Welcome to Pall Corporation's Conference Call and Webcast for the First Quarter of Fiscal 2015. Today's call is being recorded and simultaneously webcast. Instructions for the question-and-answer session will be provided at the end of management’s prepared remarks. Right now, all lines are in listen-only mode. We would like to remind you that the company's press release is available at www.pall.com. Management's remarks this morning will include forward-looking statements. Please refer to slide two 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 Chairman and CEO. Please go ahead, sir.

Thank you, Jackie. Good morning. I'm here today with Akhil Johri, our CFO; and Brent Jones, our SVP of Corporate Development and our Treasurer. I’ll begin by recapping the quarter and updating you on the markets we serve. We'll then run through the quarterly numbers and conclude with an update on our full year guidance and some summary remarks. As I'm sure you've already seen, though, from our press release this morning, we delivered an exceptional quarter. Organic growth was 9%. Operating margin expanded 210 basis points. Free cash flow was 118% of that income. The quarter is illustrative of how we can deliver outstanding performance in a stronger organic growth period. So how did this happen? It's the confluence of several things. Obviously, it's stronger order rates over the past several quarters. The ongoing strength of our BioPharm franchise, it's the timing of customer requirements and in particularly, it was an October where we -- October pretty strong. But, of course, it's the impact of our recent acquisitions as well. Our operating model is primed to generate strong profit conversion on solid organic growth. In addition to the growth, the benefit of our structural actions taken in the recent years is enabling the impressive operating leverage. SG&A was down 180 basis points year-over-year. We saw incremental margins. That’s the year-over-year increase in operating profit over the increase in sales of about 40%. When you exclude the adverse impact of strategic, but the dilutive M&A activity, organic incremental margins were up about 70% and that’s the second quarter in a row. We also continue to focus on enhancing customer service performance while driving productivity. Our team is committed to creating a customer first culture within Pall that will further differentiate us within the market that we serve. We have got a long way to go to claim success as a proficient operational excellence company, but we are continually adding new operations talent, dedicating resources to build the toolbox to enable both better and consistent performance and we are structuring the company to increase the pace of improvements. And before we get into the details of the quarter, just a quick update on the micro-environment. The summary is similar to our quarter ago view and to what you have heard from us over the past several quarters. Our Life Sciences segment continues to show strength globally, with BioPharm being particularly strong, BioPharm team is executing well. Our single-use technology acquisitions have further improved our market position and we are increasingly confident about our ability to achieve long-term growth in the market. In terms of Medical and Food and Beverage, underlying market conditions are largely in line with our expectations, with slightly better than GDP growth rates. On the Industrial side, the picture remains mixed. The MicroE markets continued to perform well, though there are signs of a slowdown in capital spend their. Our technical advances though and new products are helping us grow at above market rates as we continue to take share. Aerospace remains a GDP-ish end market with the volatility specific to customer program demand patterns. Process Technologies, which is again largely comprised of machinery and equipment, fuels and chemicals, and other energy applications continues to the mixed. There are pockets of strong growth and various applications in geographic markets, somewhat offset by macro-commodities and infrastructure market headwinds. Given the current backdrop, we are not expecting nor relying on capacity expansion driven capital spend to drive our performance. The drop in the hydrocarbon prices is actually a benefit to many of our Process Technologies customers. Our Fuels and Chemicals business is stronger in the downstream, that’s in the polymer and chemical market applications. So with that let’s dive into the results and I'm on slide five for your reference. Sales grew 13%, excluding FX and 9% excluding the acquisitions and FX. Gross margin improved 20 basis points in the quarter, in spite of the adverse impacts of about 70 basis points from acquisitions and 50 basis points from the transaction FX component. As I said before, SG&A as a percent of sales was down about 180 basis points. All-in, operating margin was 19.2% in the quarter, up 210 basis points from a year ago. Pro forma earnings per share in the quarter was $0.89, which represents an increase of $0.19, or 27% compared to last year, bridging this increase, operating profit contributed $0.23, the impact of share count reduction contributed $0.03, the higher tax rate was the detriment of about $0.02, while translational FX was a $0.05 detriment. So now I am going to hand it over to Akhil who will walk through the results in more detail. Akhil?

Thanks, Larry. I am on slide six. As noted, I will talk to the year-over-year changes excluding translation FX. Life Sciences sales grew by 14% in the quarter, 9% on an organic basis, while Industrial sales were up 13% in total and 8% organically. Consumables which represented 87% of sales in the quarter, grew 13% overall. Life Sciences consumables grew 12%, while Industrial consumables were up 13%, both benefiting from our recent acquisitions. Systems sales were up 19% overall, with Life Sciences up 28%, while Industrial which comprises a larger share of our Systems business was up 16%. Turning to slide seven, with some details on our Life Sciences segment, BioPharm consumables sales grew 18% on overall market strength, the benefit of the ATMI acquisition and to some extent, easier compares and timing of shipments. Organic growth in BioPharm consumables was 12%. Medical consumables were down 2%, largely due to lower OEM sales as well as lower blood media sales. Finally, consumables sales in food and beverage were up 4% on growth in Americas and Asia. On the order side, consumables increased 16%, with all markets up compared to last year. BioPharm orders were particularly strong, some of which relates to the timing of one large blanket order. Systems orders increased 7% in the quarter. Turning to Life Sciences margins, Q1 segment gross margin decreased 80 basis points to 56.3%, largely due to the dilutive impact of the ATMI acquisition and adverse transactional FX. These factors were partly offset by favorable plant productivity and improved pricing. Segment reported SG&A decline of 190 basis points, while R&D spend was down 50 basis points. The combination of these factors resulted in segment margin of 24.5%, a 160 basis point increase from a year ago. Turning to the Industrial segment on slide eight. Process technologies consumables sales were up 19% all-in and up 5% organically. On the back of strong orders in Q4 and relatively easy compares, Fuels & Chemicals had double-digit organic growth this quarter. Aerospace consumables sales increased 6%, largely due to strength in military OEM and helicopter program sales. MicroE consumables sales grew 8% on continued strength in Asia, particularly in E-materials. Systems sales increased 16%, mainly due to timing of Fuels & Chemicals projects. Consumables orders were up 6%, reflecting the benefit of the FSI acquisition. On an organic basis, orders were flat with declines in aerospace and machinery and equipment orders, offset by a high single digit increase in Fuels & Chemicals orders and mid-single-digit growth in MicroE. Systems orders were up 8% in the quarter. Turning to margins, Q1 segment gross margin increased 110 basis points to 47.3%. This is due to favorable end market and customer mix, plant productivity and improved pricing. These benefits were partly offset by the dilutive impact of the FSI acquisition and adverse transactional FX. Segment reported SG&A declined 150 basis points, while R&D spend increased slightly. All-in segment margin for the quarter increased by 250 basis points to 18.7%. Turning to slide nine, operating cash flow in the quarter was nearly $115 million compared to $86 million last year, an increase of 33%. This increase was driven by a continued focus on working capital management. CapEx was about $10 million. As a result, free cash flow was $104 million or 118% off reported net income. Our sustained cash generation capability continues to improve and with this solid start to the year, we are extremely confident that we will achieve our full year goal of free cash flow exceeding net income. Significant uses of cash during the quarter included $300 million of share repurchase and $30 million of dividend payments. Finally on the liquidity front, our cash position stood at about $1 billion as of October 31st, and our net debt position was $182 million at that same date. I will now turn it back to Larry for his concluding remarks.

Thanks, Akhil. Before we conclude, I want to just take a few minutes on our so-called strategic mode. It's been a topic of increased investor interest, as we develop one of the most attractive integrated business models for a company of our size and profile. As we continue to invest in R&D and deliver the new products to market, it’s critical that we also protect our position. At a core, we fundamentally are a technology company and what has historically and will continue to differentiate us is our underlying separation science technology and the deep applications experience that we’ve got at the very core of what we have invested in and what we deploy across all our markets is our material science knowledge, specifically our media and membrane, research and development. As we look at slide 10, many of our strengths are represented, our global channel, deep applications knowledge, the presence with the regulatory authorities around the world. But most critical to all and there are competitive advantages, our core technology and its application in the world of separation science. And bottom-line, we believe it’s a very protectable model. The mode is multi-channel and it is deep. Even as the leader though, we are always trying to further distance ourselves versus our peers. So changing gears and I’m on slide 11, the stronger U.S. dollar has become a significant headwind for us this year. Since our August 28 call with you, the yen is down 16% versus our planned rate. The euro is down 8% and the sterling is down about 7%, pretty big moves in our three-month period. Translational FX that is the impact of FX on consolidating our global results affects us more than most due to our higher share of ex-U.S. revenue. At the profit level, this affect is magnified by our disproportionately higher U.S. located SG&A and R&D spend. When we provided fiscal ‘15 guidance rates for such that we expected no translational impact for the year, however, at prevailing rates, we will see a $125 million headwind to revenue about 4.5%. And the impact to EPS will be even greater round $0.25, principally from the translation component. While not much can’t be done on the revenue side, we are increasingly confident that our strong operating performance can largely offset the adverse impact to EPS. If you turn to slide 12, you can see our revised expectations. Due to the healthy order rates and continued sales momentum particularly in the BioPharm market, we are increasing our organic sales expectation to the high end of our prior stated range from low to mid single-digit growth to mid-single-digit growth. We’re also accelerating select cost initiatives that we had intended as part of our ongoing SG&A improvement plan. The combination enables us to maintain our pro forma EPS guidance of $3.75 to $3.95 and again that’s up 9% to 15% from the prior year. When you boil it down, we’re facing a 7% currency induced EPS headwind and we’re holding our range. This is not going to be easy to accomplish but I’m confident that if we can convert as we recently have, we’ll deliver a very impressive operating performance here. In terms of how the rest of the fiscal year will lay out, our first half, second half of the year performance assumptions are similar to what we initially contemplated. Based on the entering backlog for the second quarter, we expect low to mid single-digit organic growth in Q2 with the FX-related headwinds in seasonally lower manufacturing hours. We do expect Q2 reported sales to be similar to Q1 but pro forma Q2 EPS to be below Q1. So again some review for the full year depends on how currency exchange rates play out but at the current rates with mid single-digit organic growth assumed, we should be able to convert sales to income at a very healthy incremental rate and therefore, we are essentially holding our full year view. So with that, we are going to open the line for questions.

[Operator Instructions] Our first question comes from the line of Richard Eastman with Robert W. Baird.

Yes. Good morning.

Hi Rick.

Larry, could you just kind of speak to the orders on the consumable side in Pall -- PI, we’re flattish, is there any message there, kind of, a slow down a little bit from where we've been tracking and usually that would maybe provide kind of a leading indicator here to the PI business, overall. Is that just a timing or a little tougher comp?

Well, I think it’s a mix of all the above, Rick. First, there is certainly from secular trends within PIs that we've heard from others in the marketplace. And that we would say are impacting us too. The machinery and equipment sub-segment that we speak to is softer and that’s globally. We did see good organic performance in the fuels and chemical side. The MicroE is as described in the prepared remarks, we continue to do well there. Although the market now is shifting somewhat from capital spend through a fab base consumption. When you look at some of the rest of it -- aerospace is little hard to draw a trend line for forecasting say from but I wouldn’t say we’re overly concerned if anything taking some share in a choppy market.

If I may just -- if I may just add Rick that if you take aerospace, which is lumpy, right, you’ve talked about the lumpiness of aerospace at various points of time, the orders for industrial consumables in totality were up low single-digit which is consistent with our full-year expectations and guidance.

I see. And then just conversely on PI as well, the thought to kind of coming in on the system side of PI was a little bit of a softer backlog coming into the year, at the same time, the thought was that the systems business would -- would finish strong for the full year in fiscal ‘15. It would seem like the orders here in the quarter and certainly the sales in the quarter would still support that?

Are you referring to PI or Life Science, Rick?

No, PI Systems.

I think that’s a good assumption. We’re doing well on the system side. We talked a little bit a quarter ago about the fact that systems could edge up a bit for the year in terms of growth rate and in terms of proportion to the total sales number and we’re not going to go into specifics of why we believe that to be the case. But there are some good content in some specific markets on the PI side. And the other good news frankly on the system side for PI is that we’ve started to see evidence of better quality sales i.e. better gross margin in the systems that should yield better consumable content.

Understand. Okay. Can I just as one follow-up on Pall Life Sciences. The food and beverage business, what’s the tone in Europe on food and bev?

The tone in the market is GDP-ish for Europe, which is obviously not wonderful. Again, we’re doing a little bit better than market. We’ve got good evidence of the fact that we’ve seen some share win there as well.

Okay. Very good. Thank you.

Sure.

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

Hi. Good morning. Congratulations on a great quarter.

Thank you, Brian.

Larry, discussing the FX through the end of the presentation, I missed a couple of these numbers. I think that I heard you say that you're expecting a $0.25 translational headwind for the full year from FX?

What we said is $0.25 in total. Most all of that being translational.

If you think about -- think about it Brian, the first quarter was about $0.05 adverse on translation and we hadn't quite seen the full impact of the currency changes, which happened towards the latter part of the quarter. So the next nine months assuming rate stay where they are and you see them stated in our -- on our slide 12. With those assumptions, that is going to be a disproportionately higher impact in the back half -- in the last nine months of the year.

Okay. And did you give us a break down between translational and transactional for the full year breakdown of that 25?

We didn’t but again the vast majority of that is translation. Again, I think the world is kind of slowly sobering up to the fact that translation has a big impact to any multinational company that’s headquartered in the U.S. In our case, I would say what makes us slightly different is one we are disproportionately high ex-U.S., two we have a good chunk of our fixed costs in the U.S. from an SG&A standpoint, so you don’t get the offset there, the reduction from a currency perspective. But also really in a very good new series that we’re operating extremely well, so we built some of that countermeasure thinking into how we can deal with those pretty, pretty amazing headwinds that we at this currency kind of -- in this currency environment would anticipate.

Right. Okay, I just want to make sure that I have those numbers clear because it looks like without the FX headwind that we would have raised the midpoint of the EPS guidance by about 6.5%.

But one could say something of the sort.

Okay, thanks. And on acquisitions, it’s ATMI and FSI, I am wondering if you could talk a little bit about maybe some of the benefits that you’re seeing maybe from an improved ability to go to market with more complete portfolio? And more specifically, I guess can you comment on after rolling in ATMI and Medistad into the Life Sciences business that improved single-use capability that you have, how is that helping at this point?

Well, the acquisitions in total are playing out very well. On the ATMI, Medistad commentary first, the idea is and we’ve talked about it before is to build the best single-use product portfolio of anybody out there. We believe between what we have that was reside in Pall, what we’ve acquired in the case of ATMI and we’ve kind of quietly acquired and then we have small technology pieces otherwise. And now what we’re organically committing to, we are well underway to creating a pretty impressive portfolio. And without getting into very specific competitive compares, we’ve got good evidence of the fact that we are taking share very, very nicely right now, strong, strong growth rates when you look at single-use. It’s completely integrated within the business. We do have a dedicated technical sales force. We have now integrated the offering within the broader sales force and we are from an operation standpoint continually integrating what we bought. So we’ve actually closed down one of the ATMI facilities and integrated it into the remainder of Pall. And we are working to better clean up where we focused our single-use technologies in a set of dedicated facilities for the future, but it frankly is going extremely well. We are proud of the team, that’s the leadership we’ve acquired. But also the integration I would say is well underway and where it should be. On the FSI side, it’s similar. In terms of what FSI brings, it’s a little bit more of a portfolio fit or gap filler. It’s basically the idea of taking a little bit more of a filtration complete solutions offering to a set of specific industrial, particularly some of the Fuels & Chemicals applications, but also other M&E applications as well, where we can bring in some of that back filter technology in conjunction with some of our cartridge filter product. And again, the evidence is good. The product is performing. The business is integrating really well. And for the most part, we saw another quarter of kind of what we anticipated. Keeping our eye on things but good leadership, very, very pleased with attitudes and how they want to be part of Pall and live within the company. And I think we are kind of up and running.

Okay. And can I just ask couple follow-ups on the acquisitions, the $17 million that we saw from FSI in the quarter, is that anything special happened in the quarter or is that kind of the run rate that we might expect going forward?

It’s a little lower than one might expect, but I think it’s only a couple million shy. It’s really more about stuff that we shipped in the quarter. It’s going to bounce around, but we are still -- our single-use plan is a…

I just want to be clear there, I think I said FSI?

Yeah, that’s probably -- it’s still maybe a million or so of the run rate but it’s close.

Okay.

Yeah.

Okay. I am sorry just when Larry mentioned single-use I want to make sure that I hadn’t mistakenly said ATMI and $17 million for FSI was up from $15 million in the fourth quarter which looked like a nice increase, but that’s still a couple million below what you had hoped for?

$1 million.

Couple $1 million.

But again it’s -- from a P&L perspective, it’s showing exactly as we would have anticipated in our assumptions going into the acquisition.

Okay. And ATMI about $13 million, I would imagine you would say that’s a little bit below expectation?

It’s slightly below, but again doing extremely well. And that’s why I was going to say our single-use strategy and plans have us committed to a very significant double-digit organic growth rate now that ATMI lapses and we are very confident that we are going to achieve that.

Okay. Then the last one on these, what do you expect in terms of EPS accretion. You mentioned Larry in your prepared remarks I think that these would be currently are dilutive in terms of margins, but in terms of EPS, how much accretion might we expect from the…

The comments were dilutive from an operating margin performance commentary.

Yeah.

So that’s clearly the case. And that’s almost always going to be the case coming into P&L profile like ours. In terms of EPS, we didn’t really say anything too specific about accretion assumptions for the full year, but there is a little bit of accretion in this fiscal year.

Consistent Brian with what we said on the fourth quarter call, no change in the expectation which was less than $0.05 overall, that’s what we said in fourth quarter call.

I know its [indiscernible]. Okay. Thank you very much.

Our next question comes from the line of Derik De Bruin with Bank of America Merrill Lynch.

Hi, good morning.

Hi, Derik.

So in the bioprocess segment, could you talk a little bit about the end market there? And in terms of, is there new capacity coming online to sort of meet the demand for some of the new drugs that are coming out there? I guess just talking about is, are we seeing a build that is more single-use? I am just sort of trying to figure out a market. And I guess how do you see sort of like the [PDL] [ph] and we got the drugs it’s contributing to the growth of that segment going forward?

I think first on the capacity expansion assumptions, they are basically playing out as most of the folks to cover the space would have anticipated and probably as you know. This space is investing both in the classical means for processing so kind of stainless solutions. And we have seen new capacity come online even in the last quarter accordingly which that will continue to be both systems opportunities for our Biopharm group but also traditional consumables for us and single-use, which is growing like crazy. Again, we talked before and I am sure you’ve seen some of these, but in many cases what we are seeing now is the systems are hybrid solutions, where they are taking a portion of the capacity into a single-use format but not all of it, and it’s probably going to be that way for quite sometime. In terms of the categories of drug that are driving the expansion, it’s not so much some of the blockbuster in biotech terms, blockbuster drugs that have been getting so much headline of recent that are really driving today’s numbers. That’s more stuff that layers in over the next couple years and our position is good on many of those therapeutics, some of the statin replacements and some of the cancer drugs.

Great. So I guess, could you talk a little bit more about the M&A environment, you basically got looks like about $7.50 in net cash and just sort of are there other things? I guess sort of evaluations are still high and just sort of talk about the environment.

Evaluations are still high I don’t know that. I don’t know if I can get quite to your $7.50 math, but we’ll certainly tell you the following. And that is, we first and foremost have our focus on the building out of the Life Science space and continuing to acquire there. We don’t need to do so to execute our strategy at this point. It’s really a kind of a return comparison that we do in terms of internal organic investment versus acquisition. Good news is we've got what we need, but if there is a means toward acceleration and that return math can make sense. We’re certainly going to deploy that capital accordingly. And then second, in terms of priority is the opportunistic acquisitions that apply across the portfolio, something again, like an FSI where you get good returns out of those kinds of acquisitions and they are great uses of our capital. And third and probably running a close third right now is our thinking around share repurchase and what make sense given frankly the covenants that we have in the operating model moving forward. So we are continuing to rack and stack them in that respect of order. And what we will for sure do is continue to be good stewards of our shareholders capital.

Yes. Sorry about that, I just got back from Europe and I can’t add. Need more copy. Thanks for the questions. Appreciate it.

You bet. Glad you’re home.

Thanks.

Our next question comes from the line of Isaac Ro with Goldman Sachs.

Good morning, guys. Thank you.

History, Isaac.

Hi. Question on Life Science core growth. Wondering if you could maybe walk us through some of the reasons why you’re raising the core growth guidance a little bit at this point in the year? Wondering if it’s a function of any specific product categories or drug contracts where you think you have better visibility now than you did when you initially gave the guidance?

Well, obviously, the focus is BioPharm, but even outside of BioPharm within Life Sciences and we talked about good order rates generally across the segment. Food and beverage is performing well, arguably better than the market. Medical gets away from some of the drag that was the former blood business induced drag. So we don't have as much in the way of adverse impact to growth rate out of the smaller components. Now on the BioPharm side, we are seeing pretty strong commitments to all what I just mentioned to the two questions. And go to question B, the capacity expansion looks good. The consumption forecast that we’ve got from our existing customers and the newer customers over the last several months appear to be very strong, based on the aggregate of what we see and that’s a global assumpion. We feel good about taking the growth rate, the remainder of the fiscal year assumption up a bit. And it’s not specific to any one drug that's materially moving the needle for us, it’s very broad-based.

And just a follow-up, it’s not necessarily market share either, is that fair?

Well, I’ll let, you kind of get through your math, others report in this space. Is it a fairly transparent space, certainly, we’re growing faster than the space. But we don't believe that there is huge shares -- share taken right now, it's basically incremental performance versus a very attractive space.

I think that’s…

One other point, Isaac, if I may just on the, Larry, talking about the consumables side, I think on System side definitely in Life Sciences we have seen some improvement as well. If you recall, our original guidance was more like Life Sciences systems would be down high-single digits and now we think they’ll be more flattish for the year.

That’s helpful. Thanks Akhil. If I can just maybe sneak in one more for you on CapEx? I know you guys are pretty thrifty, but $10 million there on the quarters, on a low side versus what we’ve seen a last few year? So just want to see if we should assume that kicks up on a quarterly basis over the balance of the year?

I would argue with the acquisition being thrifty, Isaac, just for the record. No I think...

Thoughtful in your spending?

There you go. No, we’re disciplined and we do think the $10 million is low. We do expect CapEx to be a continued healthy spend assumption for the full year.

Got it. Thank you.

Yes.

Our next question comes from the line of Paul Knight with Janney Montgomery Scott.

Good morning.

Hi, Paul.

Was that $300 million share repurchase in the quarter, it seems like it was a very big start for you, if that was the right number?

That’s right. Front loaded, yeah.

What was the though there?

It was a good buy.

Okay. Thank you. The other is, as you, I look at your product line, you’re obviously a leader in the filtration market, fluid management strong product line. What are your thoughts about being in this cell culture media or the purification or the fermentations space? Are those spaces you want to be larger in or even be in?

Well, we are not going to make terribly specific strategic comments on this call. But, certainly, we are in a very natural position, given all of what we do to build out in some of the areas that you just mentioned. And for sure, most of our customers consider us to be a stronger solutions provider and I think, we'll continue to see that trend move in that direction. So short answer is, our aspirations take us into some of those areas.

And then, Larry, about what percent of sales are manufactured here in the U.S.?

It’s pretty proportional to revenue. It’s -- about 30% Akhil?

Yeah. Maybe a little higher -- little higher in some cases.

Low 30’s.

Yeah. Low 30’s, I would say, yeah.

Okay. Thank you.

Sure.

Our next question comes from the line of Jeff Zekauskas with J.P. Morgan.

Good morning. It’s Silka Koopf for Jeff. How are you?

Good. How are you?

I am doing, okay. A couple of questions, regarding the second quarter guidance, so your ideas, you said, sales would be similar to the first quarter and but earnings maybe lower? And I was wondering whether you can explain that, because presumably, there is still just like a benefit from the share buyback picking up because not all of these 3 million or 4 million shares that you bought back, have seen yet flow though? And I would think that probably with the -- you integrate the acquisitions -- the headwinds from the acquisitions will become smaller? So I was wondering, why you thought your earnings in the second quarter should be smaller than in the first?

Great question, Silka. So let me just try and answer that. So first thing is, if you go back and look historically, our gross margin in second quarter is generally lower than first quarter and that’s driven by a fewer number of production days typically in the second quarter, which spans several holiday if you will, right. So we have lower gross margin rate in second quarter due to under absorption, relative under absorption in factories compared to the first quarter. So that's a significant impact about $0.04 to $0.05 worth. The second point is translational FX. As I said earlier, we started to see the impact of that with the currency changes late September, early October, so only one month impact in Q1. We’ll see incremental impact in Q2 assuming rates stay where they are, right. So that’s another couple of pennies, $0.02 to $0.03 impact on translational FX. The third element is on a cost base, we have our merit increases in October. It’s October 1st. So again, you have one month impact in Q1 and full three month impact in Q3 -- Q2. So that’s kind of the reasons why sequentially we stay for the same level of sales. Actually local currency sales are a little higher, so that’s on the positive side. The acquisitions are slightly better not meaningful, but about a penny better than Q1. And so net-net, we still feel we are probably down several pennies.

Marginally.

Okay. How many shares did you buyback in the quarter and even though, you already got into a $300 million goal, do you think you may buyback more?

Well, we had about 3 million shares. If you look at our share count information, you’ll see the decline offset to some extent by the natural increase in share count from stock related -- stock compensation items but about 3 million shares.

And do you think you’ll do more this year?

Well, I think, if you go back to again our guidance at the end of Q4, we had said, we expect to deploy capital of about $700 million consistent with last year. So far if you take the $300 million of share buyback and the $130 million odd so of dividend, that still leaves us with some amount of capital to be deployed, whether in the form of M&A or it could be higher share buyback. It depends on how the year pans out.

I understand. And it excludes capital expenditures?

Yeah. It excludes capital expenditures.

Yeah.

That’s helpful. The last question I have this is, why do think a drop in oil prices is favorable to the Fuels & Chemicals business? And I just want to fundamentally understand it because my view would be that maybe also the utilization rates may slow down if prices drop. And I thought it would be a headwind on the sales side and maybe down the road a benefit to your raw materials, maybe you can explain it to me?

Well, you are not completely off. So the first point here is that we don't really participate all that much upstream in energy. Most of the membrane solutions that are used for filtration upstream really aren’t off the fall type. Downstream, however, as you get into the petrochem applications that’s much closer to our sweet spot. We do quite well without getting into all the specific applications for competitive reasons. Most of those customers who benefit from lower feedstock, lower input price are seeing margin enhancement and some are reinvesting that in the form of capital expansion particularly in the U.S. But we are also seeing a pretty strong performance in the Middle East right now, where the opportunity is for us better, frankly just based on where those customers play downstream in petrochem. The other side of your comment with respect to does that helps us from a Pall P&L perspective and how our supply chain benefits from an inputs improvement, it does help to some slight degree but it is not really a big deal.

If I can ask -- if I can jam like a very last question, the operating margins on the Industrial side, they are very nice. And we saw very nice gross margin expansion also good cost controls. I understand there are currency headwinds, but if you factored all in, including the currency headwinds, do you think that type of operating margin is sustainable or it’s closely sustainable to where you are right now?

Well, let me just -- again, currency is something I don’t think we are in a position to predict necessarily. But if you look at the quarter performance for PI and you look at what we've been able to achieve over the last few years in terms of trajectory, you’re beginning to see on modest growth reasonable improvement at a given period. When you get a little bit of organic help like we did in the first quarter here, just outstanding flow through and hats off to the team because we’ve got P&L in good shape. Now we continue to think that entitlement, if you will, for us and this is again outside of currency elements, that the total company is probably moving in advance of what where our multiyear expectations for pretax being 20%, kind of profile.

That’s very helpful. Thanks very much. I’ll get back into queue.

Our next question comes from the line of Brandon Couillard with Jefferies & Company.

Thanks. Good morning. Larry, with respect to accelerated cost actions, could you elaborate on where those are coming from and perhaps quantify the magnitude? And Akhil, in terms of offsetting the $0.25 headwind from currency, could you help us bridge the factors, the buckets whether it's accelerated buyback, faster cost savings, a little bit better top line, just the moving parts?

I'll play Larry and Akhil can play Akhil. So first in terms of how we think about SG&A, it's really more about leverage than cost reduction. I know, I’ll come back to my prepared remarks but really what we've got now, I think is a nice work structure that we can leverage by way of a little bit of organic growth. Obviously, any bit of help will flow very nicely to the bottom line and what we always produce 70% incremental margins on organic sales, no. But with a little bit cost out opportunity and with good discipline around how we manage the operating model, I think you'll see this company continue to print very impressive incremental margins. On the specific cost out initiatives, the most of these things are elements of what we had already been underway with. It comes down to being more efficient as a team globally and how we go to market, what our structure looks like. And it’s really about just accelerating in a couple areas to get us head of this very adverse FX impact that we are assuming at current rates that kind of adverse impact that you saw us there represent in the prepared remarks. So I’m not going to go into more specific kind of conversation than that on it right now. Akhil?

Yeah. With regard to the map, when for the off setting of $0.25, I think what we feel relatively good about and highly confidence is probably one-third coming from the higher sales expectation as Larry described in the life sciences space. One third of that coming from the acceleration of cost initiatives we just talked about. And the remaining one-third frankly is not a gun deal, it’s not given, but we think we’ll get some benefits from additional capital deployment and/or other ideas that we have. But there is a little bit of element of risk to that full offset of the $0.25 which is why we used the word largely offset $0.25.

Super. And then on the BioPharma side in terms of the organic consumables growth of 12%, any chance you could quantify the timing benefit that we saw in the quarter?

I think, the way to think about it is our full year guidance earlier was mid to high single-digits. We think high single digit is very likely for BioPharma growth now. And that’s probably the number you should think about from modeling purposes. This year’s -- this quarter’s 12% was exceptional due to timing and some easy compares year-over-year. High single-digit is probably more appropriate.

Super. Thank you.

And at this time, we have no further question.

Okay. Well, we want to thank you all for participating. We know that this pre-Thanksgiving slot in the U.S. is a popular one but we do appreciate it. We want to wish all those who are celebrating a very happy Thanksgiving. And we look forward to talking to all of you through the course of the holidays and the New Year. Thank you, Jackie.

Thank you. This concludes today's conference call. You may now disconnect.