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Pentair's Fourth Quarter and Full Year 2000 Results Meet Revised Expectations; Cautious Optimism Expressed for Improved Performance as 2001 Progresses
02.01.2001

ST. PAUL, Minn., Feb. 1 /PRNewswire/ -- Pentair, Inc. (NYSE: PNR) reported today that sales from continuing businesses totaled $2.7 billion for the year ended December 31, 2000, an increase of 30 percent from 1999. The company said fourth quarter net income and diluted earnings per share (EPS), including a non-recurring charge of $27 million for restructuring, were significantly below year-earlier levels but in line with guidance issued last month. Pre-restructuring charge net income for full year 2000, including $30 million of non-recurring working capital write-offs in Tools, was $97.2 million, or $1.99 per share, down from $2.55 per share in the previous year. Improvements in working capital drove Pentair's free cash flow for 2000 to a record $113 million compared to $86 million in 1999.

The impact of a slower economy on the sales of the company's Tools businesses resulted in a seven percent decline in Pentair's revenues for the quarter ended December 31, 2000, and an 81 percent drop in earnings from continuing operations. Fourth quarter sales from continuing businesses totaled $674.8 million, versus $722.1 million in the comparable 1999 period; pre-restructuring charge operating earnings were $15.7 million versus $84.7 million; and pre-restructuring charge net income was $(1.0) million, or $(0.02) per share, versus $39.6 million or $.83 per share in 1999. In the fourth quarter of 2000, the company recorded a $27 million restructuring charge and established working capital reserves of $25 million to account for weakened marketplace conditions.

Pentair sales and earnings for 2000 and 1999 have been restated in accordance with new accounting standards to reclass both outbound freight (from sales) and distribution expense (from SG&A) to Cost of Goods Sold, and to reflect the discontinuation of the equipment segment. Sales and earnings for 2000 were also restated in accordance with new SEC revenue recognition guidelines.

"The fourth quarter economic slowdown certainly had a negative impact on our sales, particularly in our Tools segment, but we had already begun planning a major restructuring to revitalize the Tools business and restore the entire company's long-term growth momentum," said Randall J. Hogan, president and chief executive officer. "We have since implemented prompt and effective actions to streamline the company and position it to compete more successfully in a radically changed global economy. Today, we are cautiously optimistic that Pentair's financial performance will improve steadily throughout 2001 and beyond.

"Our restructuring will yield an estimated $20 million annual cost savings, and the benefits will begin to be reflected in the first quarter of 2001," Hogan added. "Since the end of the third quarter, we have reduced the company's payroll by 400 jobs. About 60 of the reductions came from the consolidation of key support services within the three operating businesses. An additional 340 jobs were cut within the Tools segment, where we also closed production operations in the last two weeks of December and the first two weeks of January. The Tools segment now has a substantially improved cost and inventory position."

Pentair said the cutbacks included approximately 50 percent of the corporate headquarters staff, which had been situated in two locations in the Twin Cities. As a result of these job reductions, the company has vacated its downtown Minneapolis executive offices. The company's headquarters now is consolidated in St. Paul, Minnesota, where executive staff formerly had been based and recently has been occupied by corporate services staff.

Hogan, who became CEO on January 1, 2001, said priorities for this year include completing the turnaround of the company's Tools segment, completing the disposition of the non-core equipment businesses, and expanding the water and enclosure businesses.

Sales in the Tools segment totaled $1.1 billion in 2000, a 22 percent gain over the previous year, principally due to the acquisition of DeVilbiss Air Power Company by Pentair in September 1999. Operating income for the segment was $29.1 million, down 73 percent from 1999.

Pentair's Enclosures segment recorded significant achievements in 2000, as it continued its strong performance following its transformation to serve datacom and telecom customers. All of the segment's businesses received major contract awards from global customers. For example, Pentair Electronic Packaging fourth quarter 2000 sales rose almost 70 percent over year ago figures as it captured new programs with Motorola, Dell, and Marconi, among others. The Enclosures segment is also adding aluminum enclosure capabilities to its Minnesota facilities, increasing integration capacity at several locations, and expanding its industrial enclosures plant in Mexico. Hoffman Enclosures won the annual Control magazine Reader's Choice Awards for the Enclosures Product category, in which 72 percent of readers chose Hoffman as their preferred enclosure manufacturer.

Enclosure segment sales totaled $777.7 million in 2000, an 18 percent gain over 1999 levels, while operating income totaled $94.6 million, a 50 percent improvement over the previous year. In local currencies, sales increased 22 percent while operating income gained 53 percent. Return on sales for the Enclosures segment was 12.2 percent for full year 2000, versus 9.6 percent in 1999.

The Water Technologies segment also performed well in 2000, continuing a five-year annual growth rate of over 50 percent. The integration of the Essef acquisition marked the second major successful integration in as many years. The segment's pump business reported continued strong activity in its municipal market, and pool and spa equipment sales exceeded expectations. Pentair Water Treatment continued its expansion into China and India regions and recorded sales and operating income gains of over 20 percent from its international units.

The Water Technologies segment reported 2000 sales of $903.7 million, a 55 percent gain over 1999, partially due to the acquisition of Essef in August 1999. Operating income for the segment totaled $120.7 million, up 65 percent from 1999. In local currencies, sales increased 57 percent while operating income gained 69 percent. Return on sales for the segment was 13.4 percent for 2000 versus 12.6 percent for 1999.

Hogan said discussions are under way with potential buyers of the company's discontinued equipment businesses, and transactions are expected to be concluded in the first half of 2001.

"Looking forward," Hogan said, "we are encouraged that January sales in our Tools segment are up over the same period last year. While prevailing economic conditions may slow the growth of our Water Technologies and Tools segments somewhat, we expect to achieve first quarter 2001 earnings in the range of $.40 to $.45 per share."

A Pentair conference call scheduled for 9:00 a.m. CST 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 St. Paul-based manufacturer whose core businesses compete in Tools, Water Technologies, and enclosures markets. The company employs 13,000 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, 2000. Actual results could differ materially from anticipated results.

                          PENTAIR, INC. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)


                                  Fourth Quarter                  Full Year
    In thousands, except
     per-share data           2000          1999         2000          1999

    Net sales             $674,777      $722,056   $2,748,013    $2,116,070
    Cost of goods sold     523,187       523,859    2,051,515     1,529,419
     Gross profit          151,590       198,197      696,498       586,651
    Selling, general and
     administrative        128,011       106,091      438,488       339,707
    Research and
     development             7,831         7,388       31,191        22,170
    Restructuring charge    27,257            --       24,789        23,048
    Operating income
     (loss)                (11,509)       84,718      202,030       201,726
    Net interest expense    18,619        20,100       74,899        43,582
     Income (loss) from
      continuing
      operations before
      income taxes         (30,128)       64,618      127,131       158,144
    Income taxes           (11,661)       24,991       45,263        60,056
    Income (loss) from
     continuing
     operations            (18,467)       39,627       81,868        98,088
    Income (loss) from
     discontinued
     operations, net of
     tax                    (7,962)        3,348      (24,759)        5,221
    Cumulative effect of
     accounting change,
     net of tax                 --            --       (1,222)           --
    Net income (loss)     $(26,429)      $42,975      $55,887      $103,309

    Earnings per common share
     Basic
      Continuing
       operations           $(0.38)        $0.83        $1.68         $2.24
      Income (loss)
       from discontinued
       operations            (0.16)         0.07        (0.51)         0.12
      Cumulative effect
       of accounting change     --            --        (0.02)           --
       Basic earnings per
        common share        $(0.54)        $0.90        $1.15         $2.36

     Diluted
      Continuing operations $(0.38)        $0.83        $1.68         $2.21
      Income (loss) from
       discontinued
       operations            (0.16)         0.07        (0.51)         0.12
      Cumulative effect
       of accounting change     --            --        (0.02)           --
       Diluted earnings
        per common share    $(0.54)        $0.90        $1.15         $2.33


    Pro forma amounts assuming the accounting change is applied retroactively

     Net income (loss)
      from continuing
      operations          $(18,467)      $39,532      $81,868       $97,514
     Net income (loss)
      from discontinued
      operations            (7,962)        3,348      (24,759)        5,221
                          $(26,429)      $42,880      $57,109      $102,735

    Net income (loss) per common share
     Basic
      Continuing
       operations           $(0.38)        $0.83        $1.68         $2.23
      Income (loss)
       from discontinued
       operations            (0.16)         0.07         (0.51)         0.12
                            $(0.54)        $0.90        $1.17         $2.35

     Diluted
      Continuing
       operations           $(0.38)        $0.83        $1.68         $2.20
      Income (loss) from
       discontinued
       operations            (0.16)         0.07        (0.51)         0.12
                            $(0.54)        $0.90        $1.17         $2.32

The above financial statements reflect:

*a fourth quarter 2000 net restructuring charge related to the reorganization of our Tools segment and corporate headquarters;

*discontinuing the operations of our Equipment segment in the fourth quarter of 2000;

  • the adoption of SAB 101, which resulted in a cumulative effect of accounting change in 2000; and

  • the adoption of EITF 00-10, which clarified the income statement classification for shipping and handling fees and costs.

Certain prior year information has been reclassified to conform to the current year presentation.

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

                    First       Second        Third       Fourth
                  Quarter      Quarter      Quarter      Quarter        Year
    In thousands     2000         2000         2000         2000        2000

    Net Sales
    Tools        $231,610     $275,375     $280,203     $279,428  $1,066,616
    Water         231,967      261,727      214,119      195,859     903,672
    Enclosures    184,114      196,659      197,462      199,490     777,725
    Other              --           --           --           --          --
    Consolidated $647,691     $733,761     $691,784     $674,777  $2,748,013

    Operating Income (Loss) Before Restructuring Charge
    Tools         $22,005      $17,235      $10,772    $(20,865)     $29,147
    Water          30,749       41,448       28,512       20,023     120,732
    Enclosures     23,149       24,542       24,786       22,166      94,643
    Other          (5,619)       (3,788)      (2,720)     (5,576)     (17,703)
    Consolidated  $70,284      $79,437      $61,350      $15,748    $226,819

    Operating Income (Loss) Before Restructuring
     Charge as a Percent of Net Sales
    Tools            9.5%         6.3%         3.8%        (7.5%)       2.7%
    Water           13.3%        15.8%        13.3%        10.2%       13.4%
    Enclosures      12.6%        12.5%        12.6%        11.1%       12.2%
    Consolidated    10.9%        10.8%         8.9%         2.3%        8.3%

    Restructuring Charge (Income) Expense
    Tools        $(1,171)          $--          $--       $6,567      $5,396
    Water              --           --           --           --          --
    Enclosures    (1,297)           --           --         (328)     (1,625)
    Other              --           --           --       21,018      21,018
    Consolidated $(2,468)          $--          $--      $27,257     $24,789

    Operating Income (Loss) After Restructuring Charge
    Tools         $23,176      $17,235      $10,772     $(27,432)    $23,751
    Water          30,749       41,448       28,512       20,023     120,732
    Enclosures     24,446       24,542       24,786       22,494      96,268
    Other          (5,619)       (3,788)      (2,720)    (26,594)     (38,721)
    Consolidated  $72,752       $79,437     $61,350     $(11,509)   $202,030


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

                    First       Second        Third       Fourth
                  Quarter      Quarter      Quarter      Quarter        Year
    In thousands     1999         1999         1999         1999        1999
    Net Sales
    Tools        $154,831     $153,606     $214,747     $352,459    $875,643
    Water         105,049      123,544      164,353      189,981     582,927
    Enclosures    148,360      162,038      167,486      179,616     657,500
    Other              --           --           --           --          --
    Consolidated $408,240     $439,188     $546,586     $722,056  $2,116,070

    Operating Income (Loss) Before Restructuring Charge
    Tools         $18,815      $15,611      $24,702      $47,857    $106,985
    Water          14,052       17,595       20,113       21,602      73,362
    Enclosures     12,393       14,405       16,406       19,885      63,089
    Other          (4,661)       (4,324)     (5,051)      (4,626)    (18,662)
    Consolidated  $40,599      $43,287      $56,170      $84,718    $224,774

    Operating Income (Loss) Before Restructuring Charge
      as a Percent of Net Sales
    Tools           12.2%        10.2%        11.5%        13.6%       12.2%
    Water           13.4%        14.2%        12.2%        11.4%       12.6%
    Enclosures       8.4%         8.9%         9.8%        11.1%        9.6%
    Consolidated     9.9%         9.9%        10.3%        11.7%       10.6%

    Restructuring Charge (Income) Expense
    Tools          $6,305          $--          $--          $--      $6,305
    Water              --           --           --           --          --
    Enclosures     16,743           --           --           --      16,743
    Other              --           --           --           --          --
    Consolidated  $23,048          $--          $--          $--     $23,048

    Operating Income (Loss) After Restructuring Charge
    Tools         $12,510      $15,611      $24,702      $47,857    $100,680
    Water          14,052       17,595       20,113       21,602      73,362
    Enclosures    (4,350)       14,405       16,406       19,885      46,346
    Other          (4,661)       (4,324)      (5,051)     (4,626)     (18,662)
    Consolidated  $17,551      $43,287      $56,170      $84,718    $201,726


                          PENTAIR, INC. AND SUBSIDIARIES
       RECONCILIATION OF CONTINUING AND DISCONTINUED OPERATIONS (UNAUDITED)

    In millions,
     except per     First       Second        Third       Fourth
     -share data  Quarter      Quarter      Quarter      Quarter        Year

    Net Sales (a)
     1999 total    $483.7       $521.0       $622.3       $807.5    $2,434.5
     Equipment
      discontinued
      operations     75.5         81.8         75.7         85.4       318.4

      1999
       continuing
       operations  $408.2       $439.2       $546.6       $722.1    $2,116.1

     2000 total    $722.0       $803.3       $745.6       $732.4    $3,003.3
     Equipment
      discontinued
      operations     74.3         69.5         53.8         57.7       255.3

      2000
       continuing
       operations  $647.7       $733.8       $691.8       $674.7    $2,748.0
      % change
       from
       continuing
       operations     59%          67%          27%          (7%)        30%

    Operating Income (Loss) (b)
     1999 total     $46.4        $51.6        $62.7        $91.6      $252.3
     Equipment
      discontinued
      operations      5.8          8.3          6.5          6.9        27.5

      1999
       continuing
       operations   $40.6        $43.3        $56.2        $84.7      $224.8

     2000 total     $72.9        $78.6        $40.7         $2.9      $195.1
     Equipment
      discontinued
      operations      2.6          (0.8)      (20.7)       (12.8)      (31.7)

      2000
       continuing
       operations
       (c)          $70.3        $79.4        $61.4        $15.7      $226.8
      % change
       from
       continuing
       operations     73%          83%           9%          (81%)        1%

    Diluted Earnings Per Share (d)
     1999 continuing
      operations    $0.53        $0.55        $0.62        $0.83       $2.55
     Restructuring
      charge       (0.34)           --           --           --       (0.34)
      1999 total
       continuing
       operations    0.19         0.55         0.62         0.83        2.21

     Discontinued
      operations     0.08         0.11         0.08         0.07        0.34
     Restructuring
      charge        (0.22)          --           --           --       (0.22)
      1999 total
       discontinued
       operations  (0.14)         0.11         0.08         0.07        0.12

      1999 total
       reported     $0.05        $0.66        $0.70        $0.90       $2.33

     2000
      continuing
      operations
      (excluding
      one-time
      costs)        $0.64        $0.85        $0.58        $0.31       $2.38
     One-time
      costs (e)        --         (0.06)         --        (0.33)      (0.39)
      2000
       continuing
       operations
       before
       restructuring
       charge        0.64         0.79         0.58        (0.02)       1.99
     Restructuring
      charge         0.03           --           --        (0.36)       (0.33)
      2000 total
       continuing
       operations    0.67         0.79         0.58        (0.38)       1.66

     Discontinued
      operations
      (including
      one-time
      costs)         0.01        (0.03)       (0.30)       (0.19)       (0.51)
     Restructuring
      charge       (0.03)           --           --         0.03          --

      2000 total
       discontinued
       operations  (0.02)         (0.03)      (0.30)       (0.16)       (0.51)

      2000 total
       reported     $0.65        $0.76        $0.28       $(0.54)      $1.15
      % change from
       continuing
       operations
       before
       restructuring
       and one-time
       costs          21%            55%        (6%)         (63%)        (7%)

(a) Adjusted for SAB 101, cumulative effect of accounting change, and outbound freight reclassification.

(b)Adjusted for SAB 101 and cumulative effect of accounting change and excludes restructuring charge.

(c)One-time charges included above.

(d)Amounts may not total the annual earnings per share because each quarter and the year are calculated separately based on the basic and diluted weighted average common shares outstanding during that period.

(e)One-time costs relate to our Tools segment and consist of $5 million in accounts receivable reserves that were established in the second quarter of 2000 and $25 million for accounts receivable ($17 million)and inventory valuation reserves ($8 million) that were established in the fourth quarter of 2000.

CONTACT: Mark Cain of Pentair, 651-639-5278

SOURCE Pentair, Inc.

CONTACT: Mark Cain of Pentair, 651-639-5278

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