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Pentair's 3rd Quarter EPS in Line with Revised Expectations, Sales Up 18%; Water and Enclosures Groups Continue Strong Growth Momentum
10.17.2000

MINNEAPOLIS, Oct. 17 /PRNewswire/ -- Pentair, Inc. (NYSE: PNR) reported today that its revenues for the third quarter of 2000 increased 18 percent, while earnings per share (EPS) of $.26 were in line with revised expectations.

For the quarter ended September 30, 2000, net sales totaled $715.9 million, versus $604.9 million in the year-earlier quarter; operating income was $39.1 million, versus $62.7 million. EPS in the 1999 quarter was $.69.

For the nine months ended September 30, 2000, net sales totaled $2.205 billion, an increase of 39 percent from the sales of $1.583 billion in the initial three quarters of 1999. Operating income for the first nine months of 2000 was $191.5 million, or $1.71 per share, versus 1999 operating income of $122.7 million, or $1.40 per share, including restructuring charges.

"Pentair's water and enclosures groups generated outstanding sales and earnings growth in the third quarter, however, their performance was offset by the disappointing results achieved by the tools and equipment businesses," said Winslow H. Buxton, chairman and chief executive officer. "The actions taken to turn around our underperforming tools and equipment businesses are proceeding with great intensity. We fully expect to see steady improvement in the company's operating results in the ensuing quarters."

In Water Technologies, a sales gain of 30 percent and an operating income improvement of 42 percent reflect solid organic performance gains, as well as the contributions of Essef, acquired in early August of last year. Margins in the Group increased 120 basis points over the third quarter of 1999. Municipal pump markets were up strongly, September was an all-time sales record for the Hydromatic pump brand, and order backlogs also remain exceptionally strong across most lines. Pool and spa equipment sales grew in the double digits during the third quarter, and the Water Treatment business performed equally well, despite the unfavorable impact of foreign currency translation.

In the Enclosures Group, revenues grew 18 percent -- or 22 percent in local currencies -- and operating income improved by 51 percent. Pentair's enclosure businesses have seen tremendous growth in the telecom and datacom markets, and with industrial original equipment manufacturers. Sales to these markets are up substantially against a strong comparison last year, and Pentair has landed new projects with Lucent, Gateway, Radisys, Ericsson, Qualcomm, and Corvis, to name a few. In Europe, September was a record sales month with third quarter orders up 21 percent in local currencies.

Lincoln Industrial contributed strong profits to the Equipment Group, but losses in Service Equipment (SE) continued to hurt results. As announced on September 14, an $8 million reserve was booked for receivables and another $8 million was reserved for inventory, both within the SE businesses. The SE manufacturing facility in Jonesboro, Arkansas ceased manufacturing as the company completed the delayed implementation of its Asian sourcing strategy. Responsibility for Lincoln lubrication products has been centralized at Lincoln Industrial, strengthening the automotive lubrication business and improving customer service. Pentair continues to evaluate the long-term potential of the businesses in the Equipment Group.

Third-quarter revenues grew 27 percent in the Tools Group while operating income declined 63 percent. The profit shortfall resulted from a chain of events linked to difficulties encountered during the first quarter start-up of a new tools distribution center in Tennessee.

Randall J. Hogan, president and chief operating officer, cautioned that the turnaround of the Tools Group is being implemented to assure both near-term improvement and long-term enhancement of customer service and the financial performance of the business, and will not be completed until sometime in 2001.

A Pentair conference call scheduled for 9:00 a.m. CDT today will be webcast live via http://www.pentair.com . The conference call, which can be found on the site's "Financial Information" page, will be archived at the same location.

Pentair is a diversified manufacturer operating in tools, equipment, water technologies, and enclosures markets. The company employs 14,000 people in more than 50 locations around the world.

Any statements made about the company's anticipated financial results are forward-looking statements subject to risks and uncertainties such as continued economic growth in North America, strong retail demand during the Christmas selling season, pricing and other competitive pressures, Pentair's ability to rapidly strengthen management in the affected businesses, and other uncertainties as described in the company's Annual Report on Form 10K for the year ended December 31, 1999. Actual results could differ materially from anticipated results.

                                PENTAIR, INC.
                CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

    In thousands,
     except                  Three Months Ended          Nine Months Ended
      per-share           Sept. 30      Sept. 25     Sept. 30      Sept. 25
       data                 2000          1999         2000          1999

    Net sales             $715,926      $604,918   $2,204,817    $1,582,636
    Cost of goods sold     533,529       418,719    1,577,306     1,086,593
      Gross profit         182,397       186,199      627,511       496,043
    Selling, general
     and administrative    135,009       117,066      408,699       316,745
    Research and
     development             8,252         6,481       27,117        18,583
    Restructuring charge        --            --          200        38,000
    Operating income        39,136        62,652      191,495       122,715
    Net interest expense    20,061        14,188       60,471        26,180
    Income before
     income taxes           19,075        48,464      131,024        96,535
    Income taxes             6,402        18,655       47,823        36,201
    Net income             $12,673       $29,809      $83,201       $60,334

    Earnings per
     common share
      Basic                  $0.26         $0.70        $1.72         $1.42
      Diluted                $0.26         $0.69        $1.71         $1.40

    Weighted average
     common shares
      outstanding
      Basic                 48,521        42,684       48,497        42,517
      Diluted               48,568        43,150       48,628        43,087


                                PENTAIR, INC.
       FINANCIAL INFORMATION BY REPORTABLE BUSINESS SEGMENT (UNAUDITED)

                     Nine        Third       Second        First
                   Months      Quarter      Quarter      Quarter        Year
    In thousands     2000         2000         2000         2000        1999

    Net Sales
    Tools           $766,018    $265,543     $263,780    $236,695    $852,869
    Equipment        190,911      51,288       67,406      72,217     308,954
    Water            690,168     208,561      255,627     225,980     572,259
    Enclosures       557,720     190,534      189,800     177,386     633,671
    Other                 --          --           --          --          --
    Consolidated  $2,204,817    $715,926     $776,613    $712,278  $2,367,753

    Operating Income (Loss)
     Before Restructuring Charge

    Tools            $49,278      $9,262      $16,144     $23,872    $106,987
    Equipment        (18,847)    (20,704)        (776)      2,633      27,555
    Water            100,708      28,512       41,448      30,748      73,362
    Enclosures        72,687      24,786       24,692      23,209      63,089
    Other            (12,131)     (2,720)      (3,791)     (5,620)    (18,662)
    Consolidated    $191,695     $39,136      $77,717     $74,842    $252,331

    Operating Income (Loss)
     Before Restructuring Charge
      as a Percent of Net Sales

    Tools                6.4%        3.5%         6.1%       10.1%       12.5%
    Equipment           (9.9%)     (40.4%)       (1.2%)       3.6%        8.9%
    Water               14.6%       13.7%        16.2%       13.6%       12.8%
    Enclosures          13.0%       13.0%        13.0%       13.1%       10.0%
    Consolidated         8.7%        5.5%        10.0%       10.5%       10.7%

    Restructuring Charge
     (Income) Expense

    Tools            $(1,171)        $--          $--     $(1,171)     $6,305
    Equipment          2,668          --           --       2,668      14,952
    Water                 --          --           --          --          --
    Enclosures        (1,297)         --           --      (1,297)     16,743
    Consolidated        $200         $--          $--        $200     $38,000

    Operating Income (Loss)
     After Restructuring Charge

    Tools            $50,449       $9,262     $16,144     $25,043    $100,682
    Equipment        (21,515)     (20,704)       (776)        (35)     12,603
    Water            100,708       28,512      41,448      30,748      73,362
    Enclosures        73,984       24,786      24,692      24,506      46,346
    Other            (12,131)      (2,720)     (3,791)     (5,620)    (18,662)
    Consolidated    $191,495      $39,136     $77,717     $74,642    $214,331

        In the second quarter of 2000, we reorganized our management reporting

structure into four segments, from the three segments reported in the

first quarter of 2000. Prior period amounts have been restated for this

change. In 1999, we recorded an initial restructuring charge of

$38.0 million $24.1 million after-tax) and in the first quarter of 2000

recorded an additional net restructuring charge of $0.2 million

($0.1 million after-tax). The status and progress of the projects

implemented in 1999 were re-evaluated in the first quarter and a reduction

for a change in the original estimate of $6.3 million was recorded. Three

new related projects were determined as restructuring items and an

additional $6.5 million charge was recorded.

                                PENTAIR, INC.
       FINANCIAL INFORMATION BY REPORTABLE BUSINESS SEGMENT (UNAUDITED)

                     Fourth         Nine       Third      Second       First
                    Quarter       Months     Quarter     Quarter     Quarter
    In thousands       1999         1999        1999        1999        1999
    Net Sales
    Tools           $344,125     $508,744    $209,255    $149,423    $150,066
    Equipment         82,804      226,150      73,115      79,594      73,441
    Water            185,824      386,435     160,865     121,937     103,633
    Enclosures       172,364      461,307     161,683     156,271     143,353
    Other                 --           --          --          --          --
    Consolidated    $785,117   $1,582,636    $604,918    $507,225    $470,493

    Operating Income (Loss)
     Before Restructuring Charge

    Tools            $47,859      $59,128     $24,702     $15,611     $18,815
    Equipment          6,896       20,659       6,482       8,338       5,839
    Water             21,602       51,760      20,113      17,595      14,052
    Enclosures        19,885       43,204      16,406      14,405      12,393
    Other             (4,626)     (14,036)     (5,051)     (4,324)     (4,661)
    Consolidated     $91,616     $160,715     $62,652     $51,625     $46,438

    Operating Income (Loss)
     Before Restructuring Charge
      as a Percent of Net Sales

    Tools               13.9%        11.6%       11.8%       10.4%       12.5%
    Equipment            8.3%         9.1%        8.9%       10.5%        8.0%
    Water               11.6%        13.4%       12.5%       14.4%       13.6%
    Enclosures          11.5%         9.4%       10.1%        9.2%        8.6%
    Consolidated        11.7%        10.2%       10.4%       10.2%        9.9%

    Restructuring Charge
     (Income) Expense

    Tools                $--       $6,305         $--         $--      $6,305
    Equipment             --       14,952          --          --      14,952
    Water                 --           --          --          --          --
    Enclosures            --       16,743          --          --      16,743
    Consolidated         $--      $38,000         $--         $--     $38,000

    Operating Income (Loss)
     After Restructuring Charge

    Tools            $47,859      $52,823     $24,702     $15,611     $12,510
    Equipment          6,896        5,707       6,482       8,338      (9,113)
    Water             21,602       51,760      20,113      17,595      14,052
    Enclosures        19,885       26,461      16,406      14,405      (4,350)
    Other             (4,626)     (14,036)     (5,051)     (4,324)     (4,661)
    Consolidated     $91,616     $122,715     $62,652     $51,625      $8,438

        In the second quarter of 2000, we reorganized our management reporting

structure into four segments, from the three segments reported in the

first quarter of 2000. Prior period amounts have been restated for this

change. In 1999, we recorded an initial restructuring charge of

$38.0 million $24.1 million after-tax) and in the first quarter of 2000

recorded an additional net restructuring charge of $0.2 million ($0.1

million after-tax). The status and progress of the projects implemented

in 1999 were re-evaluated in the first quarter and a reduction for a

change in the original estimate of $6.3 million was recorded. Three new

related projects were determined as restructuring items and an additional

$6.5 million charge was recorded.

CONTACT: Mark Cain of Pentair, Inc., 612-486-2761

SOURCE Pentair, Inc.

CONTACT: Mark Cain of Pentair, Inc., 612-486-2761/

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