Pall Corporation (PLL)
F1Q10 2009 Earnings Call
December 10, 2009; 8:30 am ET
Eric Krasnoff - Chief Executive Officer
Lisa McDermott - Chief Financial Officer
Frank Moschella - Corporate Controller
Brian Drab - William Blair
Richard Eastman - Robert W. Baird
Adam Brooks - Sidoti
Dan Leonard - First Analysis
Previous Statements by PLL
» Pall Corporation F4Q09 (Qtr End 07/31/09) Earnings Call Transcript
» Pall Corporation F3Q09 (Qtr End 4/30/09) Earnings Call Transcript
» Pall Corporation F2Q09 (Qtr End 01/31/09) Earnings Call Transcript
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 counterpart are included in slides at the end of the presentation.
At this time, I’ll turn the call over to Mr. Eric Krasnoff, Pall Corporation’s Chairman and CEO. Please go ahead, sir.
Thank you very much Cynthia. Good morning to all of you. We appreciate you joining us today to review the results for our first quarter. I’m here today with Lisa McDermott, Pall’s Chief Financial Officer; and Frank Moschella, our Corporate Controller. I’ll review our overall business and Lisa will provide a financial review of the quarter. Following that, we will be very pleased to take your questions.
We are finally seeing stabilization in many industrial markets and return to stronger growth in Life Sciences. Despite a $31 million drop in revenue, gross margins improved by 110 basis points in the quarter. The company reduced SG&A and improved productivity. When the top line returns, the full leverage of these improvements should be further felt.
First quarter sales were $547 million as recorded, a decrease of 5.4%. Sales of local currency were also most 7% and FX has turned sharply in our favor. This quarter’s results exemplify the strength of Pall’s market and geographic diversity, as well as the success of corporate investment and execution of our corporate initiatives.
While key industrial submarkets remain depressed, sales growth and local currency in Life Sciences has been accelerating over the last three quarters, up 4%, 5%, and then 7%. Biopharmaceuticals return to with longer term double digit growth rate, increasing over 10% in the quarter.
Medical is also grown in each of the last three quarters including almost 3% in this Q1. All regions grow in the quarter, Asia in particular increased 15%. We expect continued higher growth in this key region over the longer term. Sales in the Western Hemisphere increased almost 8% that is the best performance since July ‘07.
Major market drivers in Life Sciences are increased production at biotech drug and vaccines, with service play out with the 16% increase in based business and biopharmaceutical. Conversely, system sales were down almost 40%, largely on some tough comps. System sales in Q1 of ‘09 were up over 18%. Have a continued reluctant to global companies to spend capital is not adversely effected Life Sciences. The positive mix largely contributed to the surge in gross margins within Life Sciences in the quarter.
Raising medical standards around the world are not only expanding the market for drugs, but increasingly for leukocyte reduction filters. Australia, New Zealand, Korea and Hong Kong are among the latest to embrace leukocyte reduction at the standard of care. We saw the impact of this with the 16.5% sales increase to Asian blood centers. Elsewhere, our leukocyte reduction is already either mandated or detect as standard or picking up more business with new and differentiated products.
Tender wins in Europe drove blood center sales up 9% and in the Western Hemisphere, the largest blood market for us, sales increased 6%. Aside from blood and medical, the H1N1 pandemic regional outbreaks, increasing regulation and reimbursement policies that will not reward U.S. hospitals for treating hospital acquired infections. It’s a [whole] prevention of nosocomial infection to the forefront.
Pall has positioned itself to capitalize on these market drivers by developing enabling technologies, matched to the evolving customer needs and enhancing capabilities to serve them globally. A host of new products are improving margins and long term growth prospects and I could just mention a few updates.
First, Single Use Systems for biotechnology along with our clean pack Aseptic Connection Devices are enabling technology for rapid production of flu vaccines. Our Acrodose System is another enabling technology that increases the availability of platelets, while creating an added revenue stream for blood centers and also provides for bacterial infection reduction in hospitals.
Finally, Pall-Aquasafe water filters continue to evolve and it become a gold standard both to prevent [legenella] and mycobacterial contamination. We are pleased with the first quarter results in Life Sciences and expect a good year with sales up mid single digits.
Turning now to Pall Industrial, they had a very difficult quarter. Sales and industrial decreased over 15% in local currency with all region affected. On a sequential basis, the signs are more encouraging, indicating a leveling off and depressed market and beginning of recovery.
Let’s start with microelectronics, were sales held steady sequentially over an improved fourth quarter. Market conditions are improving. Japan however, does remain weak, but the OEM markets under duress. Third party sources recorded fab utilization is on the raise from a low of less than 15% last year to almost 80% at quarters end. This is the good sign. Capital spending continues to be relatively low, but we are seeing benefits from Intel’s well published $7 billion investment program.