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| 8-K - CURRENT REPORT - PALL CORP | pallcorp_8-k.htm |
Exhibit 99
Pall Corporation Reports Strong First Quarter Sales and Earnings
Port Washington, NY (December 9, 2010) -- Pall Corporation (NYSE:PLL) today reported financial results for the first quarter of fiscal 2011 which ended on October 31, 2010.
First Quarter Sales and Earnings Overview
First quarter sales were $605.5 million, a 10.7% gain over last year. Sales in local currency ("LC") increased 12.1%. Foreign currency translation reduced reported sales by 1.4%.
Pro forma earnings per share ("EPS") were $0.62, compared to $0.40 last year, an increase of 55%. In both periods, this excludes restructuring and other charges and items affecting interest expense and provision for income taxes last year (collectively, “Discrete Items"). Diluted EPS were $0.61, compared to $0.56 last year. Foreign currency translation did not affect EPS in the quarter.
Eric Krasnoff, Chairman, CEO and President, said, “The first quarter provided a good start to the year. Growth was broad based by market and geography. Sales in our Industrial business increased over 14% in LC. Microelectronics and Machinery & Equipment again performed well. Aerospace returned to growth in the quarter after a down fiscal 2010. Our Life Sciences business saw sales increase over 10% in LC. Within Life Sciences, BioPharmaceuticals grew 15%. Orders in Industrial and Life Sciences increased about 7%. Sales growth and productivity drove up gross margin to 51% and operating margin to over 17%.”
Life Sciences – First Quarter Highlights
(Dollar Amounts in Thousands and Discussion of Sales and Orders Changes are in Local Currency)
| % | % CHANGE | |||||||||
| Sales: | OCT. 31, 2010 | OCT. 31, 2009 | CHANGE | IN LC | ||||||
| BioPharmaceuticals | $ | 161,409 | $ | 143,223 | 12.7 | 14.6 | ||||
| Medical | 98,542 | 95,687 | 3.0 | 4.9 | ||||||
| Food & Beverage | 51,629 | 49,217 | 4.9 | 8.9 | ||||||
| Total Life Sciences segment | $ | 311,580 | $ | 288,127 | 8.1 | 10.4 | ||||
| Gross profit | $ | 169,919 | $ | 155,821 | ||||||
| % of sales | 54.5 | 54.1 | ||||||||
| Operating profit | $ | 73,188 | $ | 64,554 | ||||||
| % of sales | 23.5 | 22.4 | ||||||||
BioPharmaceuticals: Sales in Pharmaceuticals increased 14.6% with particular strength in the biotech and plasma industries. Sales increased in all geographies, led by the Western Hemisphere and Asia. Consumables sales grew 13.5% and systems sales were up 30.3%.
Sales in Laboratory grew 14.0% with solid increases in all regions.
Medical: OEM sales increased 18.8% driven by Europe. Sales in Blood Filtration grew 1.1%.
Food & Beverage: Sales growth reflects improving market conditions and increasing demand in emerging regions. Consumables sales increased 11.5%, with all geographies contributing.
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The 110 basis point improvement in Life Sciences operating margin reflects the growth in sales, including continued improvement in pricing, and the contribution of cost savings initiatives.
Industrial – First Quarter Highlights
(Dollar Amounts in Thousands and Discussion of Sales and Orders Changes are in Local Currency)
| % | % CHANGE | |||||||||||
| Sales: | OCT. 31, 2010 | OCT. 31, 2009 | CHANGE | IN LC | ||||||||
| Aeropower | $ | 116,549 | $ | 95,019 | 22.7 | 24.4 | ||||||
| Energy & Water | 102,393 | 107,244 | (4.5 | ) | (3.1 | ) | ||||||
| Microelectronics | 74,955 | 56,549 | 32.5 | 29.4 | ||||||||
| Total Industrial segment | $ | 293,897 | $ | 258,812 | 13.6 | 14.1 | ||||||
| Gross profit | $ | 138,754 | $ | 114,377 | ||||||||
| % of sales | 47.2 | 44.2 | ||||||||||
| Operating profit | $ | 45,339 | $ | 24,184 | ||||||||
| % of sales | 15.4 | 9.3 | ||||||||||
Aeropower: Machinery & Equipment sales grew 32.3% as customers worldwide increased production levels. Demand in the mining and primary metals industries was particularly strong.
Sales in Aerospace increased 15.4% led by 27.3% growth in the commercial sector. Military Aerospace sales grew 6.3%.
Energy & Water: Sales in Fuels & Chemicals declined 12.7%. Consumables sales increased 10.7% as production of oil and gas, chemicals, and polymers increased. Systems sales, which can be large and lumpy, decreased 63.5%.
Power Generation sales increased 11.1%. This was driven by continued growth including strong performance in the wind-turbine market in Asia and water treatment systems for power stations in the Western Hemisphere.
Municipal Water sales increased 11.3% with particular strength in the Western Hemisphere.
Microelectronics: The Microelectronics market remained strong worldwide. Growth continued to reflect high utilization rates at chip producers and a healthier consumer demand for advanced electronics such as LED display technology.
Industrial’s gross margin, supported by productivity improvements in manufacturing operations, also benefited from the leverage provided by sales growth, particularly in the Microelectronics market and the Machinery & Equipment submarket. Operating profit almost doubled from a year ago to $45.3 million.
Conclusion/Outlook
Mr. Krasnoff concluded, "Pall's robust first quarter results suggest economic recovery is continuing. The Western Hemisphere in particular saw revenue increase 25% and consumables orders grow 13%. Increasing economic activity was also evident in the key emerging markets the company has been focused on developing. We continue to expect a CAGR of about 20% in Latin America, MENA, China, Southeast Asia and Eastern Europe over the next 3 years.
FX has been on a roller coaster for the past 2 years. With exchange rates as they currently stand, translation would be about neutral to EPS. Based upon the first quarter results and outlook, we now expect projected pro forma EPS to be in the range of $2.48 to $2.63 for fiscal 2011. We are steadily executing our long-term strategic plan with confidence.”
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Conference Call
On Friday, December 10, 2010, at 8:30 am EST, 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 solutions to meet the critical needs of customers across the broad spectrum of life sciences and industry. Pall works with customers to advance health, safety and environmentally responsible technologies. The Company’s engineered products enable process and product innovation and minimize emissions and waste. Pall Corporation, with total revenues of $2.4 billion for fiscal 2010, is an S&P 500 company with more than 10,000 employees serving customers worldwide. To see how Pall is helping enable a greener, safer, more sustainable future, visit www.pall.com/green.
Forward-Looking Statements
The matters discussed in this report contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Results for the first quarter of fiscal year 2011 are preliminary until the Company's Form 10-Q is filed with the Securities and Exchange Commission on December 10, 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 light of past experience and trends, current conditions, expected future developments and other relevant factors. They are subject to risks and uncertainties and are not guarantees of future performance, and actual results, developments and business decisions may differ materially from those envisaged by the Company’s forward-looking statements. Such risks and uncertainties include, but are not limited to, those discussed in Part I–Item 1A.–Risk Factors in our 2010 Annual Report on 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; 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; our ability to obtain regulatory approval or market acceptance of new technologies; 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; fluctuations in our effective tax rate; 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 achieve the savings anticipated from cost reduction and gross margin improvement initiatives; the effect of the restrictive covenants in the Company’s debt facilities; our ability to enforce patents and protect proprietary products and manufacturing techniques; our ability to successfully complete or integrate any acquisitions; and the impact of pricing and other actions by competitors. 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)
| OCT. 31, 2010 | JULY 31, 2010 | ||||
| Assets: | |||||
| Cash and cash equivalents | $ | 479,377 | $ | 498,563 | |
| Accounts receivable | 565,438 | 566,499 | |||
| Inventories | 454,410 | 415,046 | |||
| Other current assets | 238,860 | 222,651 | |||
| Total current assets | 1,738,085 | 1,702,759 | |||
| Property, plant and equipment, net | 725,499 | 706,435 | |||
| Other assets | 615,471 | 590,018 | |||
| Total assets | $ | 3,079,055 | $ | 2,999,212 | |
| Liabilities and Stockholders' Equity: | |||||
| Short-term debt | $ | 46,064 | $ | 42,028 | |
| Accounts payable, income taxes and other current liabilities | 564,011 | 595,177 | |||
| Total current liabilities | 610,075 | 637,205 | |||
| Long-term debt | 729,683 | 741,353 | |||
| Deferred taxes and other non-current liabilities | 454,375 | 438,304 | |||
| Total liabilities | 1,794,133 | 1,816,862 | |||
| Stockholders' equity | 1,284,922 | 1,182,350 | |||
| Total liabilities and stockholders' equity | $ | 3,079,055 | $ | 2,999,212 | |
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PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands, except per share data)
| FIRST QUARTER ENDED | ||||||
| OCT. 31, 2010 | OCT. 31, 2009 | |||||
| Net sales | $ | 605,477 | $ | 546,939 | ||
| Cost of sales | 296,804 | 276,741 | ||||
| Gross profit | 308,673 | 270,198 | ||||
| % of sales | 51.0% | 49.4% | ||||
| Selling, general and administrative expenses | 182,298 | 176,658 | ||||
| % of sales | 30.1% | 32.3% | ||||
| Research and development | 20,169 | 17,249 | ||||
| Earnings before restructuring and other charges, | ||||||
| net ("ROTC"), interest expense, net and income | ||||||
| taxes | 106,206 | 76,291 | ||||
| % of sales | 17.5% | 13.9% | ||||
| ROTC (a) | 1,409 | 4,057 | ||||
| Interest expense/(income), net (b) | 7,294 | (2,606 | ) | |||
| Earnings before income taxes | 97,503 | 74,840 | ||||
| Provision for income taxes (b) | 26,094 | 7,857 | ||||
| Net earnings | $ | 71,409 | $ | 66,983 | ||
| Earnings per share: | ||||||
| Basic | $ | 0.61 | $ | 0.57 | ||
| Diluted | $ | 0.61 | $ | 0.56 | ||
| Average shares outstanding: | ||||||
| Basic | 116,292 | 117,686 | ||||
| Diluted | 117,821 | 118,847 | ||||
| Net earnings as reported | $ | 71,409 | $ | 66,983 | ||
| Discrete items: | ||||||
| Tax adjustments (b) | - | (14,188 | ) | |||
| Interest adjustments, after pro forma tax | ||||||
| effect (b) | - | (7,499 | ) | |||
| ROTC, after pro forma tax effect (a) | 1,054 | 2,739 | ||||
| Total discrete items | 1,054 | (18,948 | ) | |||
| Pro forma earnings | $ | 72,463 | $ | 48,035 | ||
| Diluted earnings per share as reported | $ | 0.61 | $ | 0.56 | ||
| Discrete items: | ||||||
| Tax adjustments (b) | - | (0.12 | ) | |||
| Interest adjustments, after pro forma tax | ||||||
| effect (b) | - | (0.06 | ) | |||
| ROTC, after pro forma tax effect (a) | 0.01 | 0.02 | ||||
| Total discrete items | 0.01 | (0.16 | ) | |||
| Pro forma diluted earnings per share | $ | 0.62 | $ | 0.40 | ||
Pro forma earnings exclude the items below as they are deemed to be non-recurring in nature and/or not considered by management to be indicative of underlying operating performance. The pro forma tax effects disclosed were calculated using applicable entity-specific U.S. federal and/or foreign tax rates.
(a) ROTC in the quarter ended Oct. 31, 2010 of $1,409 ($1,054 after pro forma tax effect of $355) and in the quarter ended October 31, 2009 of $4,057 ($2,739 after pro forma tax effect of $1,318), primarily includes costs related to the Company's cost reduction initiatives.
(b) Interest expense/(income), net, and provision for income taxes in the quarter ended Oct. 31, 2009 includes the reversal of accrued interest of $8,984 ($7,499 after pro forma tax effect of $1,485) and income taxes payable of $14,188, principally related to the resolution of a foreign tax audit.
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PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
| FIRST QUARTER ENDED | ||||||||
| OCT. 31, 2010 | OCT. 31, 2009 | |||||||
| Net cash provided by operating activities | $ | 58,686 | $ | 73,040 | ||||
| Investing activities: | ||||||||
| Capital expenditures | (25,358 | ) | (37,081 | ) | ||||
| Other | (12,030 | ) | (1,222 | ) | ||||
| Net cash used by investing activities | (37,388 | ) | (38,303 | ) | ||||
| Financing activities: | ||||||||
| Dividends paid | (36,976 | ) | (33,913 | ) | ||||
| Notes payable and long-term debt (repayments) / borrowings | (16,826 | ) | 2,090 | |||||
| Purchase of treasury stock | (25,000 | ) | - | |||||
| Other | 15,277 | 8,453 | ||||||
| Net cash used by financing activities | (63,525 | ) | (23,370 | ) | ||||
| Cash flow for period | (42,227 | ) | 11,367 | |||||
| Cash and cash equivalents at beginning of year | 498,563 | 414,011 | ||||||
| Effect of exchange rate changes on cash | 23,041 | 8,156 | ||||||
| Cash and cash equivalents at end of period | $ | 479,377 | $ | 433,534 | ||||
| Free cash flow: | ||||||||
| Net cash provided by operating activities | $ | 58,686 | $ | 73,040 | ||||
| Less capital expenditures | 25,358 | 37,081 | ||||||
| Free cash flow | $ | 33,328 | $ | 35,959 | ||||
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PALL CORPORATION
SUMMARY OPERATING PROFIT BY SEGMENT
(Unaudited)
(Dollar Amounts in Thousands)
SUMMARY OPERATING PROFIT BY SEGMENT
(Unaudited)
(Dollar Amounts in Thousands)
| FIRST QUARTER ENDED | |||||||
| OCT. 31, 2010 | OCT. 31, 2009 | ||||||
| Life Sciences | |||||||
| Sales | $ | 311,580 | $ | 288,127 | |||
| Cost of sales | 141,661 | 132,306 | |||||
| Gross profit | 169,919 | 155,821 | |||||
| % of sales | 54.5% | 54.1% | |||||
| Selling, general and administrative expenses | 83,474 | 80,653 | |||||
| % of sales | 26.8% | 28.0% | |||||
| Research and development | 13,257 | 10,614 | |||||
| Operating profit | $ | 73,188 | $ | 64,554 | |||
| % of sales | 23.5% | 22.4% | |||||
| Industrial | |||||||
| Sales | $ | 293,897 | $ | 258,812 | |||
| Cost of sales | 155,143 | 144,435 | |||||
| Gross profit | 138,754 | 114,377 | |||||
| % of sales | 47.2% | 44.2% | |||||
| Selling, general and administrative expenses | 86,503 | 83,558 | |||||
| % of sales | 29.4% | 32.3% | |||||
| Research and development | 6,912 | 6,635 | |||||
| Operating profit | $ | 45,339 | $ | 24,184 | |||
| % of sales | 15.4% | 9.3% | |||||
| CONSOLIDATED: | |||||||
| Operating profit | $ | 118,527 | $ | 88,738 | |||
| General corporate expenses | 12,321 | 12,447 | |||||
| Earnings before ROTC, interest expense, net and | |||||||
| income taxes | 106,206 | 76,291 | |||||
| ROTC | 1,409 | 4,057 | |||||
| Interest expense/(income), net | 7,294 | (2,606 | ) | ||||
| Earnings before income taxes | $ | 97,503 | $ | 74,840 | |||
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PALL CORPORATION
SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND GEOGRAPHY
(Unaudited)
(Dollar Amounts in Thousands)
SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND GEOGRAPHY
(Unaudited)
(Dollar Amounts in Thousands)
| EXCHANGE | % CHANGE | ||||||||||||||||
| RATE | IN LOCAL | ||||||||||||||||
| FIRST QUARTER ENDED | OCT. 31, 2010 | OCT. 31, 2009 | % CHANGE | IMPACT | CURRENCY | ||||||||||||
| Life Sciences | |-------------- Increase/(Decrease) -------------| | ||||||||||||||||
| By Market: | |||||||||||||||||
| BioPharmaceuticals | $ | 161,409 | $ | 143,223 | 12.7 | $ | (2,663 | ) | 14.6 | ||||||||
| Medical | 98,542 | 95,687 | 3.0 | (1,864 | ) | 4.9 | |||||||||||
| Food & Beverage | 51,629 | 49,217 | 4.9 | (1,981 | ) | 8.9 | |||||||||||
| Total Life Sciences | $ | 311,580 | $ | 288,127 | 8.1 | $ | (6,508 | ) | 10.4 | ||||||||
| By Geography: | |||||||||||||||||
| Western Hemisphere | $ | 109,651 | $ | 95,070 | 15.3 | $ | 144 | 15.2 | |||||||||
| Europe | 145,388 | 147,743 | (1.6 | ) | (9,555 | ) | 4.9 | ||||||||||
| Asia | 56,541 | 45,314 | 24.8 | 2,903 | 18.4 | ||||||||||||
| Total Life Sciences | $ | 311,580 | $ | 288,127 | 8.1 | $ | (6,508 | ) | 10.4 | ||||||||
| Industrial | |||||||||||||||||
| By Market: | |||||||||||||||||
| Aeropower | $ | 116,549 | $ | 95,019 | 22.7 | $ | (1,630 | ) | 24.4 | ||||||||
| Energy & Water | 102,393 | 107,244 | (4.5 | ) | (1,520 | ) | (3.1 | ) | |||||||||
| Microelectronics | 74,955 | 56,549 | 32.5 | 1,799 | 29.4 | ||||||||||||
| Total Industrial | $ | 293,897 | $ | 258,812 | 13.6 | $ | (1,351 | ) | 14.1 | ||||||||
| By Geography: | |||||||||||||||||
| Western Hemisphere | $ | 100,468 | $ | 72,098 | 39.3 | $ | 188 | 39.1 | |||||||||
| Europe | 81,681 | 82,974 | (1.6 | ) | (5,747 | ) | 5.4 | ||||||||||
| Asia | 111,748 | 103,740 | 7.7 | 4,208 | 3.7 | ||||||||||||
| Total Industrial | $ | 293,897 | $ | 258,812 | 13.6 | $ | (1,351 | ) | 14.1 | ||||||||
# # #
Contact:
Pall Corporation
Patricia Iannucci
V.P. Investor Relations & Corporate Communications
Telephone: 516-801-9848
Email: piannucci@pall.com
Patricia Iannucci
V.P. Investor Relations & Corporate Communications
Telephone: 516-801-9848
Email: piannucci@pall.com
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