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Press release from Business Wire

Pall Corporation Reports First Quarter Results

Tuesday, November 26, 2013

Pall Corporation Reports First Quarter Results

07:00 EST Tuesday, November 26, 2013

Pall Corporation (NYSE:PLL) today reported financial results for the first quarter ended October 31, 2013.

PORT WASHINGTON, N.Y. (Business Wire) -- First Quarter Continuing Operations Sales and Earnings Overview (1)

First quarter sales were $629.8 million compared to $627.6 million last year. Sales in local currency (“LC”) were up 2%. Diluted EPS were $0.63 in the quarter, compared to $0.77 last year. Pro forma diluted EPS(1) were $0.70, a 3% increase compared to $0.68 a year earlier, including a negative impact of approximately $0.02 from foreign currency translation.

Larry Kingsley, Pall Chairman and CEO, said, “We executed a good quarter in the face of global end market weakness. We are performing well and building sustaining value.”

Life Sciences – First Quarter Highlights

(Dollar Amounts in Millions and Discussion of Sales Changes are in Local Currency)
         

Sales:

OCT. 31, 2013 OCT. 31, 2012

  % CHANGE  

% CHANGE IN

LC

BioPharmaceuticals $ 196 $ 187 5 5
Food & Beverage 43 41 5 6
Medical   56     48   17 17
Total Consumables 295 276 7 7
Systems   24     24   (0 ) (1 )
Total Life Sciences segment $ 319   $ 300   6 7
 
Gross profit $ 182 $ 176
% of sales 57.1 58.7
Segment profit $ 73 $ 70
% of sales 22.9 23.3
 

BioPharmaceuticals : Consumables sales grew 5% compared to last year, on strength in single use systems and new products.

Food and Beverage : Consumables sales increased 6% compared to last year, on strength in all regions.

Medical : Consumables sales grew 17% compared to last year, on strong sales to OEMs.

Systems : Sales declined 1% compared to last year, on reduced Food & Beverage capital spend.

Industrial – First Quarter Highlights

(Dollar Amounts in Millions and Discussion of Sales Changes are in Local Currency)
         

Sales:

OCT. 31, 2013 OCT. 31, 2012

  % CHANGE  

% CHANGE IN

LC

Process Technologies $ 125 $ 150 (17 ) (15 )
Aerospace 59 56 5 5
Microelectronics   71     70   2 9
Total Consumables 255 276 (8 ) (5 )
Systems   56     52   8 8
Total Industrial segment $ 311   $ 328   (5 ) (3 )
 
Gross profit $ 144 $ 151
% of sales 46.2 46.1
Segment profit $ 50 $ 53
% of sales 16.2 16.1
 

Process Technologies : Consumables sales were down 15% compared to last year, on weakness in all submarkets, particularly Fuels & Chemicals.

Aerospace : Consumables sales increased 5% compared to last year, on strength in Commercial Aerospace, where sales were up 9%.

Microelectronics : Consumables sales grew 9% compared to last year, on strength in all regions.

Systems : Sales increased 8% compared to last year, primarily from timing of capital projects in Fuels & Chemicals.

Conclusion/Outlook

Kingsley concluded, “Our Life Sciences segment again performed well, and our Industrial business is beginning to show momentum in orders. Given these trends, I remain confident in our outlook of low-to-mid single digit revenue growth and 9-15% growth in pro forma EPSfor the year.” (1)

Conference Call

On Tuesday, November 26, 2013, 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 solutions to meet the critical fluid management 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 is an S&P 500 company serving customers worldwide. Follow us on Twitter @PallCorporation or visit www.pall.com.

Forward-Looking Statements

The matters discussed in this press release contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Results for the first quarter of fiscal year 2014 are preliminary until our Form 10-Q is filed with the Securities and Exchange Commission on or before December 10, 2013. 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, dilution from the disposition or future allocation of capital 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.

The Company's forward-looking statements 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 the 2013 Form 10-K, and other reports the Company files with the Securities and Exchange Commission, including: the impact of disruptions in the supply of raw materials and key components from suppliers, including limited or single source suppliers; the impact of terrorist acts, conflicts and wars or natural disasters; the extent to which special U.S. and foreign government laws and regulations may expose the Company to liability or impair its ability to compete in international markets; the impact of economic, political, social and regulatory instability in emerging markets, and other risks characteristic of doing business in emerging markets; fluctuations in foreign currency exchange rates and interest rates; the impact of a significant disruption in, or breach in security of, the Company's information technology systems, or the failure to implement, manage or integrate new systems, software or technologies successfully; the Company's ability to successfully complete or integrate acquisitions; the Company's ability to develop innovative and competitive new products; the impact of global and regional economic conditions and legislative, regulatory and political developments; the Company's ability to comply with a broad array of regulatory requirements; the loss of one or more members of the Company's senior management team and its ability to recruit and retain qualified management personnel; changes in the demand for the Company's products and the maintenance of business relationships with key customers; changes in product mix and product pricing, particularly with respect to systems products and associated hardware and devices for the Company's consumable filtration products; product defects and unanticipated use or inadequate disclosure with respect to the Company's products; the Company's ability to deliver its backlog on time; increases in manufacturing and operating costs and/or the Company's ability to achieve the savings anticipated from its structural cost improvement initiatives; the impact of environmental, health and safety laws and regulations and violations; the Company's ability to enforce patents or protect proprietary products and manufacturing techniques; costs and outcomes of pending or future litigation and the availability of insurance or indemnification rights; changes in the Company's effective tax rate; the Company's ability to compete effectively in domestic and global markets; and the effect of the restrictive covenants in the Company's debt facilities. Factors or events that could cause the Company's actual results to differ may emerge from time to time, and it is not possible for the Company 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.

Notes to Release:

(1) Pro forma diluted EPS are defined as Reported diluted EPS on a continuing operations basis adjusted for “Discrete Items.” Discrete items are defined as Restructuring & Other Charges (ROTC) and other items that are deemed to be non-recurring in nature and/or not considered by management to be indicative of underlying operating performance. A reconciliation of Reported to Pro forma amounts can be found in the Reconciliation of Pro forma Earnings table accompanying this release.

(2) Cash flows in the three months ended October 31, 2012 are inclusive of discontinued operations.

PALL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in Thousands)
       
OCT. 31, 2013 JUL. 31, 2013
 
Assets:
 
Cash and cash equivalents $ 967,976 $ 936,886
Accounts receivable 532,804 566,335
Inventories 408,161 381,047
Other current assets   144,814     165,761  
Total current assets   2,053,755     2,050,029  
 
Property, plant and equipment 796,946 774,948
Other assets   653,565     647,862  
Total assets $ 3,504,266   $ 3,472,839  
 
Liabilities and Stockholders' Equity:
 
Short-term debt $ 260,395 $ 170,387
Accounts payable, income taxes and other current liabilities   507,103     558,684  
Total current liabilities 767,498 729,071
 
Long-term debt, net of current portion 467,562 467,319
Deferred taxes and other non-current liabilities   475,007     461,493  
Total liabilities 1,710,067 1,657,883
 
Stockholders' equity   1,794,199     1,814,956  
Total liabilities and stockholders' equity $ 3,504,266   $ 3,472,839  
 
PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
       
 
FIRST QUARTER ENDED
OCT. 31, 2013 OCT. 31, 2012
 
Net sales $ 629,779 $ 627,600
Cost of sales   304,065     300,517  
Gross profit   325,714     327,083  
% of sales 51.7 % 52.1 %
Selling, general and administrative expenses 194,884 195,965
% of sales 30.9 % 31.2 %
Research and development   23,267     22,575  
Operating profit 107,563 108,543
% of sales 17.1 % 17.3 %
Restructuring and other charges ("ROTC") (a) 9,198 4,274
Interest expense/(income), net (c)   5,977     (568 )
Earnings from continuing operations before income taxes 92,388 104,837
Provision for income taxes (b)   20,875     15,672  
Net earnings from continuing operations $ 71,513 $ 89,165
Earnings/(loss) from discontinued operations, net of income taxes   -     250,307  
Net Earnings $ 71,513   $ 339,472  
 
Average shares outstanding:

 

Basic 111,870 114,589
Diluted 113,135 116,097
 

Earnings/(loss) per share:

From continuing operations:
Basic $ 0.64 $ 0.78
Diluted $ 0.63 $ 0.77
 
From discontinued operations:
Basic $ - $ 2.18
Diluted $ -   $ 2.15  
 
Total
Basic $ 0.64 $ 2.96
Diluted $ 0.63   $ 2.92  
 

Pro forma diluted earnings per share:

From continuing operations $ 0.70   $ 0.68  
 
PALL CORPORATION
RECONCILIATION OF PRO FORMA EARNINGS
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
       
 
FIRST QUARTER ENDED
OCT. 31, 2013 OCT. 31, 2012
 

Pro forma earnings reconciliation from continuing operations

Net earnings from continuing operations as reported $ 71,513 $ 89,165
Discrete items:
ROTC, after pro forma tax effect (a) 7,518 3,840
Tax adjustments (b) - (10,193 )
Interest adjustments, after pro forma

tax effect (c)

  -     (4,268 )
Total discrete items   7,518     (10,621 )
Pro forma earnings from continuing operations $ 79,031   $ 78,544  
 
 
FIRST QUARTER ENDED
OCT. 31, 2013 OCT. 31, 2012
 

Diluted earnings per share from continuing operations as reported

$ 0.63 $ 0.77
Discrete items:
ROTC, after pro forma tax effect (a) 0.07 0.03
Tax adjustments (b) - (0.09 )
Interest adjustments, after pro forma

tax effect (c)

  -     (0.03 )
Total discrete items   0.07     (0.09 )
Pro forma diluted earnings per share from continuing operations $ 0.70   $ 0.68  
 

Pro forma earnings measures exclude the items described 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 tax rates.

(a) ROTC in the quarter ended October 31, 2013 of $9,198 ($7,518 after pro forma tax effect of $1,680) primarily includes severance costs related to the Company's structural cost improvement initiatives as well as increase to environmental reserves.

ROTC in the quarter ended October 31, 2012 of $4,274 ($3,840 after pro forma tax effect of $434) primarily includes severance costs related to the Company's structural cost improvement initiatives.

(b) Provision for income taxes in the quarter ended October 31, 2012 includes a net benefit of $10,193 related to the resolution of a U.S. tax audit partially offset by the tax cost of repatriation of foreign earnings.

(c) Interest expense, net, in the quarter ended October 31, 2012 includes the reversal of accrued interest of $6,704 ($4,268 after pro forma tax effect of $2,436) related to the resolution of a U.S. tax audit as described in (b) above.

PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
       
 
QUARTER ENDED
OCT. 31, 2013 OCT. 31, 2012

(2)

 
Net cash provided by operating activities $ 85,897   $ 38,958  
 
Investing activities:
 
Acquisitions of businesses (1,460 ) -
Capital expenditures (18,915 ) (23,477 )
Proceeds from sale of assets 471 535,680
Other   2,649     (1,144 )
Net cash provided/(used) by investing activities   (17,255 )   511,059  
 
Financing activities:
 
Dividends paid (27,947 ) (23,979 )
Notes payable and long-term borrowings/(repayments) 85,885 (75,034 )
Purchase of treasury stock (125,000 ) (75,000 )
Other   18,373     18,307  
Net cash used by financing activities   (48,689 )   (155,706 )
 
Cash flow for period 19,953 394,311
Cash and cash equivalents at beginning of year 936,886 500,274
Effect of exchange rate changes on cash   11,137     15,095  
Cash and cash equivalents at end of period $ 967,976   $ 909,680  
 
 

Free cash flow:

Net cash provided by operating activities $ 85,897 $ 38,958
Less capital expenditures   18,915     23,477  
Free cash flow $ 66,982   $ 15,481  
 
PALL CORPORATION
SUMMARY SEGMENT PROFIT BY SEGMENT FROM CONTINUING OPERATIONS
(Unaudited)
(Dollar Amounts in Thousands)
     
 
FIRST QUARTER ENDED
OCT. 31, 2013 OCT. 31, 2012
 

Life Sciences

Sales $ 318,946 $ 299,951
Cost of sales   136,867     123,997  
Gross profit 182,079 175,954
% of sales 57.1 % 58.7 %
 
Selling, general and administrative expenses 94,091 90,905
% of sales 29.5 % 30.3 %
Research and development   14,943     15,207  
Segment profit $ 73,045   $ 69,842  
% of sales 22.9 % 23.3 %
 

Industrial

Sales $ 310,833 $ 327,649
Cost of sales   167,198     176,520  
Gross profit 143,635 151,129
% of sales 46.2 % 46.1 %
 
Selling, general and administrative expenses 84,829 90,995
% of sales 27.3 % 27.8 %
Research and development   8,324     7,368  
Segment profit $ 50,482   $ 52,766  
% of sales 16.2 % 16.1 %
 

Consolidated:

Segment profit $ 123,527 $ 122,608
Corporate services group   15,964     14,065  
Operating profit 107,563 108,543
% of sales 17.1 % 17.3 %
ROTC 9,198 4,274
Interest expense/(income), net   5,977     (568 )
Earnings from continuing operations before income taxes $ 92,388   $ 104,837  
 
PALL CORPORATION
SUPPLEMENTAL SEGMENT SALES INFORMATION BY PRODUCT/MARKET AND REGION
FROM CONTINUING OPERATIONS
(Unaudited)

(Dollar Amounts in Thousands)

         
EXCHANGE % CHANGE
RATE IN LOCAL
FIRST QUARTER ENDED OCT. 31, 2013 OCT. 31, 2012 % CHANGE IMPACT CURRENCY
 

Life Sciences

|-------------- Increase/(Decrease) -------------|
By Product/Market:
BioPharmaceuticals $ 196,118 $ 187,241 4.7 $ (989 ) 5.3
Food & Beverage 43,569 41,546 4.9 (539 ) 6.2
Medical   55,717     47,582   17.1   299   16.5
Total Consumables 295,404 276,369 6.9 (1,229 ) 7.3
Systems   23,542     23,582   (0.2 )   244   (1.2 )
Total Life Sciences $ 318,946   $ 299,951   6.3 $ (985 ) 6.7
 
By Region:
Americas $ 97,776 $ 97,798 (0.0 ) $ (1,207 ) 1.2
Europe 161,930 143,665 12.7 6,346 8.3
Asia   59,240     58,488   1.3   (6,124 ) 11.8
Total Life Sciences $ 318,946   $ 299,951   6.3 $ (985 ) 6.7
 
 

Industrial

By Product/Market:
Process Technologies $ 125,078 $ 149,969 (16.6 ) $ (1,829 ) (15.4 )
Aerospace 58,771 55,910 5.1 175 4.8
Microelectronics   71,416   70,182 1.8   (4,874 ) 8.7
Total Consumables 255,265 276,061 (7.5 ) (6,528 ) (5.2 )
Systems   55,568   51,588 7.7   (152 ) 8.0
Total Industrial $ 310,833 $ 327,649 (5.1 ) $ (6,680 ) (3.1 )
 
By Region:
Americas $ 100,575 $ 104,673 (3.9 ) $ (882 ) (3.1 )
Europe 98,696 98,677 0.0 3,111 (3.1 )
Asia   111,562   124,299 (10.2 )   (8,909 ) (3.1 )
Total Industrial $ 310,833 $ 327,649 (5.1 ) $ (6,680 ) (3.1 )
 

Pall Corporation
R. Brent Jones
Vice President Finance & Treasurer
Telephone: 516-801-9848
Email: investor_relations@pall.com

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