A Medical Device Daily
Pall (East Hills, New York) said yesterday that its annual and quarterly financial statements for the fiscal years 1999 through 2006 and the first three quarters of 2007 should no longer be relied upon and may need to be restated.
The company reached this conclusion based on its previously disclosed uderstatement of U.S. income tax payments and of its provision for income taxes. The audit committee has informed KPMG, its independent registered public accounting firm, of its conclusion.
The company said the amount of the understatement has not yet been finally determined, but is "material" and relates to the taxation of certain intercompany payable balances that mainly resulted from sales of products by a foreign subsidiary of the company to a U.S. subsidiary of the company. Under the Internal Revenue Code, these unpaid balances may have given rise to deemed dividend income to the company that was not properly taken into account in the its U.S. income tax return and provision for income taxes.
Pall said it has not finally determined the impact on the company's provision for income taxes in any period, but it will vary from period to period depending on the size of the intercompany payable balances at the end of the affected fiscal quarters, among other factors. The company's tax liability will include the amount of taxes that would have been payable with respect to any deemed dividend income in the affected periods, as well as interest on overdue amounts of taxes payable and penalties that may be assessed by the Internal Revenue Service on the eventual resolution of this matter.
The company said it believes that taxes payable with respect to the intercompany payable balances could be in excess of $130 million, exclusive of interest and penalties. It also believes that it may have one or more material weaknesses in its internal control over financial reporting.
"We are working diligently with the audit committee and our auditors to resolve this matter," said Eric Krasnoff, Pall's CEO/chairman
Pall develops products in the field of filtration, separation and purification. It is organized into two businesses: Life Sciences and Industrial. These businesses provide products to meet the demanding needs of customers in biotechnology, pharmaceutical, transfusion medicine, energy, electronics, municipal and industrial water purification, aerospace, transportation and broad industrial markets.