EX-99 2 exhibit99.htm PRESS RELEASE, DATED JUNE 8, 2010 (FURNISHED PURSUANT TO ITEM 2.02) exhibit99.htm
Exhibit 99
 
Pall Corporation Reports Robust Third Quarter Earnings
 
Orders Up 27%
 
Port Washington, NY (June 8, 2010) -- Pall Corporation (NYSE:PLL) today reported financial results for the third quarter ended April 30, 2010.
 
Sales and Earnings Overview
 
Sales for the third quarter were $616 million, an increase of 10.8% compared to the third quarter of fiscal year 2009. Sales in local currency (“LC”) increased 5.7%. Foreign currency translation increased reported sales by $28.6 million or 5.1% in the quarter. Net earnings were $69.7 million, compared to $44.2 million in the third quarter of fiscal year 2009.
 
Pro forma earnings per share (“EPS”) were $0.58, compared to $0.42 last year, an increase of 38%. This excludes restructuring and other charges as well as favorable items affecting interest expense (collectively, "Discrete Items"). Diluted EPS were $0.58, compared to $0.37 last year, an increase of 57%. The estimated impact of foreign currency translation increased both measures of EPS by $0.04.
 
For the nine months, pro forma EPS, excluding Discrete Items which also included items affecting provision for income taxes, were $1.40 compared to $1.20 a year earlier, an increase of 17%. Diluted EPS were $1.56, compared to $1.05 for the same period last year, an increase of 49%. The estimated impact of foreign currency translation increased both measures of EPS by $0.10.
 
Eric Krasnoff, Chairman and CEO, said, “The expected Industrial recovery appears to now be firmly underway. Overall, orders grew 27%. Gross margins continued their upward trend with ongoing efficiency enhancing and cost reduction programs, along with favorable mix, contributing to these results.
 
Pall Industrial returned to growth in the quarter with sales up 5%. Growth was propelled by our resurgent Microelectronics market which grew over 77%. Orders increased 47% in Industrial as the recovery spread across markets. All Industrial submarkets, other than Aerospace, saw double digit growth in orders.
 
Life Sciences continued to perform well. Sales grew over 6% led by a 12% increase in BioPharmaceuticals."
 
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Life Sciences – Third Quarter Highlights
 
(Dollar Amounts in Thousands and Discussion of Sales and Orders Changes are in Local Currency)
 
% CHANGE
Sales:   APR. 30, 2010       APR. 30, 2009       % CHANGE       IN LC
BioPharmaceuticals $ 162,606 $ 138,269 17.6        12.4
Medical 99,703 98,051 1.7 (1.9 )
Total Life Sciences segment $        262,309 $        236,320        11.0 6.4
 
Gross profit $ 146,812 $ 124,658
       % of sales 56.0 52.7      
Operating profit $ 63,339   $ 52,459  
       % of sales 24.1 22.2    

Within BioPharmaceuticals, consumable sales in the Pharmaceuticals submarket grew 9% with all geographies contributing. Key factors driving these results were the continuing demand for vaccines and expanding utilization of the Company’s single-use technologies for biotech production. Systems sales to Pharmaceutical customers grew 6%. Laboratory sales were strong.
 
The continued significant gross margin improvement in Life Sciences is driven by rigorous cost reduction programs and by the beneficial impact to sales mix from disposables for biological applications. Operating profit increased almost 21% to $63.3 million.
 
Industrial – Third Quarter Highlights
 
(Dollar Amounts in Thousands and Discussion of Sales and Orders Changes are in Local Currency)
 
% CHANGE
Sales:   APR. 30, 2010       APR. 30, 2009       % CHANGE       IN LC
Energy, Water & Process Technologies $ 216,823 $ 207,382 4.6 (1.1 )
Aerospace & Transportation 64,530 73,842        (12.6 )        (15.2 )
Microelectronics 72,320   38,339 88.6 77.5  
Total Industrial segment $        353,673 $        319,563 10.7 5.1
 
Gross profit $ 166,720 $ 139,572  
       % of sales 47.1 43.7    
Operating profit $ 56,938   $ 40,569      
       % of sales 16.1 12.7  

Within EWPT, Fuels & Chemicals and Food & Beverage sales declined by 8% and 4%, respectively, with orders up 84% and 14%, respectively. Municipal Water sales were down while orders remain strong in this longer lead-time market. Sales in the Industrial Manufacturing submarket grew 21% following declines for over a year. Power Generation sales increased 11%. For the overall EWPT market, orders increased 55%, most of which will ship after this fiscal year. We expect low single digit sales growth in the fourth quarter.
 
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Within Aerospace & Transportation, the Commercial and Military Aerospace submarkets remained weak. The smaller Transportation submarket turned positive for the first time in over a year, with sales up 19% and orders up over 60%.
 
The recovery in the Microelectronics market is in high gear. Results reflect higher capacity utilization at chip producers and growth in demand for consumer electronics products. Sales in this market returned to their highest level in 18 months.
 
Industrial’s strong gross margin improvement reflects volume growth in Microelectronics and Industrial Manufacturing, two of Pall’s highest margin markets. Long-standing lean manufacturing and cost reduction initiatives remain ongoing contributors. Operating profit increased 88% sequentially to almost $57 million in the third quarter as operating margin increased to 16.1% from 9.7% in the second quarter.
 
Conclusion
 
Mr. Krasnoff concluded, “We are focused on maintaining and enhancing the structural improvements we have accomplished over the past few years. This will enable us to continue to leverage a growing top line.
 
The Food and Beverage marketplace is evolving in ways that are drawing it ever closer to the BioPharmaceuticals world. Among the currents moving the food markets into the life sciences arena are growing requirements for testing to identify disease and spoilage organisms and a tightening regulatory environment focused on public health and manufacturing practices. Starting with the fourth quarter, Food and Beverage is being managed and reported within the Life Sciences segment.
 
Including an estimated benefit from foreign currency translation of $0.07 based on current exchange rates, we now expect full year EPS to be at the high end of the range of our previous guidance excluding Discrete Items.”
 
Conference Call
 
On Wednesday, June 9, 2010, at 8:30 am ET, Pall Corporation will host a conference call to review these results. The call can be accessed at www.pall.com/investor. The webcast will be archived for 30 days.
 
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, transfusion and veterinary 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 serving 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/green.
 
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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 third quarter of fiscal year 2010 are preliminary until the Company's Form 10-Q is filed with the Securities and Exchange Commission on June 9, 2010.
 
Forward-looking statements are those that address activities, events or developments that the Company or management intends, expects, projects, believes or anticipates will or may occur in the future. 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 "may," "will," "expect," "believe," "intend," "should," "could," "anticipate," "estimate," "forecast," "project," "plan," "predict," "potential," and similar expressions. Forward-looking statements contained in this and other written and oral reports are based on management’s assumptions and assessments in the light of past experience and trends, current conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both the near- and long-term and 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 effect of litigation and regulatory inquiries associated with the restatement of our prior period financial statements; our ability to successfully complete our business improvement initiatives, which include integrating and upgrading our information systems and the effect of a serious disruption in our information systems; the impact of legislative, regulatory and political developments globally and the impact of the uncertain global economic environment and the timing and strength of a recovery in the markets and regions we serve, and the extent to which adverse economic conditions may affect our sales volume and results; demand for our products and business relationships with key customers and suppliers, which may be impacted by their cash flow and payment practices, as well as delays or cancellations in shipments; volatility in foreign currency exchange rates, interest rates and energy costs and other macro economic challenges currently affecting us; changes in product mix, market mix and product pricing, particularly relating to the expansion of the systems business; increase in costs of manufacturing and operating costs; our ability to obtain regulatory approval or market acceptance of new technologies, enforce patents and protect proprietary products and manufacturing techniques; fluctuations in our effective tax rate; our ability to successfully complete or integrate any acquisitions; the impact of pricing and other actions by competitors; and our ability to achieve the savings anticipated from cost reduction and gross margin improvement initiatives. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. The Company makes these statements as of the date of this disclosure and undertakes no obligation to update them, whether as a result of new information, future developments or otherwise.
 
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.
 
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PALL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in Thousands)
 
APR. 30, 2010       JULY 31, 2009
Assets:
 
Cash and cash equivalents $ 483,884 $ 414,011
Accounts receivable 517,558 561,063
Inventories 430,194 413,278
Other current assets 184,835 182,098
       Total current assets 1,616,471 1,570,450
 
Property, plant and equipment, net 687,002 681,658
Other assets 585,809 588,704
       Total assets $ 2,889,282 $ 2,840,812
 
Liabilities and Stockholders' Equity:
 
Short-term debt $ 42,112 $ 139,803
Accounts payable, income taxes and other current liabilities   536,246   577,587
       Total current liabilities 578,358   717,390
 
Long-term debt 685,975 577,666
Deferred taxes and other non-current liabilities 401,986 431,158
       Total liabilities 1,666,319 1,726,214
 
Stockholders' equity 1,222,963 1,114,598
       Total liabilities and stockholders' equity $        2,889,282 $        2,840,812
  
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PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands, except per share data)
 
THIRD QUARTER ENDED NINE MONTHS ENDED
    APR. 30, 2010     APR. 30, 2009     APR. 30, 2010     APR. 30, 2009
Net sales $     615,982 $     555,883 $     1,723,322 $     1,677,201
Cost of sales 302,450 291,653 855,307 877,231
Gross profit 313,532 264,230 868,015 799,970
       % of sales 50.9 % 47.5 % 50.4 % 47.7 %
Selling, general and administrative expenses 187,303 168,747 550,973 516,337
       % of sales 30.4 % 30.4 % 32.0 % 30.8 %
Research and development 18,986 16,218 54,874 52,570
Earnings before restructuring and other
charges, net ("ROTC"), interest expense,
net, and income taxes 107,243 79,265 262,168 231,063
       % of sales 17.4 % 14.3 % 15.2 % 13.8 %
ROTC 2,030 (a) 8,369 (b) 6,659 (a) 25,291 (b)
Interest expense, net 3,254 (a) 6,576 6,342 (a) 22,555
Earnings before income taxes 101,959 64,320 249,167 183,217
Provision for income taxes 32,268 20,158 62,874 (a) 57,097 (b)
Net earnings $ 69,691 $ 44,162 $ 186,293 $ 126,120
 
Earnings per share:
       Basic $ 0.59 $ 0.37 $ 1.58 $ 1.06
       Diluted $ 0.58 $ 0.37 $ 1.56 $ 1.05
 
Average shares outstanding:
       Basic 117,589 118,305 117,713 118,753
       Diluted 119,204 119,065 119,107 119,689
 
Net earnings as reported $ 69,691 $ 44,162 $ 186,293 $ 126,120
Discrete items:
       ROTC, after pro forma tax effect 1,365 (a) 5,818 (b) 4,104 (a) 18,834 (b)
       Interest adjustments, after pro forma tax effect (2,074 ) (a) - (9,573 ) (a) -
       Tax adjustments - - (14,188 ) (a) (1,426 ) (b)
Pro forma earnings $ 68,982 $ 49,980 $ 166,636 $ 143,528
 
Diluted earnings per share as reported $ 0.58 $ 0.37 $ 1.56 $ 1.05
Discrete items:
       ROTC, after pro forma tax effect 0.01 (a) 0.05 (b) 0.03 (a) 0.16 (b)
       Interest adjustments, after pro forma tax effect (0.01 ) (a) - (0.07 ) (a) -  
       Tax adjustments - - (0.12 ) (a) (0.01 ) (b)
Pro forma diluted earnings per share $ 0.58 $ 0.42 $ 1.40 $ 1.20
 

(a) ROTC in the quarter of $2,030 ($1,365 after pro forma tax effect of $665) and $6,087 ($4,104 after pro forma tax effect of $1,983) in nine months, respectively, primarily includes severance and other costs related to the Company's cost reduction programs. Such costs in the nine months were partly offset by receipt of insurance claim payments related to the previously reported matters that were under inquiry by the audit committee of the Company's board of directors.
 
Interest expense, net in the quarter includes the reversal of accrued interest of $2,553 ($2,074 after pro forma tax effect of $479) primarily related to expiring foreign statutes of limitation for assessment related to uncertain tax positions. Interest expense, net, and provision for income taxes in the nine months includes the reversal of accrued interest of $11,537 ($9,573 after pro forma tax effect of $1,964) and income taxes payable of $14,188. These items principally related to the resolution of foreign tax audits and expiring foreign statutes of limitation for assessment related to uncertain tax positions. Pro forma earnings exclude these items as they are deemed to be non-recurring in nature and/or not considered by management to be indicative of underlying operating performance.
 
The tax effect of ROTC and interest adjustments for the quarter and the nine months, respectively, was calculated using applicable entity-specific U.S. federal and/or foreign tax rates.
 
(b) ROTC in the quarter of $8,369 ($5,818 after pro forma tax effect of $2,551) is primarily comprised of severance and other costs related to the Company's cost reduction programs. ROTC in the nine months of $25,291 ($18,834 after pro forma tax effect of $6,457) is primarily comprised of severance and other costs related to the Company's cost reduction programs, professional fees related to the previously reported matters that were under inquiry by the audit committee of the Company’s board of directors, an increase to previously established environmental reserves, the impairment of investments and capitalized software development costs and a charge to write-off in process research and development acquired in the acquisition of GeneSystems, SA.
 
Provision for income taxes in the nine months includes benefits related to the repatriation of earnings and newly enacted tax legislation. Pro forma earnings exclude these items as they are Pro forma earnings exclude these items as they are deemed to be non-recurring in nature and/or not considered by management to be indicative of underlying operating performance.
 
The tax effect of ROTC for the quarter and the nine months, respectively, was calculated using applicable entity-specific U.S. federal and/or foreign tax rates.
 
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PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
 
NINE MONTHS ENDED
      APR. 30, 2010       APR. 30, 2009
Net cash provided by operating activities $          257,041 $          154,912
 
Investing activities:
 
Acquisitions, net of cash acquired (8,984 ) (37,249 )
Capital expenditures (93,513 ) (92,531 )
Other (22,639 ) (13,514 )
Net cash used by investing activities (125,136 ) (143,294 )
 
Financing activities:
 
Dividends paid (52,600 ) (47,862 )
Notes payable and long-term borrowings / (repayments) 11,307 (13,784 )
Purchase of treasury stock (36,202 ) (64,884 )
Other 24,230 15,747
Net cash used by financing activities (53,265 ) (110,783 )
                 
Cash flow for period 78,640 (99,165 )
Cash and cash equivalents at beginning of year 414,011 454,065
Effect of exchange rate changes on cash (8,767 ) (34,837 )
Cash and cash equivalents at end of period $ 483,884 $ 320,063
                  
Free cash flow:
Net cash provided by operating activities $ 257,041 $ 154,912
Less capital expenditures 93,513 92,531
Free cash flow $ 163,528 $ 62,381

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PALL CORPORATION
SUMMARY OPERATING PROFIT BY SEGMENT
(Unaudited)
(Dollar Amounts in Thousands)
 
THIRD QUARTER ENDED NINE MONTHS ENDED
      APR. 30, 2010       APR. 30, 2009       APR. 30, 2010       APR. 30, 2009
Life Sciences
Sales $       262,309 $       236,320 $       748,642 $       681,671
Cost of sales 115,497 111,662 325,399 327,192
Gross profit 146,812 124,658 423,243 354,479
       % of sales 56.0 % 52.7 % 56.5 % 52.0 %
 
Selling, general and administrative expenses 71,872 62,454 207,881 181,924
       % of sales 27.4 % 26.4 % 27.8 % 26.7 %
Research and development 11,601 9,745 32,702 29,626
Operating profit $ 63,339 $ 52,459 $ 182,660 $ 142,929
       % of sales 24.1 % 22.2 % 24.4 % 21.0 %
 
Industrial
Sales $ 353,673 $ 319,563 $ 974,680 $ 995,530
Cost of sales 186,953 179,991 529,908 550,039
Gross profit 166,720 139,572 444,772 445,491
       % of sales 47.1 % 43.7 % 45.6 % 44.7 %
 
Selling, general and administrative expenses 102,397 92,530 304,461 290,990
       % of sales 29.0 % 29.0 % 31.2 % 29.2 %
Research and development 7,385 6,473 22,172 22,944
Operating profit $ 56,938 $ 40,569 $ 118,139 $ 131,557
       % of sales 16.1 % 12.7 % 12.1 % 13.2 %
 
CONSOLIDATED:
Operating profit $ 120,277 $ 93,028 $ 300,799 $ 274,486
General corporate expenses 13,034 13,763 38,631 43,423
Earnings before ROTC, interest and
income taxes 107,243 79,265 262,168 231,063
ROTC 2,030 8,369 6,659 25,291
Interest expense, net 3,254 6,576 6,342 22,555
Earnings before income taxes $ 101,959 $ 64,320 $ 249,167 $ 183,217

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PALL CORPORATION
SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND GEOGRAPHY
(Unaudited)
(Dollar Amounts in Thousands)
 
EXCHANGE % CHANGE
RATE IN LOCAL
THIRD QUARTER ENDED      APR. 30, 2010      APR. 30, 2009      % CHANGE      IMPACT      CURRENCY
Life Sciences |-------------- Increase/(Decrease) -------------|
By Market:
BioPharmaceuticals $ 162,606 $ 138,269 17.6 $ 7,248 12.4
Medical 99,703 98,051 1.7 3,512 (1.9 )
Total Life Sciences $ 262,309 $ 236,320 11.0 $ 10,760 6.4
 
By Geography:
Western Hemisphere $ 100,246 $ 92,170 8.8 $ 647 8.1
Europe 119,814 107,663 11.3 6,047 5.7
Asia 42,249 36,487 15.8 4,066 4.7
Total Life Sciences $ 262,309 $ 236,320 11.0 $ 10,760 6.4
 
Industrial
By Market:
Energy, Water & Process Technologies $ 216,823 $ 207,382 4.6 $ 11,716 (1.1 )
Aerospace & Transportation 64,530 73,842               (12.6 ) 1,895               (15.2 )
Microelectronics 72,320 38,339 88.6 4,259 77.5
Total Industrial $ 353,673 $ 319,563 10.7 $ 17,870 5.1
 
By Geography:
Western Hemisphere $ 105,691 $ 98,557 7.2 $ 1,349 5.9
Europe 123,312 114,511 7.7 6,159 2.3
Asia 124,670 106,495 17.1 10,362 7.3
Total Industrial $ 353,673 $ 319,563 10.7 $ 17,870 5.1
 

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PALL CORPORATION
SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND GEOGRAPHY
(Unaudited)
(Dollar Amounts in Thousands)
 
EXCHANGE % CHANGE
RATE IN LOCAL
NINE MONTHS ENDED      APR. 30, 2010      APR. 30, 2009      % CHANGE      IMPACT      CURRENCY
Life Sciences |-------------- Increase/(Decrease) -------------|
By Market:
BioPharmaceuticals $ 452,801 $ 394,327 14.8 $ 17,711 10.3
Medical 295,841 287,344 3.0 8,993 (0.2 )
Total Life Sciences $ 748,642 $ 681,671 9.8 $ 26,704 5.9
 
By Geography:
Western Hemisphere $ 279,506 $ 258,353 8.2 $ 1,005 7.8
Europe 352,294 324,797 8.5 15,990 3.5
Asia 116,842 98,521 18.6 9,709 8.7
Total Life Sciences $ 748,642 $ 681,671 9.8 $ 26,704 5.9
 
Industrial
By Market:
Energy, Water & Process Technologies $ 605,552 $ 626,313 (3.3 ) $ 29,612 (8.0 )
Aerospace & Transportation 179,292 212,925 (15.8 ) 4,277 (17.8 )
Microelectronics 189,836 156,292 21.5 9,326 15.5
Total Industrial $ 974,680 $ 995,530 (2.1 ) $ 43,215 (6.4 )
 
By Geography:
Western Hemisphere $ 268,725 $ 300,521               (10.6 ) $ 2,096               (11.3 )
Europe 351,338 364,031 (3.5 ) 16,153 (7.9 )
Asia 354,617 330,978 7.1 24,966 (0.4 )
Total Industrial $ 974,680 $ 995,530 (2.1 ) $ 43,215 (6.4 )
 
 
 
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Contact:
Pall Corporation
Patricia Iannucci
V.P. Investor Relations & Corporate Communications
Telephone: 516-801-9848
Email: piannucci@pall.com
 
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