GOLDEN VALLEY, Minn.--(BUSINESS WIRE)--Feb. 6, 2007--Pentair, Inc.
(NYSE:PNR) announced today results for the fourth quarter and year
ended December 31, 2006. Fiscal year 2006 earnings per share (EPS)
from continuing operations were $1.81 compared with $1.80 for fiscal
year 2005. Sales for 2006 reached $3.15 billion compared to sales of
$2.95 billion for 2005, an increase of 7 percent. Free cash flow for
the year of $181 million was slightly better than anticipated, with
free cash flow conversion as a percentage of net income in line with
the Company's goal of 100 percent.
For the fourth quarter, EPS from continuing operations was $0.39,
an increase of 3 percent, on sales of $743.0 million as compared to
$732.1 million in the same period in 2005. Fourth quarter sales
reflect growth in the North American commercial and industrial
markets; growth in the European and Asian markets; and, as
anticipated, declines in pool sales linked to slowing pool starts and
an inventory drawdown by distribution customers.
According to Pentair Chairman and Chief Executive Officer, Randall
J. Hogan, "Overall, our fourth quarter results were in line with our
expectations. Earnings per share were higher than anticipated, driven
by tax benefits and operating improvements in Filtration and Technical
Products. Sales grew despite softness in some markets, reflecting the
value of the diversity in Pentair's end markets.
"Last year was challenging and our 2006 performance produced mixed
results. We faced economic headwinds yet strengthened our
organization, invested in growth, and enhanced our product lines to
respond to the accelerating technological needs of our customers.
Looking ahead, we are focused on improving Water margins and
maintaining Technical Products solid margins through continued
implementation of Pentair's Integrated Management System in all of our
businesses, and by re-establishing solid growth," Hogan said.
Water Group Fourth Quarter 2006 Comments
- The Water Group's fourth quarter sales of $500.8 million were
down 3 percent over the same period last year. Excluding the
impact of favorable foreign exchange, sales declined
approximately 4 percent. Excluding the pool and spa
businesses, Water sales grew nearly 4 percent in the quarter.
- Growth in emerging markets in Asia-Pacific, successful market
penetration in Europe and the Middle East, and strength in the
North American commercial and industrial markets were offset
by a significant decline in the pool and spa businesses and
softness in retail and residential pumps.
- Emerging markets in Asia-Pacific drove significant sales
growth reflecting the Company's successful sales into
desalination projects with the Codeline product. Continued
commercial market penetration in China also contributed to the
region's impressive growth.
- Market growth in Europe and penetration into the Middle East
drove strong sales with filtration and pump contributing
growth in the mid-teens.
- Sales in North American Filtration markets grew in the low
single digits. Commercial filtration and Everpure residential
filtration grew though slowing residential and marine markets
did offset some of this growth.
- Sales in North American Pump markets were essentially flat for
the quarter with strong sales in commercial and industrial
pump markets offset by slowing residential and retail sales.
Municipal market orders and backlog reached record levels in
the quarter though sales were down due to timing of shipments.
- As expected, sales in North American pool and spa markets
experienced a decline of almost 20 percent in the quarter.
Decreases reflect the inventory drawdown by pool distribution
customers as they positioned themselves for a softer overall
market. Fourth quarter 2006 early buy orders were better than
projected; however, the additional early buy orders are
scheduled to be shipped in the first quarter of 2007 and could
take the place of higher margin standard orders.
- Water's fourth quarter operating income totaled $36.5 million,
down 34 percent as compared to $55.5 million in the same
period in 2005.
- Water's fourth quarter operating margin was 7.3 percent, down
340 basis points as compared to the same period last year.
- The most significant factor in the year-over-year operating
margin comparison was lower volume, resulting in a 160 basis
point operating margin decline. Other factors affecting
operating margin included a mix shift to lower margin
products, which resulted in an 80 basis point decline, and an
excess inventory reserve established for pump motors the
Company no longer expects to need, which resulted in an
additional 80 basis point decline.
- The impact of these negative factors was moderated by price
increases implemented to offset inflationary cost increases;
significant savings from supply management initiatives; and
lower growth-related investment spending.
Technical Products Group Fourth Quarter Comments
- For the quarter, sales of $242.2 million reflect a 13 percent
gain compared to the same period last year. Excluding the
impact of acquisitions and favorable foreign exchange, sales
grew approximately 1 percent.
- Growth in Asian markets was about 30%, reflecting new customer
wins as well as the transition of OEM programs from North
America. Even excluding the effect of favorable foreign
exchange, growth was strong.
- In European markets, sales grew in the low teens with solid
growth in general electronics markets, particularly the test
and measurement and defense markets. Excluding the effect of
favorable foreign exchange, growth was in the mid single
digits.
- Excluding acquisitions, North American sales were down
slightly. Continued strong growth in industrial and commercial
markets was more than offset by severe declines in sales due
to telecommunication market weakness and data-communication
projects, which transitioned to Pentair's Asia operations or
ended.
- Technical Products operating income of $34.5 million was 15
percent higher than the same period last year. This
performance resulted from supply management savings,
productivity improvements, acquisitive growth, and pricing
that together more than offset raw material inflation and the
impact of lower telecommunication sales.
- Technical Products operating margin was 14.2 percent for the
quarter, up 20 basis points over the year-earlier period.
These results reflect the 17th consecutive quarter of
year-over-year operating margin improvement for Technical
Products.
- The Thermal Management businesses acquired in December 2005
exceeded sales, operating income and margin expectations in
2006.
Future Outlook and Comment
The Company sees continued opportunities among its diverse end
markets in 2007 and coming years, and affirms projected EPS guidance
for the full year 2007 of between $2.00 and $2.15. The Company is also
initiating EPS guidance for the first quarter 2007 of between $0.37
and $0.41, including a $0.02 to $0.03 negative impact in the quarter
for the Jung Pumpen acquisition (announced December 11, 2006). The
Jung Pumpen acquisition is expected to be EPS neutral for the full
year 2007.
Earnings Conference Call
As previously announced, Pentair will discuss the Company's
results, strategy and outlook on a conference call with investors at
12:00 p.m. Eastern today. The Company will host a live webcast of this
call from the Financial Information page of the Company's website
(http://www.pentair.com), and the webcast will be archived at the same
site.
About Pentair, Inc.
Pentair (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
Technical Products Group is a leader in the global enclosures and
thermal management markets, designing and manufacturing thermal
management products and standard, modified, and custom enclosures that
house and protect sensitive electronics and electrical components.
With 2006 revenues of $3.15 billion, Pentair employs approximately
15,000 people worldwide.
Caution concerning forward-looking statements
Any statements made about the company's anticipated financial
results are forward-looking statements subject to risks and
uncertainties such as continued economic growth, including the
strength of housing and related markets; the ability to successfully
limit any judgment arising out of the Horizon litigation; 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.
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
per-share data 2006 2005 2006 2005
----------------------------------------------------------------------
Net sales $743,038 $732,113 $3,154,469 $2,946,579
Cost of goods sold 534,472 524,304 2,248,219 2,098,558
----------------------------------------------------------------------
Gross profit 208,566 207,809 906,250 848,021
% of net sales 28.1% 28.4% 28.7% 28.8%
Selling, general and
administrative 134,366 128,002 541,209 478,907
% of net sales 18.1% 17.5% 17.2% 16.2%
Research and
development 14,038 12,935 58,055 46,042
% of net sales 1.9% 1.8% 1.8% 1.6%
----------------------------------------------------------------------
Operating income 60,162 66,872 306,986 323,072
% of net sales 8.1% 9.1% 9.7% 11.0%
Gain on sale of
assets, net 197 236 364 5,435
Net interest expense 13,020 11,263 51,881 44,989
% of net sales 1.7% 1.5% 1.6% 1.5%
----------------------------------------------------------------------
Income from continuing
operations before
income taxes 47,339 55,845 255,469 283,518
% of net sales 6.4% 7.6% 8.1% 9.6%
Provision for income
taxes 8,717 16,889 71,702 98,469
Effective tax
rate 18.4% 30.2% 28.1% 34.7%
----------------------------------------------------------------------
Income from continuing
operations 38,622 38,956 183,767 185,049
Gain (loss) on
disposal of
discontinued
operations, net of
tax 15 -- (36) --
----------------------------------------------------------------------
Net income $38,637 $38,956 $183,731 $185,049
======================================================================
Earnings per common
share
Basic
Continuing operations $0.39 $0.39 $1.84 $1.84
Discontinued
operations -- -- -- --
----------------------------------------------------------------------
Basic earnings per
common share $0.39 $0.39 $1.84 $1.84
======================================================================
Diluted
Continuing operations $0.39 $0.38 $1.81 $1.80
Discontinued
operations -- -- -- --
----------------------------------------------------------------------
Diluted earnings per
common share $0.39 $0.38 $1.81 $1.80
======================================================================
Weighted average
common shares
outstanding
Basic 98,747 100,605 99,784 100,665
Diluted 100,233 102,314 101,371 102,618
Cash dividends
declared per common
share $0.14 $0.13 $0.56 $0.52
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
December 31 December 31
In thousands 2006 2005
----------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $54,820 $48,500
Accounts and notes receivable, net 422,134 423,847
Inventories 398,857 349,312
Deferred tax assets 50,578 48,971
Prepaid expenses and other current assets 31,239 24,394
----------------------------------------------------------------------
Total current assets 957,628 895,024
Property, plant and equipment, net 330,372 311,839
Other assets
Goodwill 1,718,771 1,718,207
Intangibles, net 287,011 266,533
Other 71,197 62,152
----------------------------------------------------------------------
Total other assets 2,076,979 2,046,892
----------------------------------------------------------------------
Total assets $3,364,979 $3,253,755
======================================================================
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $14,563 $--
Current maturities of long-term debt 7,625 4,137
Accounts payable 206,286 207,320
Employee compensation and benefits 88,882 95,552
Current pension and post-retirement benefits 7,918 --
Accrued product claims and warranties 44,093 43,551
Current liabilities of discontinued operations -- 192
Income taxes 22,493 17,518
Accrued rebates and sales incentives 39,419 45,374
Other current liabilities 90,003 111,026
----------------------------------------------------------------------
Total current liabilities 521,282 524,670
Other liabilities
Long-term debt 721,873 748,477
Pension and other retirement compensation 207,676 152,780
Post-retirement medical and other benefits 47,842 73,949
Deferred tax liabilities 109,781 125,785
Other non-current liabilities 86,526 70,455
Non-current liabilities of discontinued
operations -- 2,029
----------------------------------------------------------------------
Total liabilities 1,694,980 1,698,145
Shareholders' equity 1,669,999 1,555,610
----------------------------------------------------------------------
Total liabilities and shareholders' equity $3,364,979 $3,253,755
======================================================================
Days sales in accounts receivable (13 month
moving average) 54 54
Days inventory on hand (13 month moving
average) 76 70
Days in accounts payable (13 month moving
average) 56 56
Debt/total capital 30.8% 32.6%
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Year ended
-----------------------
December 31 December 31
In thousands 2006 2005
----------------------------------------------------------------------
Operating activities
Net income $183,731 $185,049
Adjustments to reconcile net income to net
cash provided by operating activities
Loss on disposal of discontinued operations 36 --
Depreciation 56,899 56,565
Amortization 18,197 15,995
Deferred income taxes (11,085) 5,898
Stock compensation 25,377 24,186
Excess tax benefits from stock-based
compensation (3,043) (8,676)
Gain on sale of assets, net (364) (5,435)
Changes in assets and liabilities, net of
effects of business acquisitions
Accounts and notes receivable 15,873 (20,946)
Inventories (39,354) (19,201)
Prepaid expenses and other current assets (5,052) (120)
Accounts payable (18,935) 6,629
Employee compensation and benefits (13,229) (21,394)
Accrued product claims and warranties 456 (1,099)
Income taxes 9,556 10,357
Other current liabilities (13,784) 4,609
Pension and post-retirement benefits 19,398 16,512
Other assets and liabilities 6,886 (439)
----------------------------------------------------------------------
Net cash provided by continuing
operations 231,563 248,490
Net cash provided by (used for)
operating activities of discontinued
operations 48 (632)
----------------------------------------------------------------------
Net cash provided by operating
activities 231,611 247,858
Investing activities
Capital expenditures (51,078) (62,471)
Proceeds from sale of property and equipment 684 17,111
Acquisitions, net of cash acquired (29,286) (150,534)
Divestitures (24,007) (10,155)
Proceeds from sale of investment 1,153 23,835
Other (7,523) (2,071)
----------------------------------------------------------------------
Net cash used for investing
activities (110,057) (184,285)
Financing activities
Net short-term borrowings 13,831 --
Proceeds from long-term debt 608,975 413,279
Repayment of long-term debt (631,755) (395,978)
Excess tax benefits from stock-based
compensation 3,043 8,676
Proceeds from exercise of stock options 4,066 8,380
Repurchases of common stock (59,359) (25,000)
Dividends paid (56,583) (53,134)
----------------------------------------------------------------------
Net cash used for financing
activities (117,782) (43,777)
Effect of exchange rate changes on cash 2,548 (2,791)
----------------------------------------------------------------------
Change in cash and cash equivalents 6,320 17,005
Cash and cash equivalents, beginning of period 48,500 31,495
----------------------------------------------------------------------
Cash and cash equivalents, end of period $54,820 $48,500
======================================================================
Free cash flow
Net cash provided by operating activities $231,611 $247,858
Less capital expenditures (51,078) (62,471)
Proceeds from sale of property and equipment 684 17,111
----------------------------------------------------------------------
Free cash flow $181,217 $202,498
======================================================================
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment for
2006 (Unaudited)
First Qtr Second Qtr Third Qtr Fourth Qtr Year
In thousands 2006 2006 2006 2006 2006
----------------------------------------------------------------------
Net sales to
external
customers
Water $517,169 $605,516 $531,703 $500,837 $2,155,225
Technical
Products 254,220 256,506 246,317 242,201 999,244
----------------------------------------------------------------------
Consolidated $771,389 $862,022 $778,020 $743,038 $3,154,469
======================================================================
Intersegment
sales
Water $50 $55 $140 $214 $459
Technical
Products 889 1,312 1,133 623 3,957
Other (939) (1,367) (1,273) (837) (4,416)
----------------------------------------------------------------------
Consolidated $-- $-- $-- $-- $--
======================================================================
Operating income
(loss)
Water $55,587 $84,191 $36,226 $36,494 $212,498
Technical
Products 37,704 39,678 37,050 34,473 148,905
Other (14,735) (15,894) (12,983) (10,805) (54,417)
----------------------------------------------------------------------
Consolidated $78,556 $107,975 $60,293 $60,162 $306,986
======================================================================
Operating income
as a percent of
net sales
Water 10.7% 13.9% 6.8% 7.3% 9.9%
Technical
Products 14.8% 15.5% 15.0% 14.2% 14.9%
Consolidated 10.2% 12.5% 7.7% 8.1% 9.7%
Pentair, Inc. and Subsidiaries
Supplemental Financial Information by Reportable Business Segment for
2005 (Unaudited)
First Qtr Second Qtr Third Qtr Fourth Qtr Year
In thousands 2005 2005 2005 2005 2005
----------------------------------------------------------------------
Net sales to
external
customers
Water $512,088 $585,657 $515,945 $517,815 $2,131,505
Technical
Products 197,547 202,866 200,363 214,298 815,074
----------------------------------------------------------------------
Consolidated $709,635 $788,523 $716,308 $732,113 $2,946,579
======================================================================
Intersegment
sales
Water $22 $187 $280 $(341) $148
Technical
Products 402 630 407 770 2,209
Other (424) (817) (687) (429) (2,357)
----------------------------------------------------------------------
Consolidated $-- $-- $-- $-- $--
======================================================================
Operating income
(loss)
Water $60,489 $92,167 $58,964 $55,520 $267,140
Technical
Products 25,172 26,325 27,778 29,954 109,229
Other (13,575) (11,258) (9,862) (18,602) (53,297)
----------------------------------------------------------------------
Consolidated $72,086 $107,234 $76,880 $66,872 $323,072
======================================================================
Operating income
as a percent of
net sales
Water 11.8% 15.7% 11.4% 10.7% 12.5%
Technical
Products 12.7% 13.0% 13.9% 14.0% 13.4%
Consolidated 10.2% 13.6% 10.7% 9.1% 11.0%
CONTACT: Pentair
Rachael Jarosh, Communications and Investor Relations,
763-656-5280
E-mail: [email protected]
SOURCE: Pentair, Inc.