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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 April 30, 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 May 31, 1994, 115,319,451 shares of common stock of the
Registrant were outstanding.
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PALL CORPORATION
INDEX TO FORM 10-Q
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<S> <C>
COVER SHEET . . . . . . . . . . . . . . . . . . . . . . . . 1
INDEX TO FORM 10-Q . . . . . . . . . . . . . . . . . . . . 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets -
April 30, 1994 and July 31, 1993 . . . . . . . 3
Condensed consolidated statements of earnings -
three months and nine months ended April 30,
1994 and May 1, 1993. . . . . . . . . . . . . . 4
Condensed consolidated statements of cash flows -
nine months ended April 30, 1994 and May 1, 1993 5
Notes to condensed consolidated financial statements 6
Item 2. Management's discussion and analysis of financial
condition and results of operations . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal proceedings . . . . . . . . . . . . . . . 9
Item 6. Exhibits and reports on Form 8-K . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 9
</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) April 30, July 31,
1994 1993
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 55,769 $ 42,652
Short-term investments 38,875 64,400
Accounts receivable, net of allowances
for doubtful accounts of $3,940
and $3,368, respectively 178,690 197,464
Inventories - Note 2 136,553 127,525
Deferred income taxes 17,001 19,198
Prepaid expenses 13,565 14,384
Other current assets 5,242 4,665
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Total Current Assets 445,695 470,288
Property, plant and equipment, net of
accumulated depreciation of $210,262
and $186,382, respectively 386,555 357,620
Other assets 89,873 74,365
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Total Assets $ 922,123 $ 902,273
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 126,386 $ 125,054
Accounts payable 37,122 36,998
Accrued liabilities:
Salaries and commissions 23,779 20,002
Payroll taxes 5,593 5,298
Income taxes 40,001 33,763
Interest 775 505
Pension and profit-sharing plans 9,280 8,544
Other 16,455 21,395
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95,883 89,507
Current portion of long-term debt 13,368 16,916
Dividends payable 10,697 9,285
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Total Current Liabilities 283,456 277,760
Long-term debt, less current portion 23,533 24,540
Deferred income taxes 26,338 28,673
Other non-current liabilities 28,827 28,422
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Total Liabilities 362,154 359,395
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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 545,054 524,407
Treasury stock, at cost (30,309) (24,963)
Foreign currency translation adjustment (6,503) (12,861)
Minimum pension liability adjustment (4,497) (4,996)
Stock option loans (8,545) (4,213)
Unrealized losses on investments (735) -
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Total Stockholders' Equity 559,969 542,878
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Total Liabilities and
Stockholders' Equity $ 922,123 $ 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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<CAPTION>
Three Months Ended Nine Months Ended
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Apr. 30, May 1, Apr. 30, May 1,
1994 1993 1994 1993
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<S> <C> <C> <C> <C>
Revenues:
Net sales $ 177,814 $ 172,547 $ 489,398 $ 488,370
Interest earned 1,440 1,216 4,152 3,663
------- ------- -------- --------
Total revenues 179,254 173,763 493,550 492,033
Costs and expenses:
Cost of sales 63,229 60,854 182,499 181,973
Selling, general and
administrative expenses 66,556 65,058 191,504 194,801
Research and development 10,442 10,771 31,016 29,497
Interest expense 1,552 2,118 5,078 6,685
Restructuring and other charges - - - 26,710
------- ------- -------- --------
Total costs and expenses 141,779 138,801 410,097 439,666
Earnings before income taxes 37,475 34,962 83,453 52,367
Provisions for income taxes 9,658 9,963 22,532 13,131
------- ------- -------- --------
Net earnings $ 27,817 $ 24,999 $ 60,921 $ 39,236
======= ======= ======== ========
Earnings per share $0.24 $0.22 $0.53 $0.34
Dividends declared per share $0.09 $0.08 $0.27 $0.23
Average number of shares
outstanding 115,632 115,904 115,786 115,802
</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>
Nine Months Ended
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(in thousands) Apr. 30, May 1,
1994 1993
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 106,925 $ 79,997
INVESTING ACTIVITIES:
Capital expenditures (53,760) (41,276)
Disposals of fixed assets 974 2,881
Short-term investments 25,525 14,500
Acquisitions of license and of business of
Australian distributor (11,333) -
Benefits protection trust (2,567) (7,072)
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NET CASH USED BY INVESTING ACTIVITIES (41,161) (30,967)
FINANCING ACTIVITIES:
Net short-term borrowings 189 496
Long-term borrowings 0 5,280
Payments on long-term debt (5,613) (34,635)
Net proceeds from exercise of stock options 5,983 3,272
Dividends paid (29,256) (17,082)
Treasury stock (25,266) -
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NET CASH USED BY FINANCING ACTIVITIES (53,963) (42,669)
CASH FLOW FOR PERIOD 11,801 6,361
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 42,652 26,977
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,316 (2,019)
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 55,769 $ 31,319
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Supplemental disclosures
Cash paid during the period for:
Interest (net of amount capitalized) $ 4,796 $ 8,330
Income taxes (net of refunds) 17,126 23,086
</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 April 30, 1994 and July 31, 1993, (ii) the results of
its operations for the three-month and nine-month periods ended
April 30, 1994 and May 1, 1993, and (iii) its cash flows for the
nine-month periods ended April 30, 1994 and May 1, 1993.
NOTE 2 - INVENTORIES
The major classes of inventory are as follows:
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<CAPTION>
Apr. 30, July 31,
(in thousands) 1994 1993
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<S> <C> <C>
Raw materials and components $54,285 $53,549
Work-in-process 15,487 14,075
Finished goods 66,781 59,901
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Total inventory $136,553 $127,525
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</TABLE>
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. Nine months ended April 30, 1994 compared to the nine months ended
May 1, 1993.
Sales for the first nine months of fiscal 1994 were flat, compared
to the first nine months of the prior year. Had foreign exchange
rates been unchanged, sales would have increased by 2%. Price
increases were 1 1/2% in the period.
The Company's pretax margin was 17.1% in the first nine 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 16.2%. 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 27.0% in the first nine months of fiscal 1994 from 28.5%
in the first nine months of fiscal 1993, principally due to increased
benefits of the Company's Puerto Rico operations and to lower
effective income taxes on the earnings of foreign subsidiaries,
offset in part by a higher U.S. Federal tax rate.
Excluding the effect of the restructuring charge from the first
nine months of fiscal 1993, net earnings for the first nine months
of fiscal 1994 increased 8% to $60.9 million from $56.5 million in
the prior year period.
B. Quarter ended April 30, 1994 compared to the quarter ended
May 1, 1993.
Sales for the third quarter of fiscal 1994 increased 3% over
the third quarter of fiscal 1993. Foreign currency exchange rates
had little effect in the quarter. Price increases were 1%.
The Company's pre-tax margin increased to 21.1% in the third
quarter of fiscal 1994, from 20.3% in the comparable period of the
prior year. As a percentage of sales, there were declines in
selling, general and administrative expenses, research and
development costs, and net interest expense, while cost of sales
was up slightly.
The Company's effective tax rate, before the effect of the
restructuring charge on the 1993 period, was 25.8% in the third
quarter of fiscal 1994 compared to 28.5% in the third quarter of
fiscal 1993. This decline resulted from the same factors mentioned
in the nine-month discussion above.
Net earnings for the third quarter of fiscal 1994 increased 11%
to $27.8 million from $25.0 million in the prior year period.
II. Liquidity and Capital Resources:
-----------------------------------
The Company's working capital decreased by $30.3 million during
the first nine months of fiscal 1994, principally due to (i) a decline
of $18.8 million in accounts receivable, (ii) an increase of $10.2
million in short-term debt net of cash and short-term investments,
and (iii) an increase of $6.2 million in income taxes payable, offset
in part by an increase of $9.0 million in inventory.
Capital expenditures totalled $53.8 million, and depreciation
expense totalled $27.3 million, in the nine months ended April 30,
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
was completed in May 1994. During the nine months ended April 30,
1994, 1,435,800 shares were repurchased for a total cost of $25.3
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 April 30, 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
June 8, 1994 /s/ Jeremy Hayward-Surry
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Date Jeremy Hayward-Surry
Executive Vice President and
Treasurer - Chief Financial
Officer
June 8, 1994 /s/ Peter Schwartzman
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Date Peter Schwartzman
Secretary and Chief Corporate
Accountant
