Pall : Reports Second Quarter Results

Pall Corporation (NYSE:PLL) today reported financial results for the second quarter of fiscal year 2015 which ended January 31, 2015.

• Diluted EPS in the quarter of $0.78, up 4%; pro forma diluted EPS of $0.88, up 7%
• Free cash flow in the six months of $213 million, up 25%
• Reducing full-year pro forma EPS guidance to $3.65‒$3.85, due to FX impact

Second Quarter and Six Months Sales and Earnings Overview

Second quarter sales were $673.8 million compared to $677.0 million last year. Sales in local currency (“LC”) were up 6%, and about 2% excluding acquisitions. Diluted EPS were $0.78 in the quarter, compared to $0.75 last year. Pro forma diluted EPS⁽¹⁾ were $0.88, a 7% increase compared to $0.82 a year earlier, including a headwind of approximately $0.11 from foreign currency translation.

Sales in the six months were $1.4 billion, an increase of 5% year over year. Sales in LC were up 10%, and about 5% excluding acquisitions. Diluted EPS were $1.59 in the six months, compared to $1.38 last year. Pro forma diluted EPS⁽¹⁾ were $1.77, a 16% increase compared to $1.52 a year earlier, including a headwind of approximately $0.15 from foreign currency translation.

Larry Kingsley, Pall Chairman and CEO, said, “We delivered a solid operating quarter. Our consolidated results were significantly impacted by foreign currency translation, particularly due to the strong U.S. dollar. Despite our global revenue profile and U.S.-centric cost structure, we delivered a modest increase in reported operating margin.”

Life Sciences – Second Quarter Highlights

BioPharmaceuticals: Consumables sales grew 13% compared to last year, on overall market strength, growth in single-use systems and acquisition benefit.

Food and Beverage: Consumables sales were up 8% compared to last year, on growth in all regions.

Medical: Consumables sales were up 2% compared to last year.

Systems: Sales were down 6% compared to last year, on timing of BioPharmaceuticals and Food & Beverage capital projects.

Industrial – Second Quarter Highlights

Process Technologies: Consumables sales were flat compared to last year, with acquisition benefit offset by broad based weakness in Machinery & Equipment and timing of Fuels & Chemicals plant shipments.

Aerospace: Consumables sales increased 8% compared to last year, on strong Commercial and Military sales.

Microelectronics: Consumables sales grew 3% compared to last year, on continued strength in Asia.

Systems: Sales increased 9% compared to last year, on timing of Process Technologies capital projects.

Conclusion/Outlook

Kingsley concluded, “At prevailing rates, we’ll see a $200 million full-year headwind to revenue – or around 7%. The impact to EPS will be even greater – increasing to around 40 cents, principally from foreign currency translation. Accordingly, we’re reducing our full-year pro forma EPS guidance to $3.65–$3.85, which represents a 6–12% increase over fiscal 2014. While the forecasted impact of the strong U.S. dollar represents a very large headwind to our reported results, the underlying operating performance of the company reinforces our confidence that we can continue to perform and deliver year-over-year earnings growth for the full year.”

Conference Call

On Tuesday, February 24, 2015, 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 second quarter of fiscal year 2015 are preliminary until our Form 10-Q is filed with the Securities and Exchange Commission on or before March 12, 2015. 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.

(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 and six months ended January 31, 2015 of $11,534 ($11,074 after pro forma tax effect of $460) and $20,774 ($19,799 after pro forma tax effect of $975), respectively, includes severance costs related to the Company's structural cost improvement initiative, as well as impairments of assets related to the exit of an immaterial product line and a redundant software project.

ROTC in the quarter and the six months ended January 31, 2014 of $9,170 ($8,265 after pro forma tax effect of $905) and $18,368 ($15,783 after pro forma tax effect of $2,585), respectively primarily includes severance costs related to the Company's structural cost improvement initiative. The six months ended January 31, 2014 also includes an adjustment to environmental reserves.