Back Pall Corporation Earnings Up Over 40%, Sales Increase 10% East Hills, NY (May 31, 2007) - - Pall Corporation (NYSE: PLL - News) today reported sales and earnings results for the third quarter ended April 30, 2007. Sales for the quarter were $559.3 million, up 9.7% compared with the third quarter last year. Diluted earnings per share ("EPS") were $0.54, up from $0.20 a year ago. Net earnings were $67.1 million compared to $25.2 million a year ago. EPS on a pro forma basis were $0.53 per share as compared to $0.37 per share in the same quarter last year. For the nine months ended April 30, 2007, sales were $1.6 billion, an increase of 13% over the prior year. Net earnings were $147.3 million, or $1.18 per share compared to $0.66 last year. EPS on a pro forma basis, excluding items principally related to the Company's cost reduction initiatives and favorable income tax related adjustments, were $1.24 per share as compared to $0.85 per share in the same period last year. Eric Krasnoff, Chairman and CEO, stated, "Execution of our strategic plan is driving improvements to the top and bottom line. Pall's Total Fluid Management(sm) value proposition is resonating with customers. The benefits from pricing, productivity improvement and cost reduction initiatives have driven operating profit growth of 35%." Income Statement Discussion At constant exchange rates, sales increased $27.0 million, or 5.3%, in the quarter and $130.2 million, or 9.2%, during the nine months. The impact of foreign currency translation increased the reported sales growth to $49.4 million, or 9.7%, for the quarter, and $184.0 million, or 13.0%, for the nine months. The impact of foreign currency translation increased EPS by $0.01 in the quarter and $0.02 for the nine months. Referring to the quarter, Mr. Krasnoff added, "Pall's broad cost reduction initiatives were a major contributor to the gross margin expansion to 49.5%. Continued improvement in the profitability of systems played a key role. We are on track to achieve further gross margin expansion in fiscal 2008 as our cost reduction and facilities rationalization initiatives continue to gain traction. Selling, general and administrative ("S,G&A") expenses again decreased as a percentage of sales falling to 30%." Life Sciences - Third Quarter Summary % CHANGE IN LOCAL Sales: APR. 30, 2007 % CHANGE CURRENCY -------------------------------- -------------- ---------- ----------- Medical $ 121,934 8.2 4.4 BioPharmaceuticals 107,110 14.9 9.2 -------------- Total Life Sciences segment $ 229,044 11.2 6.6 ============== % OF SALES ---------- Gross profit $ 122,050 53.3% Operating profit $ 50,121 21.9% BioPharmaceuticals sales growth was driven by strong consumables sales into the fast-growing biotechnology and vaccine industries. Medical sales increased driven by new blood center customers and new products and applications for the blood business; and growth in Hospital and Laboratory product sales, particularly in the Western Hemisphere. The Life Sciences operating profit increase primarily reflects gross margin improvement attributable to manufacturing efficiencies and price increases. Industrial - Third Quarter Summary % CHANGE IN LOCAL Sales: APR. 30, 2007 % CHANGE CURRENCY -------------------------------- -------------- ---------- ----------- General Industrial $ 193,231 9.8 4.9 Aerospace and Transportation 62,417 6.7 1.7 Microelectronics 74,655 7.5 5.5 -------------- Total Industrial segment $ 330,303 8.6 4.4 ============== % OF SALES ---------- Gross profit $ 155,447 47.1% Operating profit $ 54,246 16.4% General Industrial consumables and systems sales growth in the energy markets was particularly strong. Microelectronics sales continue to benefit from our strategic diversification into the consumer side of the electronics market. Sales in Europe were robust while the Asian market started to slow and the U.S. market was down. Gross margins improved to 47.1% compared with 44.8% last year driven by sales and manufacturing initiatives, particularly in the systems area. In addition, product mix was favorable to gross margin in the quarter. S,G&A improved by 2% as a percentage of sales to 28.5% reflecting top-line leverage and cost reduction initiatives. Operating profit increased 49% to $54.2 million and operating margin improved to 16.4% from 12.0% last year. The overall backlog in Industrial was up 26% compared to a year ago. The systems backlog increased 41%, with particularly strong growth in the Municipal Water and Food and Beverage markets. Outlook Mr. Krasnoff concluded, "For the full fiscal year, we expect Life Sciences to achieve mid single-digit sales growth with Medical on the low end and BioPharmaceuticals around 10%. Pall Industrial should come in near the top end of the 5-7% growth range provided at the beginning of the fiscal year reflecting a slowdown in the Microelectronics market offset by the vitality of systems sales and the Energy marketplace generally. This adds up to low revenue growth in the fourth quarter over a very strong fourth quarter in fiscal 2006. Our expectations for the full year are for gross margins for the Company to stabilize as the impact of our cost reduction initiatives grow. S,G&A is expected to be about 30% of sales. Our underlying tax rate is expected to be between 24 and 25% excluding the effects of favorable income tax related adjustments. At mid-year we shared an expectation that earnings would modestly exceed prior guidance. Now with three quarters in the books, we expect to finish the year with strong earnings." Conference Call Tomorrow, June 1, 2007, at 8:30 am ET, Pall Corporation will host its quarterly earnings conference call. The call will be webcast and individuals can access it at www.pall.com/investor. Listening to the webcast requires speakers and Microsoft Windows Media Player software. The webcast will be archived for 30 days. About Pall Corporation: Pall Corporation is the global leader in the rapidly growing field of filtration, separation and purification. Pall is organized into two businesses: Life Sciences and Industrial. These businesses provide leading-edge products to meet the demanding needs of customers in biotechnology, pharmaceutical, transfusion medicine, energy, electronics, municipal and industrial water purification, aerospace, transportation and broad industrial markets. Total revenues for fiscal year 2006 were $2.0 billion. The Company headquarters is in East Hills, New York with extensive operations throughout the world. For more information visit Pall at http://www.pall.com/. Forward Looking Statements: Results for third quarter ended April 30, 2007 are preliminary until the Company's Form 10-Q is filed with the Securities and Exchange Commission. Forward-looking statements contained in this and other written and oral reports are based on current Company expectations and are subject to risks and uncertainties, which could cause actual results to differ materially. All statements regarding future performance, earnings projections, earnings guidance, events or developments are forward-looking statements. Such risks and uncertainties include, but are not limited to: changes in product mix and product pricing particularly as we expand our systems business in which we experience significantly longer sales cycles and less predictable revenue with no certainty of future revenue streams from related consumable product offerings and services; increases in costs of manufacturing and operating costs including energy and raw materials; the Company's ability to achieve the savings anticipated from cost reduction and margin improvement initiatives including the timing of completion of the facilities rationalization initiative; fluctuations in foreign currency exchange rates and interest rates; regulatory approval and market acceptance of new technologies; changes in business relationships with key customers and suppliers including delays or cancellations in shipments; success in enforcing patents and protecting proprietary products and manufacturing techniques; successful completion or integration of acquisitions; domestic and international competition in the Company's global markets; and global and regional economic conditions and legislative, regulatory and political developments. The Company makes these statements as of the date of this disclosure and undertakes no obligation to update them. Management uses certain non-GAAP measurements to assess Pall's current and future financial performance. The non-GAAP measurements do not replace the presentation of Pall's GAAP financial results. These measurements provide supplemental information to assist management in analyzing Pall's financial position and results of operations. Pall 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.   PALL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (AMOUNTS IN THOUSANDS) APR. 30, 2007 JUL. 31, 2006 -------------- -------------- Assets: Cash and cash equivalents $ 364,672 $ 317,657 Accounts receivable 512,673 517,632 Inventories 473,418 408,273 Other current assets 143,639 133,419 -------------- -------------- Total current assets 1,494,402 1,376,981 -------------- -------------- Property, plant and equipment, net 584,440 620,979 Other assets 549,854 554,898 -------------- -------------- Total assets $ 2,628,696 $ 2,552,858 ============== ============== Liabilities and Stockholders' Equity: Short-term debt $ 71,667 $ 63,382 Accounts payable, income taxes and other current liabilities 493,659 467,434 -------------- -------------- Total current liabilities 565,326 530,816 -------------- -------------- Long-term debt 540,499 640,015 Deferred taxes and other non-current liabilities 214,472 203,331 -------------- -------------- Total liabilities 1,320,297 1,374,162 Stockholders' Equity 1,308,399 1,178,696 -------------- -------------- Total liabilities and stockholders' equity $ 2,628,696 $ 2,552,858 ============== ============== PALL CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Amounts in thousands, except per share data) THIRD QUARTER ENDED NINE MONTHS ENDED --------------------- ------------------------- APR. 30, APR. 30, APR. 30, APR. 30, 2007 2006 2007 2006 --------- --------- ----------- ----------- Net sales $559,347 $509,981 $1,603,565 $1,419,579 Cost of sales 282,227 (a) 271,388 (b) 846,303 (a) 753,491 (b) --------- --------- ----------- ----------- Gross profit 277,120 238,593 757,262 666,088 --------- --------- ----------- ----------- % of sales 49.5% 46.8% 47.2% 46.9% Selling, general and administrative expenses 167,677 157,407 493,255 466,250 Research and development 15,656 14,511 45,167 41,975 --------- --------- ----------- ----------- Earnings before restructuring and other charges/(gains), net ("ROTC"), interest expense, net, and income taxes 93,787 66,675 218,840 157,863 ROTC 8,620 (a) 7,313 (b) 22,060 (a) 10,999 (b) Interest expense, net 4,260 5,091 14,894 16,472 --------- --------- ----------- ----------- Earnings before income taxes 80,907 54,271 181,886 130,392 Provision for income taxes 13,833 (a) 29,082 (b) 34,575 (a) 47,657 (b) --------- --------- ----------- ----------- Net earnings $ 67,074 $ 25,189 $ 147,311 $ 82,735 ========= ========= =========== =========== Earnings per share: Basic $ 0.54 $ 0.20 $ 1.20 $ 0.66 Diluted $ 0.54 $ 0.20 $ 1.18 $ 0.66 Average shares outstanding: Basic 123,399 125,614 123,110 125,243 Diluted 124,781 126,581 124,662 126,121 Net earnings as reported $ 67,074 $ 25,189 $ 147,311 $ 82,735 ROTC and one-time purchase accounting adjustment, after pro forma tax effect 5,818 5,040 15,964 7,819 Tax adjustments (6,583) 17,000 (8,100) 17,000 --------- --------- ----------- ----------- Pro forma earnings $ 66,309 $ 47,229 $ 155,175 $ 107,554 ========= ========= =========== =========== Diluted earnings per share as reported $ 0.54 $ 0.20 $ 1.18 $ 0.66 ROTC and one-time purchase accounting adjustment, after pro forma tax effect 0.04 0.04 0.13 0.06 Tax adjustments (0.05) 0.13 (0.07) 0.13 --------- --------- ----------- ----------- Pro forma diluted earnings per share $ 0.53 $ 0.37 $ 1.24 $ 0.85 ========= ========= =========== =========== (a) Cost of sales includes incremental depreciation and other adjustments of $377 in the quarter and $2,893 (2 cents per share, after pro forma tax effect) in the nine months recorded in conjunction with the Company's facilities rationalization initiative. The other adjustments include a charge of $566 for the nine months related to a one-time purchase accounting adjustment to record, at market value, inventory acquired from BioSepra. This resulted in a $2,431 increase in acquired inventories in accordance with SFAS No. 141 "Business Combinations" and charges to cost of sales in the periods when the sale of a portion of the underlying inventory occurred. ROTC in the quarter includes charges of $8,420 (4 cents per share, after pro forma tax effect) primarily comprised of severance and other costs related to the Company's cost reduction programs, including its facilities rationalization initiative. ROTC in the nine months includes charges of $19,299 (10 cents per share, after pro forma tax effect) primarily comprised of severance costs and an impairment charge on certain long-lived assets partly offset by a gain on the sale of a facility. The charges in the nine months relate to the Company's cost reduction programs. In addition, the quarter and nine months include $200 and $2,761 (1 cent per share, after pro forma tax effect), respectively, related to an increase in environmental reserves. Provision for income taxes includes $6,583 (5 cents per share) in the quarter and $8,100 (7 cents per share) in the nine months reflecting a change in estimate of fiscal year 2006 income tax liabilities, including amounts relating to the repatriation of foreign subsidiary earnings as well as the reversal of a deferred tax asset valuation reserve which was recorded in the second quarter. (b) Included in cost of sales is a charge of $333 and $839 in the quarter and nine months, respectively, related to a one-time purchase accounting adjustment to record, at market value, inventory acquired from BioSepra as discussed above. ROTC includes severance and other costs of $7,313 (4 cents per share, after pro forma tax effect) in the quarter and $13,199 (7 cents per share, after pro forma tax effect) in the nine months primarily related to the Company's business realignment and ongoing cost reduction programs. In addition, the nine months includes gains on the sale of an investment and stock rights totaling $2,200 (1 cent per share, after pro forma tax effect). Provision for income taxes includes a charge of $17,000 (or 13 cents per share) in the quarter and nine months related to the tax effect of the repatriation of foreign subsidiary earnings. PALL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) (AMOUNTS IN THOUSANDS) NINE MONTHS ENDED --------------------------- APR. 30,2007 APR. 30, 2006 ------------- ------------- Net cash provided by operating activities $ 213,554 $ 151,667 ------------- ------------- Investing activities: Disposals of long-lived assets 44,609 6,564 Capital expenditures (54,086) (72,784) Other (3,648) (12,903) ------------- ------------- Net cash used by investing activities (13,125) (79,123) ------------- ------------- Financing activities: Dividends paid (41,521) (38,611) Notes payable and long-term borrowings (109,802) (18,945) Purchase of treasury stock (51,016) (5,750) Other 41,406 27,518 ------------- ------------- Net cash used by financing activities (160,933) (35,788) ------------- ------------- Cash flow for period 39,496 36,756 Cash and cash equivalents at beginning of year 317,657 164,928 Effect of exchange rate changes on cash 7,519 5,675 ------------- ------------- Cash and cash equivalents at end of period $ 364,672 $ 207,359 ============= ============= Free cash flow: ------------------------------------------ Net cash provided by operating activities $ 213,554 $ 151,667 Less capital expenditures 54,086 72,784 ------------- ------------- Free cash flow $ 159,468 $ 78,883 ============= ============= PALL CORPORATION SUMMARY STATEMENT OF OPERATING PROFIT BY SEGMENT (Unaudited) (DOLLAR AMOUNTS IN THOUSANDS) THIRD QUARTER ENDED NINE MONTHS ENDED ------------------- ------------------- APR. 30, APR. 30, APR. 30, APR. 30, 2007 2006 2007 2006 --------- --------- --------- --------- Life Sciences ------------------------------ Sales $229,044 $205,937 $633,981 $562,751 Cost of sales (a) 106,994 103,185 310,691 285,020 --------- --------- --------- --------- Gross profit 122,050 102,752 323,290 277,731 % of sales 53.3% 49.9% 51.0% 49.4% Selling, general and administrative expenses 63,369 54,159 182,897 163,511 Research and development 8,560 7,625 24,048 23,136 --------- --------- --------- --------- Operating profit $ 50,121 $ 40,968 $116,345 $ 91,084 % of sales 21.9% 19.9% 18.4% 16.2% ========= ========= ========= ========= Industrial ------------------------------ Sales $330,303 $304,044 $969,584 $856,828 Cost of sales (a) 174,856 167,870 532,719 467,632 --------- --------- --------- --------- Gross profit 155,447 136,174 436,865 389,196 % of sales 47.1% 44.8% 45.1% 45.4% Selling, general and administrative expenses 94,105 92,880 279,838 273,022 Research and development 7,096 6,886 21,119 18,839 --------- --------- --------- --------- Operating profit $ 54,246 $ 36,408 $135,908 $ 97,335 % of sales 16.4% 12.0% 14.0% 11.4% ========= ========= ========= ========= CONSOLIDATED: Operating profit $104,367 $ 77,376 $252,253 $188,419 General corporate expenses (10,203) (10,368) (30,520) (29,717) --------- --------- --------- --------- Earnings before ROTC, interest expense, net and income taxes (a) 94,164 67,008 221,733 158,702 ROTC (a) (8,997) (7,646) (24,953) (11,838) Interest expense, net (4,260) (5,091) (14,894) (16,472) --------- --------- --------- --------- Earnings before income taxes $ 80,907 $ 54,271 $181,886 $130,392 ========= ========= ========= ========= (a) Included in ROTC for the purpose of evaluation of segment profitability are other adjustments recorded in cost of sales. For the quarter and nine months ended April 30, 2007, such adjustments include incremental depreciation and other adjustments of $377 and $2,327 recorded in conjunction with the Company's facilities rationalization initiative. Furthermore, such adjustments include a charge of $566 for the nine months ended April 30, 2007 and $333 and $839 for the quarter and nine months ended April 30, 2006, respectively, related to a one-time purchase accounting adjustment to record, at market value, inventory acquired from BioSepra. This resulted in a $2,431 increase in acquired inventories in accordance with SFAS No. 141 "Business Combinations" and charges to cost of sales in the periods when the sale of a portion of the underlying inventory occurred. PALL CORPORATION SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND GEOGRAPHY (Unaudited) (DOLLAR AMOUNTS IN THOUSANDS) % CHANGE IN LOCAL THIRD QUARTER ENDED APR. 30, 2007 APR. 30, 2006 % CHANGE CURRENCY ------------------------ ------------- ------------- -------- -------- Life Sciences ------------------------ By Market: Medical $ 121,934 $ 112,737 8.2 4.4 BioPharmaceuticals 107,110 93,200 14.9 9.2 ------------- ------------- Total Life Sciences $ 229,044 $ 205,937 11.2 6.6 ============= ============= By Geography: Western Hemisphere $ 97,419 $ 91,691 6.3 6.3 Europe 102,934 86,096 19.6 9.2 Asia 28,691 28,150 1.9 (0.4) ------------- ------------- Total Life Sciences $ 229,044 $ 205,937 11.2 6.6 ============= ============= Industrial ------------------------ By Market: General Industrial (a) $ 193,231 $ 176,043 9.8 4.9 Aerospace and Transportation (a) 62,417 58,524 6.7 1.7 Microelectronics 74,655 69,477 7.5 5.5 ------------- ------------- Total Industrial $ 330,303 $ 304,044 8.6 4.4 ============= ============= By Geography: Western Hemisphere $ 93,811 $ 94,147 (0.4) (0.4) Europe 128,279 114,683 11.9 2.1 Asia 108,213 95,214 13.7 12.0 ------------- ------------- Total Industrial $ 330,303 $ 304,044 8.6 4.4 ============= ============= (a) Certain prior year amounts have been reclassified to conform to the current year presentation. PALL CORPORATION SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND GEOGRAPHY (Unaudited) (DOLLAR AMOUNTS IN THOUSANDS) % CHANGE IN LOCAL NINE MONTHS ENDED APR. 30, 2007 APR. 30, 2006 % CHANGE CURRENCY ------------------------ ------------- ------------- -------- -------- Life Sciences ------------------------ By Market: Medical $ 345,051 $ 315,194 9.5 6.4 BioPharmaceuticals 288,930 247,557 16.7 11.8 ------------- ------------- Total Life Sciences $ 633,981 $ 562,751 12.7 8.8 ============= ============= By Geography: Western Hemisphere $ 271,056 $ 254,107 6.7 6.6 Europe 282,855 231,724 22.1 13.2 Asia 80,070 76,920 4.1 2.8 ------------- ------------- Total Life Sciences $ 633,981 $ 562,751 12.7 8.8 ============= ============= Industrial ------------------------ By Market: General Industrial (a) $ 565,279 $ 501,590 12.7 8.4 Aerospace and Transportation (a) 183,484 170,223 7.8 3.9 Microelectronics 220,821 185,015 19.4 17.2 ------------- ------------- Total Industrial $ 969,584 $ 856,828 13.2 9.4 ============= ============= By Geography: Western Hemisphere $ 279,726 $ 264,199 5.9 5.8 Europe 379,399 328,940 15.3 7.0 Asia 310,459 263,689 17.7 16.0 ------------- ------------- Total Industrial $ 969,584 $ 856,828 13.2 9.4 ============= ============= (a) Certain prior year amounts have been reclassified to conform to the current year presentation. ### Contact Lisa McDermott Pall Corporation Telephone: 516-801-9808 Back