markets. Certainly in BioPharmaceuticals, and now in Food & Beverage, I would assess it as pretty well successful. And in Industrial, needs -- is an opportunity for continued improvement. Robert W. Mason: And in terms of the fiscal '12, would you expect though the 50 to 100 basis points still to be biased towards Life Sciences segment?

Yes. Robert W. Mason: Okay. And then I know you called out the expectations for the ROTC cost in '12 related to some of your moves. But obviously, as we saw in Ireland through the year, there's some costs and inefficiencies that still leak into the adjusted P&L. What have you assumed on that front as you go about closing some of these facilities and some of the other restructurings within your adjusted EPS number? Any bleed-through that's not going to be captured in ROTC?

Yes. We have assumed that there will be some bleed-through. And there's a number of moving parts. I'm not going to give particular guidance to exactly what view we've taken to where they may be some breakage. But we have put some conservatism into our guidance relative to what our internal targets are. Robert W. Mason: Okay. And then maybe just last question, your CapEx guidance for next year is again up double-digits off of a pretty good-size increase in fiscal '11. Could you just walk through what is baked into that as well in terms of -- I know you have an ERP implementation that's been ongoing, maybe where that stands? And what would you expect a longer-term CapEx level to be, a more maintenance level for you?

Our longer-term CapEx sustainable level should be 4% to 6% of sales. We're on the high end or exceeding that now. Next year, we have 2 significant outlier projects. Our ERP system continues to be a large outlay. It will be less than the outlay in fiscal year '11, but it is still a sizable chunk, related -- somewhere between $20 million and $30 million in fiscal year '12. We have a large project for a technology center in a facility in the U.K. And the rest of it is our typical CapEx relative to our, mostly, our manufacturing capabilities in the businesses.

I would now like to turn the call back to Mr. Krasnoff for any closing remarks.

Okay. Thank you all for participating this morning and for your interest in Pall. Please put December 8th and 9th on your calendars for the first Pall quarter results. The release will be issued on the 8th after the market closes, followed by the conference call on the next morning, 8:30 a.m. Eastern Time. Thank you.

This concludes today's Pall Corporation Conference Call. You may now disconnect.