Michael F. Biehl - Chief Financial Officer, Executive Vice President and Treasurer Samuel F.

Thomas - Chairman, Chief Executive Officer and President

Eric Stine - Craig-Hallum Capital Group LLC, Research Division Robert D. Brown - Lake Street Capital Markets, LLC, Research Division Gregory J.

McKinley - Dougherty & Company LLC, Research Division Kathryn I. Thompson - Thompson Research Group, LLC Chase Jacobson - William Blair & Company L.L.C., Research Division Pavel Molchanov - Raymond James & Associates, Inc., Research Division William A.

Priebe - Geneva Capital Management Limited Dennis Ip - Daiwa Securities Co. Ltd., Research Division

Thank you, Shannon. Good morning, everyone.

I'd like to thank you all for joining us today. I'll begin by giving you a brief overview of our first quarter results.

And Sam Thomas will provide comments on current market and order trends we see in each of our business segments. I'll finish up by commenting on our outlook for the remainder of 2014.

Reported net income for the first quarter of 2014 of $12 million or $0.38 per diluted share. This included acquisition-related costs of approximately $800,000 or $0.02 per diluted share.

This quarter also includes a $0.01 per diluted share impact associated with additional shares taken into account from our convertible notes. Excluding these items, earnings per share for the quarter would have been $0.41 per diluted share.

This compares to first quarter 2013 net income of $15.5 million or $0.51 per diluted share. The prior-year quarter earnings would have been $0.54 per diluted share excluding $1.2 million of acquisition-related costs.

Sales for the quarter were $266 million, represented a decrease of 3%, compared to net sales of $274 million a year ago. The decline was largely due to continued weakness in our BioMedical segment and weather that impacted our U.S.-based operations.

For example, our Canton, Georgia BioMedical and Distribution & Storage facilities were shut down for 6 days during the snow and ice storms that impacted the south in January and February. Weather also impacted other sites as well, and we estimate the weather-related revenue impact at approximately $8 million in the quarter or $0.06 per share.

Our gross profit for the quarter was $77.5 million or 29.1% of sales, compared with $79.5 million, or 29% of sales a year ago. Overall, margin dollars were down due to volume in our BioMedical segment, while the gross margin percentage increased due to project mix and better execution in our E&C segment.

With respect to the E&C business, sales increased 7% to $86 million in the first quarter, led by improvement in our air cooled heat exchanger segment. Gross margins were 28.7% compared to 25.9% in the prior-year quarter.

The improvement was due to a shift in project mix and better execution. In D&S, first quarter sales increased 1% year-over-year to $130 million as improved volume in LNG truck-mounted fueling systems in the U.S.

offset a slowdown in industrial bulk activity due to adverse weather. Gross margins for D&S declined slightly to 28.1% compared with 28.4% a year ago due to changes in product mix.

In our BioMedical business, sales declined 21% to $51 million in the first quarter of 2014 compared with $64 million for the same quarter in the prior year. The decrease was due to lower sales of respiratory therapy equipment in the U.S.

as a consequence of the continued market restructuring, driven by Medicare competitive bidding. Additionally, BioMed was also impacted by adverse weather that closed our facilities for the 6 days I mentioned during the quarter.

BioMedical gross profit margin declined to 32.6% in the quarter compared with 34.4% for the same period in 2013 due to lower volume and higher warranty costs associated with respiratory therapy products. SG&A expenses for the quarter were $50.9 million, up $3.7 million from the same quarter a year ago.

The increase was due to acceleration of share-based compensation expense associated with retirement-eligible participants and an increase in employee-related cost as we address the growing LNG space. SG&A, as a percentage of sales, was 19.1% compared to 17.2% in the prior-year quarter.

Net interest expense was $4.1 million for the first quarter, which included $2.6 million of noncash accretion expense associated with the company's convertible notes. Cash interest for the first quarter was just $1.5 million.

Income tax expense was $5.2 million for the first quarter, and it represented an effective tax rate of 29.7% compared to an effective tax rate of 29% in the first quarter in the prior year. The increase in the effective tax rate was primarily due to the expiration of the R&D credit at the end of last December.

I'll now turn the call over to Sam Thomas.

Thank you, Michael, and good morning, everyone. Overall, while we're disappointed with the slow start to 2014, particularly in our BioMedical business, we're confident in the long-term growth drivers of the markets we serve.

As mentioned, weather had a significant impact on our U.S. business during the quarter with respect to both loss production and customer insulation delays.

That turned a corner in March, when order intake in our Packaged Gas business was better than anticipated. That increased activity has continued in April.

Sequential orders were down in the first quarter of 2014 from fourth quarter of 2013, which is similar to what we've seen in previous years. However, our backlog remains strong at $722 million, up 23% from a year ago.

I'm pleased that our LNG business continues to grow. In China, we had sequential LNG order growth during the quarter, and the recent announcement from the Chinese government regarding NS4 emission enforcement will help offset the impact of last year's natural gas price increase.

This is for over the road trucks. The NS4 emission standards will increase the cost of diesel trucks and encourage more LNG conversion.

In addition, the Chinese government also recently implemented subsidies for the construction of LNG-powered ships. These 2 recent moves are the real drivers for continuing LNG growth in China.

We're excited that we have now commissioned the largest brazing furnace in the world at our La Crosse, Wisconsin brazed aluminum heat exchanger facility, which brings capacity and lead time improvement. The detailed planning for our $80 million capacity expansion in China is underway, and we're happy to announce we'll be holding our groundbreaking ceremony in May.

Let me comment now on specific highlights for each of our business segments. Our Energy & Chemicals business booked $65 million of orders in the first quarter.

Although this is down sequentially from $85 million in the fourth quarter, it's consistent with the seasonality we've seen in prior years. Equipment for ethylene production is one of our E&C petrochemical product offerings, and we continue to see signs of growth in that market as we received an $11 million award during the quarter for ethylene cold box and also received an $8 million ammonia cold box award in the quarter, pointing to petrochemical demand growth.

We continue to see upstream opportunities in the natural gas processing space. LNG opportunities continue to unfold for small to mid-scale applications.

We're currently working on feed studies for a liquefaction plant in Utah and Louisiana. The Louisiana plant is a 2 million ton per annum liquefaction plant, consisting of 4 LNG production trains.

This larger proposed plant will be used for LNG export and marine bunkering in North America. We plan to close our E&C acquisition in Wuxi, China during the second quarter.

As a reminder, this acquisition will add manufacturing capacity for brazed aluminum heat exchangers and cold boxes for the air separation and LNG liquefaction markets in Asia. It also will enable our current E&C cold box fabrication, which supplies the natural gas market, to move out of our D&S Asia facility in Changzhou, increasing capacity for D&S LNG products.

We see additional opportunities to provide a full spectrum of solutions to the air separation space in Asia as well. We continue to see momentum that shale gas development is having in North America with continuing infrastructure investment in natural gas processing, LNG, NGL liquid, both domestic and export facilities, and finally, petrochemical investment with natural gas and NGLs as a feedstock.

Execution on our projects and backlog has improved, along with receipt of change orders outstanding, and has reflected the improved gross margin. One of our 2 major LNG base load plants and backlog is now complete and ships in April.

Moving on to Distribution & Storage. We booked orders of $143 million in the first quarter, which is down 2% from our fourth quarter orders of $146 million.

Sequentially, for LNG-related orders, China had better-than-anticipated order growth of 11%. In the U.S., we experienced 104% growth and a rebound from a weak fourth quarter.

We continue believe our decision to move forward with the previously announced China expansion. We're seeing LNG order activity come from more regional and entrepreneurial players that have joined the market.

As a reminder, in late February, we announced an $80 million greenfield expansion in Changzhou, China that will significantly increase our capacity for all the D&S products we serve in China. As I mentioned earlier, the expansion will commence during the second quarter, and we expect it to support continued revenue growth in 2015 and beyond.

Ultimately, this expansion is expected to more than double our current capacity in Changzhou. As mentioned earlier, our industrial business was impacted by weather during the quarter, and has especially impacted our U.S.

[indiscernible] business, where revenue was down 15% from prior-year quarter as customer installations were delayed. After the weather turned in March, we saw positive signs as revenue in our industrial Packaged Gas business grew 9% from prior-year quarter results.

This has historically been a leading indicator of confidence in industrial market growth going forward. In addition, we saw bulk shipments improve in March and that continued in April.

Finally, our LNG fuel tank business continues its growth trend as sequential orders increased 68%. In general, our industrial gas customers reported significant weather-related impacts December through February.

With improvements in March continuing into April, many are optimistic regarding improving North American industrial activity. With respect to LNG in North America, we're encouraged by the increase in entrepreneurial activity in the LNG sector.

For example, we just received a $7 million order in April for LNG mobile regasification units, for oil and gas production applications from a new participant in the LNG space. We believe that there is potential for a number of service providers to move into the LNG space and be successful, similar to how new players have entered the drilling markets successfully in the Marcellus, Fayetteville and Eagle Ford shale fields as the benefits of frac-ing have improved.

In Europe, industrial demand is improving, and we're seeing several opportunities along the LNG supply chain. We recently teamed with a customer, Grupo Sousa, to implement an LNG virtual pipeline from Madeira Island off the coast of Portugal.

We supply 40-foot ISO containers to store LNG to deliver the island's power needs. We're also working with Shell in Europe to build 3 LNG fueling stations for heavy-duty trucks in the Netherlands.

We anticipate the first station to open in the third quarter of 2014. In our BioMedical segment, orders of $55 million were down 2% compared to $56 million in the fourth quarter.

As Michael mentioned earlier, sales for respiratory equipment in the first quarter remained weak as market restructuring and consolidation amongst our customers in the U.S. due to Medicare competitive bidding impact -- impacted our order intake along with delays in expected European government tender market demand.

Our cryobiological cold storage orders were down slightly from the fourth quarter of 2013 due to normal seasonality with respect to government spending programs. We see continued focus on stem cell R&D in Asia as a key indicator of demand moving forward.

On-site gas generation orders for the quarter were flat compared to the fourth quarter of 2013 as project award timing impacted the quarter. We anticipate growth in on-site generation demand, driven particularly by the environmental benefits of our wastewater processing technology and have dedicated more resources to grow this space.

Michael will now provide you with our outlook for the remainder of 2014.

Thanks, Sam. As Sam mentioned, we had a slow start to 2014.

Due to weather impacting our business, North American industrial activity and BioMedical continuing to work through the effects of competitive bidding. In addition, early April, major oil company customer curtailed and suspended certain North American LNG infrastructure projects for an order previously awarded to our D&S business during 2013.

The result of this action are reflected as a reduction in orders in the second quarter of approximately 10 million to 20 million, depending on the customer's filed plans. These events have caused us to reevaluate our anticipated results for the remainder of the year, and as such, we are changing our sales and earnings guidance.

Sales for 2014 are now expected to be in the range of $1.25 billion to $1.3 billion. Diluted earnings per share are expected to be in the range of $3 to $3.40 per diluted share at approximately 30.7 million weighted average shares outstanding.

This excludes any dilution impact resulting from the notes or any acquisition-related costs. This compares with previous sales guidance of $1.3 billion to $1.35 billion, and earnings guidance of $3.10 to $3.50 per diluted share, which also excluded any dilution impact resulting from notes or acquisition-related cost.

As we stated last quarter, we anticipate stronger momentum in the back half of this year as we expect the impact of competitive bidding will work through respiratory markets and the LNG infrastructure buildout will continue. I'd now like to open it up for questions.

Shannon, please provide instructions to the participants to be able to ask questions.

Maybe just to clarify, at the very beginning of the call, you called out $8 million and $0.06. That was just unclear.

Was that for the BioMedical business alone or was that for the overall business? And then based on that answer, maybe just some of the other areas or help quantify the shortfall versus maybe what you had been expecting previously?

That was for the overall business, Eric, the $8 million and $0.06 per share. And a lot of it was in Distribution & Storage, though.

Okay. So I mean, beyond that, I mean, that though was a quarter that probably was, I mean, fair to say, that was below what you would have expected a couple of months ago.

So just -- I mean, it's D&S, but, I mean, BioMedical -- I mean, was the margin impact of the shutdown, is that something that caught you offguard? Or how should we just kind of square the $0.41 number versus what you would have anticipated outside of weather?

Well it was below our expectations, but our expectations -- as you're aware, we don't publish quarterly numbers. We publish annual numbers.

And our expectation for the quarter was at the low end of the range compared to where the consensus was for the quarter [indiscernible] we normally disclose. So if you add in the weather-related impact, we weren't all that far off the low end.

As we -- I previously indicated, the back half is much stronger. Now with the delays and curtailments in the orders from major oil company, we had to reflect that in.

We've also reflected in some continued sluggishness in the BioMed market [indiscernible] going forward.

Right, understood. In terms of that -- the major that is delaying that, I mean, is that liquefaction?

Or should we think about that in terms of station infrastructure?

Right now, liquefaction. That's what we're [indiscernible] tanks or [ph] storage for liquefaction.

Got it. Got it.

And that's the -- and yes, that's the one that's kind of been out there for a while. Okay.

Maybe just turning to China. Just -- you talked about the sequential growth there in the order side, LNG being better than anticipated.

Any clarity in the -- is that tanks and station infrastructure, is it liquefaction or is it both? And then what does that do to your view for the remainder of the year, timing and magnitude of the recovery in the second half?

There was growth in our vehicle tanks, in mobile equipment to LNG tankers and also in fixed stations. So it goes fairly much across the board for our LNG product range in China.

And the forecasts are for continued growth of demand from the heavy-duty trucking sector. So it looks fairly positive.

Okay. And then, I mean, you did mention you're starting to see the demand spread out beyond the majors to some regional players.

Well, I guess, curious, I mean, what are you seeing in the liquefaction side as well in support of what you just talked about the tanks, mobile and the stations?

We continue to win orders for cold boxes, for liquefaction in China. There's significant quotation activity for additional liquefiers.

And just as we're seeing this move to smaller regional players and entrepreneurs on the Distribution & Storage equipment, that's also very much the case in orders we're receiving for liquefier cold boxes. But there are -- the major state-owned [ph] enterprises are also involved in quoting additional liquefiers.

Okay. Last question for me.

And you touched on it, but in the past, you've mentioned that beyond PetroChina, you're starting to see quoting activity from CNOC and Sinopec. Just any update there, whether that's continued, has accelerated or details would be great.

Yes, I think that on both of the other energy majors in China, the quotation activity continues. Discussions are progressing.

Watch this space, however, for orders.

Could you give us some more color on the LNG truck shipment? Sorry, the truck tank shipments?

How has that been increasing? And where do you stand in terms of capacity there?

We have significant capacity available and additional capacity readily added within the demand growth requirements in terms of the time it takes us to add capacity. So we're well served there and well able to handle the demand.

A major fleet has made announcements about increasing their use of LNG trucks, and we're delivering to them through this year.

Okay. And do you continue to see order flow growing in that segment?

Or is it just the one fleet?

That's certainly the largest and most notable, but there are a number of fleets buying from 10 to 15 [ph] units.

Okay, good. And then you had -- you sort of said that order flow is picking up into April here.

Are you able to ship very quickly against that or does this sort of build for more of a Q3 ramp? Or just maybe just give us a sense as to how the quarters play out as this weather-related issue sort of recedes [ph].

The -- in our Packaged -- this is referring to the industrial gas business for D&S. In Packaged Gas, the lead times are in the 2-week to 8-week time frame, generally.

For bulk shipments, the lead times are in the 4-week to 12-week lead time, generally, although there are customer tanks on the ground that when they call for installation, they can take delivery in a week. So the average lead time on those could also be in the 4- to 6-week timeframe.

So if this trend of improving order activity from the very low levels of January and February continues on, it can be reflected in the second quarter, as well as the third quarter.

I wonder if we could maybe just talk about the environment for BioMedical and your expectations for recovery in the second half of the year. Just my recollection, as looking back, there is a notion that the industry was de-stocking equipment heading into this competitive bidding process as service providers weren't quite sure who'd continue to serve clients after that.

Now we've had those contracts awarded and BioMedical has been still somewhat lumpy the last couple of quarters, or challenged. How much of a recovery in that segment are you expecting in your guidance?

And maybe can you give us some color as to why you feel that that will unfold?

Yes, well clearly, we're not happy and didn't forecast appropriately where the business would be. It's been a challenging period with uncertainty and several large customers have gone through ownership changes, so it's been a dynamic environment.

We are expecting in the second half of the year improvements of perhaps 15% to 20% in volume, but the market still is unsettled. And that's both a U.S.

issue, and then there's been several countries in Europe where there are large tenders that are supposedly close to being awarded, which would provide that volume, but the actual release dates seem to be slipping.

Okay. So moving away from BioMedical, now this year, you're breaking ground on your expanded China facility.

Of course, you just got done expanding your Wisconsin facility. Is there a degree of, call it, overhead absorption?

I'm just trying of think about, has this capacity expansion weighed on 2014 earnings in a way that, as we look to those facilities getting utilized, we could see some real margin expansion that might be massed [ph] with this year's capacity additions?

Well, clearly, at -- we -- in Distribution & Storage in North America, we've added significant capacity over the past year. And with the soft volumes we had in the fourth quarter -- or excuse me, the first quarter, that capacity hasn't been utilized.

So yes, there's an element of overhead associated with it. By the same token, we see industrial demand improving through the year and continued growth in LNG demand across the full range of Distribution & Storage projects.

So I'm pleased to have the capacity, and we think we'll be able to respond quickly to customer demand, with both excellent lead times and excellent value.

Greg, it'd be the same thing in our E&C business as we ramp up the new furnace. There's going to be some -- obviously, some inefficiencies as we get that up and running and outlined.

And so there's some additional costs that we'll be absorbing in that business, or have absorbed already. We'll continue until we get it up in full production.

That's another factor. The China facility really hasn't started yet in terms of that production or that -- putting together the facility.

It's at the early stages. We might see some of that later in the year, but keep in mind, it's a separate facility.

It's not the existing Changzhou facility that we have. And we are going to be freeing capacity up in our Changzhou facility as we get the Wuxi operations for -- just for E&C up and running as we go into second and third quarter.

So the point is, as you ask the question, "Is there going to be some cost absorbed because of the ramp-up in these different facilities?" Absolutely.

Yes. Okay.

And then, I guess, just what color can you provide -- China grew exceptionally strong in the first half of last year, slowed down following the price reforms. And then it seems to have shown some order activity maybe a little more quickly, earlier this year than, my sense, what it was expected.

What's your outlook for the remainder of the year? Is there any intelligence around what future price reforms are expected or how quickly you think the market will start responding to these NS4 emissions standards?

Or maybe you believe that's already happening. I'm just curious what your thoughts are there.

I think we're seeing improvements in demand and activity from the third and fourth quarter of last year. And the anticipation is that we'll progressively improve through the year.

The first question is on the E&C segment. There are certain number of projects that carried an inherently lower margin.

Where do you stand in terms of the project flow through in terms of those lower-margin orders? And it'd be helpful if you could quantify in terms of revenues that are remaining and the average margin for those remaining lower-margin projects.

There were 2 projects cited for base load LNG. The first of those we completed shipments in April.

So there's no margin, there's no backlog left or margin and backlog left anticipated for that project. It was perhaps at 97% complete at the end of the first quarter.

The second project is roughly at 40% completion. And pending customer change orders should shift in the first half of next year, the final train.

What's the magnitude of that second order?

We have roughly 60 million left in backlog.

And average margin?

Probably in the 10% range.

That's helpful. And shipping of the backlog, and I apologize, I got on the call slightly later.

So if you talked to this, apologies on my end. But thinking about the 10 million to 20 million that may or may not be backed out of the orders, how frequently are backlogs canceled because they're obviously bigger in magnitude, but put in relative senses historically the frequency, the magnitude and the reasoning for those larger cancelation?

It's quite exceptional. I would say that we typically experienced significantly less than 5% of our backlog being canceled, perhaps as low as 1% or 2%.

I think to get above -- to get to a notable number from memory of, say, over 5 million, I would have to go back to the 2007 time period. So it's an unusual event for us.

And with this particular customer, the outcome is still uncertain as to what the impact is in terms of actual backlog cancellation. and also the profit impact.

There's a number of moving parts to it, and a number of options being considered.

Is there a -- what -- are you able to clarify the reasoning for the change?

Yes. A significant customer announced that, as part of reduction in their capital spending plan, they were delaying the implementation of 2 liquefiers.

Okay. And then finally, on SG&A, how should we think about modeling SG&A forward such guidance either in the dollars basis or on a percentage of total sales?

It really should be in the low 50s over the next 3 quarters. That's our current expectation.

Just another question on the E&C margin. I think in your prepared comments, you mentioned something about changed orders.

In the quarter, in that business, could you just clarify that? Did that have a benefit gross margin in the quarter?

Yes. Under percentage completion accounting, when there is a change in the work scope, we start charging for the additional costs immediately when we're aware of them.

But we don't recognize improved revenue, and hence, improved margin, until we have an agreed change order from the customer. So we talked about last quarter that perhaps the margins were impacted by increased costs associated with changes that were not yet recognized by change orders from the customer.

As we work forward in the second quarter, we have been able to recognize some of those change orders.

Okay. So maybe another little benefit in the second quarter.

Okay, so then looking at the demand and the revenue there, you mentioned a couple small and mid-scale LNG projects that you're doing feed for. Can you give any insight as to your expectation of a larger award timing?

And how important is backlog growth in that business to see revenue growth later in the year and into '15? I know we're still early here in '14, but it's a long-cycle business and backlog is flat year-over-year.

So any color on that?

Yes. These are -- first, it's very difficult to call the timing on major awards.

Second, the gating factor for -- or probably lead months in the 26 weeks or time period. For heat exchangers, something in the 40-week time period -- 40- or 50-week time period for large cold boxes.

So depletion of backlog over the next 2 quarters doesn't impact 2014 results, but it certainly impacts late 2014 or early 2015 results.

Got you. I appreciate that.

And just one more on the D&S side. You mentioned that awards in China in D&S were better than you had expected.

What does that mean for the 15% to 20% revenue growth expectation you gave us last quarter for sales in that business?

Tacked.

Can I ask about a high-level question about LNG exports? Since you lasted the earnings call, I think another 2 LNG export projects in the U.S.

got DOE approval, and we've been talking about this thing for probably over a year now. Any movement as far as you can tell on getting into some of these potential developments as they move towards FID?

We are certainly involved in discussions and quotations on at least 2 and in early stage discussions on more than 2 of the projects. We don't anticipate awards in 2014 for the ones we're working on.

Is that just based on timing of reaching FID from the operator's perspective?

Correct.

Okay. And then back to China, you've alluded in the past 2 issues that PetroChina management's shakeout, et cetera.

When do you think that subsides?

We are still executing on orders for PetroChina. Things are stabilizing, although some of the projects are being handled at joint venture companies that are associated with PetroChina.

So what we would anticipate, with respect to PetroChina later in the year 2015, but we are seeing increased attention and activity with CNOC- or Sinopec-related companies. Picking up some of the slack, we're encouraging developments and building LNG in different parts of the country.

The BioMedical area, obviously, for many on the call, is not the primary reason to buy the stock here. We understand that.

It's really struggled with demand for quite some time. You've talked about running down inventories and concerns -- buyers' concerns over the health care rollout and what it means.

But beyond that, have you looked at the internal effectiveness of your sales force, ways to cut cost? I just wonder, I think some on the call are getting weary of, quarter-after-quarter, where more or less drags some of your operations.

Just to address that area a little more fully and give us an idea when we can expect a meaningful improvement and momentum.

Okay. The business is going through a significant transition as globally, but particularly, North America and Europe, there's pressure on reimbursement for respiratory therapy.

And that has led to the market gravitating to lower cost, forms of respiratory therapy, particularly oxygen concentrators that don't require delivery of liquid oxygen. Going back 2 years, we were over 80% of our sales in the respiratory therapy market or for liquid oxygen, which require deliveries.

We saw that and invested in companies that manufacture portable concentrators -- or concentrators, both home and portable concentrators that are wearable. That was an appropriate move because the liquid oxygen therapy, which was our strength, has been diminished by over 50% in the last 2 years with the acquisitions of the portable concentrators and stationary concentrators, making up for that difference.

The shakeout, as part of Medicare reimbursement cuts, is still going on. It's taking longer than we anticipated.

We are doing significant work to improve our operational efficiency. And we, in the organization, now -- so that we're positioned for what ultimately is still a growing market in terms of patients to be able to successfully be a major player in that.

So, yes, we've been disappointed as investors have in the way the market has reacted, but we think we're approaching it properly, both in terms of controlling costs and preserving a future market-leading position.

Real quick interjection, one little follow-up. Do you have any feeling if this turn around, based on whatever assumptions you're making regarding federal regulations and state regulations and how the major players are reacting to that?

You could start to see an improvement in the third and fourth quarters? Or is that too optimistic?

We believe because of our operational improvements, we will be able to shell improvements in the third and fourth quarter, yes. However, I'm becoming more circumspect base on my past year's ability to forecast what's happening in that market.

But we will address it both from a standpoint of making sure we have the right products, but also having the appropriate cost structure.

I'm Dennis from Hong Kong. I would like to ask 2 questions about China.

The first is, can you give us some color about the order backlog of the first Q 2014 year-over-year? Is there any increase or financial drop?

This is the first question. And then second question is about the subsidy of the LNG-powered ships.

Do you see there would be more orders from this part? Do you have any budget of that?

That's the questions.

We had significant first quarter and second quarter orders from PetroChina in 2013. We had a broader base of orders in 2014.

I would anticipate that our backlog is down slightly from what it was in the first quarter as a result of those large orders hitting late in the quarter. I don't have the number immediately at hand.

With respect to your question on the subsidies towards ship building, because they do involve subsidies in the cost of ships, I would anticipate that, that will significantly develop the marine market demand in China. There are sufficient liquefiers to supply that demand, but you do have to remember that you're working within ship construction cycles so that the government regulation and incentive has been announced.

There's typically a period of 6 to 12 months to understand the regulation and to actually have the subsidies be available, and then you have whatever the ship construction time, lead times will be, which way -- I would just say roughly would be in the 6 to 18 months. So it's not something you're going to see impact the 2014 sales dramatically, except perhaps for marine bunkering stations.

In terms of ship construction, I would look to 2015, 2016.

So another question is about your competitors' guidance here has recently aggressive nature got an EPC contract to build the big LNG storage tanks. So do you think you will focus more on working, cooperating with the city gas operators and also [indiscernible] major to get more EPC order going forward?

I'm not familiar with the CIFC [ph] announcement as to what size tanks were involved, whether that was normal vacuum insulated tanks or larger. [indiscernible] tanks, I do anticipate opportunities for us in the shop fabricated vacuum insulated storage tanks that we manufacture, yes.

This is Vinny [ph] asking a question on behalf of Alex. I think it was mentioned that Chinese orders grew more than expected.

We're wondering if you can comment on the margins of this order? Are they higher or lower than the historical business in China?

Across-the-board, they were probably slightly lower than the second half of last year due to mix, but I would say they're all in the 20%, low 20s gross margin range.

Great. So just a follow-up on that, is it possible to quantify the amount of LNG orders that were received in China?

It was said that was higher than expected, but how much was it?

No, we don't report that separately.

Sam, what would you -- how would you characterize sort of the cadence of the small-scale LNG market in North America? Obviously, there's been number of projects in the last 9 months that you've been involved with.

And my understanding is that there's many other small projects being talked about. Is that market continuing to develop as you and others might have anticipated?

Or is it accelerating? Any color there would be helpful.

I would say the quotation activity and inquiry activity level is at or above expectations. In order to go forward, the challenge has been unlike traditional base load LNG, where you don't go to final investment decision or go forward until you have multi-contracts [ph] in 20 years for 75% or 80% of the output.

These require making assumptions as to how quickly you'll build customer demand and customer commitments, and at the current level of overall infrastructure buildout, that's challenging. So the process from a feed study, if you will, or a firm quotation to moving forward with a Board of Directors' decision to build a liquefier and commencing construction has been more variable than we anticipated.

But we do see good progress being made with a number of orders booked as we've announced and several more in the offing.

Thank you. We're positive about the long-term fundamental drivers for our business and are committed to meet demands in the LNG, petrochemical air separation, industrial gas, health care, life sciences and environmental markets we serve.

We continue to make progress on our facility expansions and are excited about our ability to provide superior service and value to our customers. Finally, we believe a positive trend is unfolding in the global LNG market, as in China and now in the U.S., we're seeing an increasing number of smaller, regional and local entrepreneurs enter the market.

We're well suited to meet this new demand, and we're excited to serve these customers with quality products, service and dependability that we can deliver day in, day out. Thank you, everyone, for listening today.

Goodbye.