Company Highlights a 'Tremendous Year Distinguished by Successful Execution'GOLDEN VALLEY, Minn., Feb 02, 2005 /PRNewswire-FirstCall via COMTEX/ -- Pentair (NYSE: PNR)
today announced its full-year 2004 results, saying they reflect a series of
achievements including the strategic repositioning of the Company, sales
growth of 39 percent or 14 percent on an organic basis, a 36 percent gain in
2004 earnings per share (EPS) from continuing operations over that of the
previous year, and a 50 basis point increase in operating margins to
10.9 percent. Fourth quarter 2004 results were also positive with organic
sales rising 10 percent over same period last year, and EPS from continuing
operations of $0.33, up 38 percent over last year.
"Pentair's 2004 was a tremendous year distinguished by successful
execution, not the least of which was the sale of our Tools Group and the
acquisition of WICOR Industries," said Randall J. Hogan, Pentair chairman and
chief executive officer. "This strategic repositioning, coupled with double
digit growth and increased margins driven by good execution of our operating
initiatives, has delivered total shareholder return in excess of 90 percent in
2004. As we enter 2005, we believe we are well-positioned to continue our
high level of performance with two strong and growing business platforms, the
destinies of which are firmly in our grasp."
Pentair's fourth quarter 2004 EPS from continuing operations of
$0.33 increased 38 percent over fourth quarter 2003 EPS from continuing
operations of $0.24. Pentair's fourth quarter 2004 net sales totaled
$651.5 million, up 61 percent from $404.7 million in the same period a year
ago. Fourth quarter organic sales -- removing the effects of acquisitions and
excluding favorable foreign currency exchange -- grew 10 percent. Further
adjusting for the three fewer days in the fourth quarter, organic sales growth
was 15 percent. Operating income from continuing operations for the fourth
quarter 2004 totaled $62.0 million, 47 percent greater than the $42.2 million
reported in the fourth quarter of 2003. Excluding acquisitions, operating
income increased approximately eight percent in the fourth quarter. Fourth
quarter 2004 free cash flow was $46.1 million, bringing the total for the year
to $215.2 million.
For the full year 2004, Pentair's sales from continuing operations
increased 39 percent to $2.278 billion from the 2003 total of $1.643 billion.
Operating income increased 45 percent to $247.2 million in 2004 from
$170.2 million in 2003. EPS from continuing operations of $1.35 in 2004
increased 36 percent over 2003 EPS from continuing operations of $0.99.
Operating Results by Group
In the Water Group, fourth quarter 2004 sales of $469.5 million were
86 percent higher than the $252.3 million recorded in the same period last
year, reflecting the impact of the WICOR acquisition and strong organic
growth. Organic sales, without acquisitions and foreign exchange, and
adjusted for days, increased about 11 percent, reflecting strong domestic pool
sales, and growth in US, Asian, and European pump and filtration sales.
Fourth quarter 2004 operating income of $49.1 million in the Water Group
reflected a 52 percent gain over the same period last year. Operating income
margins in the Water Group were 10.5 percent in the fourth quarter 2004, down
230 basis points reflecting the lower initial margins of the former WICOR
businesses and one-time costs related to the consolidation of pump facilities
and other integration activities. Adding back these one-time costs of about
$5 million, operating income margins in the fourth quarter would have been
11.5 percent.
Pentair said integration of the former WICOR water businesses advanced in
the fourth quarter with nine facilities closed or consolidated to date, and
another six closings or consolidations in process. Construction of a water
products manufacturing facility near the campus of the existing Enclosures
operation in Reynosa, Mexico, will be complete in the first quarter of 2005,
with product transfers starting immediately thereafter. Product
rationalization efforts are well underway, and early results include a
20 percent reduction in storage tank SKUs and a 50 percent reduction in
residential filtration SKUs. Sales forces serving certain pump markets were
realigned to take advantage of cross-selling opportunities. Consistent with
its original plan, Pentair expects integration benefits to begin exceeding
costs late in the first quarter of 2005.
Enclosures Group sales in the fourth quarter 2004 totaled $182.2 million
compared to a year-earlier total of $152.5 million, a 20 percent increase.
This performance was driven by the Group's improved market position with
continued success in penetrating new vertical markets, new products, and
growth in core markets. Pentair noted that the fourth quarter of 2004 was the
Enclosure Group's eighth consecutive quarter of sequential sales growth.
Fourth quarter operating income in the Enclosures Group increased
48 percent from the same period last year, totaling $23.7 million in 2004
versus $16.0 million in 2003. Margins reached 13 percent, expanding by
250 basis points over the fourth quarter 2003 and by 20 basis points over the
third quarter 2004, delivering the Enclosures Group's 12th consecutive quarter
of sequential margin improvement. This performance was driven by higher
volume and productivity gains from lean enterprise and supply management
initiatives.
Outlook
"Our efforts to achieve operating excellence have produced solid progress
over the last four years and, now, we believe we have transformed Pentair to
maximize our growth opportunities and deliver even higher levels of
performance," Hogan said. "As we enter 2005, the integration of the former
WICOR businesses is proceeding as planned, and we are executing a robust and
reliable integration process that we expect will continue to serve us well
when applied to future Water and Enclosures acquisitions.
"As for 2005, we expect first quarter EPS of between $0.35 and $0.38,
which is at least 25 percent higher than the same period last year," Hogan
said. "For the second quarter 2005, we anticipate EPS of $0.61 to $0.65,
which is at minimum 45 percent higher than the same period in 2004. This
guidance reflects the new seasonality of the transformed Pentair. In
addition, we are reaffirming our previous guidance for the full-year 2005 of
$1.95 to $2.10, an increase of more than 45 percent from 2004."
In a separate news release issued today, Pentair announced it has
appointed Richard J. Cathcart, formerly president and COO of Pentair's Water
Group, to vice chairman. In his new role, Cathcart will lead Pentair's
intensified growth focus with primary responsibilities for international
growth and for business development. He will continue in his leadership role
with Pentair Water.
A Pentair conference call scheduled for 11:00 a.m. CST today will be
webcast live via http://www.pentair.com . A link to the conference call is
posted on the site's "Financial Information" page and will be archived at the
same location.
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three months ended Year ended
December 31 December 31 December 31 December 31
In thousands, except 2004 2003 2004 2003
per-share data
Net sales $651,476 $404,677 $2,278,129 $1,642,987
Cost of goods sold 468,274 291,184 1,623,419 1,196,757
Gross profit 183,202 113,493 654,710 446,230
% of net sales 28.1% 28.0% 28.7% 27.2%
Selling, general
and administrative 111,221 65,089 376,015 253,087
% of net sales 17.1% 16.1% 16.5% 15.4%
Research and
development 9,932 6,227 31,453 22,932
% of net sales 1.5% 1.5% 1.4% 1.4%
Operating income 62,049 42,177 247,242 170,211
% of net sales 9.5% 10.4% 10.9% 10.4%
Net interest expense 10,892 7,824 37,210 26,395
% of net sales 1.7% 1.9% 1.6% 1.6%
Income from continuing
operations before
income taxes 51,157 34,353 210,032 143,816
% of net sales 7.9% 8.5% 9.2% 8.8%
Provision for
income taxes 17,460 10,927 73,008 45,666
Effective tax rate 34.1% 31.8% 34.8% 31.8%
Income from
continuing operations 33,697 23,426 137,024 98,150
Income from
discontinued
operations,
net of tax - 10,751 40,248 46,138
Loss on disposal of
discontinued
operations,
net of tax (6,047) (2,936) (6,047) (2,936)
Net income $27,650 $31,241 $171,225 $141,352
Earnings per
common share
Basic
Continuing operations $0.34 $0.24 $1.38 $1.00
Discontinued operations (0.07) 0.08 0.34 0.44
Basic earnings per
common share $0.27 $0.32 $1.72 $1.44
Diluted
Continuing operations $0.33 $0.24 $1.35 $0.99
Discontinued operations (0.07) 0.08 0.33 0.43
Diluted earnings per
common share $0.26 $0.32 $1.68 $1.42
Weighted average
common shares
outstanding
Basic 100,014 97,926 99,316 97,876
Diluted 102,541 99,532 101,706 99,620
Cash dividends
declared per
common share $0.110 $0.105 $0.430 $0.410
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
December 31 December 31
In thousands 2004 2003
Assets
Current assets
Cash and cash equivalents $31,495 $47,989
Accounts and notes receivable, net 396,459 251,475
Inventories 323,676 166,862
Current assets of discontinued operations - 313,399
Deferred tax assets 52,899 30,871
Prepaid expenses and other current assets 24,433 18,854
Total current assets 828,962 829,450
Property, plant and equipment, net 336,302 233,106
Other assets
Assets of discontinued operations 393 539,892
Goodwill 1,620,404 997,183
Intangibles, net 258,438 98,490
Other 80,213 82,556
Total other assets 1,959,448 1,718,121
Total assets $3,124,712 $2,780,677
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $11,957 $73,631
Accounts payable 195,289 93,043
Employee compensation and benefits 104,821 61,213
Accrued product claims and warranties 42,524 24,427
Current liabilities of discontinued operations 192 155,898
Income taxes 27,395 14,912
Other current liabilities 144,664 74,327
Total current liabilities 526,842 497,451
Long-term debt 724,148 732,862
Pension and other retirement compensation 135,356 100,234
Post-retirement medical and other benefits 69,667 26,227
Deferred tax liabilities 146,698 60,636
Other noncurrent liabilities 71,154 62,208
Liabilities of discontinued operations 3,054 39,581
Total liabilities 1,676,919 1,519,199
Commitments and contingencies
Shareholders' equity 1,447,793 1,261,478
Total liabilities and shareholders' equity $3,124,712 $2,780,677
Days sales in accounts receivable
(13 month moving average) 52 54
Days inventory on hand (13 month moving average) 62 59
Days in accounts payable (13 month moving average) 57 54
Debt/total capital 33.7% 39.0%
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Year ended
December 31 December 31
In thousands 2004 2003
Operating activities
Net income $171,225 $141,352
Adjustments to reconcile net income to
net cash provided by operating activities
Net income from discontinued operations (40,248) (46,138)
Loss on disposal of discontinued operations 6,047 2,936
Depreciation 47,063 40,809
Amortization 13,534 4,074
Deferred income taxes 16,736 31,319
Stock compensation - 306
Changes in assets and liabilities, net of
effects of business acquisitions
and dispositions
Accounts and notes receivable 26,328 (5,080)
Inventories (51,996) 13,174
Prepaid expenses and other current assets 2,176 (4,781)
Accounts payable 17,864 (12,758)
Employee compensation and benefits 4,596 4,813
Accrued product claims and warranties 2,993 (1,756)
Income taxes 6,352 5,437
Other current liabilities 9,191 (3,336)
Pension and post-retirement benefits 11,508 (2,108)
Other assets and liabilities 6,794 6,769
Net cash provided by continuing operations 250,163 175,032
Net cash provided by discontinued operations 13,928 87,907
Net cash provided by operating activities 264,091 262,939
Investing activities
Capital expenditures (48,867) (43,622)
Acquisitions, net of cash acquired (869,155) (229,094)
Divestitures 773,399 (2,400)
Equity investments 60 (5,294)
Other - 48
Net cash used for investing activities (144,563) (280,362)
Financing activities
Repayment of short-term borrowings, net (4,162) (873)
Proceeds from long-term debt 343,316 780,857
Repayment of long-term debt (440,518) (709,886)
Proceeds from exercise of stock options 10,862 5,795
Repurchases of common stock (4,200) (1,589)
Dividends paid (43,128) (40,494)
Net cash provided by (used for)
financing activities (137,830) 33,810
Effect of exchange rate changes on cash 1,808 (8,046)
Change in cash and cash equivalents (16,494) 8,341
Cash and cash equivalents, beginning of period 47,989 39,648
Cash and cash equivalents, end of period $31,495 $47,989
Free cash flow
Net cash provided by operating activities $264,091 $262,939
Less capital expenditures (48,867) (43,622)
Free cash flow $215,224 $219,317
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment (Unaudited)
First Qtr Second Qtr Third Qtr Fourth Qtr Year
In thousands 2004 2004 2004 2004 2004
Net sales to
external
customers
Water $314,002 $353,345 $426,696 $469,469 $1,563,512
Enclosures 174,803 178,103 181,100 182,189 716,195
Intersegment
sales
elimination (352) (1,015) (29) (182) (1,578)
Consolidated $488,453 $530,433 $607,767 $651,476 $2,278,129
Operating
income
(loss)
Water $41,547 $59,253 $47,410 $49,100 $197,310
Enclosures 19,354 21,590 23,211 23,689 87,844
Other (10,791) (9,860) (6,521) (10,740) (37,912)
Consolidated $50,110 $70,983 $64,100 $62,049 $247,242
Operating
income as a
percent of
net sales
Water 13.2% 16.8% 11.1% 10.5% 12.6%
Enclosures 11.1% 12.1% 12.8% 13.0% 12.3%
Consolidated 10.3% 13.4% 10.5% 9.5% 10.9%
First Qtr Second Qtr Third Qtr Fourth Qtr Year
In thousands 2003 2003 2003 2003 2003
Net sales to
external
customers
Water $246,440 $290,692 $270,901 $252,332 $1,060,365
Enclosures 139,453 145,236 146,232 152,494 583,415
Intersegment
sales
elimination (142) (355) (147) (149) (793)
Consolidated $385,751 $435,573 $416,986 $404,677 $1,642,987
Operating
income
(loss)
Water $29,504 $46,002 $36,197 $32,259 $143,962
Enclosures 9,865 11,703 13,555 15,972 51,095
Other (7,217) (7,015) (4,560) (6,054) (24,846)
Consolidated $32,152 $50,690 $45,192 $42,177 $170,211
Operating
income as a
percent of
net sales
Water 12.0% 15.8% 13.4% 12.8% 13.6%
Enclosures 7.1% 8.1% 9.3% 10.5% 8.8%
Consolidated 8.3% 11.6% 10.8% 10.4% 10.4%
About Pentair, Inc.
Pentair ( http://www.pentair.com ) is a diversified operating company
headquartered in Minnesota. Its Water Group is a global leader in providing
innovative products and systems used worldwide in the movement, treatment,
storage and enjoyment of water. Pentair's Enclosures Group is a leader in the
global enclosures market, designing and manufacturing standard, modified and
custom enclosures that house and protect sensitive electronics and electrical
components. 2004 revenues from continuing operations were $2.28 billion, or
$2.76 billion on a pro forma basis (as if Pentair's 2004 acquisitions had been
completed at the beginning of the year). Pentair has approximately
13,000 employees worldwide.
Any statements made about the company's anticipated financial results are
forward-looking statements subject to risks and uncertainties such as
continued economic growth; the ability to integrate the WICOR acquisition
successfully and the risk that expected synergies may not be fully realized or
may take longer to realize than expected; foreign currency effects; retail and
industrial demand; product introductions; and pricing and other competitive
pressures. Forward-looking statements included herein are made as of the date
hereof, and the company undertakes no obligation to update publicly such
statements to reflect subsequent events or circumstances. Actual results
could differ materially from anticipated results.
SOURCE Pentair
Pentair Contacts:
Rachael Jarosh
Communications
763-656-5280
[email protected]
Mark Cain
Investor Relations
+1-763-656-5278
[email protected]