Q3 2011 Earnings Call
June 09, 2011 8:30 am ET
Eric Krasnoff - Chief Executive Officer, President, Director and Chairman of Executive Committee
Lisa McDermott - Chief Financial Officer and Treasurer
Hamzah Mazari - Crédit Suisse AG
Richard Eastman - Robert W. Baird & Co. Incorporated
Jonathan Groberg - Macquarie Research
S. Brandon Couillard - Jefferies & Company, Inc.
David Rose - Wedbush Securities Inc.
Brian Drab - William Blair & Company L.L.C.
Previous Statements by PLL
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At this time, I will turn the call over to Mr. Eric Krasnoff, Pall Corporation's CEO and President. Please go ahead, sir.
Thank you, and good morning, everyone. We appreciate your joining us on our third quarter conference call. I am here on this very sultry morning with Lisa McDermott, our Chief Financial Officer; and Frank Moschella, the Corporate Controller. Now our first 3 quarters have been strong and place us around the higher end of our earnings guidance for fiscal 2011. The company also continues to make progress towards its long-term performance goals to create further value for shareholders.
Today, we will update you on our business and then look forward to your questions.
There are a number of factors driving growth. Pall has an accomplished and capable management team with solid depth throughout the organization. Top and bottom line growth strategies had differentiated Pall from its competitors. We provide total fluid management and are now a well-respected systems engineering company, a business developed organically. We have positioned the company to capitalize on improving economic conditions and emerging market trends. We're continuing to execute these strategies to expand opportunities and improve performance.
A confluence of trends are supporting the business and setting the stage for future growth. Among them, improving economies, arising middle-class and developing regions, game-changing technologies in areas such as electronics and biotechnology and of course the economics of environmentalism and increasing regulation. All of these drive Pall's enabling technologies. It's clear that it's a good time to be a leader, and I want to quote from an annual report of Pall's from 1959: "The existence and growth of Pall Corporation goes hand in hand with the requirements of modern technology." Now that statement is as true today as it was prophetic more than half a century ago. Our business makes up real difference to industries, customers and society. Pall management employees look forward to continuing to build on the company's success.
With that, let's now get into the details for the quarter. Fiscal '11 sales have increased by double digits throughout the year. Third quarter sales grew 11% in local currency to about $710 million. Life Sciences was up 12%, and Industrial grew close to 10%. BioPharmaceuticals continues to deliver strong results, reflecting Pall's broadening presence throughout the biotech production process. Microelectronics still grew after last year's meteoric 78% sales increase. New Pall products to service the proliferation of semiconductor and consumer electronic products are driving forces.
Machinery & Equipment's healthy performance also continued. That group posted its fifth straight quarter of double-digit growth. Mining in particular remained strong.
Food and Beverage, Life Sciences, OEM, Commercial Aerospace and Energy sales all grew at or above 10%. You'll hear more about them as we go along. Now on a geographic basis, both Industrial and Life Sciences grew in all regions. The Western Hemisphere was strongest with sales increasing 14%. Europe again grew over 10% with Military Aerospace the only weak spot. Sales in Asia were up about 7% overall, but if we take Japan out, Asia sales grew about 11%.
China and India in particular did very well. Sales in Japan, which is our largest Asian market, were down about $700,000 or about 1%. Life Sciences grew despite the disaster as Pharmaceutical customers increased purchases and accelerated production schedules in anticipation of possible supply-chain disruptions and power outages. Pall's industrial markets in Japan were down 6% overall, largely driven by the semiconductor industry there. Our Microelectronics sales decreased 11% in Japan, though some of this was offset as other producers in different geographies revved up production.
We could continue to see business disruptions in Japan in the short-term. Longer-term opportunities with the third's largest economy in the world as they rebuild will improve our prospects. Total orders kept pace with sales, increasing 10%. Every major market but Energy & Water was solidly positive. We logged double-digit orders growth in Asia. Orders grew by double digits for the first time this year, and orders in the Western Hemisphere increased 6% compared to over 30% a year ago. Orders for consumables grew 6% compared to 21% last year when companies began restocking inventories as the economy began to recover. Our backlog of consumables and systems is up over 25%. Now bear in mind that this includes orders for both consumables and systems that will ship over time.