Pall stock falls 19 percent on tax inquiry

Fri Jul 20, 2007 10:39am EDT

NEW YORK, July 20 (Reuters) - Shares of Pall Corp (PLL.N) plunged 19 percent on Friday, a day after the company said it may have understated U.S. income tax payments at a subsidiary going back to 1999.

Pall, which makes filters and purification systems, was down $9.31 to $39.47 on the New York Stock Exchange, reaching its lowest level since April.

Pall said on Thursday an audit committee is looking into the possible understatement of income tax payments and of provisions for income tax in prior periods, and said it notified the U.S. Internal Revenue Service and the U.S. Securities and Exchange Commission.

It said it may have failed to comply with certain debt obligations as a result of the potential changes. Robert W. Baird analyst Richard Eastman cut Pall shares to 'neutral,' from 'outperform,' saying the accounting issue creates uncertainty over possible delays in reporting results, suspension of its dividend, or terms of its debt.

"We spoke with management briefly last night; however, no clarity on possible outcomes, definition of materiality or a timetable for resolution was provided," Eastman said in a note to clients.

Friday's decline was the biggest one-day percentage move ever for a stock that had gained 80 percent over the past year prior to Thursday's announcement.

(Reporting by Nick Zieminski)

(Editing by Dave Zimmerman; nick.zieminski@reuters.com; Reuters Messaging: nick.zieminski.reuters.com@reuters.net; +1 646 223 6162) Keywords: PALL SHARES/

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