Good day, ladies and gentlemen, and welcome to the MKS Instruments First Quarter 2014 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference, Mr. Seth Bagshaw. You may begin, sir.

Great, thank you. Good morning, everyone. I'm Seth Bagshaw, Vice President and Chief Financial Officer; and I'm joined this morning by Jerry Colella, our Chief Executive Officer and President. Thank you for joining our earnings conference call. Yesterday, after market close, we released our financial results for the first quarter of 2014. You can access this release at our website, www.mksinstruments.com. As a reminder, various remarks that we may make about future expectations, plans and prospects for MKS comprise forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in yesterday's press release and in the company's most recent annual report on Form 10-K and most recent quarterly report on Form 10-Q, which are on file with the SEC. In addition, these forward-looking statements represent the company's expectations only as of today. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statements should not be relied upon as representing the company's estimates or views as of any date subsequent to today. Now I'll turn the call to Jerry.

Thanks, Seth. Good morning, everyone, and thank you for joining us on the call today. First, I'll provide an update on our progress toward the strategic initiatives I described in our last call, as well as some highlights of recent product wins. Following that, I'll give a recap of the first quarter of 2014 and finally, our outlook for the second quarter. Seth will follow me with further details on our financial results, and then we'll open the call for your questions. On the last call, I spoke about our vision to broaden our global leadership position in vacuum processing and to measurably improve profitability of the company. This vision is supported by several key strategies. The first is a focus on satisfying customers with the best technology coupled with strong OEM relationships and more local support to help solve the complex and yield challenges inherent in sub-20-nanometer geometries and 3D structures. In concert with this, we are expanding our product solutions on our core business and we're continuing to invest in and expand into other high potential advanced markets. Next, we are managing the business for a sustainable and profitable growth. To improve our results, we are taking measured and disciplined steps to improve our operating profit throughout all aspects of the semiconductor cycle. During the first quarter, we completed a number of actions to reduce our costs and realign our workforce to better focus on our key initiatives. These are permanent structural changes unaffected by volume. We will continually pursue these initiatives in order to enhance our profitability while increasing shareholder value. Seth will have more details on this later in the call. Finally, we are committed to deploying our capital in the best long-term interest of our shareholders. In the quarter, we paid an $8.6 million dividend…

Thank you, Jerry. I'll first discuss the Q1 2014 financial results before providing further details on our Q2 2014 guidance. Revenue for the quarter was $206 million, an increase of 1% compared to Q4 revenue of $204 million and a 46% increase, $142 million a year ago. Revenue for the quarter was also above the high end of our guidance range, primarily due to continued strength in our OEM semiconductor business in the quarter. Gross margin was 43.3%, which increased from 42.9% in Q4, primarily due to higher volumes. Non-GAAP operating expenses were $50.2 million, which was favorable to our guidance range, primarily due to the timing of R&D project spending, some of which we expect to incur in the second quarter, and lower discretionary spending. GAAP operating expenses were $51.6 million and included $700,000 of restructuring costs, $400,000 of amortization and intangible assets and $200,000 of costs associated with our recently announced planned acquisition of GP. Our non-GAAP operating margin was 19% of sales, ahead of our target model at these volumes. Non-GAAP net earnings were $27.2 million or $0.51 per share compared to $22.3 million in the fourth quarter and $3.9 million in the first quarter of 2013. Our non-GAAP tax rate was 31%, which was favorable to our estimate due to the geographical mix of taxable income. GAAP net income was $31.2 million or $0.58 per share. And the tax rate for the quarter was 18%, reflected the benefit from favorable settlement of an international income tax audit. Now turning to the balance sheet. Cash and investments decreased by $2.8 million in the quarter to $647 million or approximately $12 per share. The decrease in cash and investments was primarily due to the timing of accounts payable and incentive compensation payments in the first quarter, and increases…

[Operator Instructions] Our first question comes from Krish Sankar with Bank of America Merrill Lynch.

I guess you guys did articulate about how you see the dip when your OEM customers here dropped down in shipment. The question I have was Lam was guiding to June quarter shipments down 9%. To look at your semi revenue in June, it's probably down like 18% or 20%, almost 2x the amount of your -- one of your big customers. So my question is if there is an expectation of shipment improvements sometime in like Q4 or towards the end of this year? Should we start seeing a sharper snapback for you guys in Q2 or Q4?

Well, I mean, I think the way to explain this is like I kind of look at this as a bit of a canoe. In the past, we've been in a V or a W, but we see this more of a canoe shape. And typically, what you'll see is our customers will prime the pipeline much earlier than their shipments do us. So you looked at how we went -- had a ramp in Q4 and a sustained ramp in Q1. That's a lot of inventory and pipeline building that they're doing for the shipments that they would then start out over the next several quarters. So the fact that we had record revenues gives me great encouragement that we're designed in where we should be, and that we've seen great benefit from that. So my expectation is that we are falling along the canoe, we'd expect, hopefully based on what we're hearing, that wafer fab equipment spending is going to be around $32 million, $33 million, that we would expect hopefully towards the end of year we would see a recovery. That's how we are expecting it right now. But we're managing the business to the point where we are, but we will be prepared in 10 responders in the past to any shock, any snapback that we see.

Yes, Krish, one of the points here we don't know is the amount of the inventory. For example, we have our OEMs. So if a customer guides down on shipments, that's one data point. But we don't know how much of the inventory they have at the end the quarter, which obviously affects our shipments or revenue in a particular period. So this -- you need all those pieces to really correlate, I think, exactly what's happening. Plus, Lam is one major customer. We have a lot of other semi customers. But typically, we do, as you know, Q4 and Q1, we tend to ramp in advance of our end customers. But it's not exactly a 1:1 correlation in any one quarter.

Got it, that's very helpful. And then did you have any shutdowns in 2Q?

None that we've announced, no.

None that you've announced? Okay, got it. And then one final question. Once you close the acquisition of Granville-Phillips, do you plan to bake it out separately or it'd be rolled into your semi and non-semi business?

Yes, it's pretty integrated, Krish. So it rolled in very nicely with our valve and vacuum business. So we rolled them together.

Yes, it gives us an opportunity to create consolidated restructuring business units, so that we folded in into the other businesses. And there's opportunity there.

Just one final question. Does Granville-Phillips do any kind of like complete tool integration, or any custom-made products, any other OEM?

Not that we're really aware of. They've done some work where they do some integration work, I think, with others unlike RGAs, as they've done with us, as an example. We bought the indirect gauges to make a subsystem on our RGA business out of the U.K. So there's some work that we do actually incorporating this. But for the most part, I believe it's pretty much standalone components.

Our next question comes from Patrick Ho of Stifel, Nicolaus. Patrick J. Ho - Stifel, Nicolaus & Company, Incorporated, Research Division: Jerry, first off, on the non-semi side of things, you've seen some nice quarters recently and a little bit of growth. How does that trend in the second quarter? And are there any specific markets that are providing a boost?

I think it's pretty much steady as we go right now, Patrick. We've still don't -- we still see the LED and the solar market kind of on life support. Although there are some discussions we're having on the solar side which would imply there may be some opportunity there. That's a possibility of some upside, but yet to come to fruition. And on the flat panel side of the display side, we've also heard of -- have some discussions about potential opportunities within the quarter. So I think we see a little bit on the display side if things come as we think they will, pricing a little bit out of the solar side. And everything else will just be GDP plus a point or two, I guess. So pretty much steady as they go with some upside. Patrick J. Ho - Stifel, Nicolaus & Company, Incorporated, Research Division: Great. In terms of some of the restructuring, and I get the redeployment of resources. As you reinvest into the company, is there a target for these reinvestments? Is it more semi-based or is it more non-semi-based?

Well, there's a couple of areas that we think there's some potential opportunity like environmental monitoring. We have some leading-edge technology there. We think that's one of the top growing markets, megatrend globally. So we're looking more involved in there. Biopharm and pharmaceutical, we think there's opportunities there as well, whether it be organic or potentially acquisition-based growth. And the graphene we discussed, we don't really see that taking hold right now. But one of the good things about MKS is we get in very, very early on in technology development, and we get to participate in the design of the products. So although we won't see a big benefit right now, we're positioning ourselves on the nano side to be well-positioned over the next several years, I believe. But those are a couple of the 3 carry areas. And also temperature control is an interesting area for us that we are taking a different view of. We have a lot of control on the semi side. And we think there's some opportunity in temperature within and outside of semi. So a fair amount outside, but we're still committed to our semiconductor core business as through the acquisition of GP. And then there's the industrial side we've looked at. We've made some great strides last year on our flow controller business in the industrial side. We don't participate on the semiconductor side on flow of our own volition, but we think the industrial side has some real opportunity, and particularly in Asia and in other areas. So there's a lot of good places to put the resources to use and see some good benefit, Patrick. Patrick J. Ho - Stifel, Nicolaus & Company, Incorporated, Research Division: All right, that's really helpful. Final question for me. Obviously, with a lot other comments recently by your OEM customers and the equipment guys, they're talking about this kind of midyear pause that we're seeing right now. At same time, on the fab size, it seems like wafer has started to pick up. You can see some healthy outlooks by a lot of the semiconductor companies. How does that trend for you guys into the second quarter from the fab side?

Well, I mean, certainly if there's a pit -- we are very agnostic, so whichever fab picks up in the equipment that's involved with our customer's OEMs into it, we would participate in that. Certainly, there are other opportunities we have within the fabs for hookups, as well as analytical work with the RGAs, which are a pulsed OEM bolt-on most of the time. So we would expect that we would see -- and again, we see some opportunity in the service side. So that probably bodes pretty well for us.

[Operator Instructions] Our next question comes from Tom Diffely with D. A. Davidson. Thomas Diffely - D.A. Davidson & Co., Research Division: Seth, maybe a quick question on the proposed acquisition of GP. If it closes in the second quarter, are there deferred revenues that get delayed? And -- or what is the ramp of revenue once you do close on that acquisition?

Yes, I don't think there's any deferred revenue, Tom. And again, our expectation it will be closed very late in the quarter. I mean, it's right now in regulatory reviews. It's hard give an exact gauge, you can imagine. But I think our expectation has very little impact on a quarter if it closes late. And I think from an accounting viewpoint, we book revenue sort of as soon as we acquire or control that company. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. And can you remind us what the split was for them or most recently up for semi and non-semi?

Yes, I don't have any -- it's really part of Brooks' business right now. So I can't really comment on what is currently. The historic has been sort of a 45%, 50% split, non-semi and semi, which is attractive to us in the non-semi piece as well. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. And then, I guess, moving on, when you look at some of the dynamics in the end markets right now where you mentioned 3D NAND was a little slower. It sounds like DRAMs is starting to pick up a little bit. Between those trends, does it matter to you if you benefit more from a 3D NAND versus a DRAM or is it fairly close in what you're selling to the OEM customers?

Well, I think the mix of equipment is pretty much the same. It's just that if it was a bigger acceleration based on just the mix, where there's a lot of 3D NAND equipment, because people are migrating to that as a secular change. That'd be a benefit, but that would show it would be volume. The mix is relatively the same throughout all the equipment of the different customers, not much difference. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. And I guess, a question on the restructuring, the net $6 million of restructuring, does that impact revenue at all, are there certain programs you're walking away from?

No, no, this is productivity looking at redundancy that we probably should've looked at in the past but we thought there'd be some opportunity. So we don't see any impact. Actually, we're hoping the investment that we're making with the savings in that shows a positive side, but we don't see any ill effect by that, no, none at all. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay, great. And then finally, Seth, when you look at the tax rate of 31%, that's come down a little bit in recent quarters, it seems like. Is 31% a good long-term tax rate to use now?

Yes, I think for 2014, Tom, that's our expectation for this year, and assuming no change of rates in the future and the mix stays the same, it's probably a pretty good estimate going forward as well. Yes, as said, only 2014 I could give visibility to right now. Thomas Diffely - D.A. Davidson & Co., Research Division: Okay. What has caused the slight decrease in the tax rate?

It's really mix with income resides. And we do a little bit on the planning side, I would say. But primarily, it's where the mix of the income sort of ends up. And we have some lower tax jurisdictions versus U.S. tax rate that's driving most of it.

Our next question comments from Josh Baribeau with Canaccord.

Maybe a follow-up to that, is there anything else that you can do in terms of tax jurisdictions that might be able to lower that going forward maybe, let's call, in 2015?

Yes, I would say, Josh, we are looking at that all the time. It saves a number of internal reviews we're still looking at to drive that tax rate down. So we're not at a point now we can outline the impact of that at this point. We're in early stages, but I can tell you we have a fair amount of effort internally geared exact in that area, and also to ensure the cash flow is readily available for corporate use as well.

Great. And then we're hearing a little bit more on the display side about the growth from the OLED opportunity and how some manufacturers might be focusing more on that versus traditional. Any comments on maybe the capital intensity of the mix of products in OLED versus traditional LCD for you guys?

Well, the -- in terms if you're seeing more direction to business in OLEDs?

Well, I mean, we're seeing continued investment there, just looking at your channel mix.

We have ozone cleaning. Our ozone cleaning system is used in OLED manufacturing at some major Asian fabs. So we've seen some good opportunity in the OLED. So I think that would certainly continue to benefit MKS.

And I'm not showing any further questions at this time. I would like to turn the conference back over to our host for closing remarks.

Well, we've established specific goals and plans to drive increased customer satisfaction, develop innovative product solutions, improve profitability and deploy capital in a disciplined approach to fund growth and increase shareholder value. The actions we have undertaken this quarter are aligned with these core objectives and are part of our long-term strategic direction. I am pleased with the strong start we've achieved this year, and look forward to updating you on continued progress in July. Thank you for joining us on the call today.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.