Welcome to Pall Corporation's conference call and webcast for the fourth quarter and full year of FY ‘14. Today's call is being recorded and simultaneously webcast. [Operator Instructions] 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 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 of their GAAP counterparts are includes 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.

Good morning and thank you, Christy. All of our remarks this morning will be made on a continuing operations basis. I'm here today with Akhil Johri, our CFO, and Brent Jones, our SVP of Corporate Development and Treasurer. I'll begin by recapping the year, coupled with an update on our operational initiatives. We'll then run through the quarterly and annual numbers and conclude with an assessment of the markets we serve and our FY ‘15 guidance. You and we had big expectations for our fiscal Q4. And as you can see from our press release, we delivered a strong fourth quarter and very solid results for the full year. Revenue was up nearly 12% in the quarter, 10% excluding the benefit of FX translation. And our pro forma EPS for Q4 was a record $1.11, up 23% year over year. For the full year our revenue was up 6% excluding FX. Pro forma EPS of $3.44 was at the high end of our most recent guidance representing growth of 13% of our FY ‘13 and 15% if you exclude translational FX. Before we dive further into the specifics of the quarter though, just a quick summary of what we accomplished in FY ‘14. As you'll recall, we prepared our 2014 plans amid significant macro uncertainty, particularly in the global industrial economies. And frankly, this uncertainty hasn't really abated. In the face of this we presented a plan predicated on strong execution in a slow growth environment, SG&A improvement, and a significant revenue pick up in the second half of the year. And I am pleased to say that we delivered on what we promised. On slide 4 you can see that with the exception of gross margin we met or exceeded every metric. We generated a reasonable top line, very strong incremental margins, and solid free cash flow. I'm very proud of our team for both this achievement itself, as well, though, for the underlying discipline that we are building into our operating culture. Another achievement in FY ‘14 has been our disciplined yet meaningful capital deployment. As you turn to slide 5, you can see that our capital deployment has significantly increased over the past several years. In fact, FY ‘14 represents the Company's highest M&A activity in more than a decade and I fully expect that FY ‘15 we will see total capital deployments similar to or exceeding FY ‘14. Like most global companies, we do face structural challenges with our cash balance, nearly all of it is offshore. However, this doesn't inhibit us from making smart investments. Our deployment priorities have been clear. Internal investment for organic growth and M&A are our top priorities, followed by share repurchase and, finally, modest growth in the dividend. Our M&A apparatus is fully in place with all of the necessary sourcing and integration talent. We have clear strategies for each of the markets that we serve and we are deploying capital to those that enhance our portfolio. And our capital allocation will reflect that strategy and generally increase with both the capability and capacity that we are building. Again, we don't do deals for the sake of doing deals. Our intention is to continue to build a very high-quality growth company in the end markets that we serve today. Our acquisition focus for 2015 remains the same, a 2-pronged approach based on, A, high-growth Life Sciences properties on the one hand, and, B, short-term accretive Industrial bolt-ons on the other. Turning to operations, just a quick update on where we've come in our journey to date with regard to operational excellence. This journey began with our ERP implementation and continues on a daily basis across the Company. A culture of ongoing improvement is beginning to take hold, and we're seeing it on a quarterly basis in terms of productivity gains and indirect cost reduction. On the factory floor we've made significant gains in how we manage the high mix nature of our business, with some sites making great strides in terms of velocity through the system. In the fourth quarter, I'd like to particularly acknowledge the great performance of those sites that helped us overcome some temporary customer service and productivity issues at our Cortland, New York location. Generally, though, we've made really good progress with regard to our initiatives and strategic sourcing, supply chain, order and demand management, and the list goes on. And while I'm pleased with what we've accomplished we still have significant room to improve in meeting our customers high expectations. On the cost side – and I mean largely SG&A associated expense – we continue to make solid progress. SG&A was down 135 basis points in FY ‘14 and is down nearly 250 basis points since FY ‘12. We expect another 100 basis points reduction next year, largely associated with growth while leveraging our improved fixed cost structure. The bottom line, with even modest top line growth we're positioned to print solid incremental margins and generate meaningful free cash flow. So with that, I'm going to dive more so into the results. We're on Slide 6. Again, excluding FX, sales were up 10% in the quarter and 6% for the full year. Gross margin in the quarter decline about 45 basis points, principally due to adverse transactional FX and dilutive M&A impact, including $5.3 million from purchase accounting-related inventory step-up adjustments from the ATMI Life Sciences and FSI acquisitions. For the full year, gross margin was down 70 basis points. SG&A as a percent of sales was down about 135 basis points in the quarter and 140 basis points for the full year. All-in, operating margin was 19.8% in the quarter, up 100 basis points from a year ago. For the full year, operating margin improved 60 basis points to 18.3%, including nearly 30 basis points of adverse impact from the inventory step-up accounting I just mentioned. While impacting the gross margin and operating margin, this is adjusted out of pro forma earnings. So, pro forma earnings per share in the quarter of $1.11 represents an increase of $0.21 or 23% compared to last year. And bridging this increase, operating profit contributed $0.18, the impact of the share count reduction and other items contributed $0.01 in the aggregate, translational FX or the impact that's associated with consolidating our foreign operations was a $0.02 benefit. For the full year pro forma earnings per share were $3.44, an increase of $0.40 or 13%. Bridging this increase, operating profit contributed $0.39, the impact of share count reduction and other items contributed $0.06 in the aggregate, and translational FX was a $0.05 headwind. One of the most satisfying aspects of our FY ‘14 performance, though, was the solid incremental margins we generated. While our reported incremental margins – and that is the change in the operating profit divided by the change in sales – were 30% for the year, organic incremental margins – that's excluding the adverse impact of the strategic but dilutive M&A activity – were greater than 70%. This clearly demonstrates the inherent strength of our core business but also our disciplined operating execution. And now I'm going to hand it over to Akhil who will go through the results in more detail.

Thanks, Larry. I'm on slide 7. As noted, I will talk to the year-over-year changes excluding FX. Life Sciences sales grew by 14% in the quarter, while Industrial sales were up 6%. Consumables, which represented 88% of the sales in the quarter, grew 15% overall. Life Sciences consumables grew 17%, while Industrial consumables were up 14%, both benefiting from recent acquisitions. Consistent with what we communicated at the Q3 call, system sales were down 16% overall, with Life Sciences down 4%, while Industrial, which comprises a larger share of our systems business, declined 22%. For the full year, sales grew by 11% in Life Sciences and 1% in Industrial. Consumables, which were about 88% of the sales in the year, grew 10% in Life Sciences and 3% in Industrial. In total, systems were down 1%. Turning to slide 8, with some details on our Life Sciences segment, biopharm consumable sales grew 22% in the quarter and 12% for the year on overall market strength and the benefit of acquisitions. Medical consumables grew 4% in the quarter and 7% for the year. This reflects the benefit from Medistad, our recent acquisition in this space, partly offset by lower blood media sales. Finally, consumable sales in food and beverage were up 8% in the quarter and 6% for the year on growth in all 3 regions. Life Sciences systems sales decreased 4% in the quarter from the timing of food and beverage projects, partly offset by increased biopharm spend. For the year, system sales grew 13% on higher value of biopharm and food and beverage capital projects. On the order side, consumables increased 12%, with all markets up compared to last year. Biopharm orders were particularly strong. Systems orders increased 26% in the quarter. Turning to margins, Q4 segment gross margin decreased 110 basis points to 55.7%, largely due to the dilutive impact of the ATMI and Medistad acquisitions, including the purchase accounting-related inventory step-up adjustment Larry mentioned and adverse transactional FX. These factors were partly offset by a favorable market mix and improved pricing. Segment reported SG&A declined 190 basis points, while R&D spend was down 40 basis points. The combination of these factors resulted in segment margin of 25.4%, a 120 basis point increase from a year ago. For the year, Life Sciences segment margin increased 20 basis points to 24.6%. Turning to the Industrial segment on slide 9, process consumable sales were up 14% in the quarter, driven by mid single-digit organic growth in fuels and chemicals and machinery and equipment sales, plus the benefit from our recent acquisition of FSI. For the full year, process consumables were flat including the benefit of FSI revenues. Aerospace consumables sales increased 17% in the quarter, as expected, largely due to the timing of shipments. Commercial and military were up similarly. For the year, aerospace consumable sales decreased slightly largely due to significant after-market sales and helicopter program shipments in FY ‘13 that did not repeat this year in FY ‘14. MicroE consumable sales grew 9% in the quarter and 14% for the year on continued end market strength and new business wins. System sales decreased 22% in the quarter and 8% for the year mainly due to fewer fuels and chemicals projects. Consumables orders were up 2% in the quarter due to the FSI acquisition. On an organic basis MicroE orders were up mid single digits, and fuels and chemicals orders were up low single digits, while other markets were down, indicating the continuing uncertainty in the industrial economy, particularly in Europe. Systems orders were up 8% in the quarter. Turning to margins. Q4 segment gross margin decreased 20 basis points to 46.1%. This is largely due to the dilutive impact of the FSI acquisition including purchase accounting-related inventory step-up adjustment. This was largely offset by a higher mix of consumables, improved margins on systems, and improved pricing generally. Segment reported SG&A declined 20 basis points while R&D spend increased 10 basis points. All-in, segment margin for the quarter declined by 10 basis points to 18.7%. For the year, Industrial segment margin increased 40 basis points to 16.4%. Turning to slide 10, operating cash flow in the year was $504 million compared to $384 million last year, an increase of 31%. This increase was driven by both improved working capital management in FY ‘14, particularly on the receivable side, and one-time tax payments that reduced FY ‘13's cash flow. CapEx was $75 million, down over 30% from prior year. As a result, free cash flow was $429 million or 118% of reported net income, substantially above our goal of 100% free cash flow conversion for the full year. Significant uses of cash during the year included $319 million of acquisitions, $119 million of dividend payments and $250 million of share repurchase. Finally, on the liquidity front, our cash position stood at about $964 million as of July 31. Our cash position net of debt was $75 million compared to $299 million as of the end of FY ‘13. Our free cash flow generation story continues to improve due to a combination of increased operating cash flow on the one hand and very disciplined capital spend on the other. We are continuing to institutionalize the processes and the mindset that will enable free cash flow conversion of greater than 100% of net income consistently in the future. Let me turn it back to Larry for his concluding remarks and what you are primarily interested, a discussion of the FY ‘15 outlook.

Thanks, Akhil. Let's turn to slide 11 for an overview of our FY ‘15 outlook. We spent less time today than has been customary talking about the macro backdrop because the external environment really hasn't changed all that substantially. Our macro trends assumptions remain consistent. Global growth is muted. Capacity expansion-related capital spend is soft. And the emerging world is rapidly shifting from infrastructure driven to consumer-focused consumptions. With this as a background you can see our thoughts on FY ‘15. We expect our total revenue growth rate in the mid to high single digits, with organic growth rate of low to mid single digits. Obviously if organic growth inches up a bit though we'll flow through very well. In terms of total segment performance and this includes acquired revenue, we expect Life Sciences to continue its strong growth trajectory with mid to high single-digit growth. We anticipate some end market choppiness but our improved sales execution and significant help from the FSI acquisition will enable Industrial to grow in the mid to high single-digit range. And with respect to the P&L we believe that gross margin should be flat to 20 basis points better in 2015, and SG&A should again improve by around 100 basis points. So, all-in, operating margins should rise by about 100 basis points. Our effective tax rate will likely rise to 23%, primarily due to the expected geographic mix of FY ‘15 earnings and the absence of the benefit from the US tax extenders including the R&D tax credit. And this will create some headwind below the line. Overall we expect pro forma EPS in the $3.75 to $3.95 range, reflecting 9% to 15% growth over a solid 2014. And given our top-line assumptions, this represents incremental profit margins of 35% to 40% on the whole, including the impact of the acquisitions. In terms of quarterly performance we expect more consistent year-over-year earnings growth. And that's assuming our general FX planning assumptions largely hold. So, in summary the theme is consistent. It's delivering results in a somewhat challenging top-line environment. It's what we did in 2014 and what we intend to do in 2015. Given the operational improvements we've seen, the strong and improving sales execution across our businesses and our continued focus on fixed cost leverage, I'm confident in our ability to deliver double-digit pro forma earnings growth for FY ‘15. So with that, Christy we're going to open the line for questions.

Thank you. [Operator Instructions] Your first question comes from Richard Eastman of Robert W. Baird.

Good morning. Nice results and very good outlook, as well. Just a couple things. On Pall Industrial you made some comments during your presentation, as well as maybe the numbers in the presentation, but it looked like systems orders were not bad for the fourth quarter, up 8%. And I think there was some commentary that in the quarter pricing on the system side in Pall Industrial was better, as well. Is there any turn there? Do you have any conviction or confidence that maybe that side of the business is turning a little bit and prospects are a bit better?

It's consistent, Rick, with what we've been saying for quite a few quarters, and it's 2 things, really. One, a focus on those systems that contribute the annuity stream for us, but that also are at threshold gross margin rates that we like. And then, two, it's the mix. That's the market mix of the systems that we're chasing. So, what you see year over year is, from an end market perspective, more attractive systems mix that's playing out there. That's our assumption, to some degree, going forward. If you think about 2015 – and we didn't call it out in this level of specificity – we do see a slightly inching up of the systems content which will have a very slight adverse impact to margin. But I still think you model us in total for the Company for systems to be around that 12% of sales that we've been talking about, and that the quality of those systems – that is, the margin that we assume in the annuity stream that comes from that 12% – is better as we go.

So, if I carry that thought on the systems side to the overall 2015 outlook, if we have that organic growth number as low to mid single digit for fall, it should be the assumption, perhaps, that the consumables grow at that mid to high single digit range is a swing factor on the revenue still probably the systems piece?

The systems will always swing factor, to your point, in a quarter especially. And, again, the systems are somewhat difficult for us to program in, particularly on the order side. They do tend to get pushed and pulled, to some degree – more pushed over the last year and a half than pulled in.

And, Rick, if I may just add, while the orders were encouraging in terms of year-over-year growth, the book-to-bill was still 0.87 for Industrial. That is the variability in the outlook because we do still hear about some capital projects being pushed out. So, while it is slightly better, that is truly, as you pointed out, probably the open question about the outlook.

Yes. And then just last follow-up here and I'll jump out, but Pall Life Sciences in Asia was pretty modest growth, maybe decelerated a bit from where it had been running. Is that timing or is there anything there that maybe has decelerated on a more near-term basis?

No, the biggest thing you've got in terms of organic sales performance for Asia is really just it is a tough comp against the systems performance last year on the Industrial side, which is largely water and 2 fuels and chemicals systems applications. But if you look at that consumable growth rate in Asia, and we look at the activity on obviously a very granular basis for Asia, we're doing well and we have nice assumptions built in. That's both mature and emerging Asia for how we think about 2015.

Okay, very good, thank you.

Thank you. Your next question comes from Hamzah Mazari of Credit Suisse.

Good morning. Thank you. Larry, you spoke about a capital allocation plan similar to FY ‘14. Just curious how you think about currently your ability to potentially enhance the portfolio by adding a third leg to the business, and your capability to integrate a large asset versus what you're doing right now which is largely bolt-ons and properties close to the current product line. Any comments there would be helpful.

Sure, Hamzah. I would tell you that the strategic thinking begins with we believe we operate in a set of end markets that are attractive on a relative basis to almost anything out there, and then particularly in the world of filtration or separation science that we've got an expertise that's unmatched by anyone out there. There's a fair amount to do there just given our market share position organically but also close to home acquisitively that is by far our first priority and our area for capital investment for sure for the short term. We intend to build by far the most compelling value proposition pretty close to that space that we operate in. As we go forward, we certainly have built the team, we have the capability, we're getting there in terms of our operations aptitude, we might consider things a little further from that core. But right now, just given share position, opportunity, organic attractiveness, it frankly makes sense for us to continue to do what we are doing. And I would tell you that, as we mentioned in the prepared remarks, Hamzah, this 2-pronged approach really makes good sense given the current M&A environment. If you look at where we are today, you've got pretty high multiples for properties around the world. We're going to continue to make those key strategic investments that drive particularly the biopharm business. That is a fabulous business model, as we all know. And we're going to probably continue to pay fairly expensive transaction prices for that. So, in the short term, while those are high growth adds to the model, they are going to be an overall headwind to the very short-term EPS calculation. On the other side, that other prong, what is nice in terms of the offset is that we get some immediate return out of the Industrial acquisitions that we pursue. So, if you think about the shareholder perspective I think from both a short- and long-term return, we managed to accomplish both. And we can do so on the Industrial side in a relatively low risk fashion that gives, I think, a nice blended return for both short- and long-term sake.

Very helpful. And just to follow-up, and I'll turn it over, has there been any change in thinking as to the Company's go-to-market strategy? Specifically, should you be pushing more product through the distribution channel versus direct, just given the high re-occurring revenue base? Or does healthcare really need a direct touch point? Any change in thinking there?

Within each country, within each geographic sub segment conversation there's really not a blanket statement that applies. We still have and will have indirect channels to market where it makes sense for both the Industrial and Life Sciences businesses, more so Industrial. For sure the technical content of our products only continues to increase. And we certainly benefit and differentiate better where we have direct touch. So, where we get critical mass we do tend to see better organic growth rates by way of having direct touch. And you've seen us do well in the emerging world where we've moved to direct channels to market in almost every case. We don't talk too specifically about those relative channel structures but they always will apply to one degree or another. And with technical content continually increasing we'll continue to certainly emphasize the direct approach.

Great, thanks a lot.

Your next question comes from Brian Drab of William Blair.

Good morning. Congratulations on the great results. Can you comment at all on potential for accretion from either ATMI or Filter Specialists as we head into 2015? And with ATMI, have we reached the point where that one is contributing to profit?

Let me start with, both ATMI and FSI are doing very well. We're very pleased with the teams, the leadership. We're seeing results that are slightly ahead of plan for both. We have high 2015 expectations for them. But in the blend or the aggregate of the 2, we'll see some contribution in 2015 that will be less than $0.05. And we're well along the path strategically of what we wanted to accomplish with ATMI and what it brings to the portfolio for our single-use technology buildout. And FSI is allowing us to bring Pall product into some new end market applications that we didn't, frankly, have enough girth, enough opportunity to go organically and conquer. And also on the other side of the realm, we expect Pall sales opportunities to pull through FSI product, which we're beginning to see the very tip of. So, we're pleased. Those acquisitions are playing out just a little bit better than what we anticipated and will return quite nicely.

Okay, great. And then can you comment at all – you commented on the translational FX impact that you expect in 2015 – at this point what does it look like in terms of transactional FX?

Yes, there will be a bit of headwind from transactional headed into 2015. It largely depends on how the rates swing around. And as we all know, even just the last few days, we've seen quite a bit of volatility in global currency. But at our planning rate assumption I think there's about 40 bps of headwind. Is that about right, Akhil?

Yes, I think it's largely, Brian, as we've talked, on the euro-pound equation, which started to change with pound strengthening far more than the euro in the third quarter of this year. So, we'll definitely have the impact of that in the first half of next year.

Okay, great. And if I could just ask one more. In the past, order growth has been not the best leading indicator, at least given people some trouble modeling revenue growth just given the mix of systems and consumables in the past and some of the trimming that you've done of systems even more recently. But at this point should we be able to look at order growth in a particular quarter and get a better sense for what revenue growth will be in the following quarter?

We still have a pretty broad range, Brian, of the book-to-ship assumptions that play out. Generally we've got a good order book right now. Big backlog improvement year over year from the Life Sciences side, not quite as strong on the Industrial side. But we believe that we're set up pretty nicely to support the guidance that we mentioned for 2015.

Okay, thanks very much.

Your next question comes from Paul Knight of Janney Montgomery.

Good morning. You had mentioned ATMI seemed to be progressing. If you looked where you are today versus one year ago the single-use market, what's your change in comfort level and how much further do you think you need to go? I'd love to get color there.

Sure. The single-use market is playing out as we anticipated. There are a handful of players globally that have the portfolio to play. So, it does come down to solid execution in terms of continuing to position the product to work altogether nicely as a system or family. We've got a little work to do there but picking up on great momentum that was established largely at ATMI, but also by way of a smaller acquisition we did in Medistad about a year ago. Our organic – so, pre those acquisitions – single-use products continue to do very well. If you look at how we stand now relative to the rest of the competitive base, I think we're in demonstrably better shape. And we've got a great deal of horsepower that we can work forward. We expect that single use will grow at a substantially higher rate than the core or stainless biopharm approach to those same applications, but that that core or base growth rate remains very healthy, extremely healthy, for quite a number of years to come. The biggest challenge is – and this is what's front and center for our team, that includes ATMI leadership of our organic single-use products now – is to make sure that we build out that family, and that we can generate very high quality – that means very high profit margins – single-use opportunities for the future. We're well along that path. As I said, we're really pleased with the progress to date.

And then last, Larry, on the aerospace market, seems to have shown a dramatic improvement in growth versus the last quarter. What's happening there? Is it comps? Is it the budget is finally getting spent again? What's your feeling on that end market?

No, the aerospace market in a given quarter is really a lumpy conversation. It's a consumables business but it ships per project and you tend to see lumpiness in both the order and the sales book. We expect modest growth for 2015 all-in over 2014, but I wouldn't draw on any real large macro conclusions around what's happening there on the blend of commercial and military. It's pretty consistent with what we've talked before about, Paul.

Okay, thank you.

Your next question comes from Isaac Ro of Goldman Sachs.

Good morning guys, thanks. On the biopharma business I want to talk a little bit about the broader context around some of the new drug launches we've seen, both large molecule and vaccine. There's been some pretty sizeable launches that are doing well. And wondering if you can give us a sense of how you think that will impact your business maybe on a sequential basis over the next few quarters. Any reason to think that could be above trend as some of these products really start to become meaningful?

We're not going to get into specific customers or specific customers products, but let's just put it in the simple context that we're participating nicely of what we believe to be at least market growth rate opportunities for 2015 and beyond. And that means good content in the right places with the right customers. Would we love to have more? Absolutely, Isaac. For sure that's the charter right now to the biopharm team. But doing very well globally. And, again, back to the prior question, doing well in both the stainless traditional system side as well as the single-use side.

Great. And just to follow-up on gross margin, I think if we wind back the clock 12 months ago you called for a slight improvement this year. We obviously had some transactional FX issues that hopefully will normalize here. So, as we look at the gross margin guidance you've given us for next year, can you just maybe give us a little more color as to what's baked in there? I'm assuming, of course, a normalized FX assumption. But beyond that just wondering what the moving parts are that will drive the improvement. Thank you.

Sure. I think pricing is a big part of where the improvement is going to come from, Isaac, next year. Also, we do get a little bit of benefit from improving mix, if you will, within certain of our markets. Like, the growth in the biopharm consumables continues to grow at a fast pace, which is generally helpful for us from a margin point of view. So, I think it's pricing, it's a little bit of a mix, and it's a little absence of the step-up amortization from this year. On the negative side, we do have pressure, as Larry mentioned earlier, from transaction FX into next year. We also have a little bit of headwind from the dilutive impact of the 7 months of lower gross margin acquisitions. ATMI and FSI, as you know, come with lower gross margins. So the net-net is zero to 20 basis points up for next year.

Got it. Thanks a bunch.

Thank you. Your next question comes from Derek Brown of Bank of America.

Hi, good morning. Can you give us a little bit more guidance on the organic growth expectations for the inter-segment, a little bit more color on what you're looking for specifically in biopharm and medical, food, just a little help in modeling?

Yes. To give you a little more help anyway, we expect certainly mid to high single digit, as we said, in total for Life Science. What you've got within that is biopharm is mid to high single digits. Medical is in the low single digit range. And we expect food and beverage to be mid single digits. Systems will be down.

Systems for Life Sciences will be down next year but it's a very small portion of the total, as you know.

On the Industrial side, organically you've got low to mid single digit. That's with consumables in the low single-digit range. And that assumes process low single-digit arrow, the same, as I mentioned earlier. Probably low to mid single digit on MicroE, with continued opportunities there for new wins. And then high growth on the systems side for PI.

Great, very helpful. Larry, when you came in, you put a new emphasis on R&D investment across the different segments. Can you give us a little sense on your R&D productivity and vitality index, what percentage of sales are coming from new products that have come onboard that have come at us are likely through this R&D push?

Sure. As you know, we've increased our spend in R&D dramatically. And in the quarter, the fourth quarter, you saw it level off. Our assumptions for 2015 are, on a rate basis, pretty much the same as what you've seen. So 2015 is the same as 2014. We are getting much better productivity out of that. I still think there's a long way to go. In terms of vitality we haven't really quoted that externally yet, Derek. And, frankly, that's because it was below what was necessary for us to be proud of. But we made huge increases, huge gains in 2014, which we're very pleased with. And some of the new products, both Life Science and Industrial, are off to great starts. So, without getting into the gory details we're seeing nice increases in vitality both sides of the house. Now, I think in 2015, without getting quantitative for you, what we're going to see is a little bit of roll off toward the end of 2015, beginning of 2016 on a couple of those families that qualify as what were new products. So, that rate will probably level off for a period of time. But in terms of relative health, vitality across the portfolio, I'm very pleased with what we're seeing out of that R&D productivity.

Great. And then just one final one. It looks like the M&A expectation for the overall business is around the 3.5%, 4% range of contribution to growth?

Yes, that's about right.

Great. Thank you very much.

Today's final question comes from Brandon Couillard of Jefferies.

Thanks, good morning. Larry or Akhil, with respect to 2015, could you quantify what your expectations are for the incremental organic margin? And, if you could, quantify the structural cost savings that were captured in 2014, and what's baked into the 2015 outlook.

Yes. In broad terms, as I said in the prepared remarks, we've done a chunk of heavy lifting. Not to say that we don't think that there's room to move to optimize our SG&A structure. But a lot of what you see playing out in 2015 is really the sales volume leverage over the improved cost structure initiatives already taking place and playing their way into 2015. So, in simple math terms, the work that we've done that applies to 2015 in terms of savings offsets the inflation that you would normally see from SG&A in any given year. And then we get the sales leverage on that fixed cost structure for 2015. The nice thing, and you step back and look at how the P&L is shaping up it's really in a nice form now. We're seeing great productivity capability, great core growth capability that flows through very nicely and is allowing us, frankly, to make the investment in what are naturally dilutive M&A opportunities and still print overall very nice results. P&L is a little bit ahead of the balance sheet at this point. I think we would all agree with that. But I'm pleased with what we've accomplished so far and there's still room to go in terms of how we leverage the SG&A structure. And, also, we continue to improve upon it as the next couple years play out.

Thanks. And then on the order side, Akhil, maybe I missed this, but could you break out the organic order trend in the fourth quarter, and particularly within the process and tech business overall. I think you mentioned fuels and chemicals but how was that segment overall in the fourth quarter in terms of orders?

Overall, organically, if you exclude aerospace which, as Larry talked about, is lumpy quarter to quarter, aerospace was down significantly in terms of orders in the current quarter, again timing of particular projects. Rest of the PI on consumables side was flattish, excluding the aerospace business. Within that, fuels and chemicals was up, MicroE is up, and some of the other markets, particularly water and power gen, down.

Super. And last one, Akhil, on the cash flow side, CapEx below depreciation for the first time in recent memory last year. How should we think about CapEx and operating cash flow for 2015?

I think our focus is going to be, as we have said many times, Larry has mentioned, to try and keep CapEx within depreciation. So, that would say that we expect something like $90 million to $100 million of CapEx in the current year. There is still a lot of opportunity from an operating cash flow point of view on both the DSO, DPO, and, frankly, more than 2 just even on the DIO side. We had significant improvement this year. We saw our DSOs improve by 3 days and DIOs, the days of inventory outstanding, by 5 days. Not enough progress on the supplier side, on the payables side, so there is still room to grow there. So, we feel very good about our guidance of being able to achieve more than 100% of net income for free cash flow.

Super, thank you.

We have no further questions at this time. I'll hand the floor back over to management for any further or closing remarks.

Okay, Christy, thank you. I'd certainly like to thank everyone for joining. I'd like to particularly thank the team, the Pall team, for executing a great year in 2014. We've got, I think, a very clear set of priorities for 2015 as we're already headed into our year. We look forward to speaking to all of you on the call again a quarter from now. And with that we'll end the call, Christy.

Thank you. This does conclude today's Pall Corporation conference call. You may now disconnect.