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     Sales in Asia increased 15%. The strengthening of Asian currencies added $4,491 in sales, resulting in reported sales growth of 23%. The increase in sales resulted from strong growth in General Industrial and Microelectronics sales as cited above. In addition, sales have been favorably impacted by a shift from the way FSG recorded sales through their manufacturing sites to the way Pall records sales through local sales companies. This shift resulted in sales being recorded in Asia that would have been recorded in the Western Hemisphere and Europe under the FSG methodology. Operating profit increased to 14.3% from 10.8% last year, reflecting the segment operating profit improvements cited above as well as strong sales growth. Operating profit dollars increased $4,049, or 62½%.

     General corporate expenses increased $3,666 compared with last year, reflecting consulting related to CORE cost reduction programs and Sarbanes-Oxley compliance initiatives.

Liquidity and Capital Resources

     Net cash provided by operating activities for the first quarter of fiscal 2004 was $31,542, a decrease of $3,225 as compared with the first quarter of fiscal 2003. The decrease in cash flow reflects changes in working capital items such as accounts receivable, inventory and accrued liabilities partly offset by cash generated from increased earnings.

     The Company’s balance sheet is affected by spot exchange rates used to translate local currency amounts into U.S. dollars. In comparing spot exchange rates at October 31, 2003 to those at August 2, 2003, the European currencies and the Yen have strengthened against the U.S. dollar.

     Working capital was approximately $558,200, a ratio of 2.5 at October 31, 2003 as compared with $516,900, a ratio of 2.2 at year-end fiscal 2003. Accounts receivable days sales outstanding were 93 days, as compared with 83 days at year-end fiscal 2003. Inventory turns of 2.9 remain unchanged from fiscal year-end 2003. The effect of foreign exchange increased inventory, accounts receivable and other current assets by $8,121, $12,645 and $1,200, respectively, as compared with year-end fiscal 2003. Additionally, foreign exchange increased accounts payable and other current liabilities by $6,757 and income taxes payable by $1,166.

     When operating the business day-to-day, excluding acquisitions but including funding capital expenditures and buying back common stock, our current intention is to keep net debt (debt net of cash, cash equivalents and short-term investments) at 25% to 30% of total capitalization (net debt plus equity). Net debt decreased by approximately $13,900 compared with year-end fiscal 2003. The impact of foreign exchange rates accounted for $2,500 of the reduction, while the fair value adjustment on our fixed to variable interest rate swaps carried as part of debt increased debt by approximately $8,600. As such, the actual cash reduction in our net debt was $20,000 in the first quarter of fiscal 2004. Overall, net debt, as a percentage of total capitalization, was 28.4% as compared with 30.2% at year-end fiscal 2003. Total gross debt decreased approximately $2,600 or about 1% as compared with year-end fiscal 2003. Our goal for fiscal 2004 is to reduce net debt by $75,000.

      Proceeds from stock plans were $10,073 in the quarter. Capital expenditures were $10,521 in the quarter. Depreciation and amortization expense were $19,490 and $2,067, respectively. Our goal is to keep capital expenditures below $70,000 in fiscal 2004. Also, depreciation and amortization expense are expected to be approximately $82,000 and $7,000, respectively in fiscal 2004.

      We own 6,400 of V.I. Technologies, Inc. (“VITEX”) shares at an adjusted cost basis (original cost less any impairment losses previously recorded) of $1.27 per share, or $8,101. Our investment in VITEX has been recorded at the October 31, 2003 fair market value of $2.09 per share, or $13,376 in the accompanying Condensed Consolidated Balance Sheet. For more detail regarding our investment in VITEX, refer to the Other Non-Current Assets note accompanying the consolidated financial statements.

     We consider our existing lines of credit, along with the cash generated from operations, to be sufficient for future growth. It is management’s intention to refinance any unpaid amounts under the unsecured senior revolving credit facility prior to its expiration in 2005.

Recently Issued Accounting Pronouncements

     Financial Accounting Standards Board (“FASB”) Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN No. 46”), was issued in January 2003. FIN No. 46 requires that if an entity is the primary beneficiary of a variable interest entity, the assets, liabilities and results of operations of the variable interest entity should be included in the Consolidated Financial Statements of the entity. The provisions of FIN No. 46 are effective immediately for all arrangements entered into after January 31, 2003. For those arrangements entered into prior to February 1, 2003, the provisions of FIN No. 46 were required to be adopted at the beginning of the first interim or annual period beginning after June 15, 2003. However, in October 2003, the FASB deferred the effective date of FIN No. 46 to the end of the interim or annual period ending after December 15, 2003 for those arrangements entered into prior to February 1, 2003. The Company is in the process of assessing the effect of FIN No. 46 and does not expect its adoption to have a material effect on the Company’s results of operations, cash flows or financial position.

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