Welcome to Pall Corporation's conference call and webcast for the first quarter of fiscal 2013. Today's call is being recorded and simultaneously webcast. [Operator Instructions] We'd like to remind you that the company's first 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 Mr. Larry Kingsley, Pall Corporation's President and CEO. Please go ahead, sir. Lawrence D. Kingsley: Thank you, Brook. Good morning. Thank you for joining us as well. I'm here today with Lisa McDermott, our CFO; and Brent Jones, VP of Finance. Our remarks this morning will be on a continuing operations basis, which exclude the results of the blood product line, which we divested on August 1. As most of you know, we made public statements a few weeks ago to provide our initial read of our Q1 results and to update our perspective for the full fiscal year. We noted that the end market environment had changed since we provided full year guidance in early September, specifically after a typically slow but hard-to-trend August. Late September was slower than anticipated, and October, while showing signs of improvement, was also choppy. All of this was against the backdrop of public commentary and actual financial results by our customers, our peers, as well as other large industrial players. And even though some of the messaging was mixed, the underlying theme was clear: The macroenvironment is sloppy. There is continued pressure on capital investment, and the emerging country economies in particular are slower than most anticipated and were forecasting to us, in the case of our customers. Given the diversity of our exposure, it's often difficult to distill such an environment into summary-level themes. It tends to be more about the specific projects and about utilization rates, which drive consumption of our product. A couple of current takeaways, though. First, despite the macro headwinds, the Life Sciences segment continues to perform, with Q1 growth of about 4%. Orders were up 5%, and the Life Sciences segment did experience strong momentum in the September-October time frame. The main driver was, unsurprisingly, biopharm, where we are winning new customers and new types of applications, all in a very attractive space. We continue to see strong momentum for the back half of the year. Second, the global industrial end markets have taken a bit of a pause for a few months and look to be selectively soft for several months ahead. We sorted through how much of the impact to Q1 was end market demand reduction versus channel destocking, and it appears to be about 2/3 end market versus destocking that's contributing to our year-to-date results. Sales for our Industrial segment in total were down 3.5%, and orders were down about 13%. The most acute impact was from global semiconductor fabricators and Machinery & Equipment OEMs and end users. Our Industrial customers, in many cases, have adopted a much more cautious tone, though, for the foreseeable future. The third takeaway, though, is the impact of our cost-savings initiatives. Our operating profit increased 80 bps on a year-over-year basis, and the Industrial business' segment margin increased 360 bps. Our structural cost-savings initiatives were not only necessary, a point that we have consistently made, but were also well timed. The team is acting globally to properly position our cost structure to perform in the current environment, but we will not disable our growth or innovation potential. Fourth and finally, we're in an environment where growth is critical, and we're making the necessary investments to do so. As I've previously discussed, we're increasing the focus of our R&D organization so we can get the best bang for our buck but also increasing our actual spend. R&D investment in Q1 increased by $3 million, and it is expected to grow by $12 million to $15 million this fiscal year. Moving on to look at Q1 results now from a geographic perspective first with some market-specific color. The Americas was not as strong as we expected, with sales up 2%, excluding FX, and down slightly organically, with strong biopharm-driven performance in Life Sciences, while Industrial was down. This result was significantly impacted by weakness in water, while orders from the industrial OEMs, who sell globally, were down. The Americas result is a function of export order volume decline in addition to the in-region end market demand. Europe was a little stronger than expected, up a little over 3%, x FX. As expected, biopharm was a strong contributor, but the Industrial process systems business also shipped well in the quarter. However, orders were impacted by capital spend decisions. Finally, Asia was down nearly 7%. Performance was challenged in our larger-country markets other than Korea and India. China was down double digits, again delays in capital projects and weakness specifically on our Power Generation products and primary metals applications. Japan continued to experience the effects of the lower semiconductor industry production rates and other Microelectronics sluggish demand. So with that, let's look at the specifics for the quarter. On Slide 6, first by segment. Life Sciences sales grew by about 4% in the quarter, excluding FX, and Industrial declined by about the same. Consumables, the replaceable filters which comprised 88% of total sales, grew 4% in Life Sciences and decreased 3% in Industrial. Systems, which comprise 12% of the total sales in the quarter, declined 2% overall, as growth in Life Science was offset by a decline in Industrial. And now turning to Slide 7, the drivers of the Life Science sales and orders. First, if we look at consumables sales. The growth in BioPharmaceutical consumables of 7% in the quarter reflects continued strength in the biotech, biosimilar and other biological drug sectors. Consumable sales in Food & Beverage, excluding the impact of the divestiture of our Verona business in Europe, were up slightly. Strong growth in the Americas, due in part to Latin America, largely offset weakness in Europe, and that was related to sluggishness in the beer and wine production volume there. Medical consumable sales were flat in the quarter on tough comparables in the OEM sector year-over-year. Systems sales increased 2% in the quarter, as growth in biopharm was partially offset by a decline in Food & Beverage, reflective of weak capital spend and, again, against the large comp in the prior year quarter in the Americas. Life Science total segment orders increased 5% in the quarter, with Consumables growth of 7%, again driven by biopharm. Systems orders were down, reflecting slowing in capital spend in food and bev. And then moving on to Slide 8, looking at Industrial. Consumable sales in Process Technologies were down about 4% in the quarter, mainly due to reduced sales in the Machinery & Equipment market, reflecting weakness in the mobile OEM, the primary metals and construction sectors, as well as our decision to exit certain lower-margin products. This was partly offset by increased consumable sales in the energy markets. Aerospace consumables sales were up 3%. Commercial Aerospace increased 5%, driven by increased aftermarket sales, and military consumables were flat. And Microelectronics consumables sales declined 7%, again reflecting the low utilization rates that I spoke to. So moving on to Industrial systems sales performance. Systems sales declined 4% primarily on weakness in the Municipal Water market as customers are delaying projects and are looking to reduce spending. Additionally, the comparative quarter of '12 included a large wastewater project that did not repeat this year. Looking at Industrial orders for the quarter. Consumables were down about 11%. Systems declined 26%, consistent with the capital commitment trends I mentioned earlier. The impact to Industrial organic orders performance was pretty broad based, with the exception of Commercial Aerospace. And Slide 9 refers to specific regional performance, but I think I've covered that, so I'm going to move on. Let's go to Slide 10. With regard to overall performance in the quarter, sales were $628 million compared to $651 million last year. Foreign currency translation decreased the top line by about $23 million or about 3.5%. Excluding FX, sales were flat. Overall gross margins improved 60 basis points to 52.1%. This reflects the notable improvement in Industrial, but it's partly offset by the FX-driven decline in Life Sciences. SG&A, excluding FX, decreased 200 basis points. This reflects the savings generated by our structural cost improvement initiatives that we've spoken to, net of those investments we're making to structure the company for future profitable growth. Excluding the discrete items, the underlying tax rate in the quarter was 23.3% compared to 23.9% last year. Pro forma earnings per share in the quarter were $0.68, an increase of $0.02 compared to last year. And bridging this, the growth in the operating profit contributed about $0.08, $0.04, net of the transactional FX headwind, and the tax rate and share count reduction, combined, contributed about $0.01. Translational FX decremented EPS by about $0.03, so for combined FX headwind or impact of $0.07. From an operations management perspective, we achieved reasonable leverage. If you think about it, on flat sales, we grew EPS about 13.5%. That's obviously excluding the total FX impact. So with that, I'm going to turn it over to Lisa to discuss the specifics of segment performance and more detail around profitability drivers, as well as cash flow performance in the quarter. And then we'll finish up with a current business outlook for the full year.

Okay, thank you, Larry, and good morning, everyone. I'll start with the review of segment performance in the context of Larry's overall comments, and I'll begin on Slide 11 with Life Sciences. Life Sciences gross margin declined 40 basis points to 58.7%, and this principally reflects about 150 bps of FX headwinds related to the deterioration of the euro. And it was partly mitigated by favorable mix from the solid Pharmaceuticals consumable sales growth in the quarter. R&D expenditures in Life Sciences increased $4 million or 35%, and this excludes FX, and it's about 130 bps as a percent of sales. And this reflects the increased focus on development of our instrumentation capabilities, including spends related to our ForteBio product lines. SG&A increased about 9%, excluding FX, and this also principally reflects the ForteBio-associated costs. Putting these factors together, Life Sciences segment profit declined 8%, excluding FX, with the investment impact of ForteBio slightly dilutive. Turning now to Industrial. Gross margin improved by 110 basis points to 46.1%, and this reflects Pall Industrial's continued rationalization of its product lines. And this performance was also attributable to a larger proportion of higher-margin systems and service revenue than usual. We do not expect this to be sustained for the rest of the year. The structural cost improvement efforts begun last year and continuing into this year in Industrial benefited SG&A, which declined about 11%, x FX. So we are pleased with this result. The 240-basis-point decline in SG&A as a percentage of sales, together with gross margin improvement, yielded a 360-bp improvement in segment margin in the quarter. Segment profit dollars increased 23%, excluding FX, despite the decline in revenue of almost 4%. Now one item of note with respect to our overall corporate-wide SG&A is that, in our second quarter, we expect a typical sequential increase due to certain annual events such as merit increases, equity grants, et cetera. So that's important to consider generally in connection with our second quarter operating margins. Turning now to Slide 12. Operating cash flow in the quarter was $39 million, which was a decrease of $39 million year-over-year. This reflects the impact to cash flow of the blood sale as well as the settlement of several years of U.S. tax audits and payments for the structural cost-reduction initiatives in the quarter, and that we're -- we talked about in our fourth quarter last year. On a year-over-year basis, our inventory is essentially flat but with a $25 million reallocation from finished goods to raw materials and WIP, which is part of our media supermarket strategy. This will allow us to better allocate resources and more efficiently manage our production while avoiding unnecessary inventory build. Significant uses of cash included just under $100 million returned to shareholders with dividends of $24 million and stock repurchases of $75 million, repayment of short-term debt of $75 million and $23 million in CapEx. Wrapping up the discussion of our liquidity. Our cash position stood at approximately $910 million at quarter end. And our cash position, net of debt, was $291 million, and this compares to a net debt position of $196 million at year end. Before Larry wraps up with our current outlook for 2013, I'll briefly recap FX on Slide 14 (sic) [Slide 13]. Looking at the major currency pairs impacting our business, compared to a year ago, the euro weakened against the dollar -- the U.S. dollar and the pound by 10% in the first quarter. Recapping the impact, as Larry covered a moment ago, the dislocation of the euro was a headwind of approximately $0.07 in the first quarter, and we continue to have significant euro exposure. And as we've spoken about before, we have taken actions to mitigate it, including hedging forecasted transaction to cushion the risk of possible further weakening. Now our need to enter into hedge agreements will lessen as we make changes to our transactional flows to maximize natural hedges through better currency matching of revenue and expense. That concludes my report, and I'll turn this back to Larry. Lawrence D. Kingsley: Thanks, Lisa. As you know, we're in a very dynamic environment, but we're responding well to it. There are a number of moving targets: FX volatility and governmental budgetary pressure, customers changing risk tolerance and a number of others. They all have the potential to continue to affect activity globally. That being said, we're listening closely to the customers, and we’ve parsed what we've heard from them into the trends, which form the basis of our updated forecast. So first, the specific Life Sciences input. Biopharm continues at a healthy pace, even in Europe, driven by Western world product development supporting the so-called pharmerging global activity. The sustained growth of the biopharm end markets, in particular the biologicals, monoclonal-based treatments for autoimmune diseases, will continue to drive very strong performance in the face of choppy economics. Our outlook, accordingly, is that -- from first to second half of our fiscal year, that we've got a 10% growth assumption, so sequential growth of 10%. That calculates on a full year basis to an assumption of mid- to high-single-digit organic growth for Life Sciences. In the Industrial end markets. As we've said, current sales and order rate performance for our Industrial segment is driven by both end market softening and destocking. And these trends are particularly germane to our Microelectronics and the Machinery & Equipment markets. In Microelectronics, the majority of the current sales trend is end market capacity-driven. MicroE demand is pretty broadly down. Recent consumer demand, if sustained, suggests that some of the inventory will be consumed, though. And therefore, fab utilization might increase before the end of our fiscal year. And for Machinery & Equipment, we attribute the current challenge to both too much OEM inventory as well as lower utilization rates. And more specifically, for Machinery & Equipment in the Americas, the outlook assumes that in-region demand and exports impact OEMs but also that end user spend generally remains pressured. Europe is largely affected by low utilization rates. And Asia is more of a destocking, channel-driven set of issues, which could rebound, but it may not be until the end of the year. And Municipal Water just doesn't look good. Continued weakness is expected in muni water through the end of the fiscal year. So our outlook for Industrial, accordingly, is that we expect Industrial sales growth to be down low to mid-single digits, and this factors in a sequential improvement through the balance of the year. Our updated guidance is entirely driven by the range of sales performance we now anticipate. We think Q2 sales levels will be similar to Q1. However, we know that we will not have the benefit of favorable mix in the Industrial business. In addition, due to the holidays -- in the schedule this year, there are less work days versus last, and some of our customers may selectively shut down to a greater degree this year. We'll see. Relative to margin for the upcoming quarter, as Lisa mentioned, we also expect the typical sequential SG&A increase from Q1 to 2 that will modestly impact margins. However, our structural actions are on target, and we're beginning to see the benefits of productivity enhancements. For the full year, the underlying tax rate will be 24%, in line with the previous guidance. And there is no significant change to our repurchase assumption. Our FX exposure, again, represents about an 8% drag on earnings for the full year. So in total, all factored in, we're guiding pro forma EPS to $2.95 to $3.15. So with that, operator, we're ready to go into the Q&A session.

[Operator Instructions] Your first question comes from Kevin Maczka with BB&T Capital Markets. Kevin R. Maczka: First question. Larry, you mentioned most of the pressure in Industrial here due to end markets slowing and not destocking. Can you just give a sense of the channel inventory here? Is that something that we ought to expect? It’s still a coming attraction, with Industrial orders down 13%? Or do you think the channel is fairly lean already? Lawrence D. Kingsley: Well, just to be clear, the destocking, in the case of our business is channeled to a degree, but let's also make sure we include the OEM customers as part of that thinking. So it's inventory that OEMs may have built into product that hasn't sold and/or product that they have on the shelf awaiting a build cycle. And that's a significant portion of the content that represents about the 1/3 of the impact to the sales numbers that we described for Industrial as down: 1/3 destock versus the 2/3 the Industrial end demand. I think that it's leaned out pretty well, to answer your question. I don't think there's too much more that will come. It's a little bit of a different picture in Asia versus the rest of the world where there is more inventory in the OEM food chain in Asia, so there could be slightly kind of more to come there, but I think that what we've seen is kind of representation of the destocking component. And as far as the end market demand, you didn't specifically ask, but we don't expect it to get a lot worse. And if you go back to my comments relative to guidance, we think the back half does improve sequentially. Some of that is not unusual. That's a fairly typical Pall and a seasonal trend, and so it's not unusual for us to assume sequential improvement of that magnitude. But also, we think that we have somewhat bottomed out relative to the 2 components. Kevin R. Maczka: Okay. And can you update us on pricing? I know that's part of your initiative. I think you had guided originally 80 or 90 bps into your original '13 guidance. How much more difficult is it to achieve that, given the conditions? And have you seen any share loss as a result of that? Lawrence D. Kingsley: No, I wouldn't point to significant share loss as a result of pricing dynamics. Pricing is just holding reasonably well. It's consistent with that 80 -- a little bit better than 80 bps assumption for the full year. Some of that is already in place in terms of action taken, some of it, a little bit of it, to come. The most price pressure, I'd say, that we're seeing right now would be in the food and bev space and some of the systems there, but holding up really well in the Life Sciences businesses otherwise and most of the industrial-facing businesses otherwise. Kevin R. Maczka: Okay. So you still think something on the order of 80 bps is appropriate for the year. Lawrence D. Kingsley: I'd say that's accurate, yes.

Your next question comes from Jon Groberg with Macquarie. Jonathan P. Groberg: Just 2 questions for me. One, just a little bit more clarity on the guidance. So I guess I'm going to -- it looks like, even though the euro has improved a little bit, you're still anticipating for the -- relative to when you kind of last gave guidance, you're still anticipating the -- kind of the same impact, as far as I can tell, from currency for the full year. And so when you talk about kind of the movements around on the revenue side, it sounds like, from where we ended this quarter, the thing that stood out to me is the -- you said you didn't expect the gross margin for Industrial to persist at the level it was in the first quarter, and you attributed that to mix. Can you maybe just talk about exactly what the mix was in the first quarter and why that isn’t going to repeat? Just a little bit more detail and, look, I guess, maybe just some clarification around the mix there. Lawrence D. Kingsley: Yes, sure. So first with regard to your currency question. There could be a little bit of improvement that's euro based, to your point, if you look at current rates. And we’ve factored a little bit of that in, so the new EPS range does include $0.02 or $0.03, I guess. Is that correct, Lisa?

$0.03 or so. $0.03, plus or minus. Lawrence D. Kingsley: $0.03. And then with respect to your -- the upcoming quarter question around Industrial gross margin or, for that matter, bridging off the first quarter for the rest of the year, what Industrial saw in the first quarter were just a couple of things. First, the systems margin for Industrial was particularly positive or strong in the quarter, driven by a stronger service component within systems. And we didn't have as much, call it, bad-margin systems business either. Some of the fall-off, Industrial water -- or excuse me, Municipal Water, in particular, isn't such a bad thing. We expect a more normalized Industrial mix as we go into the remainder of the year. Now as I mentioned in the prepared remarks, the good news is that we're getting after the cost, both direct costs but, more importantly, the cost to serve, in Industrial such that we'll continue to see Industrial both gross margins and OP margins improve over the intermediate period as well as the long term, but it's not going to be a kind of completely clean bridge off 16% as we go forward. Jonathan P. Groberg: But just to be clear, because I think you said you thought municipal just was bad and wouldn't recover. So are you seeing some pretty -- given what you know is in your pipeline, are you -- is it pretty clear to you that the gross margin will not sustain at these levels? Or is there just an element of conservatism built into this outlook as well? Lawrence D. Kingsley: No. The mix components that are definitely not repeating are the strong systems margin contribution from Q1 as we go into the rest of the year, so we will see a fairly large shift accordingly. And there are a couple of other more minor contributors to what was very positive mix in Q1 for Industrial that won't repeat. I do think that the Q1 achievement is fairly indicative of what we'll see as we move forward, but just don't expect that it's going to be a -- particularly on this sales level, a consistent Pall Industrial OP margin rate for the rest of the year. It'll step back a tad and then continue to move forward in the right direction.

And if I could just augment Larry's comments. As we look at our second quarter, in addition to the favorability we saw in the first quarter for the service revenues, we do see a step-up, step change in terms of overall mix, with sequential growth in lower-margin systems and sequential decline in consumables Q2 versus Q1. Jonathan P. Groberg: Okay. I just wanted to make sure. That's helpful just to -- you clearly have an understanding of some specific things that are going on there. And then my last one, I guess, is on Microelectronics. You're now -- we're now kind of cycling up against easier comps. Obviously, some of the leading indicators we follow there are suggesting that it's kind of bumping along the bottom but not necessarily getting worse. Are you confident that there is nothing -- I know it's kind of a niche of your market. Are you confident there's nothing else going on there from, like, a market share standpoint? And maybe you can just give us some more comments around how you feel you're competitively positioned in Microelectronics and maybe what you're looking for to see when that might tick up a little bit. Lawrence D. Kingsley: Yes, sure. Well, I would agree with your comment. I think we're bumping along the bottom. I think our market position is very competitive, very strong, and we're doing well. We've made comments, which would still be applicable and certainly in this environment where our share is, on a relative basis, stronger in some of the semiconductor producers and some of the specific sites, the fabs, than it is in others. And depending on which fab may be producing more at any given point in time, you do see swings in the market. So it's not a traditional market share kind of win-loss dynamic as much as it is where we're stronger in a given fab, even a -- just a site itself. We may either benefit or lose as a function of our relative position. But we've got great products. We've got, obviously, a great reputation in the space and doing quite well.

Your next question comes from Jon Wood with Jefferies.

Lisa, the cash flow dynamic in the first quarter, how much of the cash tax liability on the blood products divestiture did you pay in the first quarter?

Well, we paid about 25% of the liability, so you'll continue to see some of that drag in our cash flow throughout the year. But more broadly, if you look at what we paid in the quarter for the blood business, as well as to settle some other items related to the U.S. audit, we took about a $50 million hit in the quarter in operating cash flow.

Okay, so the -- about $25 million is in operating cash flow related to blood products and then another $25 million on other tax items, is that correct?

Yes, about 20, 30.

Okay. And then just going back to the mix question, Larry. The -- where are you in terms of the process to actually call out some of the systems business that you don't feel like you should be in longer term? I guess what I'm asking is, adjusted for the mix comment you just shared, are you in the first inning, the third inning, fifth inning in terms of actually getting out of some of that systems business that you don't want to be in longer term? Lawrence D. Kingsley: Yes, I mean, the short answer is third inning, but let me back up and kind of give you the description of what's going on. So there's a couple of things driving where we would very selectively exit systems. And I've talked before about the fact that, once we're all said and done, it cost us probably less, but it's as much as a point in terms of sales growth or sales contribution to the total company. The issue here is that we've historically participated in some systems that don't have some follow-on consumables opportunity. And in some cases, those that didn't have a consumables follow-on or razor blade nature to them, they were also low margins. So those are the ones that we definitely don't want to be in long term. We do not want to be in low-margin systems that don't have a consumables follow-on opportunity. And those are the ones that we're further along with, maybe that's a fifth inning kind of situation. There's others where we're not making as much as we would like for a system that does generate a downstream consumable opportunity. And in those cases, we're trying to work through our cost structure, design issues and other things that contribute to make that a more attractive value proposition for the customer and business opportunity for us. And that's probably kind of somewhere earlier than the third inning. But I think, all said and done, by the end of the year, we'll be pleased with our profile of systems business and what it generates in the way of future relatively high-margin consumables pull-through.

Okay, very good. And Lisa, can you just give us the update on what you assumed for the full year FY '13 in terms of the systems trend organically?

Well, we have quite a range because -- given the orders and the way they're looking, and some of our systems do book and ship in the same year, but we have a range of down mid-single digit to potentially up low single digit.

Your next question comes from Brian Drab with William Blair.

Just a couple of questions. You talked about the second quarter and gave us some good insight into where SG&A is going; sales, similar. Putting it all together, it sounds like earnings for the second quarter are down from the first quarter. Am I connecting the dots the right way? Lawrence D. Kingsley: Well I would just tell you that I think the prepared remarks covered it: Sales, similar. And it's a matter of continued structural actions to overcome what would be a less-attractive Pall Industrial mix.

Okay, okay. And then looking at the full year guidance with respect to what we're -- now that we have the first quarter in the books, what we're expecting for the second quarter, it really seems like the back half of the year in terms of EPS would be up materially in the third quarter and fourth quarter compared with the first and second. And I'm just wondering what are the -- what would be the key dynamics that contribute to that? Is it just the typical seasonality or the benefits of the restructuring starting to kick in? Lawrence D. Kingsley: Yes to both of those, and a couple of other things. So yes, it is typical. If you look at prior years, that sequential growth is at least typically 5% or 6% on the very low, and it's teens on the high ends. So where we're planning is probably more conservative than historically typical but, given the environment, I think, appropriate. We do see continued positive impact associated with the actions that we're taking, and I'm pleased, frankly, with the progress we're making. And I would say that we do believe, from a macro perspective, that things are bottomed out, so we don't expect a lot more downward pressure. Actually, I spoke to the fact that there's lots of variables out there in the world right now, but there's a kind of a little bit of early good news that China may be coming back from a plan for how they're going after continually to spend on the infrastructure-associated set of segments, which we'll benefit from. I do think MicroE is somewhat bottomed out, for the comments that we just made. And I think that most of the destocking is out of the Machinery & Equipment segment, so it's really a matter of tracking what happens against the end user demand patterns, which gives us reasonable confidence in the sequential growth assumptions, first to back half, that we spoke to.

Okay, and then last question, do you... Lawrence D. Kingsley: And then EPS obviously -- excuse me, the EPS is a direct derivative of entirely what happens in the top line because our cost structure is in great shape.

And then I -- given the significant challenges you're seeing in the Industrial side, do you think that you'll be accelerating the restructuring that -- sorry if you touched on this, but if you have, maybe just more specifically, are you still expecting the $0.30 benefit in EPS from restructuring? Or are you accelerating from there? Lawrence D. Kingsley: No, I think that's still the assumption you got to work with. It's still what is included within our guided range. Is it possible that we'll do a little bit better than that? It's possible, but right now, we have a plan. It’s a tight plan. We've had it assembled for 6 months or so. And we're really not going to be enabled to do much more than that short term, given where our priorities are.

Your next question comes from Richard Eastman with Robert W. Baird. Richard C. Eastman: Just a question, Larry. When you look at Europe Industrial, it's been surprisingly strong, just literally over the last 4, 5 quarters. And we talk about things having bottomed out, maybe China, MicroE, destocking past us. Is your perspective of Europe Industrial for Pall, is that a lagging business? Why is that business continued strength -- to be so strong in local currency? Lawrence D. Kingsley: Well, you got 2 markets in Europe. You've got the mature European market, and you've got the emerging markets, and the way that we tally it, of the Middle East and, to a lesser degree, the sub-Saharan African contribution. You've got different patterns relative to sales and orders right now. If you look at some of the order pattern that we're anticipating for Europe, including the emerging portion of that total sales content, it's not fabulous. So we don't expect Europe to continue to trend at the fantastic pace on the Industrial side relative to the markets they serve, as it has in the first quarter. However, I would tell you, from an execution standpoint, I think our team is doing a super job in Europe. And if anywhere globally we're taking share right now, it would be in Europe, both life science and Industrial. If you look at Pall Europe from a regional perspective, obviously, including life science, it comes back to the comments of the fact that there's a lot of strong European and biopharmaceutical content that actually ends up in emerging markets otherwise around the world. So the sales transaction is a European one, but the demand is a function of what's happening globally. Richard C. Eastman: Okay. So that business doesn't crater before it starts to improve again, another lag into the second half and go negative... Lawrence D. Kingsley: Well, I am concerned about systems order rates and capital kind of decision-making that's going on in the region right now, as I just mentioned. There's a definite different dynamic currently at play globally, but certainly in Europe too, around capital allocation to projects. And there's a lot of deferral. There are some cancellations. And it's not just the Western world as a function of capacity requirements. It's also across a lot of the Industrial end segments and the emerging market opportunities that have been pretty consistent order growth opportunities for us. Richard C. Eastman: Okay. And then just a question maybe -- perhaps they’re related, but in the Industrial process market, you mentioned some fulfillment challenges maybe held back sales in the quarter. First of all, they must have been big enough to note. And are they temporary? And then secondly, Lisa addressed the inventory year-over-year, but I'm a bit curious as to why the inventory is up off the year end. Lawrence D. Kingsley: Yes, sure. So to your first question, the fulfillment challenges from a total company perspective in the quarter really boil down to 2 areas. One, the last bit of lagging impact of the SAP go-live was in our medical and lab products. And we saw certainly a little bit of sales impact in the quarter just based on ability to return to strong customer-driven requests for products. So there's a bit of an impact there, not a lot. Secondly, with respect to -- we had a little bit of a plant interruption at our Fort Myers facility in Florida where we had a fire during the quarter, and we lost several days of production. And we were not able to return to what our desired customer-driven sales opportunity was for the quarter by the end of the quarter. And it cost us, from an absorption perspective, by about $0.5 million as well. So that would total the tally of kind of where we ended up with fulfillment challenges in the quarter. Richard C. Eastman: Okay. And the inventory, then... Lawrence D. Kingsley: Your second question, Rick? I'm sorry. Richard C. Eastman: Well, just the inventory build off the year -- fiscal year end on essentially down sales? Lawrence D. Kingsley: Yes, well, it's been typical. I won't say it's appropriate, but it's been typical that our Q1 ending inventory is higher than our Q4 ending inventory. Some of that is a dynamic of what we ship at the end of our fiscal year and how we recognize that. The bigger element to what's happening in terms of how we're thinking about managing inventory, both from what's happening in the current environment but also structurally and strategically for how we get at a much better working capital story, is -- and Lisa mentioned it, but we're building inventory principally in WIP, a little bit in raw. It's about $25 million that moves from finished goods to the WIP and raw in the quarter such that we can respond just as fast going forward without having to have the degree of dedicated finished goods inventory that we have historically. So historically, we have, as you know, held a fair amount of finished goods inventory. That's, in many cases, customer specific. We're moving to rolled stock media such that we can convert very quickly and be much more flexible and allow ourselves a finished goods inventory reduction over time. So the swing in the quarter really had to do more so with the move from finished goods to WIP and raw when you look at it from a year-over-year basis. And the sequential piece is just the typical Pall seasonal Q1 event [ph], yes.

[Operator Instructions] Your next question comes from Derik De Bruin with Bank of America.

So Lisa, what was the net M&A impact during the quarter? I know you had the ForteBio acquisition offset by the Food & Beverage divestiture.

For the total revenues, it was about a pickup of a point on the bottom line. All in, slightly dilutive.

Okay. Looking at some of the -- the Americas is a little bit softer. How much, if any, of that do you think was attributed to some of the concerns from customers on the fiscal cliff? Lawrence D. Kingsley: I'm sorry, you faded there, Derik.

Sorry. If you look at some of the softness you saw in the Americas this quarter, how much do you think was that just from customers pulling back spending because they're worried a little bit about what's happening in Washington and the fiscal cliff? Have you seen a more [indiscernible] change [ph] in customers? Lawrence D. Kingsley: No, I do think that, in the Americas, there's some psychological impact relative to what's going on here. And I think that, in China, you've got a different dynamic, but it's also central government driven where they've been working against an aggressive strategic plan, largely infrastructure focused. And that stopped back in kind of the July time frame, June-July time frame. And with the new government in place now, I think there's a confidence factor that restores in China, direction and confidence factor there too. So I do think that those 2 principal kind of Federal government-driven issues pertain to what's going on now in terms of spend pattern. It's hard to quantify…

And so picking on the China commentary there. So when would you expect to see potentially an order pickup in China? Lawrence D. Kingsley: Well, as I said earlier, there's a larger dose of inventory and what we saw already in the way of destocking impact to the sales numbers. But I think, still out there, I think that depending on how quickly the government mobilizes to decide where they're going to spend and how much they're going to spend and how that is then going to consume some of the -- particularly the OEM inventory that sits in China. I would hope, by mid second -- kind of end of our third quarter that we’d start to see a pickup there.

Okay. And then just sort of one final question. The -- when you look at the strengths in the biopharma business there, how much of that is coming from new drugs coming online, facilities coming online, or versus new indications for existing drugs? I'm just curious about how you're sort of seeing the ramp-up going forward in that business. Lawrence D. Kingsley: There -- in the quarter, to give you an example, we totaled something like 7 or 8 new installations, not all of which were new drugs but most of which were, which represent, in a couple of cases, new customers either entering the space or customers that we haven't historically done business with. The rest of it would be ongoing consumption rates. So if you try and break the organic performance into how much is new drugs versus existing kind of production rate, I'd say it's probably 80% ongoing and 20% new drugs.

Great. And for the ones where you're sort of seeing customers that you haven't been into before, can you just give a little color on what sort of products those are and where your -- what's getting into these customers now? Lawrence D. Kingsley: What's getting into the customers now?

I mean, no -- why are you being successful with these consumers now, if you haven’t dealt with... Lawrence D. Kingsley: Sure, well, I can give you a little bit -- it's a competitive space, so I don't want to provide too much color. But there are a number of local governments that are incubating biotech industries that are working together with global players. We're doing particularly well in Singapore. Singapore has dedicated a fairly large chunk of their industrial growth plan to working with European and American global players. And in a couple of cases, we hadn't had a position with a global player where they were producing product in, say, Europe, but because our strength is what it is in Singapore, that's been the catalyst to allow us to build now our relationship back to have that global position that we hadn't historically had with that customer. And so without getting into too much more detail, it's kind of a reach advantage that we have as a company versus anybody out there, in this case specific to Asia and Singapore, that's allowed us to build a global partnership.

At this time, there are no further questions. Are there any closing remarks? Lawrence D. Kingsley: Just a couple, Brook. So obviously, our change in outlook for the Industrial segment versus just a few months ago is quite pronounced. We've taken a -- what we believe is a realistic view for the remainder of the year, given all that we know and can model. Rapid change in customer order patterns kind of elicits the question around how can one accurately forecast orders and sales, and it’s a good question. However, all said, we believe we have current customer sentiment understood, and we should be able to deliver well to the bottom line. I think our team’s doing a great job enabling significant change and driving waste out of the cost structure while still investing for growth. And I'd like to thank them for proving -- while we're in process here, we're proving that we can get it done. So we'd like to also thank all of you for joining. And we'll be speaking with you through the course of the quarter and certainly on our next call in January -- February.

February. Lawrence D. Kingsley: February. Thank you.

Thank you. This concludes the conference. You may now disconnect.