<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 April 29, 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 May 31, 1995, 114,392,437 shares of common stock of the Registrant were
outstanding.
<PAGE> 2
PALL CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<S> <C>
COVER SHEET 1
INDEX TO FORM 10-Q 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets - April 29,
1995 and July 30, 1994 3
Condensed consolidated statements of earnings -
three months and nine months ended April 29,
1995 and April 30, 1994 4
Condensed consolidated statements of cash flows -
nine months ended April 29, 1995 and April 30,
1994 5
Notes to condensed consolidated financial statements 6
Item 2. Management's discussion and analysis of financial
condition and results of operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 11
SIGNATURES 11
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands) April 29, July 30,
ASSETS 1995 1994
Current Assets: ----------- ---------
<S> <C> <C>
Cash and cash equivalents $ 50,101 $ 38,224
Short-term investments 57,970 50,800
Accounts receivable, net of allowances
for doubtful accounts of $4,916
and $4,776, respectively 198,835 207,159
Inventories - Note 2 167,067 138,382
Deferred income taxes 17,825 17,178
Prepaid expenses 17,272 15,346
Other current assets 4,654 3,336
----------- ---------
Total Current Assets 513,724 470,425
Property, plant and equipment, net of
accumulated depreciation of $257,987
and $223,012, respectively 423,741 397,617
Other assets 121,416 91,537
----------- ---------
Total Assets $ 1,058,881 $ 959,579
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 125,612 $ 112,034
Accounts payable 46,278 40,401
Accrued liabilities:
Salaries and commissions 29,618 24,031
Payroll taxes 5,595 5,185
Income taxes 36,542 33,019
Interest 1,569 1,232
Pension and profit-sharing plans 7,932 11,014
Other 23,574 16,437
----------- ---------
104,830 90,918
Current portion of long-term debt 6,724 2,819
Dividends payable 12,118 10,667
----------- ---------
Total Current Liabilities 295,562 256,839
Long-term debt, less current portion 53,705 54,097
Deferred income taxes 34,920 31,450
Other non-current liabilities 32,088 29,987
----------- ---------
Total Liabilities 416,275 372,373
----------- ---------
Stockholders' Equity:
Common stock, $.10 par value 11,735 11,735
Capital in excess of par value 56,448 53,769
Retained earnings 609,754 572,388
Treasury stock, at cost (38,629) (35,144)
Foreign currency translation adjustment 15,725 (1,816)
Minimum pension liability adjustment (4,422) (4,711)
Stock option loans (7,893) (8,432)
Unrealized losses on investments (112) (583)
----------- ---------
Total Stockholders' Equity 642,606 587,206
----------- ---------
Total Liabilities and
Stockholders' Equity $ 1,058,881 $ 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 Nine Months Ended
per share data) -------------------- --------------------
Apr. 29, Apr. 30, Apr. 29, Apr. 30,
1995 1994 1995 1994
Revenues: -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $217,309 $177,814 $569,351 $489,398
Interest earned 1,711 1,440 4,564 4,152
-------- -------- -------- --------
Total revenues 219,020 179,254 573,915 493,550
Costs and expenses:
Cost of sales 77,125 63,229 212,278 182,499
Selling, general and
administrative expenses 79,804 66,556 216,419 191,504
Research and development 12,106 10,442 34,107 31,016
Interest expense 2,410 1,552 6,697 5,078
-------- -------- -------- --------
Total costs and expenses 171,445 141,779 469,501 410,097
Earnings before income taxes
and the cumulative effect of
an accounting change 47,575 37,475 104,414 83,453
Provisions for income taxes 14,067 9,658 31,116 22,532
-------- -------- -------- --------
Earnings before the cumulative
effect of an accounting change 33,508 27,817 73,298 60,921
Cumulative effect of a change in
accounting for postemployment
benefits - Note 3 0 0 (780) 0
-------- -------- -------- --------
Net earnings $ 33,508 $ 27,817 $ 72,518 $ 60,921
======== ======== ======== ========
Earnings per share:
Before the cumulative effect of
an accounting change $0.29 $0.24 $0.64 $0.53
Cumulative effect of a change in
accounting for postemployment
benefits - Note 3 0 0 (0.01) 0
-------- -------- -------- --------
Net earnings per share $0.29 $0.24 $0.63 $0.53
======== ======== ======== ========
Dividends declared per share $0.11 $0.09 $0.30 $0.27
Average number of shares
outstanding 115,560 115,632 115,418 115,786
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 5
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------
(in thousands) Apr. 29, Apr. 30,
1995 1994
--------- ---------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 116,306 $ 106,925
INVESTING ACTIVITIES:
Capital expenditures (47,039) (53,760)
Disposals of fixed assets 2,008 974
Short-term investments (7,170) 25,525
Acquisitions of license, business of Australian
distributor, and Filtron Technology Corporation,
net of cash acquired (230) (11,333)
Benefits protection trust (2,450) (2,567)
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (54,881) (41,161)
FINANCING ACTIVITIES:
Net short-term borrowings 8,266 189
Payments on long-term debt (2,126) (5,613)
Net proceeds from exercise of stock options 1,353 5,983
Dividends paid (33,445) (29,256)
Treasury stock (26,730) (25,266)
--------- ---------
NET CASH USED BY FINANCING ACTIVITIES (52,682) (53,963)
CASH FLOW FOR PERIOD 8,743 11,801
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 38,224 42,652
EFFECT OF EXCHANGE RATE CHANGES ON CASH 3,134 1,316
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 50,101 $ 55,769
========= =========
Supplemental disclosures:
Interest paid (net of amount capitalized) $ 6,340 $ 4,796
Income taxes paid (net of refunds) 23,973 17,126
Treasury stock issued upon acquisition of Filtron
Technology Corporation 24,854 -
</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 April
29, 1995 and July 30, 1994, (ii) the results of its operations for the
three-month and nine-month periods ended April 29, 1995 and April 30, 1994, and
(iii) its cash flows for the nine-month periods ended April 29, 1995 and April
30, 1994.
NOTE 2 - INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
Apr. 29, July 30,
(in thousands) 1995 1994
-------- --------
<S> <C> <C>
Raw materials and components $ 65,217 $ 58,999
Work-in-process 21,255 12,737
Finished goods 80,595 66,646
-------- --------
Total inventory $167,067 $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.
NOTE 4 - ACQUISITION OF FILTRON TECHNOLOGY CORPORATION
On January 26, 1995, the Company acquired for approximately $28 million all
of the outstanding shares of Filtron Technology Corporation, a manufacturer of
ultrafiltration membranes and cassettes. This acquisition was financed through
issuance of 1.28 million shares of the Company's treasury shares valued at
approximately $25 million, and the remainder through working capital sources.
The acquisition has been accounted for under the purchase method of
accounting and accordingly the operations of Filtron are included in the
Company's financial statements from the date of acquisition. The results of
operations for the Company would not be materially affected had Filtron been
included in fiscal 1995 from the beginning of the year, or had it been included
in fiscal 1994.
The purchase price exceeded the fair value of the tangible net assets
acquired by approximately $22 million which is being amortized on a
straight-line basis over 20 years.
<PAGE> 7
NOTE 5 - CONTINGENCIES
On April 19, 1995, a jury verdict for $7 million in damages was rendered
against the Company in a product disparagement action. In the opinion of
management and outside counsel, post-trial motions filed by the Company
requesting the court to either (a) dismiss the jury verdict as a matter of law,
or (b) grant a new trial, will be successful, resulting in no loss to the
Company, and therefore, no accrual for the judgment has been made in the
accompanying consolidated financial statements.
NOTE 6 - SUBSEQUENT EVENT
On May 30, 1995, the Company announced that it had reached agreement in
principle to acquire the assets of the Medical Plastics business of Bayer
Corporation. This business is a leading producer of proprietary plastic
disposable products and preservative solutions used in blood collection and
storage. The purchase price will be about $41 million, subject to adjustment
based on asset valuations at the time of closing.
<PAGE> 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
I. Results of Operations:
A. Nine months ended April 29, 1995 compared to the nine months ended
April 30, 1994.
Sales for the first nine months of fiscal 1995 increased 16 1/2% compared to
the first nine months of the prior year. Had foreign exchange rates been
unchanged, sales would have increased by 10 1/2%.
The Company has announced that it expects sales for fiscal year 1995 to be in
the range of $805 to $810 million. This would be a sales increase of about 15%
for the year, including about 5% due to changes in foreign currency exchange
rates.
The Company's pre-tax margin increased to 18.3% of sales in the first nine
months of 1995 from 17.1% in the 1994 period. A decrease in selling, general
and administrative expenses as a percentage of sales to 38.0% in the 1995
period, from 39.1% in the 1994 period, was the principal factor in the improved
profit margin. The dollar increase in selling, general and administrative
expenses resulted from higher exchange rates, the acquisition of Filtron
Technology Corporation at the beginning of the third quarter, and an increase in
selling costs to better support the growing volume of sales.
The Company's effective tax rate increased to 29.8% in the first nine months
of fiscal 1995 from 27.0% in the first nine months 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 nine months of fiscal 1995 increased 20 1/2% to $73.3
million from $60.9 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 pretax,
$780,000 after taxes, 1 cent per share) is reported as the cumulative effect of
a change in an accounting principle.
B. Quarter ended April 29, 1995 compared to the quarter ended
April 30, 1994.
Sales for the third quarter of fiscal 1995 increased 22% over the third
quarter of fiscal 1994. Had foreign currency exchange rates been unchanged,
sales would have increased by 14%. Of this increase, 12% was due to volume and
2% to price increases. By segment, Fluid Processing sales increased 31 1/2%,
Aeropower 23 1/2% and Health Care by 17%. In the quarter, backlogs increased in
all three market segments.
<PAGE> 9
The Company's pre-tax margin increased to 21.9% in the third quarter of
fiscal 1995, from 21.1% in the comparable period of the prior year. The
increase resulted from the same factor mentioned in the nine-month discussion.
The Company's effective tax rate increased to 29.6% in the third quarter of
fiscal 1995 from 25.8% in the third quarter of fiscal 1994, for the same reason
mentioned in the nine-month discussion.
Net earnings for the third quarter of fiscal 1995 increased 20 1/2% to $33.5
million from $27.8 million in the prior year period.
II. Liquidity and Capital Resources:
The Company's working capital increased by $4.6 million in the nine months
ended April 29, 1995, principally as a result of changes in foreign currency
exchange rates.
The changes in the components of working capital were:
<TABLE>
<CAPTION>
(in millions) Increase Changes
(Decrease) Due to
in Working Exchange Other
Component Capital Rates Factors
--------- ---------- -------- -------
<S> <C> <C> <C>
Accounts receivable ($8.3) $12.4 ($20.7)
Inventories 28.7 8.4 20.3
Other current assets 3.9 0.6 3.3
Short-term borrowings,
net of cash and
investments 1.5 (2.5) 4.0
Payables and accruals (17.7) (5.8) (11.9)
Income taxes payable (3.5) (0.4) (3.1)
----- ----- ------
Change in working
capital $4.6 $12.7 ($8.1)
</TABLE>
Capital expenditures totalled $47.0 million, and depreciation expense
totalled $31.1 million, in the nine months ended April 29, 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 was completed in May 1995. During the nine
months ended April 29, 1995, $26.7 million was expended to reacquire 1.3 million
shares.
On November 15, 1994, the Company announced that it had reached an agreement
to acquire Filtron Technology Corporation for a price of approximately $28
million (consisting of $2.8 million from working capital sources and 1.28
million shares of the Company's treasury shares, valued at approximately $25
million). This transaction, which is being accounted for as a purchase, was
completed at the end of January 1995.
<PAGE> 10
On May 30, 1995, the Company announced that it had reached agreement in
principle to acquire the assets of the Medical Plastics business of Bayer
Corporation. This business is a leading producer of proprietary plastic
disposable products and preservative solutions used in blood collection and
storage. The purchase price will be about $41 million, subject to adjustment
based on asset valuations at the time of closing.
<PAGE> 11
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
April 29, 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
June 8, 1995 /s/ Jeremy Hayward-Surry
- -------------- -----------------------------
Date Jeremy Hayward-Surry
President and Treasurer -
Chief Financial Officer
June 8, 1995 /s/ Peter Schwartzman
- -------------- -----------------------------
Date Peter Schwartzman
Secretary and Chief Corporate
Accountant
<PAGE> 12
EXHIBIT INDEX
Exhibit 27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-29-1995
<PERIOD-END> APR-29-1995
<CASH> 50,101
<SECURITIES> 57,970
<RECEIVABLES> 203,751
<ALLOWANCES> 4,916
<INVENTORY> 167,067
<CURRENT-ASSETS> 513,724
<PP&E> 681,728
<DEPRECIATION> 257,987
<TOTAL-ASSETS> 1,058,881
<CURRENT-LIABILITIES> 295,562
<BONDS> 0
<COMMON> 11,735
0
0
<OTHER-SE> 630,871
<TOTAL-LIABILITY-AND-EQUITY> 1,058,881
<SALES> 569,351
<TOTAL-REVENUES> 573,915
<CGS> 212,278
<TOTAL-COSTS> 469,501
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,697
<INCOME-PRETAX> 104,414
<INCOME-TAX> 31,116
<INCOME-CONTINUING> 73,298
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (780)
<NET-INCOME> 72,518
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.63
</TABLE>
