Pall Corp. reports fiscal 2004 sales up 9-1/2%

EAST HILLS, NY, Sept. 2, 2004 (BUSINESS WIRE) -- Pall Corp. enjoyed sales for the fourth quarter and fiscal year ended July 31 that jumped 7% to $504.5 million compared to $471.4 million last year. Earnings on a pro forma basis amounted to $56.8 million compared to $56.0 million, or 45 cents per share in both quarters. The effect of foreign currency shifts added $19.8 million or 4% to revenues and increased pro forma earnings per share by about 1 cent.

For the full year, sales increased 9-1/2% to $1.77 billion compared to $1.61 billion last year. Pro forma earnings for the full year increased 7-1/2% to $159.8 million, or $1.26 per share compared to last year's $148.8 million, or $1.20 per share. Foreign currency translation increased sales by 7% or $109.9 million and pro forma earnings per share by about 7 cents.

Reported earnings per share for the fourth quarter and full year were 44 cents and $1.20, respectively.

In the year, we recorded restructuring and other charges net of about $12.5 million. The charges include an increase in our environmental reserves of $21.3 million and restructuring charges of $4.4 million, partly offset by a gain of $7.6 million related to the sale of our investment in Oiltools International and non-recurring income of $5.6 million related to a decrease of pension liabilities in Germany. The environmental reserve increase relates primarily to a change in the estimated duration and costs of the remediation effort at our Ann Arbor, Michigan facility.

On Sept. 1, the Michigan Department of Environmental Quality (MDEQ) provided Pall and the state court with its response to the company's proposed remedial alternative regarding the Unit E aquifer, giving the company one year to demonstrate that its proposed clean-up method is approvable as a final remedy. The MDEQ has also identified an alternative remedy that would, in the MDEQ's judgment, need to be implemented if the company could not resolve the outstanding issues regarding the company's remedy within one year. The MDEQ's remedial alternative would be subject to possible legal challenge as being unauthorized by law. These matters are still under investigation. The costs to implement an alternative clean-up methodology could be significant and are not reflected in the company's balance sheet at July 31, 2004.

Eric Krasnoff, Chairman and CEO, said, "The fourth quarter showed a continued resurgence in our Industrial business. The results by segment, with sales reported in local currency, are:
* Microelectronics fourth quarter sales were up 27% over last year, operating profit margins reached 20.2% and operating profit dollars increased 40%. We are capitalizing on the cyclical upturn in the semiconductor cycle and from the impact of new product introductions.
* General Industrial sales increased 4-1/2%. As in the third quarter, we again grew in all five of its Industrial business divisions. The operating profit margin was 14.2% and operating profit dollars increased 21% to $27.7 million. Within General Industrial, Water Processing sales grew 3% and orders increased 32-1/2%. Power Generation's sales increased 14% and orders increased 27% over last year. Fuels and Chemicals sales were up slightly with orders up 38% over last year.
* Food and Beverage grew 7%, as our Total Fluid Management strategy begins to take hold. Machinery and Equipment sales increased 4-1/2% in the quarter. This segment covers a number of cyclical industrial markets and our growth is another confirmation of a generally strengthening industrial landscape.

As we've mentioned throughout the year, non-repeating military sales associated with the Iraqi conflict led to a 6-1/2% reduction in Aerospace sales compared to last year. Commercial Aerospace posted modest growth. Aerospace operating margins were still an impressive 26.2% in the quarter.

This adds up to an overall Industrial business sales increase of 6%. Industrial's operating profit margin was 17.3% with operating profit dollars increasing about 13-1/2% to $52.3 million.

Turning now to Life Sciences, growth in BioSciences and the core Blood Business was offset by lower sales in Pharmaceuticals and Critical Care. Sales came in at $202.5 million, a decrease of 1 1/2 %. Life Sciences operating profit margins were also down slightly at 25.5%.

Looking at the reporting segments, sales in Medical were down 1% as growth in blood bank and hospital sales were offset by a decline in the OEM portion of Critical Care. The Western Hemisphere blood business grew 7% in the quarter. Operating profit margins were 24.7%. Pall's new eBDS Bacterial Detection System and the Pall-Aquasafe^™ Water Filters are selling well and our revolutionary Leukotrap(R) Affinity Prion Reduction Filter is on schedule for commercial launch next year.

Sales in BioPharmaceuticals were down 2% as the decline in the plasma fractionation industry offset continuing growth of biotechnology products. BioPharmaceuticals operating profit margin remained strong at 26.3%.

We are successfully executing our CoRe cost reduction programs. I am pleased to report that S, G & A as a percentage of sales reduced by 50 basis points compared to last year and by 20 basis points sequentially. The CoRe efforts are on track to deliver the savings expected.

As for the company's balance sheet and cash flow, Mr. Krasnoff said, "Our strong cash flow enabled us to repurchase $75 million of our stock, invest $66 million in capital expenditures, pay dividends of $45 million and still reduce net debt by $63 million in the year.

Looking ahead to fiscal year 2005, Mr. Krasnoff continued, "We anticipate this new fiscal year will benefit substantially from the investments made in fiscal 2004 in the CoRe cost initiatives, the benefits of which should ramp up this fiscal year. The next phase of our plan has already started and involves the rationalization of infrastructure globally. As part of this initiative, we are combining our operations into three integrated businesses: Life Sciences, comprising Medical and BioPharmaceuticals; Aeropower, comprising Aerospace and General Industrial's Machinery & Equipment business; while our remaining Industrial businesses will operate under the banner Pall Process Technologies, comprising Food & Beverage, Fuels & Chemicals, Power Generation, Municipal Water and Microelectronics. We expect these changes will propel us to reach the high end of our CoRe goals. At the same time, we will achieve greater efficiencies and profit growth with this leaner, customer-centric structure. Overall, we anticipate pro forma earnings per share for fiscal 2005 to be in the range of $1.38 to $1.52."

About Pall Corp.
Pall Corp. is the global leader in the rapidly growing field of filtration, separations and purification. Pall's business is organized around two broad markets: Life Sciences and Industrial. The company provides leading-edge products to meet the demanding needs of customers in biotechnology, pharmaceuticals, transfusion medicine, semiconductors, municipal drinking water and aerospace. Total revenues are $1.8 billion. The company is headquartered in East Hills, NY. Pall's website is at www.pall.com.

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