<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 28, 1995
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, 1995, 116,073,613 shares of common stock of the Registrant were
outstanding.
<PAGE> 2
PALL CORPORATION
INDEX TO FORM 10-Q
COVER SHEET 1
INDEX TO FORM 10-Q 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets - January 28, 1995 and
July 30, 1994 3
Condensed consolidated statements of earnings - three months
and six months ended January 28, 1995 and January 29, 1994 4
Condensed consolidated statements of cash flows - six months
ended January 28, 1995 and January 29, 1994 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 6. Exhibits and reports on Form 8-K 9
SIGNATURES 9
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands) January 28, July 30,
ASSETS 1995 1994
----------- --------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 36,568 $ 38,224
Short-term investments 53,400 50,800
Accounts receivable, net of allowances
for doubtful accounts of $4,673
and $4,776, respectively 177,632 207,159
Inventories - Note 2 148,556 138,382
Deferred income taxes 17,600 17,178
Prepaid expenses 16,736 15,346
Other current assets 5,063 3,336
-------- --------
Total Current Assets 455,555 470,425
Property, plant and equipment, net of
accumulated depreciation of $240,708
and $223,012, respectively 409,971 397,617
Other assets 94,064 91,537
-------- --------
Total Assets $959,590 $959,579
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 92,130 $ 112,034
Accounts payable 37,376 40,401
Accrued liabilities:
Salaries and commissions 20,047 24,031
Payroll taxes 4,746 5,185
Income taxes 33,956 33,019
Interest 1,654 1,232
Pension and profit-sharing plans 11,744 11,014
Other 16,836 16,437
-------- --------
88,983 90,918
Current portion of long-term debt 6,385 2,819
Dividends payable 12,111 10,667
-------- --------
Total Current Liabilities 236,985 256,839
Long-term debt, less current portion 48,943 54,097
Deferred income taxes 33,994 31,450
Other non-current liabilities 30,442 29,987
-------- --------
Total Liabilities 350,364 372,373
-------- --------
Stockholders' Equity:
Common stock, $.10 par value 11,735 11,735
Capital in excess of par value 53,769 53,769
Retained earnings 588,382 572,388
Treasury stock, at cost (34,779) (35,144)
Foreign currency translation adjustment 3,321 (1,816)
Minimum pension liability adjustment (4,566) (4,711)
Stock option loans (8,136) (8,432)
Unrealized losses on investments (500) (583)
-------- --------
Total Stockholders' Equity 609,226 587,206
-------- --------
Total Liabilities and
Stockholders' Equity $959,590 $959,579
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 4
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands, except Three Months Ended Six Months Ended
per share data) ----------------------- --------------------------
Jan. 28, Jan. 29, Jan. 28, Jan. 29,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Net sales $192,847 $169,710 $352,042 $311,584
Interest earned 1,483 1,395 2,853 2,712
-------- -------- -------- --------
Total revenues 194,330 171,105 354,895 314,296
Costs and expenses:
Cost of sales 73,165 64,069 135,153 119,270
Selling, general and
administrative expenses 69,392 63,816 136,615 124,948
Research and development 11,841 11,015 22,001 20,574
Interest expense 2,105 1,607 4,287 3,526
-------- -------- -------- --------
Total costs and expenses 156,503 140,507 298,056 268,318
Earnings before income taxes
and the cumulative effect of
an accounting change 37,827 30,598 56,839 45,978
Provisions for income taxes 11,346 8,567 17,049 12,874
-------- -------- -------- --------
Earnings before the cumulative
effect of an accounting change 26,481 22,031 39,790 33,104
Cumulative effect of a change in
accounting for postemployment
benefits - Note 3 0 0 (780) 0
-------- -------- -------- --------
Net earnings $ 26,481 $ 22,031 $ 39,010 $ 33,104
======== ======== ======== ========
Earnings per share:
Before the cumulative effect of
an accounting change $ 0.23 $ 0.19 $ 0.35 $ 0.29
Cumulative effect of a change in
accounting for postemployment
benefits - Note 3 0 0 (0.01) 0
-------- -------- -------- --------
Net earnings per share $ 0.23 $ 0.19 $ 0.34 $ 0.29
======== ======== ======== ========
Dividends declared per share $ 0.11 $ 0.09 $ 0.20 $ 0.17
Average number of shares
outstanding 115,329 115,840 115,325 115,854
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 5
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
(in thousands) Jan. 28, Jan. 29,
1995 1994
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 73,378 $ 58,648
INVESTING ACTIVITIES:
Capital expenditures (32,105) (39,027)
Disposals of fixed assets 1,868 1,006
Short-term investments (2,600) 13,500
Acquisitions of license and of business of
Australian distributor 0 (11,333)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (32,837) (35,854)
FINANCING ACTIVITIES:
Net short-term borrowings (20,337) 28,440
Payments on long-term debt (1,813) (5,039)
Net proceeds from exercise of stock options 423 1,830
Dividends paid (21,334) (18,558)
Treasury stock 0 (15,381)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (43,061) (8,708)
CASH FLOW FOR PERIOD (2,520) 14,086
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 38,224 42,652
EFFECT OF EXCHANGE RATE CHANGES ON CASH 864 418
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 36,568 $ 57,156
======== ========
Supplemental disclosures:
Interest paid (net of amount capitalized) $ 4,037 $ 3,453
Income taxes paid (net of refunds) 12,888 11,688
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 6
PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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
28, 1995 and July 30, 1994, (ii) the results of its operations for the
three-month and six-month periods ended January 28, 1995 and January 29, 1994,
and (iii) its cash flows for the six-month periods ended January 28, 1995 and
January 29, 1994.
NOTE 2 - INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
Jan. 28, July 30,
(in thousands) 1995 1994
-------- --------
<S> <C> <C>
Raw materials and components $ 59,397 $ 58,999
Work-in-process 18,752 12,737
Finished goods 70,407 66,646
-------- --------
Total inventory $148,556 $138,382
======== ========
</TABLE>
NOTE 3 - CUMULATIVE EFFECT OF A CHANGE IN AN ACCOUNTING PRINCIPLE
In the first quarter of fiscal 1995, the Company adopted
Financial Accounting Standards Board Statement No. 112 (Employers'
Accounting for Postemployment Benefits). The effect of initially
applying this Statement ($1,200,000 pre-tax, $780,000 after taxes,
1 cent per share) is reported as the cumulative effect of a change
in an accounting principle.
<PAGE> 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
I. Results of Operations:
A. Six months ended January 28, 1995 compared to the six months ended January
29, 1994.
Sales for the first six months of fiscal 1995 were up 13% from the comparable
period of the prior year. Had foreign exchange rates been unchanged, sales
would have increased by 8%.
The Company's pre-tax margin increased to 16.1% of sales in the first half of
1995 from 14.8% in the 1994 period. A decrease in selling, general and
administrative expenses as a percentage of sales to 38.8% in the 1995 period,
from 40.1% in the 1994 period, was the principal factor in the improved pre-tax
margin.
The Company's effective tax rate increased to 30.0% in the first half of
fiscal 1995 from 28.0% in the first half of fiscal 1994, such increase resulting
mainly from reduced benefits of the Puerto Rico operations due to changes in the
U.S. tax laws.
Prior to the cumulative effect of a change in an accounting principle, net
earnings for the first half of fiscal 1995 increased 20% to $39.8 million from
$33.1 million in the prior year period.
In the first quarter of fiscal 1995, the Company adopted Financial Accounting
Standards Board Statement No. 112 (Employers' Accounting for Postemployment
Benefits). The effect of initially applying this Statement ($1,200,000 pre-tax,
$780,000 after taxes, 1 cent per share) is reported as the cumulative effect of
a change in an accounting principle.
B. Quarter ended January 28, 1995 compared to the quarter ended January 29,
1994.
Sales for the second quarter of fiscal 1995 increased 13 1/2% over the second
quarter of fiscal 1994. Had foreign exchange rates not changed, sales would
have increased by 8%.
The Company's pre-tax margin increased to 19.6% in the second quarter of
fiscal 1995, from 18.0% in the comparable period of the prior year. The
increase resulted from the same factor mentioned in the six-month discussion
above.
<PAGE> 8
The Company's effective tax rate increased to 30.0% in the second quarter of
fiscal 1995 from 28.0% in the second quarter of fiscal 1994, for the same reason
mentioned in the six-month discussion above.
Net earnings for the second quarter of fiscal 1995 increased 20% to $26.5
million from $22.0 million in the prior year period.
II. Liquidity and Capital Resources:
The Company's working capital increased by $5.0 million during the first six
months of fiscal 1995. Had foreign exchange rates not changed from July 30,
1994, working capital would have increased by $2.4 million.
Capital expenditures totalled $32.1 million, and depreciation expense
totalled $20.4 million, in the six months ended January 28, 1995.
On January 9, 1995, the Company's Board of Directors authorized a program to
repurchase shares of its common stock. The Board authorized the expenditure of
up to $50 million, and this program is ongoing. No shares were repurchased
during the six months ended January 28, 1995.
On November 15, 1994, the Company announced that it had reached an agreement
to acquire Filtron Technology Corporation for a price of $27.65 million
(consisting of $2.8 million in cash and 1.28 million shares of Company common
stock). This transaction, which will be accounted for as a purchase, was
completed at the end of January 1995.
<PAGE> 9
PART II. OTHER INFORMATION
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 28, 1995.
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, 1995 /s/ Jeremy Hayward-Surry
- ------------------ -------------------------------
Date Jeremy Hayward-Surry
President and Treasurer -
Chief Financial Officer
March 10, 1995 /s/ Peter Schwartzman
- ------------------ -------------------------------
Date Peter Schwartzman
Secretary and Chief Corporate
Accountant
<PAGE> 10
EXHIBIT INDEX
Sequentially No.
Exhibit No. Description Page
- ---------- ------------------- -----
Ex-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-29-1995
<PERIOD-END> JAN-28-1995
<CASH> 36,568
<SECURITIES> 53,400
<RECEIVABLES> 182,305
<ALLOWANCES> 4,673
<INVENTORY> 148,556
<CURRENT-ASSETS> 455,555
<PP&E> 650,679
<DEPRECIATION> 240,708
<TOTAL-ASSETS> 959,590
<CURRENT-LIABILITIES> 236,985
<BONDS> 0
<COMMON> 11,735
0
0
<OTHER-SE> 597,491
<TOTAL-LIABILITY-AND-EQUITY> 959,590
<SALES> 352,042
<TOTAL-REVENUES> 354,895
<CGS> 135,153
<TOTAL-COSTS> 298,056
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,287
<INCOME-PRETAX> 56,839
<INCOME-TAX> 17,049
<INCOME-CONTINUING> 39,790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (780)
<NET-INCOME> 39,010
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
