<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended January 29, 1994
Commission File No. 1-4311
PALL CORPORATION
Incorporated in New York State I.R.S. Employer Identifi-
cation # 11-1541330
2200 Northern Boulevard, East Hills, N.Y. 11548
Telephone Number (516) 484-5400
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- -----
At February 28, 1994, 115,725,206 shares of common stock of the
Registrant were outstanding.
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PALL CORPORATION
INDEX TO FORM 10-Q
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets -
January 29, 1994 and July 31, 1993 . . . . . . . 1
Condensed consolidated statements of earnings -
three months and six months ended January 29,
1994 and January 30, 1993 . . . . . . . . . . . . 2
Condensed consolidated statements of cash flows -
six months ended January 29, 1994 and January 30,
1993 . . . . . . . . . . . . . . . . . . . . . . 3
Notes to condensed consolidated financial statements 4
Item 2. Management's discussion and analysis of financial
condition and results of operations . . . . . . . 5
PART II. OTHER INFORMATION
Item 1. Legal proceedings . . . . . . . . . . . . . . . . 7
Item 6. Exhibits and reports on Form 8-K . . . . . . . . . 7
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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<CAPTION>
(in thousands) January 29, July 31,
1994 1993
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ASSETS
Current Assets:
Cash and cash equivalents $ 57,156 $ 42,652
Short-term investments 50,900 64,400
Accounts receivable, net of allowances
for doubtful accounts of $3,687
and $3,368, respectively 172,144 197,464
Inventories - Note 2 127,841 127,525
Deferred income taxes 17,501 19,198
Prepaid expenses 14,881 14,384
Other current assets 8,514 4,665
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Total Current Assets 448,937 470,288
Property, plant and equipment, net of
accumulated depreciation of $201,488
and $186,382, respectively 377,313 357,620
Other assets 87,526 74,365
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Total Assets $ 913,776 $ 902,273
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 153,306 $ 125,054
Accounts payable 28,446 36,998
Accrued liabilities:
Salaries and commissions 15,225 20,002
Payroll taxes 5,215 5,298
Income taxes 35,848 33,763
Interest 576 505
Pension and profit-sharing plans 7,631 8,544
Other 20,460 21,395
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84,955 89,507
Current portion of long-term debt 13,123 16,916
Dividends payable 10,698 9,285
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Total Current Liabilities 290,528 277,760
Long-term debt, less current portion 22,344 24,540
Deferred income taxes 27,331 28,673
Other non-current liabilities 30,457 28,422
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Total Liabilities 370,660 359,395
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Stockholders' Equity (Note 3):
Common stock, $.10 and $.25 par value,
respectively 11,735 29,338
Capital in excess of par value 53,769 36,166
Retained earnings 533,413 524,407
Equity adjustment from foreign
currency translation (12,532) (12,861)
Minimum pension liability adjustment (4,668) (4,996)
Treasury stock, at cost (31,814) (24,963)
Stock option loans (6,787) (4,213)
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Total Stockholders' Equity 543,116 542,878
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Total Liabilities and
Stockholders' Equity $ 913,776 $ 902,273
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</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except
per share data)
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Three Months Ended Six Months Ended
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Jan. 29, Jan. 30, Jan. 29, Jan. 30,
1994 1993 1994 1993
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Revenues:
Net sales $ 169,710 $ 167,460 $ 311,584 $ 315,823
Interest earned 1,395 1,084 2,712 2,447
------- ------- -------- --------
Total revenues 171,105 168,544 314,296 318,270
Costs and expenses:
Cost of sales 64,069 62,954 119,270 121,119
Selling, general and
administrative expenses 63,816 65,061 124,948 129,743
Research and development 11,015 9,727 20,574 18,726
Interest expense 1,607 2,047 3,526 4,567
Restructuring and other charges - 26,710 - 26,710
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Total costs and expenses 140,507 166,499 268,318 300,865
Earnings before income taxes 30,598 2,045 45,978 17,405
Provisions for income taxes 8,567 (1,210) 12,874 3,168
------- ------- -------- --------
Net earnings $ 22,031 $ 3,255 $ 33,104 $ 14,237
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Earnings per share $0.19 $0.03 $0.29 $0.12
Dividends declared per share $0.09 $0.08 $0.17 $0.15
Average number of shares
outstanding 115,840 115,818 115,854 115,752
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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<CAPTION>
Six Months Ended
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(in thousands) Jan. 29, Jan. 30,
1994 1993
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 58,593 $ 49,324
INVESTING ACTIVITIES:
Capital expenditures (39,027) (26,016)
Disposals of fixed assets 1,006 394
Short-term investments 13,500 19,375
Acquisition of business of Australian distributor (6,278) -
Acquisition of license (5,000) -
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NET CASH USED BY INVESTING ACTIVITIES (35,799) (6,247)
FINANCING ACTIVITIES:
Net short-term borrowings 28,440 769
Long-term borrowings - 5,280
Payments on long-term debt (5,039) (33,476)
Net proceeds from exercise of stock options 1,830 2,378
Dividends paid (18,558) (7,812)
Treasury stock (15,381) -
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NET CASH USED BY FINANCING ACTIVITIES (8,708) (32,861)
CASH FLOW FOR PERIOD 14,086 10,216
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 42,652 26,977
EFFECT OF EXCHANGE RATE CHANGES ON CASH 418 (3,669)
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 57,156 $ 33,524
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Supplemental disclosures
Cash paid during the period for:
Interest (net of amount capitalized) $ 3,453 $ 6,491
Income taxes (net of refunds) 11,688 16,730
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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NOTE 1 - BASIS OF PRESENTATION
The financial information included herein is unaudited. However,
such information reflects all adjustments which are, in the opinion of
management, necessary to present fairly (i) the financial position of
the Company at January 29, 1994 and July 31, 1993, (ii) the results of
its operations for the three-month and six-month periods ended
January 29, 1994 and January 30, 1993, and (iii) its cash flows for
the six-month periods ended January 29, 1994 and January 30, 1993.
NOTE 2 - INVENTORIES
The major classes of inventory are as follows:
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Jan. 29, July 31,
(in thousands) 1994 1993
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Raw materials and components $51,677 $53,549
Work-in-process 15,850 14,075
Finished goods 60,314 59,901
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Total inventory $127,841 $127,525
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NOTE 3 - COMMON STOCK
At their annual meeting held on November 18, 1993, the stockholders
approved an amendment to the Certificate of Incorporation reducing
the par value of the Common Stock from $.25 per share to $.10 per
share, and increasing the number of authorized shares of Common
Stock from 200 million to 500 million. As a result of the reduction
in par value, the Common Stock account was reduced by $17,603,000
and the Capital in Excess of Par Value account was increased by the
same amount.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
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I. Results of Operations:
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A. Six months ended January 29, 1994 compared to the six months ended
January 30, 1993.
Sales for the first six months of fiscal 1994 were down 1 1/2% from
the comparable period of the prior year. Had foreign exchange rates
been unchanged, sales would have increased by 1 1/2%. Price increases
were 2% in the period.
The Company has announced reduced sales expectations for fiscal
1994. The Company now expects sales to be in the range of $720 to
$725 million, which would give a unit and price growth of between
7% and 8%, after being reduced by 2% due to currency effects.
The Company's pre-tax margin was 14.8% in the first six months
of fiscal 1994. The comparable rate in fiscal 1993, excluding the
$26.7 million restructuring charge reported in the second quarter of
that year, was 14.0%. This increase resulted from continuing controls
over selling, general and administrative expenses and from lower net
interest expenses, offset in part by higher research and development
expenditures.
The Company's effective tax rate, before the effect of the
restructuring charge reflected in the second quarter of fiscal 1993,
declined to 28.0% in the first half of fiscal 1994 from 28.5% in
the first half of fiscal 1993.
Excluding the effect of the restructuring charge from the first
half of fiscal 1993, net earnings for the first half of fiscal 1994
increased 5% to $33.1 million from $31.5 million in the prior period.
B. Quarter ended January 29, 1994 compared to the quarter ended
January 30, 1993.
Sales for the second quarter of fiscal 1994 increased 1 1/2% over
the second quarter of fiscal 1993. Had foreign exchange rates not
changed, sales would have increased by 2 1/2%. Price increases were
2% in the quarter.
The Company's pre-tax margin increased to 18.0% in the second
quarter of fiscal 1994, from 17.2% in the comparable period of the
prior year, excluding the restructuring charge from such prior period.
The increase resulted from the same factors mentioned in the six-
month discussion above.
The Company's effective tax rate, before the effect of the
restructuring charge on the 1993 period, declined to 28.0% in the
second quarter of fiscal 1994 from 28.5% in the second quarter of
fiscal 1993.
Excluding the effect of the restructuring charge from the second
quarter of fiscal 1993, net earnings for the second quarter of fiscal
1994 increased 7% to $22.0 million from $20.6 million in the prior
year period.
II. Liquidity and Capital Resources:
-----------------------------------
The Company's working capital decreased by $34.1 million during the
first six months of fiscal 1994, principally due to a decline of $25.3
million in accounts receivable as a result of the lower level of sales
in the first half of fiscal 1994 compared to the second half of fiscal
1993, and an increase of $23.5 million in short-term debt net of cash
short-term investments, offset in part by a decrease of $13.8 million
in payables and accruals.
Capital expenditures totalled $39.0 million, and depreciation expense
totalled $18.5 million, in the six months ended January 29, 1994.
On August 3, 1993, the Company's Board of Directors authorized
a second program to repurchase shares of its common stock. The Board
authorized the expenditure of up to $30 million, and this program
is ongoing. During the six months ended January 29, 1994, 855,700
shares were repurchased for a total cost of $15.4 million.
During the second quarter of fiscal 1994, the Company purchased the
business of its Australian distributor and acquired a license from
New Logic International, Inc. to complement its separations product
lines, which transactions required approximately $12 million in funds.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company had been one of several third-party defendants in an
action brought by the City of Glen Cove, N.Y., involving potential
environmental damages and hazardous waste contamination. The City
sought from the primary defendants the cost of environmental clean-
up, compensatory damages of $10 million, and punitive damages of
$25 million.
On December 30, 1993, the several parties in this matter agreed
to settle for a total of $625,000, of which the Company's share
was $200,000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the three
months ended January 29, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PALL CORPORATION
March 10, 1994 /s/ Jeremy Hayward-Surry
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Date Jeremy Hayward-Surry
Executive Vice President and
Treasurer - Chief Financial
Officer
March 10, 1994 /s/ Peter Schwartzman
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Date Peter Schwartzman
Secretary and Chief Corporate
Accountant
