Pall Corporation Reports Year-End Results

PORT WASHINGTON, N.Y.-(Business Wire)-September 14, 2009 - Pall Corporation (NYSE:PLL) today reported financial results for the fourth quarter and fiscal year ended July 31, 2009. Sales and net earnings for the year were $2.3 billion and $195.6 million, respectively. Diluted earnings per share (EPS) were $1.64, compared to $1.76 a year earlier. Pro forma EPS were $1.77 versus last year's $1.97. The estimated impact of foreign currency translation reduced diluted EPS by $0.16 and pro forma EPS by $0.17.

Fourth quarter sales were $652 million and net earnings were $69.5 million. Diluted EPS were $0.58. Pro forma EPS were $0.57. The estimated impact of foreign currency translation reduced both measures of EPS by $0.05.

Eric Krasnoff, Chairman and CEO, stated, “The economy has certainly presented challenges. Revenues in the fourth quarter were still off from a robust 2008. Life Sciences sales grew 5.2% in the quarter and 3% for the year. Pall Industrial sales declined 8.8% in the quarter and 7.3% for the year. This is reflective of a generally depressed manufacturing landscape particularly in the microelectronics sector.

There are positive signs dotting the industrial horizon. This was the first quarter in a year that Microelectronics sales grew, turning in almost 40% sequential growth. This market led the overall sequential increase in Pall sales. Our Municipal Water, Power Generation and Military markets all showed double-digit growth in the quarter and for the year.

Pall's gross margin improved in the year despite the drop in sales volume. Continuing success of our pricing initiative and sustained cost reduction efforts were key to that result. SG&A reduced about 6 1/2% to $700 million. Operating cash flow improved, an accomplishment given the economy.”

Life Sciences - Fourth Quarter Highlights

(Dollar Amounts in Thousands)

Sales:	JULY 31, 2009		% CHANGE		% CHANGE IN LC
Medical (a)	$	102,497	(4.7	)	1.6
BioPharmaceuticals (a)		156,293	0.4		7.8
Total Life Sciences segment	$	258,790	(1.7	)	5.2

			% OF SALES

Gross profit	$	135,057	52.2
Operating profit	$	57,141	22.1

(a) Amounts reflect inclusion of the Laboratory market within the BioPharmaceuticals market effective August 1, 2008.

Medical sales increased 1.6% in the quarter driven, in part, by strong growth of Pall-Aquasafe^TM water filters to hospitals. Sales to independent blood centers grew solidly in the United States. Medical product sales continue to be healthy in Asia.

BioPharmaceuticals sales increased 7.8% in the quarter with sales growing in all geographies. The vaccine and plasma derivatives markets were particularly strong. The Company continues to benefit from expanding adoption of single-use systems for biotechnology and vaccine production.

Life Sciences gross margin increased 70 basis points to 52.2%. SG&A as a percentage of sales decreased 120 basis points to 25.7%. This resulted in an improvement in operating margin to 22.1% from 20.5% a year earlier.

Industrial - Fourth Quarter Highlights

(Dollar Amounts in Thousands)

Sales:	JULY 31, 2009		% CHANGE		% CHANGE IN LC
Energy, Water & Process Technologies	$	261,349	(9.4	)	(2.5	)
Aerospace & Transportation		77,081	(14.5	)	(8.3	)
Microelectronics		54,737	(32.9	)	(31.7	)
Total Industrial segment	$	393,167	(14.5	)	(8.8	)

			% OF SALES
Gross profit	$	165,663	42.1
Operating profit	$	54,496	13.9

Energy, Water & Process Technologies (“EWPT”) sales decreased 2.5% in the quarter. Municipal Water posted a 12.7% sales increase. Industrial Manufacturing markets continued to be weak globally. Sales in the energy-related markets were flat overall with strong sales in Power Generation offset by weakness in Fuels & Chemicals.

Aerospace & Transportation decreased 8.3% for the quarter. Military Aerospace sales increased 14.9% in the quarter on strong performance led by Europe. Commercial Aerospace declined 9.2% reflecting weakness in airline aftermarket sales and reduced airframe production, particularly in the small jet market. Sales in the Transportation market were down on continued weakness in global mobile equipment production and operations.

Fourth quarter Microelectronics sales decreased 31.7% over the prior year. Sales on a sequential basis grew. Activity in the microelectronics markets rebounded and their chemical suppliers began replenishing inventory. This is suggestive of a bottoming out in the semiconductor and consumer electronics markets.

Industrial gross margin was negatively impacted by product mix and reduced volume. Pricing and manufacturing improvements mitigated the decline. SG&A improved 4.6% in local currency as a result of cost reduction and efficiency programs. This resulted in a decrease in operating profit margin to 13.9%.

Conclusion/Outlook

Mr. Krasnoff concluded, "Pall's market and geographic diversity continue to moderate the impact of a challenging macroeconomic environment. Our financial management has positioned Pall well to grow earnings and increase cash flow. We are steadily reducing costs while continuing to invest for the future. Looking at fiscal 2010, our current expectation is for global economic activity to remain weak for at least the first half of the year and a slow recovery in the second half. We continue to make progress on many fronts and carry that momentum into this new year.”

Conference Call and Webcast

On Tuesday, September 15, 2009, at 8:30 am ET, Pall Corporation will host a conference call to review these results. The call will be webcast and individuals can access it at www.pall.com/investor. Listening to the webcast requires audio speakers and Microsoft Windows Media Player software. The webcast will be archived for 30 days.

About Pall Corporation

Pall Corporation (NYSE:PLL) is a filtration, separation and purification leader providing Total Fluid Management^SM solutions to meet the critical needs of customers in biopharmaceutical, hospital and transfusion medicine, energy and alternative energy, electronics, municipal and industrial water, aerospace, transportation and broad industrial markets. Together with our customers, we foster health, safety and environmentally responsible technologies. The Company’s engineered solutions enable process and product innovation and minimize emissions and waste. Pall Corporation, with total revenues of $2.3 billion for fiscal 2009, is an S&P 500 company with more than 10,000 employees servicing customers worldwide. To see how Pall is helping enable a greener and more sustainable future, visit www.pall.com.

Forward-Looking Statements

The matters discussed in this release contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Results for 2009 are preliminary until the Company's Form 10-K is filed with the Securities and Exchange Commission on or before September 29, 2009.

All statements regarding future performance, earnings projections, earnings guidance, management’s expectations about its future cash needs and effective tax rate, and other future events or developments are forward-looking statements. Forward-looking statements are those that use terms such as “anticipate”, “should”, “believe”, “estimate”, “expect”, “intend”, “plan”, “predict”, “potential” or similar expressions about matters that are not historical facts. Forward-looking statements contained in this and other written and oral reports are based on current Company expectations and are subject to risks and uncertainties, which could cause actual results to differ materially. Such risks and uncertainties include, but are not limited to, those discussed in Part I, Item 1A, “Risk Factors” in the 2008 Form 10-K, and other reports the Company files with the Securities and Exchange Commission, including the impact of the current global recessionary environment and its likely depth and duration, the current credit market crisis, volatility in currency exchange rates and energy costs and other macro economic challenges currently affecting the Company, our customers (including their cash flow and payment practices) and vendors, and the effectiveness of our initiatives to mitigate the impact of the current environment; and the Company’s ability to successfully complete its business improvement initiatives that include integrating and upgrading its information systems and the effect of a serious disruption in the Company's information systems on its business and results of operations.

The Company makes these statements as of the date of this disclosure and undertakes no obligation to update them.

Management uses certain non-GAAP measurements to assess the Company's current and future financial performance. The non-GAAP measurements do not replace the presentation of the Company’s GAAP financial results. These measurements provide supplemental information to assist management in analyzing the Company's financial position and results of operations. The Company has chosen to provide this information to facilitate meaningful comparisons of past, present and future operating results and as a means to emphasize the results of ongoing operations.


PALL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in Thousands)

	JULY 31, 2009		JULY 31, 2008

Assets:

Cash and cash equivalents	$	414,011	$	454,065
Accounts receivable		561,063		617,079
Inventories		413,278		492,977
Other current assets		182,098		95,518
Total current assets		1,570,450		1,659,639

Property, plant and equipment, net		681,658		662,985
Other assets		588,704		634,122
Total assets	$	2,840,812	$	2,956,746

Liabilities and Stockholders' Equity:

Short-term debt	$	139,803	$	29,314
Accounts payable, income taxes and other current liabilities		577,587		544,649
Total current liabilities		717,390		573,963

Long-term debt		577,666		747,051
Deferred taxes and other non-current liabilities		431,158		496,497
Total liabilities		1,726,214		1,817,511

Stockholders' equity		1,114,598		1,139,235
Total liabilities and stockholders' equity	$	2,840,812	$	2,956,746



PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Amounts in thousands, except per share data)


	FOURTH QUARTER ENDED								YEAR ENDED
	JULY 31, 2009				JULY 31, 2008				JULY 31, 2009				JULY 31, 2008

Net sales	$	651,957			$	723,211			$	2,329,158			$	2,571,645
Cost of sales		351,237				384,934				1,228,468				1,360,810
Gross profit		300,720				338,277				1,100,690				1,210,835
% of sales		46.1	%			46.8	%			47.3	%			47.1	%
Selling, general and administrative expenses		183,495				204,202				699,832				749,519
% of sales		28.1	%			28.2	%			30.0	%			29.1	%
Research and development		18,643				18,123				71,213				71,647
Earnings before restructuring and other charges, net ("ROTC"), interest expense, net, and income taxes		98,582				115,952				329,645				389,669
% of sales		15.1	%			16.0	%			14.2	%			15.2	%
ROTC		5,432		(a)		3,415		(b)		30,723		(a)		31,538		(b)
Interest expense, net		5,581				6,848				28,136				32,576
Earnings before income taxes		87,569				105,689				270,786				325,555
Provision for income taxes		18,070		(a)		35,774		(b)		75,167		(a)		108,276		(b)
Net earnings	$	69,499			$	69,915			$	195,619			$	217,279

Earnings per share:
Basic	$	0.59			$	0.58			$	1.65			$	1.77
Diluted	$	0.58			$	0.57			$	1.64			$	1.76

Average shares outstanding:
Basic		118,308				120,550				118,631				122,445
Diluted		119,280				121,908				119,571				123,686

Net earnings as reported	$	69,499			$	69,915			$	195,619			$	217,279
ROTC after pro forma tax effect		3,979		(a)		2,325		(b)		22,813		(a)		21,414		(b)
Tax adjustments		(4,925	)	(a)		2,436		(b)		(6,351	)	(a)		4,871		(b)
Pro forma earnings	$	68,553			$	74,676			$	212,081			$	243,564

Diluted earnings per share as reported	$	0.58			$	0.57			$	1.64			$	1.76
ROTC after pro forma tax effect		0.03		(a)		0.02		(b)		0.19		(a)		0.17		(b)
Tax adjustments		(0.04	)	(a)		0.02		(b)		(0.06	)	(a)		0.04		(b)
Pro forma diluted earnings per share	$	0.57			$	0.61			$	1.77			$	1.97

(a) ROTC in the quarter and the year includes severance and other costs related to the Company's cost reduction programs and an increase to previously established environmental reserves. ROTC in the year also includes professional fees related to the previously reported matters that were under inquiry by the audit committee of the Company’s board of directors, the impairment of investments and capitalized software development costs and a charge to write-off in process research and development acquired in the acquisition of GeneSystems, SA. Provision for income taxes in the quarter and the year includes benefits related to foreign operations including the repatriation of earnings, a favorable tax settlement and a restructuring. Provision for income taxes in the year also includes a benefit for newly enacted tax legislation. Pro forma earnings excludes these items as they are deemed to be non-recurring in nature. (b) ROTC in the quarter and the year is primarily comprised of severance and other costs related to the Company's cost reduction programs and legal and other professional fees related to the previously reported matters that were under inquiry by the audit committee of the Company’s board of directors. Provision for income taxes in the quarter and year includes a charge related to the repatriation of foreign earnings. Provision for income taxes in the year also includes a charge resulting from newly enacted tax legislation in a foreign tax jurisdiction. Pro forma earnings excludes these items as they are deemed to be non-recurring in nature.



PALL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)


	YEAR ENDED
	JULY 31, 2009			JULY 31, 2008

Net cash provided by operating activities	$	327,495		$	190,806

Investing activities:

Acquisitions, net of cash acquired		(37,249	)		-
Capital expenditures		(133,049	)		(123,854	)
Other		(11,732	)		2,167
Net cash used by investing activities		(182,030	)		(121,687	)

Financing activities:

Dividends paid		(64,914	)		(59,945	)
Notes payable and long-term borrowings		(23,471	)		112,245
Purchase of treasury stock		(96,439	)		(148,850	)
Other		16,214			20,209
Net cash used by financing activities		(168,610	)		(76,341	)

Cash flow for period		(23,145	)		(7,222	)
Cash and cash equivalents at beginning of year		454,065			443,036
Effect of exchange rate changes on cash		(16,909	)		18,251
Cash and cash equivalents at end of period	$	414,011		$	454,065


Free cash flow:
Net cash provided by operating activities	$	327,495		$	190,806
Less capital expenditures		133,049			123,854
Free cash flow	$	194,446		$	66,952



PALL CORPORATION
SUMMARY OPERATING PROFIT BY SEGMENT
(Unaudited)
(Dollar Amounts in Thousands)


	FOURTH QUARTER ENDED						YEAR ENDED
	JULY 31, 2009			JULY 31, 2008			JULY 31, 2009			JULY 31, 2008

Life Sciences
Sales	$	258,790		$	263,141		$	940,461		$	975,231
Cost of sales		123,733			127,526			450,925			473,298
Gross profit		135,057			135,615			489,536			501,933
% of sales		52.2	%		51.5	%		52.1	%		51.5	%

Selling, general and administrative expenses		66,635			70,741			248,559			263,233
% of sales		25.7	%		26.9	%		26.4	%		27.0	%
Research and development		11,281			10,964			40,907			40,926
Operating profit	$	57,141		$	53,910		$	200,070		$	197,774
% of sales		22.1	%		20.5	%		21.3	%		20.3	%

Industrial
Sales	$	393,167		$	460,070		$	1,388,697		$	1,596,414
Cost of sales		227,504			257,408			777,543			887,512
Gross profit		165,663			202,662			611,154			708,902
% of sales		42.1	%		44.1	%		44.0	%		44.4	%

Selling, general and administrative expenses		103,805			116,349			394,795			432,326
% of sales		26.4	%		25.3	%		28.4	%		27.1	%
Research and development		7,362			7,159			30,306			30,721
Operating profit	$	54,496		$	79,154		$	186,053		$	245,855
% of sales		13.9	%		17.2	%		13.4	%		15.4	%

CONSOLIDATED:
Operating profit	$	111,637		$	133,064		$	386,123		$	443,629
General corporate expenses		13,055			17,112			56,478			53,960
Earnings before ROTC, interest and income taxes		98,582			115,952			329,645			389,669
ROTC		5,432			3,415			30,723			31,538
Interest expense, net		5,581			6,848			28,136			32,576
Earnings before income taxes	$	87,569		$	105,689		$	270,786		$	325,555

PALL CORPORATION
SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND GEOGRAPHY
(Unaudited)
(Dollar Amounts in Thousands)

FOURTH QUARTER ENDED	JULY 31, 2009		JULY 31, 2008		% CHANGE		EXCHANGE RATE IMPACT			% CHANGE IN LOCAL CURRENCY

Life Sciences					\|——————— Increase/(Decrease) ——————-\|
By Market:
Medical (a)	$	102,497	$	107,497	(4.7	)	$	(6,724	)	1.6
BioPharmaceuticals (a)		156,293		155,644	0.4			(11,425	)	7.8
Total Life Sciences	$	258,790	$	263,141	(1.7	)	$	(18,149	)	5.2

By Geography:
Western Hemisphere	$	102,622	$	101,305	1.3		$	(499	)	1.8
Europe		116,717		125,889	(7.3	)		(16,551	)	5.9
Asia		39,451		35,947	9.7			(1,099	)	12.8
Total Life Sciences	$	258,790	$	263,141	(1.7	)	$	(18,149	)	5.2


Industrial
By Market:
Energy, Water & Process Technologies	$	261,349	$	288,344	(9.4	)	$	(19,911	)	(2.5	)
Aerospace & Transportation		77,081		90,156	(14.5	)		(5,585	)	(8.3	)
Microelectronics		54,737		81,570	(32.9	)		(974	)	(31.7	)
Total Industrial	$	393,167	$	460,070	(14.5	)	$	(26,470	)	(8.8	)

By Geography:
Western Hemisphere	$	108,206	$	126,538	(14.5	)	$	(1,376	)	(13.4	)
Europe		154,762		185,077	(16.4	)		(20,912	)	(5.1	)
Asia		130,199		148,455	(12.3	)		(4,182	)	(9.5	)
Total Industrial	$	393,167	$	460,070	(14.5	)	$	(26,470	)	(8.8	)

(a) Amounts reflect inclusion of the Laboratory market within the BioPharmaceuticals market effective August 1, 2008.



PALL CORPORATION
SUPPLEMENTAL SEGMENT SALES INFORMATION BY MARKET AND GEOGRAPHY
(Unaudited)
(Dollar Amounts in Thousands)

YEAR ENDED	JULY 31, 2009		JULY 31, 2008		% CHANGE		EXCHANGE RATE IMPACT			% CHANGE IN LOCAL CURRENCY

Life Sciences					\|——————— Increase/(Decrease) ——————-\|
By Market:
Medical (a)	$	389,841	$	410,416	(5.0	)	$	(23,190	)	0.6
BioPharmaceuticals (a)		550,620		564,815	(2.5	)		(40,858	)	4.7
Total Life Sciences	$	940,461	$	975,231	(3.6	)	$	(64,048	)	3.0

By Geography:
Western Hemisphere	$	360,975	$	379,591	(4.9	)	$	(2,169	)	(4.3	)
Europe		441,514		469,450	(6.0	)		(58,651	)	6.5
Asia		137,972		126,190	9.3			(3,228	)	11.9
Total Life Sciences	$	940,461	$	975,231	(3.6	)	$	(64,048	)	3.0


Industrial
By Market:
Energy, Water & Process Technologies	$	887,662	$	981,291	(9.5	)	$	(66,111	)	(2.8	)
Aerospace & Transportation		290,006		306,571	(5.4	)		(20,493	)	1.3
Microelectronics		211,029		308,552	(31.6	)		(4,444	)	(30.2	)
Total Industrial	$	1,388,697	$	1,596,414	(13.0	)	$	(91,048	)	(7.3	)

By Geography:
Western Hemisphere	$	408,727	$	431,068	(5.2	)	$	(6,626	)	(3.6	)
Europe		518,793		637,533	(18.6	)		(69,445	)	(7.7	)
Asia		461,177		527,813	(12.6	)		(14,977	)	(9.8	)
Total Industrial	$	1,388,697	$	1,596,414	(13.0	)	$	(91,048	)	(7.3	)