Pall Corporation Reports Second Quarter Results
Pall Corporation Reports Second Quarter Results
Business Wire
PORT WASHINGTON, N.Y. -- February 27, 2013
Pall Corporation (NYSE:PLL) today reported financial results for the second
quarter of fiscal year 2013 which ended on January 31, 2013.
Second Quarter and Six Months Continuing Operations Sales and Earnings
Overview^(1)
Second quarter sales were $662.5 million compared to $640.0 million last year,
an increase of 3.5%. Sales in local currency (“LC”) were up 3.9% year over
year. Diluted EPS were $0.70 in the quarter, compared to $0.63 last year. Pro
forma diluted EPS^(2) were $0.73 compared to $0.67 last year, an increase of
9.0%. Foreign currency translation negatively impacted second quarter EPS by
$0.01.
For the six months, sales were flat year over year (+1.9% in LC). Diluted EPS
were $1.48 in the six months, compared to $1.14 for the same period last year.
Pro forma EPS were $1.41, a 6.0% increase compared to $1.33 a year earlier,
including a negative impact of approximately $0.04 from foreign currency
translation.
Larry Kingsley, Pall President and CEO, said, “Life Sciences continued to
perform well, with all three markets achieving solid sales growth.
BioPharmaceuticals in particular had a strong quarter. The Industrial segment
continues to face the headwinds that we characterized last quarter. Some end
markets are down year-over-year and others are flat. The exception in the
segment is Aerospace, which grew double digits in the quarter.”
Life Sciences – Second Quarter Highlights
(Dollar Amounts in Thousands and Discussion of Sales Changes are in Local
Currency)
% % CHANGE
Sales: JAN. 31, 2013 JAN. 31, IN
2012 CHANGE
LC
BioPharmaceuticals $ 218,775 $ 201,647 8.5 9.0
Food & Beverage 56,948 53,366 6.7 7.6
Medical 53,459 44,218 20.9 21.4
Total Life Sciences $ 329,182 $ 299,231 10.0 10.6
segment
Gross profit $ 192,136 $ 177,683
% of sales 58.4 59.4
Segment profit $ 82,477 $ 78,088
% of sales 25.1 26.1
BioPharmaceuticals: Within BioPharmaceuticals, our Pharmaceuticals sales
increased 11%. Consumables sales to Pharmaceuticals customers grew 14%.
Continued strength in the biotech market, as well as a strong contribution
from ForteBio, drove consumables sales growth. Systems sales were down 11%.
Laboratory sales were down 6% overall, on weakness in the Americas and Europe.
Food and Beverage: Consumables sales were up 5%. This reflects strong
consumables sales growth in the Americas, due in part to Latin America and
accompanied by solid growth in Asia. Europe continued to be affected by lower
beer and wine production levels. Overall systems sales grew about 20%, with
contributions from all regions.
Medical: Medical grew on strong sales in the OEM market and blood media.
Hospital Critical Care contributed solid growth as well.
Industrial – Second Quarter Highlights
(Dollar Amounts in Thousands and Discussion of Sales Changes are in Local
Currency)
% % CHANGE
Sales: JAN. 31, 2013 JAN. 31, 2012 IN
CHANGE
LC
Process Technologies $ 200,435 $ 211,654 (5.3 ) (5.1 )
Aerospace 64,287 54,959 17.0 16.5
Microelectronics 68,551 74,203 (7.6 ) (6.5 )
Total Industrial $ 333,273 $ 340,816 (2.2 ) (1.9 )
segment
Gross profit $ 149,827 $ 160,482
% of sales 45.0 47.1
Segment profit $ 48,104 $ 48,129
% of sales 14.4 14.1
Process Technologies: Machinery & Equipment sales were down almost 8%.
In-plant sales declined due to weak end-market demand in Europe and Asia,
despite strength in the Americas. In addition, the heavy off-road equipment
market was soft globally.
Sales in Fuels & Chemicals were flat as growth in the Americas and Asia was
offset by a decline in Europe.
Power Generation sales decreased 1% on weakness in both capital spend in
Europe and the wind turbine market in China.
Municipal Water sales declined 19% primarily on weakness in the Americas, as
capital spending pressure and project delays impacted results.
Aerospace: Commercial Aerospace sales increased about 39%, on strength in all
three regions. Fulfillment of past due backlog also contributed. Military
Aerospace sales were flat year over year.
Microelectronics: The year over year result reflects continuing global
weakness in semiconductor and data storage end markets.
Conclusion/Outlook
Kingsley concluded, “As we factor in first half performance and what we are
hearing from our customers, our view is generally consistent with what we said
last quarter. We still expect overall revenue for the full year to have
flat-to-low single digit growth excluding FX, and full year pro forma EPS to
be in the range of $2.95-$3.15^(2).”
Conference Call
On Thursday, February 28, 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. Pall has been named a “top green company”
by Newsweek magazine. To see how Pall is helping enable a greener, safer, more
sustainable future, follow us on Twitter @PallCorporation or visit
www.pall.com/green.
Forward-Looking Statements
The matters discussed in this presentation contain “forward-looking
statements” as defined in the Private Securities Litigation Reform Act of
1995. Results for the second quarter of fiscal year 2013 are preliminary until
the Company's Form 10-Q is filed with the Securities and Exchange Commission
on or before March 12, 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 2012 Form 10-K, and other reports the Company files
with the Securities and Exchange Commission, including: the impact of
legislative, regulatory and political developments globally; the impact of the
uncertain global economic environment; the extent to which adverse economic
conditions may affect the Company’s sales volume and results; demand for the
Company’s products and business relationships with key customers and
suppliers, which may be impacted by their cash flow and payment practices;
delays or cancellations in shipments; the Company’s ability to develop and
commercialize new technologies or obtain regulatory approval or market
acceptance of new technologies; the Company’s ability to enforce patents and
protect proprietary products and manufacturing techniques; increase in costs
of manufacturing and operating costs; the Company’s ability to achieve and
sustain the savings anticipated from its structural cost improvement
initiatives; volatility in foreign currency exchange rates, interest rates and
energy costs and other macroeconomic challenges currently affecting the
Company; the Company’s ability to meet its regulatory obligations; costs and
outcome of pending or future claims or litigation; the Company’s ability to
comply with environmental, health and safety laws and regulations; changes in
product mix, market mix and product pricing, particularly relating to the
expansion of the systems business; the effect of a serious disruption in the
Company’s information systems; fluctuations in the Company’s effective tax
rate; the Company’s ability to successfully complete or integrate any
acquisitions; competition, including the impact of pricing and other actions
by the Company’s competitors; the effect of litigation and regulatory
inquiries associated with the restatement of the Company’s prior period
financial statements; the Company’s ability to attract and retain management
talent or the loss of members of its senior management team; the effect of the
restrictive covenants in the Company’s debt facilities; and the effect of
product defects and recalls. 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:
As discussed in our news release dated August 1, 2012, the Company
completed the sale of certain assets of its Blood product line.
Accordingly, discussion of results from continuing operations excludes
the Blood product line. Tables appended to this release are presented on
(1) a continuing operations basis (with reconciliation to include the
discontinued Blood product line). Further, Life Sciences and Industrial
segment profit for fiscal year 2012 have been restated to reflect a
change in the allocation of certain shared expenses on a continuing
operations basis.
Pro forma diluted EPS are defined as Reported diluted EPS on a
continuing operations basis adjusted for “Discrete Items.” Discrete
items are defined as ROTC and other items that are deemed to be
(2) 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.
(3) Reflects assets held for sale related to the Blood product line.
(4) Cash flows are inclusive of discontinued operations.
# # #
PALL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in Thousands)
JAN. 31, 2013 JUL. 31, 2012
Assets:
Cash and cash equivalents $ 870,232 $ 500,274
Accounts receivable 580,031 655,436
Inventories 404,651 364,766
Other current assets 185,242 195,464
Assets held for sale - 136,517 ^ (3)
Total current assets 2,040,156 1,852,457
Property, plant and equipment 764,182 750,993
Other assets 648,755 744,442
Total assets $ 3,453,093 $ 3,347,892
Liabilities and Stockholders'
Equity:
Short-term debt $ 235,421 $ 205,393
Accounts payable, income taxes and 568,057 646,735
other current liabilities
Total current liabilities 803,478 852,128
Long-term debt, net of current 474,492 490,706
portion
Deferred taxes and other 471,550 495,023
non-current liabilities
Total liabilities 1,749,520 1,837,857
Stockholders' equity 1,703,573 1,510,035
Total liabilities and $ 3,453,093 $ 3,347,892
stockholders' equity
PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
SECOND QUARTER ENDED SIX MONTHS ENDED
JAN. 31, JAN. 31, JAN. 31, 2013 JAN. 31, 2012
2013 2012
Net sales $ 662,455 $ 640,047 $ 1,290,055 $ 1,291,309
Cost of sales 320,492 301,882 621,009 617,792
Gross profit 341,963 338,165 669,046 673,517
% of sales 51.6 % 52.8 % 51.9 % 52.2 %
Selling,
general and 206,009 209,576 401,974 417,756
administrative
expenses
% of sales 31.1 % 32.7 % 31.2 % 32.4 %
Research and 23,399 20,050 45,974 39,571
development
Operating 112,555 108,539 221,098 216,190
profit
% of sales 17.0 % 17.0 % 17.1 % 16.7 %
Restructuring
and other 4,399 5,156 8,673 28,140
charges
("ROTC") (a)
Interest
expense, net 6,017 5,386 5,449 11,331
(c)
Earnings from
continuing
operations 102,139 97,997 206,976 176,719
before income
taxes
Provision for
income taxes 21,820 23,351 37,492 42,421
(b)
Net earnings
from continuing $ 80,319 $ 74,646 $ 169,484 $ 134,298
operations
Earnings/(loss)
from
discontinued (3,549 ) 10,083 246,758 19,886
operations, net
of income taxes
Net Earnings $ 76,770 $ 84,729 $ 416,242 $ 154,184
Average shares
outstanding:
Basic 112,420 116,196 113,398 115,997
Diluted 113,809 117,914 114,784 117,555
Earnings/(loss)
per share:
From continuing
operations:
Basic $ 0.71 $ 0.64 $ 1.49 $ 1.16
Diluted $ 0.70 $ 0.63 $ 1.48 $ 1.14
From
discontinued
operations:
Basic $ (0.03 ) $ 0.09 $ 2.18 $ 0.17
Diluted $ (0.03 ) $ 0.09 $ 2.15 $ 0.17
Total
Basic $ 0.68 $ 0.73 $ 3.67 $ 1.33
Diluted $ 0.67 $ 0.72 $ 3.63 $ 1.31
Pro forma
diluted
earnings per
share:
From continuing $ 0.73 $ 0.67 $ 1.41 $ 1.33
operations
PALL CORPORATION
RECONCILIATION OF PRO FORMA EARNINGS
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
SECOND QUARTER SIX MONTHS ENDED
ENDED
JAN. 31, JAN. 31, JAN. 31, JAN. 31,
2013 2012 2013 2012
Pro forma
earnings
reconciliation
from
Continuing
Operations
Net earnings
from
continuing $ 80,319 $ 74,646 $ 169,484 $ 134,298
operations as
reported
Discrete
items:
ROTC, after
pro forma tax 3,122 3,965 6,962 21,721
effect (a)
Tax
adjustments - - (10,193 ) -
(b)
Interest
adjustments,
after pro - - (4,268 ) -
forma tax
effect (c)
Total discrete 3,122 3,965 (7,499 ) 21,721
items
Pro forma
earnings from $ 83,441 $ 78,611 161,985 156,019
continuing
operations
FISCAL
YEAR
SECOND QUARTER SIX MONTHS ENDED 2013
ENDED (ESTIMATE
JAN. 31, JAN. 31, JAN. 31, JAN. 31, AT
2013 2012 2013 2012 MIDPOINT)
Diluted
earnings per
share from $ 0.70 $ 0.63 $ 1.48 $ 1.14 $ 3.12
continuing
operations as
reported
Discrete
items:
ROTC, after
pro forma tax 0.03 0.04 0.06 0.19 0.06
effect (a)
Tax
adjustments - - (0.09 ) - (0.09 )
(b)
Interest
adjustments,
after pro - - (0.04 ) - (0.04 )
forma tax
effect (c)
Total discrete 0.03 0.04 (0.07 ) 0.19 (0.07 )
items
Pro forma
diluted
earnings per $ 0.73 $ 0.67 $ 1.41 $ 1.33 $ 3.05
share from
continuing
operations
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 U.S. federal and/or
foreign tax rates.
(a) ROTC in the quarter and six months ended January 31, 2013 of $4,399
($3,122 after pro forma tax effect of $1,277) and $8,673 ($6,962 after pro
forma tax effect of $1,711), respectively primarily includes severance costs
related to the Company's structural cost improvement initiatives.
ROTC in the quarter and six months ended January 31, 2012 of $5,156 ($3,965
after pro forma tax effect of $1,191) and $28,140 ($21,721 after pro forma tax
effect of $6,419), respectively, includes expenses related to the Company's
cost reduction initiatives, primarily in the Industrial segment and certain
employment contract obligations. ROTC in the six months was partly offset by a
gain on the sale of an investment.
(b) Provision for income taxes in the six months ended January 31, 2013
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 six months ended January 31, 2013 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)
SIX MONTHS ENDED
JAN. 31, 2013 ^(4) JAN. 31, 2012 ^(4)
Net cash provided by operating $ 89,382 $ 203,983
activities
Investing activities:
Acquisitions of businesses - (25,669 )
Capital expenditures (42,403 ) (94,285 )
Proceeds from sale of assets 542,088 19,856
Other 1,062 (9,620 )
Net cash provided/(used) by 500,747 (109,718 )
investing activities
Financing activities:
Dividends paid (52,634 ) (40,274 )
Borrowings/(repayments) of notes 29,800 (75,169 )
payable and long-term borrowings
Purchase of treasury stock (250,000 ) -
Other 33,049 18,719
Net cash used by financing (239,785 ) (96,724 )
activities
Cash flow for period 350,344 (2,459 )
Cash and cash equivalents at 500,274 557,766
beginning of year
Effect of exchange rate changes 19,614 (27,403 )
on cash
Cash and cash equivalents at end $ 870,232 $ 527,904
of period
Free cash flow:
Net cash provided by operating $ 89,382 $ 203,983
activities
Less capital expenditures 42,403 94,285
Free cash flow $ 46,979 $ 109,698
PALL CORPORATION
SUMMARY SEGMENT PROFIT BY SEGMENT FROM CONTINUING OPERATIONS
(Unaudited)
(Dollar Amounts in Thousands)
SECOND QUARTER ENDED SIX MONTHS ENDED
JAN. 31, JAN. 31, JAN. 31, JAN. 31,
2013 2012 2013 2012
Life Sciences
Sales $ 329,182 $ 299,231 $ 629,133 $ 600,985
Cost of sales 137,046 121,548 261,043 245,089
Gross profit 192,136 177,683 368,090 355,896
% of sales 58.4 % 59.4 % 58.5 % 59.2 %
Selling,
general and 94,414 87,341 185,319 174,407
administrative
expenses
% of sales 28.7 % 29.2 % 29.5 % 29.0 %
Research and 15,245 12,254 30,452 23,684
development
Segment profit $ 82,477 $ 78,088 $ 152,319 $ 157,805
% of sales 25.1 % 26.1 % 24.2 % 26.3 %
Industrial
Sales $ 333,273 $ 340,816 $ 660,922 $ 690,324
Cost of sales 183,446 180,334 359,966 372,703
Gross profit 149,827 160,482 300,956 317,621
% of sales 45.0 % 47.1 % 45.5 % 46.0 %
Selling,
general and 93,569 104,557 184,564 209,970
administrative
expenses
% of sales 28.1 % 30.7 % 27.9 % 30.4 %
Research and 8,154 7,796 15,522 15,887
development
Segment profit $ 48,104 $ 48,129 $ 100,870 $ 91,764
% of sales 14.4 % 14.1 % 15.3 % 13.3 %
Consolidated:
Segment profit $ 130,581 $ 126,217 $ 253,189 $ 249,569
Corporate 18,026 17,678 32,091 33,379
services group
Operating 112,555 108,539 221,098 216,190
profit
% of sales 17.0 % 17.0 % 17.1 % 16.7 %
ROTC 4,399 5,156 8,673 28,140
Interest 6,017 5,386 5,449 11,331
expense, net
Earnings from
continuing
operations $ 102,139 $ 97,997 $ 206,976 $ 176,719
before income
taxes
PALL CORPORATION
SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND REGION
FROM CONTINUING OPERATIONS
(Unaudited)
(Dollar Amounts in Thousands)
EXCHANGE % CHANGE
RATE IN LOCAL
SECOND QUARTER JAN. 31, JAN. 31, % IMPACT CURRENCY
ENDED 2013 2012 CHANGE
|--------------
Life Sciences Increase/(Decrease)
-------------|
By Market:
BioPharmaceuticals $ 218,775 $ 201,647 8.5 $ (934 ) 9.0
Food & Beverage 56,948 53,366 6.7 (495 ) 7.6
Medical 53,459 44,218 20.9 (211 ) 21.4
Total Life Sciences $ 329,182 $ 299,231 10.0 $ (1,640 ) 10.6
By Region:
Americas $ 104,018 $ 84,014 23.8 $ (789 ) 24.8
Europe 159,360 152,027 4.8 603 4.4
Asia 65,804 63,190 4.1 (1,454 ) 6.4
Total Life Sciences $ 329,182 $ 299,231 10.0 $ (1,640 ) 10.6
Industrial
By Market:
Process $ 200,435 $ 211,654 (5.3 ) $ (523 ) (5.1 )
Technologies
Aerospace 64,287 54,959 17.0 245 16.5
Microelectronics 68,551 74,203 (7.6 ) (807 ) (6.5 )
Total Industrial $ 333,273 $ 340,816 (2.2 ) $ (1,085 ) (1.9 )
By Region:
Americas $ 105,636 $ 104,726 0.9 $ (732 ) 1.6
Europe 105,502 106,374 (0.8 ) 928 (1.7 )
Asia 122,135 129,716 (5.8 ) (1,281 ) (4.9 )
Total Industrial $ 333,273 $ 340,816 (2.2 ) $ (1,085 ) (1.9 )
PALL CORPORATION
SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND REGION
FROM CONTINUING OPERATIONS
(Unaudited)
(Dollar Amounts in Thousands)
EXCHANGE % CHANGE
RATE IN LOCAL
SIX MONTHS ENDED JAN. 31, JAN. 31, % IMPACT CURRENCY
2013 2012 CHANGE
|--------------
Life Sciences Increase/(Decrease)
-------------|
By Market:
BioPharmaceuticals $ 421,352 $ 397,659 6.0 $ (9,850 ) 8.4
Food & Beverage 106,534 109,385 (2.6 ) (3,097 ) 0.2
Medical 101,247 93,941 7.8 (2,082 ) 10.0
Total Life $ 629,133 $ 600,985 4.7 $ (15,029 ) 7.2
Sciences
By Region:
Americas $ 201,816 $ 174,738 15.5 $ (1,525 ) 16.4
Europe 303,025 305,905 (0.9 ) (10,856 ) 2.6
Asia 124,292 120,342 3.3 (2,648 ) 5.5
Total Life $ 629,133 $ 600,985 4.7 $ (15,029 ) 7.2
Sciences
Industrial
By Market:
Process $ 398,969 $ 425,939 (6.3 ) $ (7,597 ) (4.5 )
Technologies
Aerospace 122,722 111,592 10.0 (806 ) 10.7
Microelectronics 139,231 152,793 (8.9 ) (2,168 ) (7.5 )
Total Industrial $ 660,922 $ 690,324 (4.3 ) $ (10,571 ) (2.7 )
By Region:
Americas $ 210,309 $ 213,791 (1.6 ) $ (1,469 ) (0.9 )
Europe 204,179 205,487 (0.6 ) (6,802 ) 2.7
Asia 246,434 271,046 (9.1 ) (2,300 ) (8.2 )
Total Industrial $ 660,922 $ 690,324 (4.3 ) $ (10,571 ) (2.7 )
Contact:
Pall Corporation
Brent Jones
Vice President of Finance & Treasurer
Telephone: 516-801-9848
Email: investor_relations@pall.com
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