Good day and welcome to the Entegris First Quarter 2011 Earnings Release Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Steve Cantor, Vice President of Corporate Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining our call. Earlier today, we announced the financial results for our first quarter ended April 2, 2011. You can access a copy of our press release on our website, www.entegris.com. Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements. These statements involve a number of risks and uncertainties, which are outlined in detail in our reports and filings with the SEC. On this call, we will also refer to non-GAAP financial measures as defined by the SEC in Regulation G. You can find a reconciliation table in today’s press release, as well as on our website. On the call today are Gideon Argov, President and CEO; Bertrand Loy, Chief Operating Officer; and Gregory Graves, Chief Financial Officer. Gideon will now begin the call.

Thank you, Steve, and good morning. Thanks for joining the call. We are very pleased with the results of the first quarter. We achieved record level sales of $203 million, our eighth consecutive quarter of growth. Our adjusted operating margin expanded to nearly 20% in line with our operating model and we have continuing momentum across our business thus far, in the second quarter. Our semiconductor revenues, which accounted for 74% of total Q1 sales, grew 12% from the fourth quarter of last year. Production across the industry remain high as new fab construction and capital investments in 28-nanometer process manufacturing capability at leading foundries and device manufacturers continued at a solid pace. We also had good performance in markets adjacent to the semiconductor industry. Sales to these markets grew 10% sequentially and accounted for 26% of our total first quarter sales. This reflected growth in TFT/LCD, as well as high-tech industrial sales and continued steady growth in emerging markets including our Solar business. However, these numbers don't tell the entire story. Our results this quarter are further evidenced with the growth strategies we've put in place over the past 3 years are producing results. Our unit-driven sales grew 8% sequentially in the quarter. While industry wafer start data is not yet available for Q1, through the year end of 2010, our sales of unit-driven products to semiconductor customers had grown faster than wafer starts for each of the past 7 quarters, this demonstrates there are strategies to grow market share in a number of product areas such as filtration and 300-millimeter wafers shippers are achieving real share gains. Our CapEx sales were even stronger, up 17% from the fourth quarter reflecting greater demand for our fluid handling solutions used in new fab construction and new tool installation as well…

Thank you, Gideon. Good morning, everyone. Before reviewing our Q1 results, I want to remind everyone that we are holding an analyst meeting on May 12, New York City. The meeting will focus on a number of our key technologies that are driving our growth and market share gain. If you're interested in attending, and I hope many of you will, please contact Steve Cantor here at Entegris. I'm pleased with our financial results for the first quarter. The strong revenue performance demonstrates the momentum of our growth initiatives. In addition to the excellent revenue performance, we continue to execute against our target operating model. Q1 sales of $203 million were up 12% from Q4 and reflected growth across all regions in all divisions. In Asia, our largest region, sales grew 12% sequentially. Europe and North America were up 20% and 13%, respectively. And Japan, in the face of a very difficult circumstances, was up 2%. The unit CapEx mix in the quarter was 61% to 39%. First quarter gross margin was up 43.5%. Gross margin in the quarter was negatively impacted primarily by low factory utilization at the end of 2010, which resulted at higher valued inventory flowing through cost of sales early in Q1. To a lesser extent, the gross margin reflected costs associated with the ramp of new product manufacturing that we had discussed in our Q4 earnings call. Gross margin actually improved steadily through the quarter and the margin rate in March was over 45%, which is about the level we would expect to see in Q2. Q1 operating expenses of $48 million were in line with our guidance and consistent with our target model. R&D expense was $12.5 million or up $1.5 million from Q4. During the quarter, we continued to make significant investments in…

[Operator Instructions] Your first question comes from the line of Christian Schwab from Craig-Hallum Capital Group.

Congratulations on a good quarter. It appears you have attained you're roughly $1 in earnings power that you highlighted previously at -- in Analyst Day for 2012 and seemed to be on track for that a year ahead of expectations. Given the new initiatives in growth areas outside your previous core competency, are you prepared to outline another stretch target goal or is that something maybe we'll hear about in a few weeks?

Christian, this is Greg. What I would say is we're committed to continuing to achieve our target model and we've done it for the last 8 to 10 quarters. And we're focused on -- as the revenue continues to grow, continuing to improve the operating leverage of the business. As it relates to our growth initiatives, I wouldn't say we plan to roll anything new out in a couple of weeks but we continue to remain steadfast in our efforts to gain share in our core markets and deliver in our new markets.

That's fair. Regarding the well-improved balance sheet over the last 2.5 half years, is there any corporate initiatives for what to do with that cash, either add-on acquisitions or just beef that back up to get into a very comfortable range again?

Christian, this is Gideon. I think the latter. At this point, we're very comfortable building that cash over the next few quarters. And at some point, we will be talking about new initiatives. But right now, we feel that it's appropriate and prudent to build up our cash position additionally from what it is today.

Great. No other questions. Thanks, guys.

Thank you.

Your next question comes from the line of Tim Arcuri from Citi.

Good morning, this is Wenge for Tim. A couple of questions. Bertrand mentioned about some push outs in the premium side, I just want to hear from your capital equipment business, what have you seen in terms of push outs and in which sectors? And how long do you think those can last at this point?

Wenge, this Bertrand. As of right now, we have not seen actually any meaningful push outs and that clearly didn't impact our business in Q1, and we don't expect any -- we're not aware of any push outs that would impact our Q2 results at this point. Our CapEx sales grew 17% in Q1, which is a record quarter for fluid handling and our wafer carrier business. We are very well positioned on all of the new major fab under construction and we've made some additional progress in terms of design wins in some major OEM platforms. So I think that we have a lot of momentum. We have a lot of momentum in Q1 and I would expect this positive momentum to continue going into Q2.

So you expect capital [indiscernible] sales to continue to go up in Q2, is that what he said?

What we're saying is we've been taking share and as a result of that, we do expect our CapEx business to remain fairly steady going into Q2.

Okay. In terms of the wafer start outlook, Q1 based on off some of your peers' comment, Q1 definitely is stronger than seasonal. What is the -- for the wafer starts in Q2 and any kind of visibility on the second half?

Well, Wenge, we have limited visibility. I would say Q1, our sense is that we saw moderate growth in the wafer starts. The key in our world is I think, we grew our consumer revenue more rapidly than wafer starts and we've done that for several quarters and expect to do that in Q2 as well. I would expect to see some further wafer start growth in Q2 but I would characterize that as moderate as well.

And what about second half?

We don't have visibility in the second half. In the normal course of business, we don't really see wafer growth prediction. We don't have that capability to predict wafer growth 6 and 9 months out.

Okay. My last question, the revenue has hit above 200 levels, so your target of $1 billion overall revenue, is much closer than in the last year. So I just want to understand the revenue growth, how much is it from your market share gains? And how much -- does it come from the new product contributions?

Wenge, I would say it's a mix. If you look clearly, in the quarter with the 8% growth on the unit side of our business and 17% growth on the capital side of our business. I mean, we feel like we're growing faster than the market overall, which would imply that we're gaining share. If you look at our new market initiatives, we don't break them out individually. But I will say when you take them collectively, the new market initiatives grew substantially faster than the company's overall revenue. So we feel good about both the share gains as well as the new market initiatives.

Understand. Just on that question a little bit further, do you see any new products that's not contributing to the revenue right now that could have some breakout results in the coming quarters?

What I would say to you is this, Wenge. As we look out into the next few quarters, we're going to see the results of the continued investment that we've made in a series of what we believe are going to be sort of market-leading platforms in a number of different areas in our business. And many of those are going to gain traction and they are beginning to, as a function of the geometry shrink, the 28 nanometers and below. In other words, the difficulty of controlling microcontamination as Moore's Law advances and as geometry shrinks, and we now are seeing obviously fabs being constructed with 28-nanometer technology and below, really brings our strengths into play. And those strengths are strong material science background, which creates these products, the process knowledge, the list to supply them and the ability to serve a global customer base. Frankly, that combination and the products that we have now in the marketplace are going to play well over the next few quarters given that reality.

That's very helpful. Just allow me to add 1 last question. With the situation in Japan, do you actually gain any market share versus some of your competitors in Japan in light of some of the supply constraints there?

Wenge, I think that the overall impact of the Japan situation for us has been neutral. I think that in some cases, we may have benefited from the inability of certain of our competitors to supply products. But at the same time, some of our customers were shut down for a period of time. So if what you're trying to do is gauge the overall impact of the Japanese situation on our Q1 results, I would say it would probably a net neutral.

Great. Thanks.

Your next question comes from the line of Krish Sankar from Bank of America Merrill Lynch.

Yes. Thanks a lot and congratulations, guys, on your first $200 million-plus quarter. I have a few questions. Number 1, in terms of your units business, so looking at it I mean, clearly you've outgrown the industry, but if I'm right, the way you described the units is really not correlated exactly to wafer start, it’s more consumables which get reused or like have to have a lifetime of less than 18 months, right? So is it fair enough to assume, like correlated to wafer starts, to figure out the run rate going forward?

Yes. Well, Krish, this is Steve Cantor. What we do is we actually track our semiconductor-related revenues to wafer starts and you're right, it's not a perfect correlation. But directionally over time, it's proven to be quite accurate. And for the most part, those products are driven by production levels. So the more production in the fab and the higher the utilization rate generally the higher demand for these products.

Got it. Okay.

Just to follow on that, Krish. You're right to say, on a quarter-to-quarter basis, the correlation is not going be perfect. I mean, when you look at it over time, over the course of the year or several years, that correlation is going to be better, much better.

Fair enough. Alright. And then when I look at your Specialty Materials business, clearly seems to have quite a tremendous operating leverage. And how do you think about the revenues going forward in the division? And incremental like margins that you get on that, is it driven by the core industrial side or is it driven by the ion implant side?

I'll comment on the margins, Krish, and then I'll ask for Bertrand to comment on the revenue going forward. With regard to the margins, I'm glad you noted exactly what we've been telling people all the way along. We’ve said, “This is a business where we're investing more in new business initiatives than our other business on a relative basis.” And so the business does have substantial operating leverage and you saw that this quarter. I mean we’re very pleased with both the margin and our overall operating performance of that business. As we move through the year, we'd expect to continue to see favorable trends from an operating performance perspective. As it relates to the revenue, I'll let Bertrand comment what we see for the balance of the year.

So Krish, you're right. I think we had 2 measure of success that we wanted to deliver for ESMD. 1 was bottom line improvement and Greg addressed that and we're very pleased with the results in Q1. The second thing that we needed to demonstrate was the overall growth potential of that business. And we're very pleased with the results in Q1. I think it's fair to say that the business really fired on all cylinders in Q1. So the growth is not attributable to 1 particular product line. We're pleased with the performance of our protein products [ph] with applications in ion implants, as you know, but we also saw some real momentum in our graphite products and silicon carbide products with applications in the industrial markets but also in our semi -- core-semi-markets. So I think it was really across-the-board good performance for this division.

At this state, do you assume that this run rate will continue through the year?

Well, I would say that as of right now and based on the current bookings, the year looks very promising.

Got it. Alright. And then, final question for Greg. I understand that probably again like a onetime effect in gross margins in Q1, so should we assume that the margins will roll back to your usual model of net of fee $20 million fixed costs plus incremental variable costs?

What I would say is the margins, I mean the target model we talked about margins of 45%, 46%. And if you look at the public model, the most we talk about is kind of 46%, maybe a shade north of that. We would expect that the margins moving forward will be much closer to the target model than what we have seen over the last 2 quarters. I will say our operating performance -- well what happened in our factories in Q1 was frankly much better than the margins indicate. Because what I talked about, we had some flow-throughs from low volume production in 4. But I feel as good about the margins and the operating environment in our factories than I felt in a long time.

Got it. That's very helpful and thanks a lot and congrats on the great quarter, guys.

Thanks, Krish.

Your next question will come from the line of Avinash Kant from D.A. Davidson & Co.

A few questions. The first 1 is, could you give us some idea about what do you think of the mix in the June quarter guidance that take mostly in terms of unit in CapEx?

Avinash, the mix has been relatively consistent. It bounces around sort of 61%, which was the lowest it's been this quarter to 63% or 64% so it's really hard to say exactly what that will be. But it doesn't really have an impact on our profitability or our margins because the 2 pieces, I mean, both have comparable margins.

Right. And could you give us some idea about -- within the semiconductor business that you had this quarter, what was the exposure to memory, logic and foundry?

We don't break that down in the same way that some other companies do. But I would say, we have a heavy exposure to logic and foundries and somewhat of a lower exposure to memory. But again, we don't break that down in nearly the same way that some other businesses are able to. We have a very broad-based exposure in this industry. And I remind you that we are agnostic between DRAM and NAND Flash and any other types of device you're talking about.

Okay. And also, I may have missed it maybe but you gave some sequential growth in regions. But did you give the revenue by regions percentage or absolute terms?

I didn't but I can. Asia was $81 million, Japan was $34.5 million, North America was $55.5 million and Europe was a little over $32 million.

Okay. And 1 final question I had was, I was looking into some of your customer base in the 300-millimeter wafer shippers, you have been very active there and you've been talking about getting market share and I think you've got pretty good results this quarter. Was it aided by some of the dynamic there in Japan right now given some of the wafer companies maybe suffering and may not have been big customers of yours. Did you get some benefit or do you think it could benefit you in the longer term going forward, gain on your market share initiatives?

Avinash, you're right. We're very pleased with our performance on [indiscernible] shippers. We posted a record quarter in Q1. During the quarter we've won 2 additional shipping lanes as a result of our continued work with wafer growers and device makers. And we feel really good about where we are from a market share standpoint. The Japanese situation really didn't have any positive impact that I can think of in Q1. You’ve got to think a lot of our Japanese customers were negatively impacted by the aftermath of the tsunami and mostly due to some of the power outages that were fairly rampant in a lot of parts of Japan. So if anything I think that the wafer shipping business had some headwinds in the first quarter.

Okay. And so maybe then following up on that 1, do you think that some of the weakness that you saw because of this situation could actually come back and help you in future quarters?

You're right, time will tell. I mean, I don't pretend to really be able to fully read how this whole Japan situation will play out. A lot has been already written and said about it. So I don't think I can really meaningfully contribute to the discussion, so we'll stay posted.

Perfect. Thank you so much.

Your next question comes from the line of Dick Ryan from Dougherty.

So Greg, trying to look -- I have another question on the Specialty Materials side. I think on the last call, you said if revenues approached $25 million you'd expect margins getting to 20% range. You were just shy of that revenue level but margins were significantly above the 20% goal line. Can you give a sense of what the contribution was there and how do you think those margins should trend?

Yes, I would say 2 things. 1 is you're absolutely right, we said at $25 million, we would be over 20%. We had very good mix, we had very good execution, it would just, as Bertrand said, a very solid quarter for them. The other thing that I would just point out is we did have, as we reorganized that business, there's about 2 of those margin points to related to some costs that we shifted essentially to the ME business so when you look at the ME business, probably looks a little bit worse than it should have, if we run an apples to apples basis compared to last quarter, we would've seen something more like 22% versus 24% in Specialty Materials. So I guess, part of it is related to that but a small part, overall though, a very solid execution.

Great. And then on the ME side, that kind of explains a little bit. But at what revenue level do you do need to see that to get those margins back into the say low to mid-20% range?

I would say, we don't need a lot more revenue. We just need to see continued improvement on the manufacturing side. I mean, overall, we were pleased with the performance of the business in the quarter. Is that $48 million kind of level of revenue, I mean, is 17% the right operating margin? I would say, no. And so, I would say, we'll continue to see some improvement in operating margins there even if the revenues are the same.

Great. Thanks, Greg.

Your next question comes from the line of Steve Schwartz from First Analysis.

Greg, just on share count. It looks like there's a creep of about 2% and on the cash flow statement, it looks like you generated about $3 million from share issuances, is that just related to option awards?

Yes, what's happened is as the stock prices have gotten back up to this level, we've seen a lot more option exercises, quite a number of options in the company in the $7 or $8 range. Some of which are close to expiring.

Okay. And then just generally speaking, we've seen Intel make comments that a number of their facilities in North America are of 450-millimeter capable. When they set up a facility for that capability in the future, does that benefit you in any way or potentially benefit you in any way at revenue today?

Well, this is Gideon, Steve. So we don't comment on specific customers. We do have initiative, an important initiative, in the 450 area. And I would say that we intend to be leaders in that area as it relates to any form of wafer handling. So anything that any of the device manufacturers does to put in place infrastructure for 450, which I remind you is a long-term proposition, this is not happening tomorrow, will absolutely benefit us.

Okay. And let me -- just to help me out here, Gideon. When at this point, are there devices, other products that you sell that are unique to that or are you working on products that are unique to 450 that go in, in the early stages of facility establishments like this?

Right, so we are very committed to the industry roadmap and obviously migration to larger wafer diameter is a very significant undertaking by the industry ecosystem. You may be aware that we are very active participant to the effort by ISMI. And as part of this consortium, we've been selling products, 450 products, to all of the industry participants working and committing to the 450-millimeter development efforts. So yes, you're right. We are generating some level revenue related to 450. I would expect that as we see some players in the industry to meaningfully commit to the 450 roadmap, I would expect those revenues to grow incrementally. I would say that in a few weeks at the latest, we will be unveiling some more details around our 450 plans in terms of the magnitude of our investments and the location of our investments. So just stay tuned and you will have probably some more details to answer your questions.

Oh, that's great. Okay. Thanks for the color.

[Operator Instructions] We'll go to our next question from Tom Claugus from Graham Partners.

I guess my question has sort of been answered, I was going to ask about ME and why it grew so much, and what you guys think going forward, but you already reasonably vague on that. I couldn't understand whether it was, you kind of said it was from semi and other. But I guess let me ask it in a different way. Do you expect over the next 3 years for that to be your highest growth rate business?

Yes. So, Tom, I just want to clarify. When you said ME, I think you meant Specialty Materials.

Yes, I meant Specialty Materials.

So what's the question, Tom, sorry.

I guess, since it wasn't really clear on what segments the growth rate is coming from, do expect that to be your highest growth rate business over the next 3 years?

No, we didn't say that. I think each division has its own role in this company. I would say we've been fairly consistent, both with the CCS division as well as the Specialty Materials division will have probably somewhat higher growth and then the ME division as well as be very profitable as they grow. However, the ME division is an excellent cash generator and an important business for us and has an important role in the company as well. I'd say, ESMD is starting from a lower base and has many opportunities outside of semi, which we're investing and as Greg mentioned. And that should prove to -- turbo charger for their growth as well.

Okay, thanks.

This concludes today's question-and-answer session. At this time, I'd like to turn the conference over to Mr. Argov for any closing comments.

Thank you. I want to remind everyone again of our analyst meeting on May 12, 11:00 in New York City. We hope you can join us. Please call Steve Cantor for information. Thanks for joining our call.

This concludes today's conference call. Thank you for your participation.