Mark IV divests purolator automotive filter business

1NDUSTR-Y ISSUE 24 MARCH 1999 ISSN 1365-6937

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PALL PLANS TO RESTRUCTURE OPERATIONS Pall is to restructure its business to achieve cost cuts of more than US$50 million per year. This restructuring, which starts immediately, is targeted at payroll and expense cost reductions. Pall is to take a one-time unspecified charge in the third quarter, as part of the restructure. Commenting on Pail's results for the second quarter, Eric Krasnoff, chairman and chief executive officer, said that pressure on gross margins had reduced earnings to well below acceptable levels. It was of little comfort, Krasnoff said, that sales came in about as expected with encouraging growth in several areas of the business. "We have already begun restructuring our business to navigate through certain unfavorable business conditions. The restructuring will involve all parts of the company with special emphasis on corporate payroll and expenses." Pall reported second quarter sales of US$278.2 million, up 7 V2 per cent on US$259 million last year. Earnings for the second quarter fell however to US$18.7 million from US$27.5 million. For the six months, sales grew 6 V2 per

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Mark IV Industries Inc has c o m p l e t e d the sale of its Purolator automotive filter business to Arvin Industries Inc for US$276 million. The cash purchase price includes the assumption of approximately US$6 million of debt. Mark IV acquired Purolator Products in 1994 for US$285 million. The automotive filter unit has annual revenues of US$345 million. Mark IV retains ownership of Purolator's specialty filtration operations, which have annual revenues of approximately US$150 million, and serve industrial, transportation, petroleum and chemical markets worldwide. Sal H Alfiero, chairman and chief executive officer of Mark IV, said redeployment of the capital invested in the automotive filter business would be used to reduce debt in the short-run and significantly

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MARK IV DIVESTS PUROLATOR AUTOMOTIVE FILTER BUSINESS

CONTENTS GENERAL NEWS 1,10,11,12,16 MARKET PROSPECTS 2-4 COMPANY PROFILE 5"6 COMPANY ~ C_I~7-9IN BRIEF 10 DIVID~ENDS 12 ORDERS 13 PEOPLE 13 ECONOMIC REVIEW 14 MARKET REst'to ?,,T a4 b i A R - f l l 5 ~

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cent to US$528.1 million. Six months earnings were down to US$33.2 million, from US$45.9 million a year earlier. Krasnoff expects the rest of this fiscal year to be difficult. He believes top-line growth should continue at the levels seen in the first half of this year. While the second half of this fiscal year should reflect some benefit from the restructuring, Pall does not expect gross margins to improve significantly on the first half of this fiscal year. Krasnoff warned that earnings per share for the year (before one-time charges) are likely to be 10-15 per cent below last year. Pall believes it can get back to strong earnings and sales growth next year given the full benefit of the US$50 million savings programme, better top-line growth in medical sales as countries implement aggressive blood filtration programmes, turnaround in microelectronics sales and improving margins in industrial systems. Pall shares fell sharply on the day the news was announced. On the New York Stock Exchange, Pall shares slipped 23 per cent to close at US$161A. The 52-week high was US$26~

strengthen Mark IV's balance sheet. Longer term, Alfiero said this transaction would enable Mark IV to pursue other growth opportunities and enhance shareholder value. Using debt repayment as a measure, on a pro forma basis, the transaction would be slightly dilutive by only two to three cents per share for fiscal 1999. Additionally, when completed, the sale will result in a small after-tax loss charged to discontinued operations. Alfiero believes the sale of Purolator automotive filter products will help to focus efforts on growing the Automotive Engine business, consisting of power transmission and air intake systems, along with the Vehicle Platform business, which consists of fluid handling and fuel systems. "We remain committed to our OEM and aftermarket businesses and will continue to expand in these vital markets. Additionally, the company plans to broaden its industrial business segment in select geographical and technological areas." Arvin Industries Inc, headquartered in Columbus, Indiana, is a global manufacturer of automotive parts, with annual revenue of approximately US$2.5 billion. Mark IV Industries Inc is a US$2.2 billion global manufacturing company headquartered in the Buffalo suburb of Amherst, New York, employing 17 000 people worldwide.

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