Good day, everyone, and welcome to the Entegris' fourth quarter 2007 earnings release conference call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Steve Cantor, Vice President of Corporate Relations. Please go ahead, sir.

Thank you, Cindy. Good morning, everyone. Thank you for joining our call today. Earlier we released our financial results for our fourth quarter ended December 31, 2007. 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, and our actual results may differ materially. These risks and uncertainties are outlined in detail in this morning's press release, and in our most recent 10-K report, as well as in our other reports and filings with the SEC. We encourage you to carefully read those reports and filings. On this call we will also refer to non-GAAP financial measures defined by the SEC and Regulation G. You can find a reconciliation of non-GAAP financial measures to the comparable reported results of operations under GAAP in today's press release, as well as on our website. Going forward, we intend to only provide GAAP results. I should point out that all numbers discussed on this call, unless otherwise noted, are based on results from continuing operations. On the call today are Gideon Argov, President and CEO; Jean-Marc Pandraud, Chief Operating Officer; Greg Graves, Chief Financial Officer; and Peter Walcott, General Counsel. Gideon will now begin the call.

Thanks, Steve. I'll begin with some comments on sales and business trends, and then turn the call over to Greg Graves for some financial highlights. Our Q4 sales were stronger than originally expected, as we saw strength in demand extend through the last week of the year. Sales of unit-driven products represented 61% of our revenues, reflecting healthy production levels at chip-maker customers. Deals to non-semi customers, such as manufacturers of flat panel displays, and data storage components, were also strong. In particular sales of liquid filtration products for lithography applications in chemical filters to control airborne molecular contamination and the fab performed well. Wafer and data storage shippers were essentially flat compared to Q3. Our newest business, Entegris Specialty Coatings, which is the semiconductor portion of the Surmet Corporation we acquired in last August, grew as planned in its first full quarter with Entegris. EC's flagship product, a consumable specialized coated electrostatic chuck used to hold the wafer in the ion implant tool continues to leave the market. The capital-driven side of the business which accounted for about 39% of revenues, also did well despite declines in the capital spending across the industry. Sales of our liquid systems grew in part on higher shipments related to advance lithography applications. Specifically, we shipped a large order for our newest photochemical pump. This product is targeting retrofit applications for the large installed-base track tools. We also had sustained demand for our gas purification system, which offset lower sales of our wager process carriers, such as our 300 millimeter sales of our wafer process carriers such as our 300 millimeters FOUPs that were impacted by weaker capacity-related spending. Geographically, Q4 sales for both Asia and North America, reach perspective highs for the year. Sales to the Asia grew 5% sequentially and represented…

Thank you, Gideon. Good morning, everyone. Sales for the fourth quarter were $161.3 million, which was 6% from the third quarter, and down 5% from a year ago. Net income in Q4 was $10.8 million or $0.09 per diluted share. On a non-GAAP basis, net income from continuing operations was $16.9 million or $0.15 per diluted share. Reconciliation information between our non-GAAP and GAAP results may be found in today's press release, which can be accessed on our website. Gross margin for the fourth quarter on a modified basis was 43% of sales versus 43.7% in Q3. Despite higher sales, gross margin was impacted by lower overhead absorption resulting from a plan to $8 million reduction in inventories. To achieve the lower inventory, our plans produced less than we did in Q3. Operating expense on a modified basis were $53.9 million or 33.4% of sale. The increase in operating expense from Q3 was due in part to severance expenses related to the plant closure that Gideon mentioned, as well as marketing expenses in yearend sales incentive adjustments that hit in Q4. ER&D was $10.1 million reflecting our continuing investments in new product development project. Our GAAP operating expenses included $4.2 million of merger-related amortization. Total stock-based compensation in Q4 amounted to $1.9 million or $0.1 per diluted share. Adjusted for merger-related in other restructuring, our non-GAAP operating income was $15.4 million or 9.6% of sales. We reported an income tax benefit on a GAAP basis of $1.6 million in the quarter. This reflects the favorable impact of the $8 million US tax benefits that resulted from a series of transactions, to bring approximately $100 million of cash to the US. The full effect of the tax benefit from the Japan dividend in Q4 was offset by the geographic mix of…

(Operator Instructions). And we will take Brett Hodess with Merrill Lynch.

Hi. Good Morning. Gideon, I am wondering if you could talk a little bit about the first quarter outlook in the -- if you look at some of the other materials in top component companies, I know none of them are an exact match for you, but some of them also had a little bit stronger fourth quarter and their first quarter revenue guidance was flatted down 2% or 3% and your is down 7% or 8%? I am wondering if you can talk a little bit about why you think they might be down a little bit more or is it just a more cautious view. And the second comment I'd like to make is, if you look at your non-semi businesses, you said they were pretty strong in the fourth quarter. We've heard a lot of real strength out of the flat panel area and the unit side of data storage being very strong. Could those provide some offset to the weakness you see in semi-cap in the near-term?

Yeah. Good morning, Brett. First of all, as far as our forecast for the first quarter, we do try to be realistic in our forecast as best we can. I would remind everyone on the call that we are in a quick turn business around here and so we tend to book and ship in the same quarter and that means we have limited visibility. Number two, approximately 40% of our revenue is in the capital area. And I think that in that area, we do see a slowdown and that is going to impact our first quarter. That is a primary reason why we see that has been a lower quarter. And I'll let Jean-Marc talk about our flat panel business.

Yes. Brett, this is Jean-Marc. Indeed to supplement Gideon's answer on the consumable side, I do see a modest decline going into the first quarter. But as we don't predict, it’s mostly on the capital side but we see a negative trend in the coming quarter. And on the flat panel, on the consumer electronic business, we should be pretty stable in the first quarter. So only a modest decline, but mostly on the capital side that drives us down for the first quarter.

And then, if I could have a quick follow on. As you look into the ramp-up for the next quarter or so of the two other product lines in Malaysia, if revenue stayed around this level what -- and product mix stayed around, sort of, the current kind of product mix, would we be starting to see a gross margin improvement on those two additional product lines set to ramp or do we need to wait to see the further product lines to be moved over.

Brett, I would say we would see some very modest improvement going. You look at the kind of our whole gross margin story, I mean, there is a number of headwinds as well as a number of tailwinds. On the headwind front, I would say, we face some modest increases in material costs, probably about 2% that has overall relatively modest less than a 0.5 point impact on gross margin. We also in some of our -- as we've talked about some of our newer product lines will face margin pressures such as the FOSB. The tailwinds, however, are the migration of the product to Malaysia, which has again a modest positive impact. Initiatives like we took to close the Gilroy facility, again, something that doesn't have a big impact, but has got a third of a point of margin improvement for year. So the margin story, it's a lot of little things and sort of to quantify specifically the improvement related to those products is difficult to do, but I mean they will have a favorable impact. I would say the products that are there as you said, what's the number? The cost savings related to those two is probably about $2 million a year.

Okay. Great. Thank you.

And we will take our next question from Chris Blansett with JP Morgan.

What should we expect, are you going to make, I guess, a material structural change to your OpEx costs or maybe you're [cognizant]? Where should we model say, and how should we look at it?

We have -- first of all, good morning. We have both long-term transitions in our costs structure that we're making, which Greg alluded to and that involves moving infrastructure to Asia and we're in a process of doing that. And number two, we have short-term cost containment measure that we're going to be taking, which we're evaluating at the present time. And as we make decisions, we'll communicate those to you. We don't have any more specifics to say on that at the present time.

Alright.

And I think, specifically, as it relates to Q1 we would expect the operating expenses in Q1 of this year to be comparable to what we saw in Q1 of last year, which is something right around $51million excluding the merger-related amortization?

Right.

And just, Chris, that would be excluding any impact of any cost containment measures.

When you talk about cost containment, is this like employee comp or what do you kind of -- I think, I am not understanding what you are giving in?

Well, it's a variety of things, its discretionary spending.

Okay.

It’s headcount in certain areas, it's the kind of things that we're used to doing because obviously this is an industry that experiences up and down cycles and it’s the prudent thing to do. So it’s a variety of those kinds of measures, Chris.

One thing is that I was kind of wondering with kind of the progressive ramp you're having in Malaysia. How has your kind of total topline revenue potential grown and based on what the outlook is, it means should we expect or could we expect a serious facility consolidation some time this year if things remain weaker?

We have taken serious steps to trim our footprint. The latest of those is closing a small facility in Gilroy, between that and Singapore represents about, just under a 100 people. It's just over $1 million of savings from the Gilroy facility. We have a plan that involves continuing to make those kinds of steps, but I would not read more into it than we've actually said.

Okay. Then one quick last thing. Since you guys have the majority of the 200 millimeter wafer shipper and cassette business, there has been a lot of discussion or I guess, news flow about some of these large memory factories either shutting down temporarily or closing them. I wasn't sure if this is also kind of, what you're seeing in your first quarter outlook and how has that affected you yet?

Yes, Chris, we have seen some move and in fact away from not on regard to outside of America, I mean Israel and Asia for a move to 300, but for what we are left with 200, we have seen some softening. And as you know, this is becoming a competitive area. And at some point of time, there are businesses we take, there are businesses we don't take. So we are very careful about pricing in that area. We continue to have a very large market share there and are enjoying some very good cash generation.

Alright. I think you also alluded to some of the push outs in Asia on the memory side.

Right

If you look at some of the weakness that we're seeing in the CapEx side of the business, I would say the most significant area of weakness is on the capital side of some of the new fab retrofits particularly the memory area where we are seeing push outs that are affecting things like FOUP orders.

Alright. And then one quick last one from me. Since the solar side of, the solar industry is growing and then most of these facilities today; they look to be similar to, say, at 200 millimeter model of handling wafers, what kind of opportunity exists out there for you, or should we expect you guys to address some products in '08 or kind of these lines along that line?

Yes. I mean the opportunity exists but it's not that great. I mean the requirement in terms of contamination control for [weather change] in products are less stringent than the semiconductor business. So we'll explore some opportunities, but it's not that important. And on the shipment side, same. This is not that sophisticated, so at this point in time, it represents only a very small revenue addition cost.

Alright. Thank you, guys. I appreciate it.

Operator, can we have the next question please.

(Operator Instructions). And we'll take our next question from Timothy Arcuri with Citi.

Hi, guys. A couple of things. First of all, Gideon, I think you said last quarter that your 300 millimeter wafer shipper revenue would be roughly $8 million a year by the end of '08. I know that that's been an issue this year. It's been holding back your consumables revenue. So I am wondering, are you still on track to hit that goal by the end of '08 and I think you also mentioned that you were close to qualifying a second customer. Did that actually occur?

The answer is, if I did say that you have a very good memory and the answer would be yes, and yes Chris, very simple yes and yes, sorry, Tim. Sorry about that. Obviously, I don't have a good memory.

Thanks. Okay. Yes and yes. Alright. So next thing would be, I think also, Gideon, you were talking about $25 million to $50 million worth of new product revenue in '08 incremental product revenue in '08. Is that still the expectation?

It is. It absolutely is. Our revenues are not being held back by new products, they are being held back by overall market demand. In fact, I will let Jean-Marc describe precisely what we're seeing. But Tim, we track these things on a monthly basis. There is very, there was a series of these initiatives that it's very top of mind here. Jean-Marc?

Yes. I mean, we can never be pleased with new product revenue. In fact, in just to give you number theme in 2007, they hardly contributed to about 12% overall of total revenue. In quarter four, however, it was already 15% of our quarter revenue related to these new products. So we did achieve the internal target for those revenues in 2007. For 2008, I expect that the contribution will be in excess of 15% to 16% of revenue. Ideally, it would rather be in the 25% to 30%, but we are not there yet, we need to ramp-up. And hopefully, we'll get there in the next couple of years. But for 2008, 15% to 16% would be a good number.

Okay. So, I guess on that point, if I am using a pretty healthy ramp in revenue through the end of '08 and you stripped $25 million off of that number to, kind of, compare apples-to-apples year-over-year, it seems like your core business is down a lot more than pretty much anybody else, just in the absolute core business. Is that kind of the wrong way to read that and is that all due to the 300 millimeter wafer shipper issue?

This is true that on the core business we have seen and they do exit pressures from Asia. These chip manufacturers, especially, in the lower dimension, were in 150 millimeter, the 90 millimeter, 125 millimeter and so on. So we are seeing some pressure from some Asian competitor and we are not ready to take the business at any price there. So, we have to admit that. The reason for us to hope is to come up with a stream of new products that we have today in the plan that Gideon is saying we are reviewing every month. I mean eight of these key products are representing about 40% of our total revenue and (inaudible) on the top products that we are looking at. And they are basically differentiated products, well-in-demand products for the key to doing application. And we do expect that the market share we're going to take with these eight families of product this year will drag us into the coming years with much more additional revenue. But for the commoditized product offering, this is true that we are seeing some erosion.

Okay. And then I guess the last thing for me, Greg, I would have thought that the tax rate would have been better than 32% in '08 given the holiday which were getting in Kulim. So was that not the right expectation, I guess or when does that tax holiday begin to actually help?

As more and more profit shifts to Malaysia, we should clearly see a decline in the rate. But I mean if you look at sort of a core federal and state rate for us, I mean with nothing outside of the United States, its 35%, 36%. Our next biggest country is Japan, which is another 35%, 36% country. So 32 does take into account some benefit from Malaysia. We did have in -- clearly in '07, we had a number of discrete items that helped our rate that we don't expect to recur.

So then what's the right -- Greg, as you kind of look at longer term if it's not going to help us much in '08, what's the right -- you look out two-three years, what's the normalized tax rate once you move as much as you think you'll eventually move over to Kulim?

The normalized rate would be, today, like I said, its 32, it would have a downward bias from there -- I haven't modeled it out three years to say that it will be 25. I would expect there to be a downward bias.

Okay. But it's not going to be like sub-20, right?

It's not going to be 24.

Okay.

I mean it might be 28 or 29.

Okay. Great.

And we will take our next question from Jim Covello with Goldman Sachs. Mr. Covello?

Hello, Jim. Are you there?

Mr. Covello, your line is open.

Hi. This is Kate Kotlarsky for Jim Covello. Just a quick question on your target operating model. I am curious about, there is a model that you're thinking about for the end of 2008 and maybe if you can comment on what your current breakeven is, and how that's going to change throughout the year?

Yeah, Kate, the current breakeven is about $130 million a quarter.

Okay.

I would expect that to improve modestly through the year. When I look at, kind of, our long-term model we've laid out, we think this is a mid-40s gross margin business. If you look at our margins, over the last four quarters they have been relatively consistent at about 43% and what I would consider relatively weak sales volumes in terms of where we are in the cycle. So the long-term model is mid-40s gross margins with leverage in the operating expenses. So we would expect to see improvement in operating margins over the next couple of years.

So, Gideon, is there a specific operating margin target that you have.

Our specific operating margin target that we laid out at the Analyst Day that we would, back in May which is we would still stick with, was low-to-mid teens. So I believe it was about 14%.

Okay. Thank you.

(Operator Instructions) And we'll take our next question Ali Irani with AI Capital Management.

Good morning, Gideon. I was hoping…

Good morning, Ali. How are you?

Good, thank you. Gideon, I am hoping you could give us a sense of what your material cost changes have been given the price rise in commodities. And also given that the environment is slowing down a little bit of your OEM business, is there a potential for accelerating the requalification process for your products and accelerating to move to Malaysia?

If you're referring to accelerating the qualification process, here is the way that works. We have three products right now that are in cool and fully moved production ready, tooling is done. One of them, in fact, is in production at this point, really only in the past 30 to 45 days. And that product is one of the -- the nature of the product allows us to, I would say, unilaterally make decisions about production location. There are a couple of other products in the wafer shipper business -- sorry, the wafer transport business that are fully tooled up but where the nature of the contracts with customers makes it necessary for us to get their, if you will, their blessing to move the production location. And that takes a period of a number of months. We are in that process, that's why it doesn't happen until realistically at the end of the second or the end the mid of the end of the second quarter I know they'll start to see volume from those. And that was part of the plan all along. There are another two to three products, I would say, few that are going to be moving over there, over the next six to nine months. And we are, sort of, speeding that process along. And in a couple of those cases, there is permission that is required and at least one where there is not. We're working that as aggressively as we possibly can, because the more volume that we shift over there, the more volume we have at zero tax rate, and it obviously helps our gross margin. So, we're very, very keenly aware of it. I would say this to you also, Ali, it's been a very smooth process of transition from the internal standpoint. Greg, I know wants to answer as well part of your question.

Yeah. With regard to the material costs, we are planning in '08 for our materials cost to increase approximately 2% on average. And materials cost make up 40% of our cost of sales. So when you take that and you look at the overall impact on the margin, it's not significant. I mean it's one of the things that we mentioned as the headwind, but I mean we have number of tailwinds as well. Most of our -- just to comment a little further on material, most of our material is purchased under longer term contracts. They are mostly many of them are residents, and so they are petroleum-based. But I would say in general, our procurement people have done a good job in managing those cost even in $90 to $100 petroleum environment.

And one additional brief point on -- since we're talking about materials. Transferring multiple product lines and at the same time increasing inventory turns to somewhere close to four times, five times -- excuse me, and lower inventory by $20 million over a year, as you transfer product lines is a complicated advance, which I think we have executed frankly very well.

Okay. And just shifting a little bit to the 45-nanometer migration that is in swing with the microprocessor guys and coming up with the memory guys, there was a lot of talk over the last cycle about the benefits that your contamination control business would see, as we would migrate into the smaller geometries. I know the focus has been really over the last couple of calls over the cost containment migration to Malaysia and just the cyclical factors, but could you give us a renewed sense of what you see out there in terms of interest for some of your existing and new product as we make these migrations, maybe some specific examples that allows us to understand the trends out there? And also just to add one…

Ali, it's kind of hard to hear you. Just to paraphrase your question. You want us to speak to the continue transitions to 45-nanometer on the part of our memory makers and the impact on our--?

Exactly. And what that's doing to enhance your business prospects?

Okay. Yeah. It's the single biggest tailwind that we have in our business. There are several factors that result from that. The most significant is the level of purification and filtrations that's required. The reason we're seeing success with our Torrento 20-nanometer filtration product, which is the first in the industry and the best in the industry, I would add, the reason we're seeing a ramp, a good ramp in a difficult capital environment of our Clarilite certified solutions is the move to 45-nanometers. We see that, for example, and Intel, Israel where they are about to open their third fab, it's a 45-nanometers fab and we're seeing very good orders into that specifically to address that advanced technology node. The 193-nanometer technology node in photolithography is another manifestation of exactly the same phenomenon, it is manifested in the liquid lens or product sales that we see into lithography producers. And so I would say, this is a good tailwind. Jean-Marc may have additional thoughts on that.

Yeah. I would continue to that saying that on the liquid subsystem, I mean we had a growth, which was in excess of 50% this year, which means that we are advising this demanding 45-nanometer photolithography application. And you mentioned Torrento at 20-nanometer, which is exactly the same kind of application. And the new Palms, the new IntelliGen Mini we just introduced as well, will, as well, be a requirement for these applications.

And as a final point on that, because it's a very important part of our business model. We tend to sell everywhere we can it's based on a cost of ownership model, Ali. And that is true because from a customer standpoint it helps us maintain margin, but it helps us maintain margin particularly at the advance nodes.

Great. Thank you very much.

Yeah. Thank you.

And it appears we have no further questions at this time. I would like to turn the conference back over to Gideon Argov for any additional and closing remarks.

Thank you for your interest in Entegris. We look forward to speaking with you in the future.

Thank you. That does conclude today's conference. You may disconnect at this time.