PLL-1/31/2015-Q2FY2015


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
R
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended January 31, 2015
or
o
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to

Commission File Number: 001- 04311
PALL CORPORATION
(Exact name of registrant as specified in its charter)

New York
 
11-1541330
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
   
25 Harbor Park Drive, Port Washington, NY
11050
(Address of principal executive offices)
 
(Zip Code)

(516) 484-5400
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ   No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer þ
Accelerated filer o
 
 
 
 
 
Non-accelerated filer o
Smaller reporting company o
 
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
The number of shares of the registrant’s common stock outstanding as of February 23, 2015 was 106,645,105.




Table of Contents
 
 
Page No.
 
 
 
 
 
 
 
 
Item 5.
Other Information
 



2


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)

 
 
Jan 31, 2015
 
Jul 31, 2014
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
1,029,673

 
$
964,110

Accounts receivable
 
527,847

 
615,713

Inventory
 
377,210

 
404,878

Other current assets
 
153,897

 
152,522

Total current assets
 
2,088,627

 
2,137,223

Property, plant and equipment
 
741,845

 
805,327

Goodwill
 
469,643

 
491,462

Intangible assets
 
218,776

 
242,423

Other non-current assets
 
149,017

 
176,078

Total assets
 
$
3,667,908

 
$
3,852,513

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Notes payable
 
$
724,796

 
$
424,943

Accounts payable
 
140,991

 
165,373

Accrued liabilities
 
265,954

 
328,397

Income taxes payable
 
56,542

 
60,775

Current portion of long-term debt
 
76,412

 
87,955

Dividends payable
 
32,518

 
30,203

Total current liabilities
 
1,297,213

 
1,097,646

Long-term debt, net of current portion
 
375,342

 
375,826

Income taxes payable – non-current
 
151,339

 
150,484

Deferred taxes
 
54,241

 
67,303

Other non-current liabilities
 
239,641

 
265,897

Total liabilities
 
2,117,776

 
1,957,156

Stockholders’ equity:
 
 
 
 
Common stock, par value $.10 per share
 
12,796

 
12,796

Capital in excess of par value
 
353,255

 
327,301

Retained earnings
 
2,618,509

 
2,512,961

Treasury stock, at cost
 
(1,232,024
)
 
(942,780
)
Accumulated other comprehensive income/(loss)
 
(202,404
)
 
(14,921
)
Total stockholders’ equity
 
1,550,132

 
1,895,357

Total liabilities and stockholders’ equity
 
$
3,667,908

 
$
3,852,513


See accompanying notes to condensed consolidated financial statements.



3


PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended
 
Six Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
Net sales
 
$
673,794

 
$
676,969

 
$
1,370,286

 
$
1,306,748

Cost of sales
 
332,776

 
332,710

 
667,860

 
636,775

Gross profit
 
341,018

 
344,259

 
702,426

 
669,973

Selling, general and administrative expenses
 
191,834

 
196,299

 
394,490

 
391,183

Research and development
 
24,458

 
24,979

 
49,235

 
48,246

Restructuring and other charges, net
 
11,534

 
9,170

 
20,774

 
18,368

Interest expense, net
 
6,238

 
5,195

 
12,940

 
11,172

Earnings before income taxes
 
106,954

 
108,616

 
224,987

 
201,004

Provision for income taxes
 
22,555

 
24,950

 
52,315

 
45,825

Net earnings
 
$
84,399

 
$
83,666

 
$
172,672

 
$
155,179

Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.79

 
$
0.76

 
$
1.60

 
$
1.39

Diluted
 
$
0.78

 
$
0.75

 
$
1.59

 
$
1.38

Dividends declared per share
 
$
0.305

 
$
—

 
$
0.610

 
$
0.275

Average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
107,139

 
110,720

 
107,639

 
111,263

Diluted
 
108,507

 
111,980

 
108,896

 
112,532


See accompanying notes to condensed consolidated financial statements.



4


PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(In thousands)
(Unaudited)

 
 
Three Months Ended
 
Six Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
Net earnings
 
$
84,399

 
$
83,666

 
$
172,672

 
$
155,179

Other comprehensive income/(loss), net of income taxes:
 
 
 
 
 
 
 
 
Foreign currency translation
 
(119,915
)
 
(21,938
)
 
(201,212
)
 
21,289

Pension liability adjustment
 
7,211

 
(71
)
 
13,563

 
(665
)
Unrealized investment gains/(losses)
 
61

 
(292
)
 
(571
)
 
(374
)
Unrealized gains/(losses) on derivatives
 
1,953

 
3,126

 
737

 
5,581

Total other comprehensive income/(loss), net of income taxes
 
(110,690
)
 
(19,175
)
 
(187,483
)
 
25,831

Comprehensive income/(loss)
 
$
(26,291
)
 
$
64,491

 
$
(14,811
)
 
$
181,010


See accompanying notes to condensed consolidated financial statements.



5


PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
 
Six Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
OPERATING ACTIVITIES
 
 
 
 
Net cash provided by operating activities
 
$
238,166

 
$
205,595

INVESTING ACTIVITIES
 
 
 
 
Capital expenditures
 
(25,240
)
 
(34,663
)
Acquisition of businesses, net of cash acquired
 
(1,741
)
 
(5,299
)
Purchases of retirement benefit assets
 
(38,506
)
 
(14,312
)
Proceeds from retirement benefit assets
 
40,913

 
19,946

Proceeds from sale of assets
 
2,200

 
1,953

Other
 
(4,565
)
 
(3,278
)
Net cash used by investing activities
 
(26,939
)
 
(35,653
)
FINANCING ACTIVITIES
 
 
 
 
Notes payable
 
299,853

 
134,963

Dividends paid
 
(62,796
)
 
(58,408
)
Repayments of short-term debt
 
—

 
(3,927
)
Repayments of long-term debt
 
(280
)
 
(375
)
Net proceeds from stock plans
 
8,169

 
7,130

Additions to deferred financing costs
 
(1,535
)
 
—

Purchase of treasury stock
 
(304,105
)
 
(250,000
)
Excess tax benefits from stock-based compensation arrangements
 
2,475

 
9,444

Other
 
(1,458
)
 
—

Net cash used by financing activities
 
(59,677
)
 
(161,173
)
Effect of exchange rate changes on cash and cash equivalents

 
(85,987
)
 
6,179

Net increase in cash and cash equivalents
 
65,563

 
14,948

Cash and cash equivalents at beginning of year
 
964,110

 
936,886

Cash and cash equivalents at end of period
 
$
1,029,673

 
$
951,834

Supplemental Disclosures
 
 
 
 
Interest paid
 
$
12,715

 
$
11,844

Income taxes paid (net of refunds)
 
41,683

 
31,772


See accompanying notes to condensed consolidated financial statements.



6

PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)

NOTE 1 – BASIS OF PRESENTATION
The condensed consolidated financial information of Pall Corporation and its subsidiaries (hereinafter collectively called the “Company”) included herein is unaudited. Such information reflects all adjustments of a normal recurring nature, which are, in the opinion of Company management, necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows as of the dates and for the periods presented herein. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2014 (“2014 Form 10-K”).
NOTE 2 – BALANCE SHEET DETAILS
The following tables provide details of selected balance sheet items:
 
 
Jan 31, 2015
 
Jul 31, 2014
Accounts receivable:
 
 
 
 
Billed
 
$
464,175

 
$
556,928

Unbilled
 
77,250

 
72,681

Total
 
541,425

 
629,609

Less: Allowances for doubtful accounts
 
(13,578
)
 
(13,896
)
 
 
$
527,847

 
$
615,713

Unbilled receivables principally relate to revenues accrued for long-term contracts recorded under the percentage-of-completion method of accounting.
 
 
Jan 31, 2015
 
Jul 31, 2014
Inventory:
 
 
 
 
Raw materials and components
 
$
132,458

 
$
117,581

Work-in-process
 
94,056

 
112,824

Finished goods
 
150,696

 
174,473

 
 
$
377,210

 
$
404,878

 
 
Jan 31, 2015
 
Jul 31, 2014
Property, plant and equipment:
 
 
 
 
Property, plant and equipment
 
$
1,690,242

 
$
1,776,983

Less: Accumulated depreciation and amortization
 
(948,397
)
 
(971,656
)
 
 
$
741,845

 
$
805,327

NOTE 3 – GOODWILL AND INTANGIBLE ASSETS
The following table presents changes in the carrying value of goodwill, allocated by reportable segment:
 
 
Life Sciences
 
Industrial
 
Total
Balance at July 31, 2014
 
$
269,758

 
$
221,704

 
$
491,462

Acquisitions
 
—

 
2,617

 
2,617

Foreign currency translation / other
 
(18,572
)
 
(5,864
)
 
(24,436
)
Balance at January 31, 2015
 
$
251,186

 
$
218,457

 
$
469,643

Increase in acquisitions primarily related to working capital adjustment for acquisition of Filter Specialists, Inc.


7


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

Intangible assets consist of the following:
January 31, 2015
 
Gross
 
Accumulated
Amortization
 
Net
Patents and unpatented technology
 
$
158,103

 
$
68,661

 
$
89,442

Customer-related intangibles
 
158,372

 
38,854

 
119,518

Trademarks
 
16,473

 
7,593

 
8,880

Other
 
3,477

 
2,541

 
936

 
 
$
336,425

 
$
117,649

 
$
218,776

 
 
 
 
 
 
 
July 31, 2014
 
Gross
 
Accumulated
Amortization
 
Net
Patents and unpatented technology
 
$
165,727

 
$
66,126

 
$
99,601

Customer-related intangibles
 
165,759

 
33,845

 
131,914

Trademarks
 
16,971

 
7,130

 
9,841

Other
 
3,647

 
2,580

 
1,067

 
 
$
352,104

 
$
109,681

 
$
242,423

Intangible assets were primarily impacted by changes in the foreign exchange rates used to translate intangible assets of foreign subsidiaries.
Amortization expense for intangible assets for the three and six months ended January 31, 2015 was $6,029 and $12,246, respectively. Amortization expense for intangible assets for the three and six months ended January 31, 2014 was $4,655 and $9,379, respectively. Amortization expense is estimated to be approximately $10,819 for the remainder of fiscal year 2015, $21,521 in fiscal year 2016, $21,232 in fiscal year 2017, $21,098 in fiscal year 2018, $18,969 in fiscal year 2019, and $17,642 in fiscal year 2020.
NOTE 4 – TREASURY STOCK
The following table highlights the share repurchase authorizations in effect during fiscal year 2015:
 
 
Date of Authorization
 
 
 
 
Jan 17, 2013
 
Jul 17, 2014
 
Oct 9, 2014
 
Total
Amount available for repurchases as of July 31, 2014
 
$
81,873

 
$
600,000

 
$
—

 
$
681,873

New authorizations
 
—

 
—

 
200,000

 
200,000

Utilized
 
(81,873
)
 
(222,232
)
 
—

 
(304,105
)
Amount available for repurchases as of January 31, 2015
 
$
—

 
$
377,768

 
$
200,000

 
$
577,768

The Company’s shares may be purchased over time as market and business conditions warrant. There is no time restriction on these authorizations. In August 2014, the Company entered into an Accelerated Share Repurchase (“ASR”) agreement with a third-party financial institution to repurchase $300,000 of the Company’s common stock. This transaction was completed in the second quarter of fiscal year 2015. Under the agreement, the Company paid $300,000 to the financial institution. Upon completion of the transaction, the Company received a total of 3,461 shares with an average price per share of $86.67. In addition, during the three months ended January 31, 2015, the Company purchased 44 shares on the open market for a total cost of $4,105 and an average price per share of $94.26.
During the six months ended January 31, 2015, 275 shares were issued under the Company’s stock-based compensation plans. At January 31, 2015, the Company held 21,341 treasury shares.


8


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

NOTE 5 – CONTINGENCIES AND COMMITMENTS
With respect to the matters described in Note 14, Contingencies and Commitments, to the Company’s consolidated financial statements included in the Company’s 2014 Form 10-K and below, the Company has assessed the ultimate resolution of these matters and has reflected appropriate contingent liabilities in the condensed consolidated financial statements as of January 31, 2015 and July 31, 2014.
The Company and its subsidiaries are subject to certain other legal actions that arise in the normal course of business. Other than those legal proceedings and claims discussed in the 2014 Form 10-K and this Note, the Company is not facing any other legal proceedings and claims that would individually or in the aggregate have a reasonably possible material adverse effect on its financial condition or operating results. As such, any reasonably possible loss or range of loss, other than those legal proceedings discussed in the 2014 Form 10-K and this Note, is immaterial. However, the results of legal proceedings cannot be predicted with certainty. If the Company failed to prevail in several of these legal matters in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.
Environmental Matters
The Company’s condensed consolidated balance sheet at January 31, 2015 includes liabilities for environmental matters of $18,098 which relate primarily to the environmental proceedings discussed in the 2014 Form 10-K and as updated in this Note. In the opinion of management, the Company is in substantial compliance with applicable environmental laws and its current accruals for environmental remediation are adequate. However, as regulatory standards under environmental laws are becoming increasingly stringent, there can be no assurance that future developments, additional information and experience gained will not cause the Company to incur material environmental liabilities or costs beyond those accrued in its condensed consolidated financial statements.


9


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

NOTE 6 – RESTRUCTURING AND OTHER CHARGES, NET
The following tables summarize the restructuring and other charges (“ROTC”) recorded in the three and six months ended January 31, 2015 and January 31, 2014:
 
 
Three Months Ended Jan 31, 2015
 
Six Months Ended Jan 31, 2015
 
 
Restructuring (1)
 
Other Charges/(Gains) (2)
 
Total
 
Restructuring (1)
 
Other Charges/(Gains) (2)
 
Total
Severance benefits and other employment contract obligations
 
$
6,271

 
$
—

 
$
6,271

 
$
15,021

 
$
—

 
$
15,021

Professional fees and other costs, net of receipt of insurance claim payments
 
438

 
197

 
635

 
990

 
245

 
1,235

Impairment of assets
 
4,334

 
1,620

 
5,954

 
4,334

 
1,620

 
5,954

Reversal of excess restructuring reserves
 
(1,326
)
 
—

 
(1,326
)
 
(1,436
)
 
—

 
(1,436
)
 
 
$
9,717

 
$
1,817

 
$
11,534

 
$
18,909

 
$
1,865

 
$
20,774

Cash
 
$
5,383

 
$
197

 
$
5,580

 
$
14,575

 
$
245

 
$
14,820

Non-cash
 
4,334

 
1,620

 
5,954

 
4,334

 
1,620

 
5,954

 
 
$
9,717

 
$
1,817

 
$
11,534

 
$
18,909

 
$
1,865

 
$
20,774

 
 
Three Months Ended Jan 31, 2014
 
Six Months Ended Jan 31, 2014
 
 
Restructuring (1)
 
Other Charges/(Gains) (2)
 
Total
 
Restructuring (1)
 
Other Charges/(Gains) (2)
 
Total
Severance benefits and other employment contract obligations
 
$
7,347

 
$
(844
)
 
$
6,503

 
$
10,462

 
$
(402
)
 
$
10,060

Professional fees and other costs, net of receipt of insurance claim payments
 
894

 
2,053

 
2,947

 
2,137

 
2,195

 
4,332

Impairment of assets
 
—

 
—

 
—

 
—

 
160

 
160

Environmental matters
 
—

 
—

 
—

 
—

 
4,440

 
4,440

Reversal of excess restructuring reserves
 
(280
)
 
—

 
(280
)
 
(624
)
 
—

 
(624
)
 
 
$
7,961

 
$
1,209

 
$
9,170

 
$
11,975

 
$
6,393

 
$
18,368

Cash
 
$
7,961

 
$
1,209

 
$
9,170

 
$
11,975

 
$
6,233

 
$
18,208

Non-cash
 
—

 
—

 
—

 
—

 
160

 
160

 
 
$
7,961

 
$
1,209

 
$
9,170

 
$
11,975

 
$
6,393

 
$
18,368



10


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

(1) Restructuring:
In fiscal year 2012, the Company announced a multi-year strategic cost reduction initiative (“structural cost improvement initiative”). This initiative impacts both segments as well as the Corporate Services Group. The goal of this initiative is to properly position the Company’s cost structure globally to perform in the current economic environment without adversely impacting its growth or innovation potential.
Key components of the structural cost improvement initiative include:
▪
the strategic alignment of manufacturing, sales and R&D facilities to cost-effectively deliver high-quality products and superior service to the Company’s customers worldwide,
▪
creation of regional and global shared financial services centers for the handling of accounting transaction processing and other accounting functions,
▪
reorganization of sales functions, to more cost-efficiently deliver superior service to the Company’s customers globally, and
▪
reductions in headcount across all functional areas, enabled by efficiencies gained through the Company’s ERP systems, as well as in order to align to economic conditions.
Restructuring charges recorded in the three and six months ended January 31, 2015 and January 31, 2014 primarily reflect the expenses incurred in connection with the Company’s structural cost improvement initiative as discussed above. Restructuring charges recorded in the three and six months ended January 31, 2015 also include the impairment of assets related to the exit of an immaterial product line.
(2) Other Charges/(Gains):
Severance benefits and other employment contract obligations: In the three and six months ended January 31, 2014, the Company recorded adjustments related to certain employment contract obligations.
Professional fees and other: In the three months ended January 31, 2014, the Company recorded acquisition related legal and other professional fees.
Impairment of assets: In the three months ended January 31, 2015, the Company recorded an impairment related to a redundant software project.
Environmental matters: In the six months ended January 31, 2014, the Company increased its previously established environmental reserve related to a matter in Pinellas Park, Florida.


11


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

The following table summarizes the activity related to restructuring liabilities recorded for the Company’s structural cost improvement initiative which began in fiscal year 2012:
 
 
Severance
 
Other
 
Total
Original charge
 
$
61,852

 
$
3,448

 
$
65,300

Utilized
 
(27,365
)
 
(2,798
)
 
(30,163
)
Translation
 
(123
)
 
(47
)
 
(170
)
Balance at July 31, 2012
 
$
34,364

 
$
603

 
$
34,967

Additions
 
21,637

 
2,840

 
24,477

Utilized
 
(29,574
)
 
(1,936
)
 
(31,510
)
Reversal of excess reserves
 
(500
)
 
(57
)
 
(557
)
Translation
 
313

 
23

 
336

Balance at July 31, 2013
 
$
26,240

 
$
1,473

 
$
27,713

Additions
 
27,803

 
4,419

 
32,222

Utilized
 
(26,178
)
 
(4,596
)
 
(30,774
)
Reversal of excess reserves
 
(1,923
)
 
(107
)
 
(2,030
)
Translation
 
230

 
39

 
269

Balance at July 31, 2014
 
$
26,172

 
$
1,228

 
$
27,400

Additions
 
15,021

 
990

 
16,011

Utilized
 
(17,997
)
 
(1,207
)
 
(19,204
)
Reversal of excess reserves
 
(1,429
)
 
(7
)
 
(1,436
)
Translation
 
(2,563
)
 
(103
)
 
(2,666
)
Balance at January 31, 2015
 
$
19,204

 
$
901

 
$
20,105

NOTE 7 – INCOME TAXES
The Company’s effective tax rates for the six months ended January 31, 2015 and January 31, 2014 were 23.3% and 22.8%, respectively. For the six months ended January 31, 2015 and January 31, 2014, the effective tax rate varied from the U.S. federal statutory rate primarily due to the benefits of foreign operations.
At January 31, 2015 and July 31, 2014, the Company had gross unrecognized income tax benefits of $200,144 and $202,564, respectively. During the six months ended January 31, 2015, the amount of gross unrecognized tax benefits decreased by $2,420, primarily due to the recognition of a tax position taken in a prior year and the impact of foreign currency translation partially offset by tax positions taken during the current period. As of January 31, 2015, the amount of net unrecognized income tax benefits that, if recognized, would impact the effective tax rate was $163,857.
At January 31, 2015 and July 31, 2014, the Company had liabilities of $15,343 and $14,556, respectively, for potential payment of interest and penalties.
Due to the potential resolution of tax examinations and the expiration of various statutes of limitation, the Company believes that it is reasonably possible that the gross amount of unrecognized tax benefits may decrease within the next twelve months by a range of zero to $43,963.


12


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

NOTE 8 – COMPONENTS OF NET PERIODIC PENSION COST
Net periodic pension benefit cost for the Company’s defined benefit pension plans includes the following components:
 
 
Three Months Ended
 
 
U.S. Plans
 
Foreign Plans
 
Total
 
 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
Service cost
 
$
2,589

 
$
2,170

 
$
883

 
$
997

 
$
3,472

 
$
3,167

Interest cost
 
2,896

 
3,027

 
3,771

 
4,321

 
6,667

 
7,348

Expected return on plan assets
 
(2,484
)
 
(2,324
)
 
(3,640
)
 
(3,542
)
 
(6,124
)
 
(5,866
)
Amortization of prior service cost/(credit)
 
364

 
395

 
1

 
(10
)
 
365

 
385

Amortization of actuarial loss
 
1,019

 
1,345

 
1,299

 
1,425

 
2,318

 
2,770

Net periodic benefit cost
 
$
4,384

 
$
4,613

 
$
2,314

 
$
3,191

 
$
6,698

 
$
7,804

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
 
U.S. Plans
 
Foreign Plans
 
Total
 
 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
Service cost
 
$
5,178

 
$
4,340

 
$
1,838

 
$
1,993

 
$
7,016

 
$
6,333

Interest cost
 
5,792

 
6,055

 
7,759

 
8,525

 
13,551

 
14,580

Expected return on plan assets
 
(4,967
)
 
(4,649
)
 
(7,484
)
 
(6,980
)
 
(12,451
)
 
(11,629
)
Amortization of prior service cost/(credit)
 
729

 
790

 
2

 
(21
)
 
731

 
769

Amortization of actuarial loss
 
2,038

 
2,689

 
2,673

 
2,811

 
4,711

 
5,500

Net periodic benefit cost
 
$
8,770

 
$
9,225

 
$
4,788

 
$
6,328

 
$
13,558

 
$
15,553

NOTE 9 – STOCK-BASED PAYMENT
The Company currently has three stock-based employee and director compensation plans — the Pall Corporation 2012 Stock Compensation Plan, under which the Company may grant stock options, restricted shares, restricted units, performance shares, and performance units; the Management Stock Purchase Plan (“MSPP”); and the Employee Stock Purchase Plan (“ESPP”). These three plans are more fully described in Note 15, Common Stock, to the consolidated financial statements included in the 2014 Form 10-K.
The detailed components of stock-based compensation expense recorded in the condensed consolidated statements of earnings for the three and six months ended January 31, 2015 and January 31, 2014 are reflected in the table below:
 
 
Three Months Ended
 
Six Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
Restricted stock units
 
$
5,100

 
$
6,254

 
$
13,323

 
$
10,447

Stock options
 
1,949

 
1,965

 
3,903

 
3,486

MSPP
 
1,454

 
972

 
2,519

 
1,164

ESPP
 
263

 
273

 
537

 
498

 
 
$
8,766

 
$
9,464

 
$
20,282

 
$
15,595



13


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

NOTE 10 – EARNINGS PER SHARE
The condensed consolidated statements of earnings present basic and diluted earnings per share. Basic earnings per share is determined by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share considers the potential effect of dilution on basic earnings per share assuming potentially dilutive shares that meet certain criteria, such as those issuable upon exercise of stock options, were outstanding. The treasury stock method reduces the dilutive effect of potentially dilutive securities as it assumes that any cash proceeds (from the issuance of potentially dilutive securities) are used to buy back shares at the average share price during the period. Equity awards aggregating 477 and 506 were not included in the computation of diluted shares for the three months ended January 31, 2015 and January 31, 2014, respectively, because their effect would have been antidilutive. For the six months ended January 31, 2015 and January 31, 2014, 190 and 921 antidilutive shares, respectively, were excluded. The following is a reconciliation between basic shares outstanding and diluted shares outstanding:
 
 
Three Months Ended
 
Six Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
Basic shares outstanding
 
107,139

 
110,720

 
107,639

 
111,263

Effect of stock plans
 
1,368

 
1,260

 
1,257

 
1,269

Diluted shares outstanding
 
108,507

 
111,980

 
108,896

 
112,532

NOTE 11 – FAIR VALUE MEASUREMENTS
The Company records certain of its financial assets and liabilities at fair value, which is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.
The current authoritative guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). Authoritative guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
▪
Level 1: Use of observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
▪
Level 2: Use of inputs other than quoted prices included in Level 1, which are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
▪
Level 3: Use of inputs that are unobservable.


14


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

The following table presents, for each of these hierarchy levels, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of January 31, 2015:
 
 
Fair Value Measurements
 
 
As of Jan 31, 2015
 
Level 1
 
Level 2
 
Level 3
Financial Assets Carried at Fair Value
 
 
 
 
 
 
 
 
Money market funds
 
$
6,951

 
$
6,951

 
$
—

 
$
—

Available-for-sale securities:
 
 
 
 
 
 
 
 
Equity securities
 
860

 
860

 
—

 
—

Debt securities:
 
 
 
 
 
 
 
 
Corporate
 
28,898

 
—

 
28,898

 
—

U.S. Treasury
 
10,663

 
—

 
10,663

 
—

Federal agency
 
12,591

 
—

 
12,591

 
—

Mortgage-backed
 
8,218

 
—

 
8,218

 
—

Trading securities
 
817

 
817

 
—

 
—

Derivative financial instruments:
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
7,893

 
—

 
7,893

 
—

Financial Liabilities Carried at Fair Value
 
 
 
 
 
 
 
 
Derivative financial instruments:
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
3,351

 
—

 
3,351

 
—

The following table presents, for each of these hierarchy levels, the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of July 31, 2014:
 
 
Fair Value Measurements
 
 
As of Jul 31, 2014
 
Level 1
 
Level 2
 
Level 3
Financial Assets Carried at Fair Value
 
 
 
 
 
 
 
 
Money market funds
 
$
4,860

 
$
4,860

 
$
—

 
$
—

Available-for-sale securities:
 
 
 
 
 
 
 
 
Equity securities
 
4,748

 
4,748

 
—

 
—

Debt securities:
 
 
 
 
 
 
 
 
Corporate
 
30,243

 
—

 
30,243

 
—

U.S. Treasury
 
9,724

 
—

 
9,724

 
—

Federal agency
 
13,719

 
—

 
13,719

 
—

Mortgage-backed
 
11,405

 
—

 
11,405

 
—

Trading securities
 
819

 
819

 
—

 
—

Derivative financial instruments:
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
5,931

 
—

 
5,931

 
—

Financial Liabilities Carried at Fair Value
 
 
 
 
 
 
 
 
Derivative financial instruments:
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
1,726

 
—

 
1,726

 
—

The Company’s money market funds and equity securities are valued using quoted market prices and, as such, are classified within Level 1 of the fair value hierarchy.


15


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

The fair value of the Company’s investments in debt securities are valued utilizing third party pricing services and verified by management. The pricing services use inputs to determine fair value which are derived from observable market sources including reportable trades, benchmark curves, credit spreads, broker/dealer quotes, bids, offers, and other industry and economic events. These investments are included in Level 2 of the fair value hierarchy.
The fair values of the Company’s foreign currency forward contracts are valued using pricing models, with all significant inputs derived from or corroborated by observable market data such as yield curves, currency spot and forward rates, and currency volatilities. These investments are included in Level 2 of the fair value hierarchy.
NOTE 12 – INVESTMENT SECURITIES
The following is a summary of the Company’s available-for-sale investment securities by category which are classified within other non-current assets in the Company’s condensed consolidated balance sheets. Contractual maturity dates of debt securities held by the benefits protection trusts at January 31, 2015 range from 2015 to 2046.
January 31, 2015
 
Cost/Amortized
Cost Basis
 
Fair Value
 
Gross Unrealized
Holding Gains
 
Gross Unrealized
Holding Losses
 
Net Unrealized
Holding
Gains/(Losses)
Equity securities
 
$
703

 
$
860

 
$
157

 
$
—

 
$
157

Debt securities:
 
 
 
 
 
 
 
 
 
 
Corporate
 
27,843

 
28,898

 
1,061

 
(6
)
 
1,055

U.S. Treasury
 
10,391

 
10,663

 
280

 
(8
)
 
272

Federal agency
 
11,716

 
12,591

 
875

 
—

 
875

Mortgage-backed
 
8,147

 
8,218

 
72

 
(1
)
 
71

 
 
$
58,800

 
$
61,230

 
$
2,445

 
$
(15
)
 
$
2,430

 
 
 
 
 
 
 
 
 
 
 
July 31, 2014
 
Cost/Amortized
Cost Basis
 
Fair Value
 
Gross Unrealized
Holding Gains
 
Gross Unrealized
Holding Losses
 
Net Unrealized
Holding
Gains/(Losses)
Equity securities
 
$
4,160

 
$
4,748

 
$
588

 
$
—

 
$
588

Debt securities:
 
 
 
 
 
 
 
 
 
 
Corporate
 
28,987

 
30,243

 
1,259

 
(3
)
 
1,256

U.S. Treasury
 
9,478

 
9,724

 
246

 
—

 
246

Federal agency
 
12,778

 
13,719

 
941

 
—

 
941

Mortgage-backed
 
11,219

 
11,405

 
190

 
(4
)
 
186

 
 
$
66,622

 
$
69,839

 
$
3,224

 
$
(7
)
 
$
3,217



16


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

The following table shows the gross unrealized losses and fair value of the Company’s available-for-sale investments with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
January 31, 2015
 
Less Than 12 Months
 
12 Months or Greater
 
Total
 
 
Fair Value
 
Gross Unrealized
Holding Losses
 
Fair Value
 
Gross Unrealized Holding Losses
 
Fair Value
 
Gross Unrealized Holding Losses
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
$
1,701

 
$
(6
)
 
$
—

 
$
—

 
$
1,701

 
$
(6
)
U.S. Treasury
 
906

 
(8
)
 
—

 
—

 
906

 
(8
)
Mortgage-backed
 
1,381

 
(1
)
 
—

 
—

 
1,381

 
(1
)
 
 
$
3,988

 
$
(15
)
 
$
—

 
$
—

 
$
3,988

 
$
(15
)
July 31, 2014
 
Less Than 12 Months
 
12 Months or Greater
 
Total
 
 
Fair Value
 
Gross Unrealized
Holding Losses
 
Fair Value
 
Gross Unrealized Holding Losses
 
Fair Value
 
Gross Unrealized Holding Losses
Debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate
 
$
3,384

 
$
(3
)
 
$
—

 
$
—

 
$
3,384

 
$
(3
)
Mortgage-backed
 
1,919

 
(4
)
 
—

 
—

 
1,919

 
(4
)
 
 
$
5,303

 
$
(7
)
 
$
—

 
$
—

 
$
5,303

 
$
(7
)
The following table shows the proceeds and gross gains and losses from the sale of available-for-sale and trading investments primarily related to the Company's benefits protection trust for the three and six months ended January 31, 2015 and January 31, 2014:
 
 
Three Months Ended
 
Six Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
Proceeds from sales
 
$
17,693

 
$
2,558

 
$
33,749

 
$
3,058

Realized gross gains on sales
 
515

 
84

 
573

 
84

Realized gross losses on sales
 
7

 
99

 
12

 
100

The following is a summary of the Company’s trading securities by category which are classified within other non-current assets in the Company’s condensed consolidated balance sheets.
 
 
Jan 31, 2015
 
Jul 31, 2014
Equity securities
 
$
817

 
$
819

Total trading securities
 
$
817

 
$
819

The following table shows the net gains and losses recognized on trading securities for the three and six months ended January 31, 2015 and January 31, 2014:
 
 
Three Months Ended
 
Six Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
Gains/(losses), net recognized for securities held
 
$
(4
)
 
$
7

 
$
(32
)
 
$
23

Gains/(losses), net recognized for securities sold
 
—

 
—

 
1

 
—

Total gains/(losses), net recognized
 
$
(4
)
 
$
7

 
$
(31
)
 
$
23



17


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

NOTE 13 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company manages certain financial exposures through a risk management program that includes the use of foreign exchange derivative financial instruments. Derivatives are executed with counterparties with a minimum credit rating of “A” by Standard & Poors and “A2” by Moody’s Investor Services, in accordance with the Company’s policies. The Company does not utilize derivative instruments for trading or speculative purposes. As of January 31, 2015, the Company had foreign currency forward contracts outstanding with notional amounts aggregating $390,756, whose fair values were a net asset of $4,542.
Foreign Exchange Related
a. Derivatives Not Designated as Hedging Instruments
The risk management objective of holding foreign exchange derivatives is to mitigate volatility to earnings and cash flows due to changes in foreign exchange rates. The Company and its subsidiaries conduct transactions in currencies other than their functional currencies. These transactions include non-functional intercompany and external sales as well as intercompany and external purchases. The Company uses foreign exchange forward contracts, matching the notional amounts and durations of the receivables and payables resulting from the aforementioned underlying foreign currency transactions, to mitigate the exposure to earnings and cash flows caused by the changes in fair value of these receivables and payables from fluctuating foreign exchange rates. The notional amount of foreign currency forward contracts not designated as hedging instruments entered into during the three and six months ended January 31, 2015 was $565,333 and $1,387,104, respectively. The notional amount of foreign currency forward contracts outstanding that were not designated as hedging instruments as of January 31, 2015 was $308,896.
b. Cash Flow Hedges
The Company uses foreign exchange forward contracts for cash flow hedging on its future transactional exposure to the Euro due to changes in market rates to exchange Euros for British Pounds. The hedges cover a British subsidiary (British Pound functional) with Euro revenues and a Swiss subsidiary (Euro functional) with British Pound expenses. The probability of the occurrence of these transactions is high and the Company’s assessment is based on observable facts including the frequency and amounts of similar past transactions. The objective of the cash flow hedges is to lock a portion of the British Pound equivalent amount of Euro sales for the British subsidiary and a portion of the Euro equivalent amount of British Pound expenses for the Swiss subsidiary at the agreed upon exchange rates in the foreign exchange forward contracts. The notional amount of foreign currency forward contracts designated as hedging instruments entered into during the three and six months ended January 31, 2015 was $18,975 and $39,404, respectively. The notional amount of foreign currency forward contracts outstanding designated as hedging instruments as of January 31, 2015 was $81,859 and covers certain monthly transactional exposures through February 2016.
c. Net Investment Hedges
The risk management objective of designating the Company’s foreign currency loan as a hedge of a portion of its net investment in a wholly owned Japanese subsidiary is to mitigate the change in the fair value of the Company’s net investment due to changes in foreign exchange rates. The Company uses a JPY loan outstanding to hedge its equity of the same amount in the Japanese wholly owned subsidiary. The hedge of net investment consists of a JPY 9 billion loan.


18


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

The fair values of the Company’s derivative financial instruments included in the condensed consolidated balance sheets are presented as follows:
January 31, 2015
 
Asset Derivatives
 
Liability Derivatives
 
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
Other current assets
 
$
5,729

 
Other current liabilities
 
$
—

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
Other current assets
 
$
2,164

 
Other current liabilities
 
$
3,351

Total derivatives
 
 
 
$
7,893

 
 
 
$
3,351

Nonderivative instruments designated as hedging instruments
 
 
 
 
 
 
 
 
Net investment hedge
 
 
 
 
 
Current portion of Long-term debt
 
$
76,086

July 31, 2014
 
Asset Derivatives
 
Liability Derivatives
 
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
Other current assets
 
$
4,755

 
Other current liabilities
 
$
3

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Foreign exchange forward contracts
 
Other current assets
 
$
1,176

 
Other current liabilities
 
$
1,723

Total derivatives
 
 
 
$
5,931

 
 
 
$
1,726

Nonderivative instruments designated as hedging instruments
 
 
 
 
 
 
 
 
Net investment hedge
 
 
 
 
 
Current portion of Long-term debt
 
$
87,570

The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments for the three and six months ended January 31, 2015 and January 31, 2014 are presented as follows:
Derivatives in cash flow hedging relationships
 
Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)
 
Location of Gain/(Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)
 
Amount of Gain/(Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion) (a)
 
 
Three Months Ended
 
 
 
Three Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
 
 
 
Jan 31, 2015
 
Jan 31, 2014
Foreign exchange forward contracts
 
$
3,806

 
$
3,489

 
Net sales
 
$
560

 
$
113

 
 
 
 
 
 
Cost of sales
 
847

 
(46
)
Total derivatives
 
$
3,806

 
$
3,489

 
 
 
$
1,407

 
$
67

 
 
 
 
 
 
 
 
 
 
 
Derivatives in cash flow hedging relationships
 
Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)
 
Location of Gain/(Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)
 
Amount of Gain/(Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion) (a)
 
 
Six Months Ended
 
 
 
Six Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
 
 
 
Jan 31, 2015
 
Jan 31, 2014
Foreign exchange forward contracts
 
$
4,397

 
$
5,310

 
Net sales
 
$
1,120

 
$
112

 
 
 
 
 
 
Cost of sales
 
1,938

 
(866
)
Total derivatives
 
$
4,397

 
$
5,310

 
 
 
$
3,058

 
$
(754
)
(a)
There were no gains or losses recognized in earnings related to the ineffective portion of the hedging relationship or related to the amount excluded from the assessment of hedge effectiveness for the three and six months ended January 31, 2015 and January 31, 2014.


19


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments for the three and six months ended January 31, 2015 and January 31, 2014 are presented as follows:
Derivatives not designated as hedging relationships
 
Location of Gain/(Loss) Recognized in Earnings on Derivatives
 
Amount of Gain/(Loss) Recognized in
Earnings on Derivatives
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 

 
Jan 31, 2015
 
Jan 31, 2014
 
Jan 31, 2015
 
Jan 31, 2014
Foreign exchange forward contracts
 
Selling, general and administrative expenses
 
$
(5,910
)
 
$
(2,793
)
 
$
(10,420
)
 
$
(2,343
)
The amounts of the gains and losses related to the Company’s nonderivative financial instruments designated as hedging instruments for the three and six months ended January 31, 2015 and January 31, 2014 are presented as follows:
Nonderivatives designated as hedging relationships
 
Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)
 
Location of Gain/(Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)
 
Amount of Gain/(Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion) (b)
 
 
Three Months Ended
 
 
 
Three Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
 
 
 
Jan 31, 2015
 
Jan 31, 2014
Net investment hedge
 
$
6,336

 
$
3,735

 
N/A
 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
Nonderivatives designated as hedging relationships
 
Amount of Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion)
 
Location of Gain/(Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)
 
Amount of Gain/(Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion) (b)
 
 
Six Months Ended
 
 
 
Six Months Ended
 
 
Jan 31, 2015
 
Jan 31, 2014
 
 
 
Jan 31, 2015
 
Jan 31, 2014
Net investment hedge
 
$
11,484

 
$
4,176

 
N/A
 
$
—

 
$
—

(b)
There were no gains or losses recognized in earnings related to the ineffective portion of the hedging relationship or related to the amount excluded from the assessment of hedge effectiveness for the three and six months ended January 31, 2015 and January 31, 2014.


20


PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(In thousands, except per share data)
(Unaudited)

NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
Changes in accumulated other comprehensive income/(loss) by component are presented below:
 
 
Foreign Currency Translation
 
Defined Benefit Pension Plan
 
Unrealized Investment Gains/(Losses)
 
Unrealized Gains/(Losses) on Derivatives
 
Accumulated Other Comprehensive Income/(Loss)
Balance at July 31, 2014
 
$
98,689

 
$
(121,280
)
 
$
2,880

 
$
4,790

 
$
(14,921
)
Other comprehensive income/(loss) before reclassifications
 
(201,212
)
 
—

 
(259
)
 
3,540

 
(197,931
)
Amounts reclassified from accumulated other comprehensive income/(loss)
 
—

 
3,822

 
(312
)
 
(2,803
)
 
707

Foreign exchange adjustments and other
 
—

 
9,741

 
—

 
—

 
9,741

Balance at January 31, 2015
 
$
(102,523
)
 
$
(107,717
)
 
$
2,309

 
$
5,527

 
$