Pall Corporation Reports First Quarter Results

PORT WASHINGTON, N.Y.--()--Pall Corporation (NYSE:PLL) today reported financial results for the first quarter of fiscal year 2015 which ended October 31, 2014.

  • Sales in the quarter increased 11%; up 13% in local currency
  • Orders in the quarter grew 8%; up 11% in local currency
  • Diluted EPS in the quarter of $0.81, up 29%; pro forma diluted EPS of $0.89, up 27%

First Quarter Sales and Earnings Overview

First quarter sales were $696.5 million compared to $629.8 million last year, an increase of 11%. Sales in local currency (“LC”) were up 13%, and about 9% excluding acquisitions. Diluted EPS were $0.81 in the quarter, compared to $0.63 last year. Pro forma diluted EPS(1) were $0.89, a 27% increase compared to $0.70 a year earlier, including a detriment of approximately $0.05 from foreign currency translation.

Larry Kingsley, Pall Chairman and CEO, said, “We delivered an exceptional quarter. Organic revenue growth was 9 percent, operating margin expanded 210 basis points and free cash flow was 118 percent of net income.”

Life Sciences – First Quarter Highlights

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

Sales:

OCT. 31, 2014 OCT. 31, 2013 % CHANGE % CHANGE IN LC
BioPharmaceuticals $ 227 $ 196 16 18
Food & Beverage 43 43 (1 ) 4
Medical   53   56 (4 ) (2 )
Total Consumables 323 295 9 12
Systems   29   24 24 28
Total Life Sciences segment $ 352 $ 319 11 14
 
Gross profit $ 199 $ 182
% of sales 56.3 57.1
Segment profit $ 86 $ 73
% of sales 24.5 22.9

BioPharmaceuticals: Consumables sales grew 18% compared to last year, on overall market strength, the benefit of acquisitions and to some extent easier compares and timing of shipments.

Food and Beverage: Consumables sales were up 4% compared to last year, on growth in the Americas and Asia.

Medical: Consumables sales declined 2% compared to last year, on lower OEM and blood media sales.

Systems: Sales were up 28% compared to last year, on timing of BioPharmaceuticals and Food & Beverage projects.

Industrial – First Quarter Highlights

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

Sales:

OCT. 31, 2014 OCT. 31, 2013 % CHANGE % CHANGE IN LC
Process Technologies $ 145 $ 125 16 19
Aerospace 62 59 5 6
Microelectronics   75   71 5 8
Total Consumables 282 255 10 13
Systems   62   56 12 16
Total Industrial segment $ 344 $ 311 11 13
 
Gross profit $ 163 $ 144
% of sales 47.3 46.2
Segment profit $ 64 $ 50
% of sales 18.7 16.2

Process Technologies: Consumables sales increased 19% compared to last year, on double-digit growth in Fuels & Chemicals and benefit from our recent acquisition of Filter Specialists, Inc.

Aerospace: Consumables sales increased 6% compared to last year, on strong Military OEM and helicopter program sales.

Microelectronics: Consumables sales grew 8% compared to last year, on continuing strength in Asia, particularly in E-materials.

Systems: Sales increased 16% compared to last year, on timing of Fuels & Chemicals projects.

Conclusion/Outlook

Kingsley concluded, “The dramatic strengthening of the U.S. Dollar, which began during our first quarter, will be a very significant earnings headwind for the year. However, our operating momentum provides us with confidence that we can largely offset FX and deliver a full year outlook consistent with our original guidance. We continue to expect pro forma diluted EPS for fiscal 2015 to be in the range of $3.75 to $3.95 per share. This is an increase of between 9 to 15% over fiscal 2014.”

Conference Call

On Tuesday, November 25, 2014, 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 2015 are preliminary until our Form 10-Q is filed with the Securities and Exchange Commission on or before December 10, 2014. Forward-looking statements are those that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. All statements regarding future performance, earnings projections, earnings guidance, management’s expectations about our 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.

Our 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 our forward-looking statements. Such risks and uncertainties include, but are not limited to, those discussed in Part I-Item 1A.-Risk Factors in the 2014 Form 10-K, and other reports we file with the Securities and Exchange Commission, including: the impact of disruptions in the supply of raw materials and key components for our products 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, such as the Foreign Corrupt Practices Act and the U.K. Bribery Act, and regulations and procurement policies and practices, including regulations on import-export control, may expose us to liability or impair our ability to compete in international markets; the impact of a significant disruption in, or breach in security of, our information technology systems or we fail to implement, manage or integrate new systems, software and technologies successfully; 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; our ability to successfully complete or integrate acquisitions; product defects and unanticipated use or inadequate disclosure with respect to our products; our ability to develop innovative and competitive new products; the impact of global and regional economic conditions and legislative and political developments; our ability to comply with a broad array of regulatory requirements; the loss of one or more members of our senior management team and our ability to recruit and retain qualified management personnel; changes in the demand for our products and business relationships with key customers and suppliers; changes in product mix and product pricing, particularly with systems products and associated hardware and devices for our consumable filtration products; our ability to deliver our backlog on time; increases in manufacturing and operating costs and/or our ability to achieve the savings anticipated from our structural cost improvement initiative; the impact of environmental, health and safety laws and regulations, and violations; our 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 our effective tax rate; the impact of certain risks associated with potential labor disruptions; our ability to compete effectively in domestic and global markets; and the effect of the restrictive covenants in our debt facilities. 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. We make these statements as of the date of this disclosure and undertake 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. Reconciliations of the non-GAAP financial measures used throughout this release to the most directly comparable GAAP measures appear in the accompanying tables at the end of this document 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, 2014 JUL. 31, 2014
 
Assets:
 
Cash and cash equivalents $ 1,001,481 $ 964,110
Accounts receivable 561,013 615,713
Inventories 401,524 404,878
Other current assets   156,855   152,522
Total current assets   2,120,873   2,137,223
 
Property, plant and equipment 773,373 805,327
Other assets   881,288   909,963
Total assets $ 3,775,534 $ 3,852,513
 
Liabilities and Stockholders' Equity:
 
Short-term debt $ 807,520 $ 512,898
Accounts payable, income taxes and other current liabilities   531,299   584,748
Total current liabilities 1,338,819 1,097,646
 
Long-term debt, net of current portion 375,593 375,826
Deferred taxes and other non-current liabilities   466,281   483,684
Total liabilities 2,180,693 1,957,156
 
Stockholders' equity   1,594,841   1,895,357
Total liabilities and stockholders' equity $ 3,775,534 $ 3,852,513
 
 
PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
   
 
FIRST QUARTER ENDED
OCT. 31, 2014 OCT. 31, 2013
 
Net sales $ 696,492 $ 629,779
Cost of sales   335,084     304,065  
Gross profit   361,408     325,714  
% of sales 51.9 % 51.7 %
Selling, general and administrative expenses 202,656 194,884
% of sales 29.1 % 30.9 %
Research and development   24,777     23,267  
Operating profit 133,975 107,563
% of sales 19.2 % 17.1 %
Restructuring and other charges ("ROTC") (2) 9,240 9,198
Interest expense, net   6,702     5,977  
Earnings before income taxes 118,033 92,388
Provision for income taxes   29,760     20,875  
Net earnings $ 88,273   $ 71,513  
 
Average shares outstanding:
Basic 108,081 111,870
Diluted 109,219 113,135
 
Earnings per share:
Basic $ 0.82 $ 0.64
Diluted $ 0.81 $ 0.63
 
Pro forma diluted earnings per share: $ 0.89 $ 0.70
 
 
PALL CORPORATION
RECONCILIATION OF PRO FORMA EARNINGS
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
       
 
FIRST QUARTER ENDED
OCT. 31, 2014 OCT. 31, 2013
 
Net earnings as reported $ 88,273 $ 71,513
Discrete items:
ROTC, after pro forma tax effect (2)   8,725   7,518
Total discrete items   8,725   7,518
Pro forma net earnings $ 96,998 $ 79,031
 
FISCAL YEAR
FIRST QUARTER ENDED 2015 (ESTIMATE
OCT. 31, 2014 OCT. 31, 2013 AT MIDPOINT)
 
Diluted earnings per share as reported $ 0.81 $ 0.63 $ 3.77
Discrete items:
ROTC, after pro forma tax effect (2)   0.08   0.07   0.08
Total discrete items   0.08   0.07   0.08
Pro forma diluted earnings per share $ 0.89 $ 0.70 $ 3.85
 
 
PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
   
 
QUARTER ENDED

 

OCT. 31, 2014 OCT. 31, 2013
 
Net cash provided by operating activities $ 114,537   $ 85,897  
 
Investing activities:
 
Acquisitions of businesses - (1,460 )
Capital expenditures (10,408 ) (18,915 )
Proceeds from sale of assets 1,577 471
Other   (1,444 )   2,649  
Net cash provided/(used) by investing activities   (10,275 )   (17,255 )
 
Financing activities:
 
Dividends paid (30,202 ) (27,947 )
Notes payable and long-term borrowings/(repayments) 299,645 85,885
Purchase of treasury stock (300,000 ) (125,000 )
Other   838     18,373  
Net cash used by financing activities   (29,719 )   (48,689 )
 
Cash flow for period 74,543 19,953
Cash and cash equivalents at beginning of year 964,110 936,886
Effect of exchange rate changes on cash   (37,172 )   11,137  
Cash and cash equivalents at end of period $ 1,001,481   $ 967,976  
 
 

Free cash flow:

Net cash provided by operating activities $ 114,537 $ 85,897
Less capital expenditures   10,408     18,915  
Free cash flow $ 104,129   $ 66,982  
 
 
PALL CORPORATION
SUMMARY SEGMENT PROFIT BY SEGMENT
(Unaudited)
(Dollar Amounts in Thousands)
   
 
FIRST QUARTER ENDED
OCT. 31, 2014 OCT. 31, 2013
 

Life Sciences

Sales $ 352,464 $ 318,946
Cost of sales   153,910     136,867  
Gross profit 198,554 182,079
% of sales 56.3 % 57.1 %
 
Selling, general and administrative expenses 97,171 94,091
% of sales 27.6 % 29.5 %
Research and development   14,903     14,943  
Segment profit $ 86,480   $ 73,045  
% of sales 24.5 % 22.9 %
 

Industrial

Sales $ 344,028 $ 310,833
Cost of sales   181,174     167,198  
Gross profit 162,854 143,635
% of sales 47.3 % 46.2 %
 
Selling, general and administrative expenses 88,748 84,829
% of sales 25.8 % 27.3 %
Research and development   9,874     8,324  
Segment profit $ 64,232   $ 50,482  
% of sales 18.7 % 16.2 %
 

Consolidated:

Segment profit $ 150,712 $ 123,527
Corporate services group   16,737     15,964  
Operating profit 133,975 107,563
% of sales 19.2 % 17.1 %
ROTC 9,240 9,198
Interest expense, net   6,702     5,977  
Earnings before income taxes $ 118,033   $ 92,388  
 
 

PALL CORPORATION

SUPPLEMENTAL SEGMENT SALES INFORMATION BY PRODUCT/MARKET AND REGION

(Unaudited)

(Dollar Amounts in Thousands)

         
EXCHANGE % CHANGE
RATE IN LOCAL
FIRST QUARTER ENDED OCT. 31, 2014 OCT. 31, 2013 % CHANGE IMPACT CURRENCY
 

Life Sciences

|-------------- Increase/(Decrease) -------------|

By Product/Market:
BioPharmaceuticals $ 226,605 $ 196,118 15.5 $ (5,625 ) 18.4
Food & Beverage 43,168 43,569 (0.9 ) (2,109 ) 3.9
Medical   53,446   55,717 (4.1 )   (1,225 ) (1.9 )
Total Consumables 323,219 295,404 9.4 (8,959 ) 12.4
Systems   29,245   23,542 24.2   (798 )   27.6
Total Life Sciences $ 352,464 $ 318,946 10.5 $ (9,757 )   13.6
 
By Region:
Americas $ 107,657 $ 97,776 10.1 $ (1,799 ) 11.9
Europe 176,033 161,930 8.7 (6,135 ) 12.5
Asia   68,774   59,240 16.1   (1,823 ) 19.2
Total Life Sciences $ 352,464 $ 318,946 10.5 $ (9,757 ) 13.6
 
 

Industrial

By Product/Market:
Process Technologies $ 144,926 $ 125,078 15.9 $ (3,885 ) 19.0
Aerospace 61,811 58,771 5.2 (334 ) 5.7
Microelectronics   75,166   71,416 5.3   (1,715 ) 7.7
Total Consumables 281,903 255,265 10.4 (5,934 ) 12.8
Systems   62,125   55,568 11.8   (2,284 ) 15.9
Total Industrial $ 344,028 $ 310,833 10.7 $ (8,218 ) 13.3
 
By Region:
Americas $ 124,937 $ 100,575 24.2 $ (1,365 ) 25.6
Europe 99,790 98,696 1.1 (4,059 ) 5.2
Asia   119,301   111,562 6.9   (2,794 ) 9.4
Total Industrial $ 344,028 $ 310,833 10.7 $ (8,218 ) 13.3
 
 
PALL CORPORATION
SUPPLEMENTAL ORGANIC SALES GROWTH INFORMATION BY SEGMENT
(Unaudited)
(Dollar Amounts in Thousands)
         
EXCHANGE % CHANGE
RATE IN LOCAL
FIRST QUARTER ENDED OCT. 31, 2014 OCT. 31, 2013 % CHANGE IMPACT CURRENCY
 
|-------------- Increase/(Decrease) -------------|
Life Sciences:
Organic $ 339,322 $ 318,946 6.4 $ (9,757 ) 9.4
Acquisitions   13,142   -   -  
Total Life Sciences Sales $ 352,464 $ 318,946 10.5 $ (9,757 ) 13.6
 
Industrial:
Organic $ 327,139 $ 310,833 5.2 $ (8,218 ) 7.9
Acquisitions   16,889   -   -  
Total Industrial Sales $ 344,028 $ 310,833 10.7 $ (8,218 ) 13.3
 
Total Pall:
Organic $ 666,461 $ 629,779 5.8 $ (17,975 ) 8.7
Acquisitions   30,031   -   -  
Total Pall Sales $ 696,492 $ 629,779 10.6 $ (17,975 ) 13.4

Notes to release:

 

(1)

 

Pro forma earnings measures exclude the items described below in footnote 2 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.

 

(2)

ROTC in the quarter ended October 31, 2014 of $9,240 ($8,725 after pro forma tax effect of $515) primarily includes severance costs related to the Company's structural cost improvement initiative.

 
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 initiative and an adjustment to environmental reserves.

Contacts

Pall Corporation
R. Brent Jones
Senior Vice President Corporate Development & Treasurer
Telephone: 516-801-9871

Release Summary

Pall Corporation Reports First Quarter Results

Contacts

Pall Corporation
R. Brent Jones
Senior Vice President Corporate Development & Treasurer
Telephone: 516-801-9871