ST. PAUL, Minn., Oct 19, 2001 /PRNewswire via COMTEX/ -- A strategically
balanced portfolio of businesses, rigorous cost controls, and the benefits of a
turnaround well underway in its Tools Group enabled Pentair, Inc. (NYSE: PNR) to
deliver $647 million in sales and earnings per share of $0.50 in the third
quarter of 2001 in spite of severe economic difficulties in the global
marketplace, the company announced today.
"In a period of reduced consumer confidence and lower capital spending, Pentair
has concentrated on strengthening its market positions, controlling costs,
improving productivity, and increasing financial discipline to build cash flow,"
said Randall J. Hogan, president and chief executive officer. "These actions are
helping us navigate through difficult times, and are positioning us well to
capitalize on the opportunities that will emerge when the business climate
improves."
For the three months ended September 29, 2001, Pentair had operating income of
$51.2 million, compared to $61.4 million in the third quarter of 2000.
Continuing diluted earnings per share (EPS) for the 2001 third quarter was
$0.50, compared to $0.58 in the year-earlier quarter. Sales for the third
quarter of 2001 totaled $646.6 million, versus $691.8 million in the third
quarter of 2000.
Pentair's free cash flow for the third quarter totaled $56 million, bringing
total free cash flow for the first nine months of 2001 to $110 million, on track
with the company's goal of $150 million for the year.
"Our efforts to improve working capital productivity have paid off handsomely
through the first nine months of 2001," said David D. Harrison, Pentair's chief
financial officer. "Thus far this year, the company has shown a $120 million
improvement from the previous year's free cash flow, with a 149 percent
conversion of year-to-date 2001 net income. In addition, third quarter SG&A
expenses were reduced $4 million from those of the same period last year, due
primarily to cost control initiatives in the Tools and Enclosures groups
partially offset by process improvement investments. Further, we realized more
than $16 million in additional cost reductions in the third quarter 2001
compared to the same period last year."
For the nine months ended September 29, 2001, operating income was $164.4
million, compared to $213.5 million (including restructuring charge income of
$2.5 million) in the comparable 2000 period. Continuing diluted EPS in the first
nine months of 2001 was $1.50, versus $2.06 a year earlier. Sales for the first
nine months of 2001 were $2.0 billion, compared to $2.1 billion in the
year-earlier period.
On a segment-by-segment basis, Pentair reported that its Tools business recorded
its third consecutive quarter of operating margin improvement, while the Water
Technologies business held margins in the double digits and increased sales in a
difficult market environment. The performance of the Enclosures business
declined as the slowdown in capital spending by both industrial and
telecom/datacom customers persisted.
In Tools, third quarter sales were below 2000 levels, but operating income
showed a 63 percent improvement and comparable gains were reported in free cash
flow from reduced inventory and receivables. Much of the performance improvement
was attributed to the Group's realigned supply management strategies and cost
control programs, both of which are principal elements of the segment's recovery
strategy.
Pressure washer sales continued strong through the third quarter. The company's
DeVilbiss Air Power Company (DAPC) unit was honored as Home Depot's "Partner of
the Year," in recognition of the strong sales of DAPC pressure washers.
A new line of Porter-Cable branded air tools and accessories was launched
successfully in September, and the company's new 9.6-volt cordless drill
generated strong sales at the quarter's end. A number of trade publications
presented top awards for innovative Porter-Cable and Delta tools during the
third quarter. Among the winners were Porter-Cable's 9290, the world's first
cordless router, the BN200V12 cordless brad nailer, NS150A narrow crown stapler,
and the 557 biscuit jointer. Delta winners included the 50-868 ambient air
cleaner, the 23-710 sharpening machine, the 17-965 drill press, and the 28-280
14-inch band saw.
Third quarter 2001 sales in the Water Technologies Group were up eight percent
from prior year, spurred by substantial gains in the Pool and Spa Equipment
business, while Pump and Water Treatment sales were below 2000 levels because of
slowing export demand and domestic economic weakness. Operating income was flat
to the prior year.
Although the sales mix reduced the Water Technologies Group's overall margin
rate, Pentair said strong cost control measures in all of the Group's businesses
lessened the impact. The Water Technologies group continues to drive cost
efficiency with its lean manufacturing processes and other strong cost control
measures.
Third quarter highlights of the Water Technologies Group included the selection
of Pentair's CodeLine vessels for a new desalination plant in Tampa Bay, the
largest such project in the U.S. The order is valued at more than $1.5 million.
Also in the quarter, Pentair introduced a new line of reverse osmosis vessels,
called EuroLine, which are better suited to the lower-pressure filtration
applications common in Europe.
Third quarter sales and operating income were down significantly in the
Enclosures Group, as industrial and technology demand continued to be weak in
North America, and declined further in Europe, where sales to that region are
off approximately 35 percent year over year. Enclosures profitability improved
in North America in the third quarter of 2001 compared to the second quarter,
but declined precipitously in Europe during the same period. Pentair continues
to accelerate its cost control programs in Enclosures to restore performance.
The Enclosures Group improved its cost position by completing the relocation of
small enclosures production to an existing plant in Reynosa, Mexico; reducing
headcount by 170 employees through early retirement and lay-offs; and relocating
the European enclosures headquarters from Scotland to an existing facility in
Germany. Pentair said it named Michael V. Schrock, 48, formerly president of
Pentair Water Technologies -- Americas, to head the Enclosures Group, and that
new senior management at the Group's European operations has recently been
installed.
Among its third-quarter business achievements, the Enclosures Group won a
contract for Compaq's next generation rack-mounted data storage unit and was
selected as the next generation power solutions provider for Lucent. The Group
also received the first release of 15 systems of Tellabs' 6100 series chassis
and won a major rack mounting system program from Dell. The wins will
potentially represent more than $20 million in sales for 2002.
"Looking across the company, the problems that plagued Pentair's Tools Group in
2000 have been addressed, and this business is now focused on growing its top
line, developing new products, and leveraging its strong brands," Hogan said.
"Our company-wide cost control and productivity improvement activities have
supported margins, but Pentair, like most other companies, is dealing with
unprecedented business pressures.
"We realized an immediate drop in demand after September 11, and although some
of that demand appears to be returning, it's clear that the global economy is
very unsettled," Hogan added. "We are confident that we have control of the
operating levers in each of our three groups, but given the prevailing economic
conditions, we expect fourth quarter earnings comparable to those of the third
quarter, at best. Given continued benefits from our cost control, debt
reduction, and lean enterprise initiatives, we look for double-digit earnings
improvement and a stronger economy in 2002."
A Pentair conference call scheduled for 9:00 a.m. CDT today will be webcast live
via 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, headquartered in St. Paul, produces a wide range of tools under several
well-known brand names, including Porter-Cable, Delta, and Ex-Cell. In addition
to tools, the company's core businesses include water technologies -- including
water pumps, water treatment products, and pool and spa equipment -- and
enclosures, which house and protect delicate electronic and computer
technologies. Pentair employs 12,500 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, retail and industrial demand and other competitive pressures,
the ability to successfully strengthen management and other uncertainties as
described in the company's Annual Report on Form 10K for the year ended December
31, 2000. Actual results could differ materially from anticipated results.
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three months ended Nine months ended
September 29 September 30 September 29 September 30
In thousands,
except per-share
data 2001 2000 2001 2000
Net sales $646,559 $691,784 $2,020,018 $2,073,236
Cost of goods sold 487,033 518,925 1,525,723 1,528,328
Gross profit 159,526 172,859 494,295 544,908
Selling, general and
administrative 100,537 104,295 307,112 310,477
Research and
development 7,805 7,214 22,794 23,360
Restructuring charge
(income) -- -- -- (2,468)
Operating income 51,184 61,350 164,389 213,539
Net interest expense 14,409 18,753 48,366 56,280
Write-off of investment -- -- 2,500 --
Income from continuing
operations before
income taxes 36,775 42,597 113,523 157,259
Provision for income
taxes 12,104 14,576 39,733 56,924
Income from continuing
operations 24,671 28,021 73,790 100,335
Income (loss) from
discontinued
operations, net of tax -- (14,382) -- (16,797)
Cumulative effect of
accounting change,
net of tax -- -- -- (1,222)
Net income $ 24,671 $ 13,639 $ 73,790 $ 82,316
Earnings per common share
Basic
Continuing operations $ 0.50 $ 0.58 $ 1.50 $ 2.07
Income (loss) from
discontinued operations -- (0.30) -- (0.35)
Cumulative effect of
accounting change -- -- -- (0.02)
Basic earnings per
common share $ 0.50 $ 0.28 $ 1.50 $ 1.70
Diluted
Continuing operations $ 0.50 $ 0.58 $ 1.50 $ 2.06
Income (loss) from
discontinued operations -- (0.30) -- (0.35)
Cumulative effect of
accounting change -- -- -- (0.02)
Diluted earnings per
common share $ 0.50 $ 0.28 $ 1.50 $ 1.69
Weighted average common
shares outstanding
Basic 49,082 48,521 49,040 48,497
Diluted 49,410 48,568 49,270 48,628
Cash dividends
declared per
common share $ 0.18 $ 0.17 $ 0.52 $ 0.49
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
September 29 December 31 September 30
2001 2000 2000
In thousands (Unaudited) (Unaudited)
Assets
Current assets
Cash and cash equivalents $ 32,816 $ 34,944 $ 54,387
Accounts and notes
receivable, net 460,732 468,081 524,631
Inventories 343,127 392,495 422,909
Other current assets 102,226 95,019 82,594
Net assets of discontinued
operations 106,683 101,263 130,335
Total current assets 1,045,584 1,091,802 1,214,856
Property, plant and
equipment, net 340,187 352,984 351,203
Goodwill, net 1,111,992 1,141,102 1,142,047
Other assets 93,814 58,137 59,838
Total assets $2,591,577 $2,644,025 $2,767,944
Liabilities and
Shareholders' Equity
Current liabilities
Short-term borrowings $ 61,890 $ 108,141 $ 198,351
Current maturities of
long-term debt 4,371 23,999 22,584
Accounts and notes payable 207,721 250,088 243,436
Accrued expenses and other
current liabilities 257,265 266,564 275,491
Total current liabilities 531,247 648,792 739,862
Long-term debt 781,885 781,834 827,891
Other noncurrent liabilities 211,649 202,808 171,563
Total liabilities 1,524,781 1,633,434 1,739,316
Shareholders' equity 1,066,796 1,010,591 1,028,628
Total liabilities and
shareholders' equity $2,591,577 $2,644,025 $2,767,944
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended
September 29 September 30
In thousands 2001 2000
Operating activities
Net income $73,790 $82,316
Depreciation 48,662 45,471
Amortization 30,966 29,281
Deferred income taxes 3,843 (1,669)
Restructuring charge (income) -- (2,468)
Other expense, write-off of investment 2,500 --
Cumulative effect of accounting change -- 1,222
Changes in assets and liabilities, net of
effects of business acquisitions
Accounts and notes receivable 5,416 (43,911)
Inventories 47,978 (78,297)
Prepaid expenses and other current assets (11,963) (19,933)
Accounts payable (40,418) 28,662
Employee compensation and benefits (8,353) (3,471)
Accrued product claims and warranties (1,887) (5,422)
Income taxes 10,922 16,405
Other current liabilities (8,018) (17,224)
Pension and post-retirement benefits 7,614 4,399
Other assets and liabilities (4,851) (15,643)
Net cash provided by continuing operations 156,201 19,718
Net cash used for discontinued operations (8,944) 13,177
Net cash provided by (used for) operating
activities 147,257 32,895
Investing activities
Capital expenditures (37,639) (43,556)
Acquisitions, net of cash acquired (1,937) --
Equity investments (20,564) --
Other -- (371)
Net cash used for investing activities (60,140) (43,927)
Financing activities
Net short-term borrowings (46,937) 47,739
Proceeds from long-term debt 2,676 6,030
Repayment of long-term debt (22,582) (35,135)
Proceeds from exercise of stock options 1,492 1,619
Repurchases of common stock (1,458) (410)
Dividends paid (25,499) (23,767)
Net cash provided by (used for) financing
activities (92,308) (3,924)
Effect of exchange rate changes on cash 3,063 6,328
Change in cash and cash equivalents (2,128) (8,628)
Cash and cash equivalents, beginning of period 34,944 63,015
Cash and cash equivalents, end of period $32,816 $54,387
Pentair, Inc. and Subsidiaries
Financial Information by Reportable Business Segment (Unaudited)
Three months ended Nine months ended
September 29 September 30 September 29 September 30
In thousands 2001 2000 2001 2000
Net sales to
external customers
Tools $ 250,677 $ 280,203 $ 776,974 $ 787,188
Water 231,565 214,119 693,434 707,813
Enclosures 164,317 197,462 549,610 578,235
Consolidated $ 646,559 $ 691,784 $2,020,018 $2,073,236
Operating income
(loss) before
restructuring charge
Tools (1) $ 17,524 $ 10,772 $ 43,605 $ 50,012
Water 28,427 28,512 92,270 100,709
Enclosures 8,740 24,786 39,811 72,477
Other (3,507) (2,720) (11,297) (12,127)
Consolidated $ 51,184 $ 61,350 $ 164,389 $ 211,071
Operating income
(loss) before
restructuring charge
as a percent of net
sales
Tools (1) 7.0% 3.8% 5.6% 6.4%
Water 12.3% 13.3% 13.3% 14.2%
Enclosures 5.3% 12.6% 7.2% 12.5%
Consolidated 7.9% 8.9% 8.1% 10.2%
Restructuring charge
(income)
Tools $ -- $ -- $ -- $ (1,171)
Water -- -- -- --
Enclosures -- -- -- (1,297)
Other -- -- -- --
Consolidated $ -- $ -- $ -- $ (2,468)
Operating Income
(Loss) After
Restructuring Charge
Tools (1) $ 17,524 $ 10,772 $ 43,605 $ 51,183
Water 28,427 28,512 92,270 1
SOURCE Pentair, Inc.
CONTACT: Mark Cain of Pentair, +1-651-639-5278