Pall Corporation (PLL)
F3Q10 (Qtr End 04/30/10) Earnings Call
June 9, 2010 8:30 am ET
Eric Krasnoff – Chairman and CEO
Lisa McDermott – CFO and Treasurer
Kevin Maczka – BB&T Capital Markets
Hamzah Mazari – Credit Suisse
Brian Drab – William Blair
Richard Eastman – Robert W. Baird
Tony Butler – Barclays Capital
Dan Leonard – First Analysis
Jon Wood – Jefferies
David Rose – Wedbush
Adam Brooks – Sidoti & Company LLC
Previous Statements by PLL
» Pall Corporation F2Q10 (Qtr End 01/31/10) Earnings Call Transcript
» Pall Corporation F1Q10 (Qtr End 10/31/09) Earnings Call Transcript
» Pall Corporation F4Q09 (Qtr End 07/31/09) Earnings Call Transcript
Welcome to Pall Corporation's conference call and webcast for the third quarter of fiscal 2010. Today's call is being recorded and simultaneously webcast. Instructions for the question-and-answer session will be provided at the end of management’s prepared remarks. Right now, all lines are in listen-only mode.
We would like to remind you that the company's third quarter press release is available at www.pall.com. Management's remarks this morning will include forward-looking statements. Please refer to slide two or request a copy of the specific wording of this qualification of the company's remarks. Management also uses certain non-GAAP measures to assess the company's performance. Reconciliations of these measures to their GAAP counterparts are included in slides at the end of the presentation.
At this time, I would turn the call over to Mr. Eric Krasnoff, Pall Corporation's Chairman and CEO. Please go ahead, sir.
Thank you very much and good morning. It’s a pleasure to share Pall’s third quarter results and fourth quarter outlook with you today, and thank you for joining us. I’m here this morning with Lisa McDermott, our Chief Financial Officer, and Frank Moschella, our Corporate Controller.
As you saw from last evening’s press release, Pall’s third quarter results were a solid step toward meeting our year-end guidance. We will review some of the details and drivers. We will also provide our outlook for the balance of fiscal 2010. And of course, there will be lots of time for your questions at the end.
Third quarter sales were $616 million, and this is an increase of 11% on an as-reported basis over last year and close to 6% in local currency. Life Sciences grew over 6% in local currency. Industrial turned the corner in the third quarter growing 5% and delivering the stronger second half that we expected. The spreading recovery in our industrial markets goes well for a good close for 2010 and for a solid 2011. This is a quarter of achievement in Pall Industrial, culminating in almost $57 million in profit in the quarter, 88% more than the operating profit in the second quarter.
Our Microelectronics business shifted into high gear with sales up 77% and orders equally strong. We also saw the recovery begin to spread in other industrial markets, with revenues up sharply in all three core markets that we are particularly hard hit by the recession. And they are, in addition to Microelectronics, Industrial Manufacturing and Transportation.
On a geographic basis, sales grew in both the Industrial and the Life Sciences segments in all three of our geographies. Overall growth in the Western Hemisphere and Asia was 7%, and sales in Europe increased 4%. Our focus on increasing productivity and reducing costs continues to show through, with gross margin increasing all year despite earlier pressure on the top-line. Increased volume and especially solid growth in our three highest margin markets provided lift in the quarter. We do expect the large fourth quarter for system shipments and for gross margins to come down a bit in response.
At the end of the second quarter, we reported that orders turned positive and were up almost 5%. Now in the third quarter, orders jumped up 27% overall. They were up sharply in all regions, including Europe, which was up 22%, the Western Hemisphere up 30%, and Asia orders up 32%. On the Industrial side of the business, orders increased 47% and reflects an increasing capacity utilization and investment by customers. Orders grew double digits in all Industrial submarkets except Aerospace.
Now let’s look at those markets in little more detail. The 6% local currency sales increase in Life Sciences was driven by BioPharm, which grew more than 12%. Sales were up in Life Sciences in all regions, led by the Western Hemisphere at 8%, Europe up 6%, and Asia up 5%. Many major drivers in BioPharm continue to be the increased production of filtration dependent biotech drugs and vaccines, including for H1N1, and expanding consumption of our single-use products.
The plasma market has slowed compared to last year, and that is reflected in our numbers. Even so, base business in BioPharm grew 13%, continuing the healthy double-digit trend reported all year; 15% in the second quarter, and if you remember, 16% up in the first quarter. Increasing adoption of some of Pall’s newer high value products continues to drive Life Science gross margins, which increased 330 basis points in the quarter. System sales were up 6% and are expected to be about 20% in Q4, which is an unusually high amount.
Within BioPharm, lab sales were strong. Some of this is restocking, but it also reflects the strengthening of the end markets worldwide. Consistent with our earlier guidance, our expectation for BioPharm sales growth is single-high digits for the year. Medical sales were down almost 2% in the quarter as for blood filter sales.
A reduction in blood transfusions, particularly in the US and UK, held growth down. This is the same situation as last quarter. Decreased demand for blood attributable to declines in areas such as elective surgery. We still grew in the Western Hemisphere albeit slightly in spite of the drop-off in blood collection. Sales in Asia continue to ramp up and represent the largest potential for our future growth.