Pall Corporation Reports First Quarter Results

Pall Corporation Reports First Quarter Results
Posts Strong Earnings


PORT WASHINGTON, N.Y., December 09, 2009 - Pall Corporation (NYSE:PLL) today reported financial results for the first quarter ended October 31, 2009.

Sales and Earnings Overview

Net earnings were $67.0 million, compared to $43.1 million in the first quarter of fiscal year 2009. Diluted earnings per share ("EPS") were $0.56, compared to $0.36 a year earlier. Pro forma EPS, excluding restructuring and other charges as well as non-recurring favorable items affecting interest expense and provision for income taxes ("Discrete Items"), were $0.40 on par with last year. The estimated impact of foreign currency translation increased both measures of fiscal year 2010 EPS by $0.01.

As previously reported, first quarter sales were $546.9 million, a decrease of 5.4% compared to the first quarter of fiscal year 2009. Sales in local currency ("LC") decreased 6.9%. Foreign currency translation increased reported sales by $8.8 million or 1.5% in the quarter.

Eric Krasnoff, Chairman and CEO, stated, "This quarter's results exemplify the strength of Pall's market and geographic diversity as well as the success of our investments and execution of corporate initiatives. Key Industrial end markets remained depressed. The Life Sciences business was strong, particularly in high value added, differentiated product lines.

Overall, gross margin in the quarter improved 110 basis points over last year. SG&A decreased over $5 million, or 3%, in LC. Both these improvements also reflect ongoing cost reduction and efficiency initiatives. Cash flow from operations was $73 million in the quarter, an increase of 44% over last year."

Life Sciences - First Quarter Highlights

(Dollar Amounts in Thousands and Discussion of Sales Changes are in Local Currency)
             
Sales:
   OCT. 31, 2009   % CHANGE   % CHANGE IN LC
Medical   $ 95,687   3.6   2.6
BioPharmaceuticals     143,223   12.0   10.3
Total Life Sciences segment   $ 238,910   8.4   7.1
             
        % OF SALES    
             
Gross profit   $ 133,001   55.7    
Operating profit   $ 57,767   24.2    

Medical sales increased 2.6% in the quarter, with Blood Filtration submarkets growing 4%. Pall-AquasafeTM water filter sales were strong.

BioPharmaceuticals sales increased 10.3% in the quarter with growth in all geographies. Sales within Pharmaceutical submarkets increased 9.8% with strong consumables growth in all geographies. Vaccine production remains high.

Life Sciences gross margin increased 370 basis points to 55.7% primarily driven by favorable market trends and product mix. SG&A as a percentage of sales decreased 90 basis points to 27.4%. Operating profit increased 38% to $57.8 million. Operating margin improved to 24.2% from 19% a year earlier.

Industrial - First Quarter Highlights

(Dollar Amounts in Thousands and Discussion of Sales Changes are in Local Currency)
             
Sales:
   OCT. 31, 2009   % CHANGE   % CHANGE IN LC
Energy, Water & Process Technologies   $ 194,489   (10.6)   (12.3)
Aerospace & Transportation     56,991   (21.6)   (21.6)
Microelectronics     56,549   (16.1)   (19.2)
Total Industrial segment   $ 308,029   (13.9)   (15.5)
             
        % OF SALES    
Gross profit   $ 137,197   44.5    
Operating profit   $ 30,971   10.1    

Energy, Water & Process Technologies ("EWPT") sales decreased 12.3% in the quarter. Fuels and Chemicals and Power Generation submarkets were flat and sales to Municipal Water, Food & Beverage and Industrial Manufacturing submarkets were down.

Aerospace & Transportation declined 21.6% in the quarter. Commercial Aerospace submarkets declined 8.5% reflecting a reduction in flights and production of airframes, particularly for private jets. Sales to Military Aerospace submarkets decreased 29.8% compared to a very strong quarter a year ago. Sales to Transportation submarkets were down on continued weakness in mobile equipment production.

Microelectronics sales decreased 19.2% over the prior year, but held steady sequentially over an improved fourth quarter.

Industrial gross margin declined to 44.5% from 46.1% a year ago reflecting the impact of reduced volume and product mix. SG&A decreased 4% in local currency benefitted by the company's cost reduction programs. Operating profit decreased to $31 million. Operating margin declined to 10.1% from 15.4% a year earlier.

Conclusion

Mr. Krasnoff concluded, "Life Sciences continues to benefit from the sale of new products targeted to emerging industry trends. While Industrial had a difficult quarter, we believe it has begun to stabilize. There is upside opportunity if the harder hit industrial markets do rebound over the next half-year as many economists expect. We remain confident in Pall's ability to execute its growth plans and look forward to reviewing the details at our investor day on December 17, 2009.

We are resuming providing annual guidance. Pro forma EPS is projected to be in a range of $2.02 to $2.19 per share. This guidance includes a $0.17 benefit from foreign currency translation. By also including the Discrete Items from the first quarter, the EPS range is $2.18 to $2.35."

Conference Call

On Thursday, December 10, 2009, at 8:30 am ET, Pall Corporation will host a conference call to review these results. The call will be webcast and individuals can access it at www.pall.com/investor. Listening to the webcast requires audio speakers and Microsoft Windows Media Player software. The webcast will be archived for 30 days.

The company will also host an Investor Day on December 17, 2009 from 9-11 am ET. The conference will be simultaneously webcast and individuals can access it at www.pall.com/investor.

About Pall Corporation

Pall Corporation (NYSE:PLL) is a filtration, separation and purification leader providing Total Fluid ManagementSM solutions to meet the critical needs of customers in biopharmaceutical, hospital and transfusion medicine, energy and alternative energy, electronics, municipal and industrial water, aerospace, transportation and broad industrial markets. Together with our customers, we foster health, safety and environmentally responsible technologies. The Company's engineered solutions enable process and product innovation and minimize emissions and waste. Pall Corporation, with total revenues of $2.3 billion for fiscal 2009, is an S&P 500 company with more than 10,000 employees servicing customers worldwide. Pall has been named a top "green company" by Newsweek magazine. To see how Pall is helping enable a greener and more sustainable future, visit www.pall.com.

Forward-Looking Statements

The matters discussed in this release contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Results for the first quarter of fiscal year 2010 are preliminary until the Company's Form 10-Q is filed with the Securities and Exchange Commission on December 10, 2009.

All statements regarding future performance, earnings projections, earnings guidance, management's expectations about its future cash needs and effective tax rate, and other future events or developments are forward-looking statements. Forward-looking statements are those that use terms such as "anticipate", "should", "believe", "estimate", "expect", "intend", "plan", "predict", "potential" or similar expressions about matters that are not historical facts. Forward-looking statements contained in this and other written and oral reports are based on current Company expectations and are subject to risks and uncertainties, which could cause actual results to differ materially. Such risks and uncertainties include, but are not limited to, those discussed in Part I, Item 1A, "Risk Factors" in the 2009 Form 10-K, and other reports the Company files with the Securities and Exchange Commission, including the impact of the current global recessionary environment and its likely depth and duration, the current credit market crisis, volatility in currency exchange rates and energy costs and other macro economic challenges currently affecting the Company, our customers (including their cash flow and payment practices) and vendors; the effectiveness of our initiatives to mitigate the impact of the current environment; and the Company's ability to successfully complete its business improvement initiatives that include integrating and upgrading its information systems and the effect of a serious disruption in the Company's information systems on its business and results of operations. The Company makes these statements as of the date of this disclosure and undertakes no obligation to update them.

Management uses certain non-GAAP measurements to assess the Company's current and future financial performance. The non-GAAP measurements do not replace the presentation of the Company's GAAP financial results. These measurements provide supplemental information to assist management in analyzing the Company's financial position and results of operations. The Company has chosen to provide this information to facilitate meaningful comparisons of past, present and future operating results and as a means to emphasize the results of ongoing operations. Reconciliations of the non-GAAP financial measures used in this presentation to the most directly comparable GAAP measures appear on the last slide of this presentation (in the Reconciliation Appendix) and are also available on Pall's website at www.pall.com/investor.

 
PALL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in Thousands)
         
    OCT. 31, 2009   JULY 31, 2009
         
Assets:        
         
Cash and cash equivalents   $ 433,534   $ 414,011
Accounts receivable     546,225     561,063
Inventories     419,180     413,278
Other current assets     197,557     182,098
Total current assets     1,596,496     1,570,450
         
Property, plant and equipment, net     698,896     681,658
Other assets     585,965     588,704
Total assets   $ 2,881,357   $ 2,840,812
         
Liabilities and Stockholders' Equity:        
         
Short-term debt   $ 147,436   $ 139,803
Accounts payable, income taxes and other current liabilities     520,371     577,587
Total current liabilities     667,807     717,390
         
Long-term debt     577,765     577,666
Deferred taxes and other non-current liabilities     440,532     431,158
Total liabilities     1,686,104     1,726,214
         
Stockholders' equity     1,195,253     1,114,598
Total liabilities and stockholders' equity   $ 2,881,357   $ 2,840,812
     
PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands, except per share data)
                 
                 
    FIRST QUARTER ENDED    
    OCT. 31, 2009       OCT. 31, 2008    
                 
Net sales   $ 546,939       $ 578,022    
Cost of sales   276,741       298,631    
Gross profit   270,198       279,391    
% of sales   49.4%       48.3%    
Selling, general and administrative expenses   176,658       180,506    
% of sales   32.3%       31.2%    
Research and development   17,249       18,933    
Earnings before restructuring and other                
charges, net ("ROTC"), interest expense,                
net, and income taxes   76,291       79,952    
% of sales   13.9%       13.8%    
ROTC   4,057   (a)   8,175   (b)
Interest (income)/expense, net   (2,606)   (a)
   9,426    
Earnings before income taxes   74,840       62,351    
Provision for income taxes   7,857   (a)   19,264   (b)
Net earnings   $ 66,983       $ 43,087    
                 
Earnings per share:                
Basic   $ 0.57       $ 0.36    
Diluted   $ 0.56       $ 0.36    
                 
Average shares outstanding:                
Basic   117,686       119,363    
Diluted   118,847       120,520    
                 
Net earnings as reported   $ 66,983       $ 43,087    
ROTC, after pro forma tax effect   2,739   (a)   6,694   (b)
Interest adjustments, after pro forma tax       
        
effect   (7,499)   (a)
   -    
Tax adjustments   (14,188)   (a)   (1,426)   (b)
Pro forma earnings   $ 48,035       $ 48,355    
                 
Diluted earnings per share as reported   $ 0.56       $ 0.36    
ROTC, after pro forma tax effect   0.02   (a)   0.05   (b)
Interest adjustments, after pro forma tax       
        
effect   (0.06)   (a)
   -    
Tax adjustments   (0.12)   (a)   (0.01)   (b)
Pro forma diluted earnings per share   $ 0.40       $ 0.40    
                 
(a) ROTC in the quarter includes severance and other costs related to the Company's cost reduction programs.
 
Interest (income)/expense, net and provision for income taxes includes the reversal of accrued interest of $8,984 ($7,499 after pro forma tax effect) and income taxes payable of $14,188, principally related to the resolution of a foreign tax audit. Pro forma earnings exclude these items as they are deemed to be non-recurring in nature.
 
(b) ROTC in the quarter includes severance and other costs related to the Company's cost reduction programs, an increase to previously established environmental reserves, professional fees related to the previously reported matters that were under inquiry by the audit committee of the Company's board of directors, the impairment of investments and a charge to write-off in process research and development acquired in the acquisition of GeneSystems, SA.
 
Provision for income taxes in the quarter includes benefits related to the repatriation of earnings and newly enacted tax legislation. Pro forma earnings exclude these items as they are deemed to be non-recurring in nature.
 
PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
         
         
    FIRST QUARTER ENDED
    OCT. 31, 2009   OCT. 31, 2008
         
Net cash provided by operating activities   $ 73,040     $ 50,854  
         
Investing activities:        
         
Acquisitions, net of cash acquired     -       (36,832 )
Capital expenditures     (37,081 )     (26,287 )
Other     (1,222 )     77  
Net cash used by investing activities     (38,303 )     (63,042 )
         
Financing activities:        
         
Dividends paid     (33,913 )     (15,501 )
Notes payable and long-term borrowings     2,090       (83,045 )
Purchase of treasury stock     -       (49,894 )
Other     8,453       7,433  
Net cash used by financing activities     (23,370 )     (141,007 )
         
Cash flow for period     11,367       (153,195 )
Cash and cash equivalents at beginning of year     414,011       454,065  
Effect of exchange rate changes on cash     8,156       (34,567 )
Cash and cash equivalents at end of period   $ 433,534     $ 266,303  
         
         
Free cash flow:
        
Net cash provided by operating activities   $ 73,040     $ 50,854  
Less capital expenditures     37,081       26,287  
Free cash flow   $ 35,959     $ 24,567  
 
PALL CORPORATION
SUMMARY OPERATING PROFIT BY SEGMENT
(Unaudited)
(Dollar Amounts in Thousands)
         
         
    FIRST QUARTER ENDED
    OCT. 31, 2009   OCT. 31, 2008
         
Life Sciences
        
Sales   $ 238,910     $ 220,329  
Cost of sales     105,909       105,810  
Gross profit     133,001       114,519  
% of sales     55.7%
 
     52.0%
 
 
         
Selling, general and administrative expenses     65,413       62,384  
% of sales     27.4%
 
     28.3%
 
 
Research and development     9,821       10,267  
Operating profit   $ 57,767     $ 41,868  
% of sales     24.2%
 
     19.0%
 
 
         
Industrial
        
Sales   $ 308,029     $ 357,693  
Cost of sales     170,832       192,821  
Gross profit     137,197       164,872  
% of sales     44.5%
 
     46.1%
 
 
         
Selling, general and administrative expenses     98,798       101,100  
% of sales     32.0%
 
     28.3%
 
 
Research and development     7,428       8,666  
Operating profit   $ 30,971     $ 55,106  
% of sales     10.1%
 
     15.4%
 
 
         
CONSOLIDATED:        
Operating profit   $ 88,738     $ 96,974  
General corporate expenses     12,447       17,022  
Earnings before ROTC, interest and                
income taxes     76,291       79,952  
ROTC     4,057       8,175  
Interest(income)/expense, net     (2,606 )     9,426  
Earnings before income taxes   $ 74,840     $ 62,351  
   
PALL CORPORATION
SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND GEOGRAPHY
(Unaudited)
(Dollar Amounts in Thousands)
                
   
 
FIRST QUARTER ENDED   OCT. 31, 2009   OCT. 31, 2008   % CHANGE   EXCHANGE
RATE
IMPACT
   % CHANGE
IN LOCAL
CURRENCY
 
                     
Life Sciences
           |---------- Increase/(Decrease) ---------|
 
By Market:                    
Medical   $ 95,687   $ 92,406   3.6     $ 865     2.6  
BioPharmaceuticals     143,223     127,923   12.0       2,157     10.3  
Total Life Sciences   $ 238,910   $ 220,329   8.4     $ 3,022     7.1  
                     
By Geography:                    
Western Hemisphere   $ 87,540   $ 81,316   7.7     $ (18 )   7.7  
Europe     114,726     109,458   4.8       349     4.5  
Asia     36,644     29,555   24.0       2,691     14.9  
Total Life Sciences   $ 238,910   $ 220,329   8.4     $ 3,022     7.1  
                     
                     
Industrial
                    
By Market:                    
Energy, Water & Process Technologies   $ 194,489   $ 217,599   (10.6 )   $ 3,642     (12.3 )
Aerospace & Transportation     56,991     72,695   (21.6 )     33     (21.6 )
Microelectronics     56,549     67,399   (16.1 )     2,067     (19.2 )
Total Industrial   $ 308,029   $ 357,693   (13.9 )   $ 5,742     (15.5 )
                     
By Geography:                    
Western Hemisphere   $ 79,628   $ 101,899   (21.9 )   $ (71 )   (21.8 )
Europe     115,991     132,097   (12.2 )     705     (12.7 )
Asia     112,410     123,697   (9.1 )     5,108     (13.3 )
Total Industrial   $ 308,029   $ 357,693   (13.9 )   $ 5,742     (15.5 )

 

 

Pall Corporation
Patricia Iannucci
V.P. Investor Relations & Corporate Communications
Telephone: 516-801-9848
Email: [email protected]

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