ST. PAUL, Minn., July 20 /PRNewswire/ -- Pentair, Inc. (NYSE: PNR)
announced today that increased cost controls and other operating efficiencies
enabled the company to deliver second quarter 2001 earnings per share (EPS) of
$0.58, in line with analysts' estimates and 38 percent above first quarter
2001 EPS of $0.42. Pentair's free cash flow for the second quarter totaled
$106.4 million, bringing total free cash flow for the first half of 2001 to
$53.4 million, a nearly $100 million improvement from the first six months
last year and representing 109 percent conversion of year-to-date 2001 net
income.
"We achieved these results in spite of sales pressures created by economic
softness in the global marketplace," said Randall J. Hogan, president and
chief executive officer. "Our Water Technologies segment performed as
expected, Enclosures was disappointing, and Tools exceeded its recovery plan.
In addition, our interest expense was lower, driven by our strong cash flow
performance."
For the three months ended June 30, 2001, operating income was
$60.3 million, compared to $79.4 million in the second quarter of 2000.
Continuing EPS for the 2001 second quarter was $0.58, below the $0.79 in the
year-earlier quarter. Net sales for the second quarter of 2001 were
$702.1 million, versus $733.8 million in the second quarter of 2000.
For the six months ended June 30, 2001, operating income was
$113.2 million, compared to $152.2 million (including restructuring charge
income of $2.5 million) in the comparable 2000 period. Continuing EPS in the
first half of 2001 was $1.00, versus $1.48 a year earlier, but in line with
analysts' estimates. Net sales for the first six months of 2001 were
$1.4 billion, flat when compared to the year-earlier period.
"Cash flow is a critical measurement of our progress in the prevailing
economic conditions and we set ambitious goals for 2001," Hogan said. "We are
ahead of our cash flow objectives, and on track to meet our full-year free
cash flow target of $150 million."
In a review of second quarter 2001 highlights, Hogan singled out dramatic
improvements at the Tool segment, sparked by cost reductions and strong sales
of pressure washers and Porter-Cable branded tools; strength in the pool and
spa markets, which compensated for softer pump sales in the Water Technologies
segment; and cost reductions in all of Pentair's businesses, whose sales are
depressed by economic softness.
"We don't see dramatic near-term improvements in the markets we serve,"
Hogan said, "but the diversity of Pentair's product groups and the company's
improved cost efficiencies bolster confidence in our performance. Although
there is no reliable timetable for a return to more favorable conditions in
the global economy, the steps we have taken in the first half of 2001 have put
Pentair back on track."
In the Tools segment, Pentair said the turnaround strategies it has
implemented are taking hold. Economic pressures continue to affect sales
growth, but revenues and operating income both improved from quarter-earlier
levels as the refocused segment made strong inroads in most of its product
lines and reinforced its traditionally high service levels. A highlight of
the quarter was the success of the pressure washer line at DeVilbiss Air Power
Company, largely due to the outstanding performance of its ExCell brand.
Pentair has expanded its leading position in the pressure washer business with
the introduction of units with oil-free radial pumps that provide added
efficiencies and quality benefits at attractive price points. Delta renewed
its focus on customer service and product development, and profit margins
improved as the result of reduced discounting activities. Porter-Cable is
introducing a host of new tools, which when combined with those of Delta and
DeVilbiss, will total approximately 50 for the year.
In the Enclosures segment, second quarter sales and operating earnings
declined from those of both the second quarter of 2000 and the first quarter
of 2001. The downturn in industrial capital spending reduced Hoffman's sales,
while the slowdown in electronics and telecom markets affected Pentair
Electronic Packaging and Pentair Enclosures Europe, in particular. Operating
income reflected weaker sales; a disproportionate decline in standard product
business and fewer small, high-margin programs; and one-time costs to reduce
capacity. In response, the business reduced headcount by 11 percent; idled
one plant and reduced capacity at others; cut material costs and overhead; and
reduced inventory $10 million. The Enclosures business continues to
experience significant quoting activity and is increasing its percentage of
contract wins; however, these wins have not translated to shipments as
customers continue to deplete inventories and delay implementation of new
projects. Given the uncertain outlook for this business, the Enclosures
business is continuing to aggressively attack its cost structure.
In the Water Technologies segment, sales declined, due to sluggish water
softener component sales and a decline in pump revenues. Operating income
also was down for the quarter, but strong cost controls expanded operating
margins 200 basis points over the first quarter. The pool and spa equipment
business started the second quarter slowly, but record June sales brought the
business back in line for the year. Sales of pumps to industrial customers
have been particularly hard hit in the current economic slump. The pump
business also was affected by decreased international sales due to the strong
U.S. dollar, and timing of shipments for several large pump projects.
Although sales were down, backlogs were up five percent over prior-year levels
and orders remain solid. New product introductions in the quarter included a
line of pressure tanks for the Home Center channel and heat pumps for pool and
spa applications.
"We are cautiously optimistic in our ability to meet third quarter
earnings expectations in the current economic environment," Hogan said. "We
continue to work on the recovery of our Tools segment, to pursue cost
reductions in our Water Technologies and Enclosures segments and make certain
they are sized appropriately for the markets they serve, to maintain our
momentum on cash flow to pay down additional debt, and to capture every
opportunity to add further value for shareholders."
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 St. Paul-based manufacturer whose core businesses compete in
tools, water technologies, and enclosures markets. The company 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 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 Six months ended
June 30 July 1 June 30 July 1
2001 2000 2001 2000
In thousands, except per-share data
Net sales $702,076 $733,761 $1,373,459 $1,381,452
Cost of goods sold 531,294 541,614 1,038,690 1,009,403
Gross profit 170,782 192,147 334,769 372,049
Selling, general
and administrative 103,183 105,182 206,575 206,182
Research
and development 7,250 7,528 14,989 16,146
Restructuring
charge (income) - - - (2,468)
Operating income 60,349 79,437 113,205 152,189
Net interest expense 16,241 18,579 33,957 37,527
Write-off of investment - - 2,500 -
Income from continuing
operations before
income taxes 44,108 60,858 76,748 114,662
Provision for
income taxes 15,552 22,185 27,629 42,348
Income from
continuing operations 28,556 38,673 49,119 72,314
Income (loss) from
discontinued operations,
net of tax - (1,440) - (2,415)
Cumulative effect
of accounting change,
net of tax - - - (1,222)
Net income $28,556 $37,233 $49,119 $68,677
Earnings per
common share
Basic
Continuing operations $0.58 $0.80 $1.00 $1.49
Income (loss) from
discontinued operations - (0.03) - (0.05)
Cumulative effect
of accounting change - - - (0.02)
Basic earnings
per common share $0.58 $0.77 $1.00 $1.42
Diluted
Continuing operations $0.58 $0.79 $1.00 $1.48
Income (loss) from
discontinued operations - (0.03) - (0.05)
Cumulative effect
of accounting change - - - (0.02)
Diluted earnings
per common share $0.58 $0.76 $1.00 $1.41
Weighted average
common shares
outstanding
Basic 49,032 48,517 49,019 48,485
Diluted 49,274 48,742 49,200 48,658
Cash dividends declared
per common share $0.17 $0.16 $0.34 $0.32
Pentair, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30 December 31 July 1
2001 2000 2000
In thousands (Unaudited) (Unaudited)
Assets
Current assets
Cash and cash equivalents $27,689 $34,944 $45,188
Accounts and
notes receivable, net 475,813 468,081 527,128
Inventories 345,097 392,495 421,586
Other current assets 96,330 95,019 73,579
Net assets of
discontinued operations 109,060 101,263 153,397
Total current assets 1,053,989 1,091,802 1,220,878
Property, plant
and equipment, net 341,037 352,984 355,637
Goodwill, net 1,114,115 1,141,102 1,135,810
Other assets 91,275 58,137 59,380
Total assets $2,600,416 $2,644,025 $2,771,705
Liabilities and
Shareholders' Equity
Current liabilities
Short-term borrowings $98,828 $108,141 $195,964
Current maturities of
long-term debt 21,605 23,999 21,341
Accounts and notes payable 230,286 250,088 248,639
Accrued expenses and
other current liabilities 244,731 266,564 259,675
Total current liabilities 595,450 648,792 725,619
Long-term debt 763,746 781,834 839,003
Other noncurrent liabilities 199,343 202,808 170,459
Total liabilities 1,558,539 1,633,434 1,735,081
Shareholders' equity 1,041,877 1,010,591 1,036,624
Total liabilities and
shareholders' equity $2,600,416 $2,644,025 $2,771,705
Pentair, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six months ended
June 30 July 1
In thousands 2001 2000
Operating activities
Net income $49,119 $68,677
Depreciation 32,830 32,366
Amortization 20,565 19,893
Deferred income taxes 264 335
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 (16,233) (40,088)
Inventories 42,753 (67,222)
Prepaid expenses and other current assets (7,462) (11,309)
Accounts payable (15,222) 31,070
Employee compensation and benefits (16,600) (8,017)
Accrued product claims and warranties (563) (1,394)
Income taxes 7,000 24,492
Other current liabilities (5,754) (33,250)
Pension and post-retirement benefits 3,499 193
Other assets and liabilities (5,784) (12,705)
Net cash used for continuing operations 90,912 1,795
Net cash used for discontinued operations (12,387) (8,697)
Net cash used for operating activities 78,525 (6,902)
Investing activities
Capital expenditures (25,131) (28,449)
Acquisitions, net of cash acquired (1,937) -
Equity investments (16,698) -
Net cash used for investing activities (43,766) (28,449)
Financing activities
Net short-term borrowings (8,586) 45,352
Proceeds from long-term debt 2,413 4,968
Repayment of long-term debt (21,683) (26,036)
Proceeds from exercise of stock options 1,648 1,558
Dividends paid (16,665) (15,517)
Net cash provided by financing activities (42,873) 10,325
Effect of exchange rate changes on cash 859 7,199
Change in cash and cash equivalents (7,255) (17,827)
Cash and cash equivalents, beginning of period 34,944 63,015
Cash and cash equivalents, end of period $27,689 $45,188
Pentair, Inc. and Subsidiaries
Financial Information by Reportable Business Segment (Unaudited)
Three months ended Six months ended
June 30 July 1 June 30 July 1
In thousands 2001 2000 2001 2000
Net sales to ?
external customers
Tools $ 285,905 $ 275,375 $ 526,297 $ 506,985
Water 241,017 261,727 461,869 493,694
Enclosures 175,154 196,659 385,293 380,773
Corporate/other - - - -
Consolidated $ 702,076 $ 733,761 $1,373,459 $1,381,452
Operating income
(loss) before
restructuring charge
Tools $18,218 $17,235 $26,081 $39,240
Water 35,650 41,448 63,843 72,197
Enclosures 9,834 24,542 31,071 47,691
Other (3,353) (3,788) (7,790) (9,407)
Consolidated $60,349 $79,437 $ 113,205 $ 149,721
Operating income (loss)
before restructuring
charge as a percent of
net sales
Tools (1) 6.4% 6.3% 5.0% 7.7%
Water 14.8% 15.8% 13.8% 14.6%
Enclosures 5.6% 12.5% 8.1% 12.5%
Consolidated 8.6% 10.8% 8.2% 10.8%
Restructuring charge (income)
Tools $ - $ - $ - $(1,171)
Water - - - -
Enclosures - - - (1,297)
Other - - - -
Consolidated $ - $ - $ - $(2,468)
Operating Income (Loss)
After Restructuring Charge
Tools (1) $18,218 $17,235 $26,081 $40,411
Water 35,650 41,448 63,843 72,197
Enclosures 9,834 24,542 31,071 48,988
Other (3,353) (3,788) (7,790) (9,407)
Consolidated $60,349 $79,437 $ 113,205 $ 152,189
(1) Second quarter 2000 Tools segment operating income reflects one-time
pre-tax costs to establish an additional $5.0 million in accounts
receivable reserves.
| Contact: |
Mark Cain of Pentair, (651) 639-5278 |
SOURCE Pentair, Inc.
CONTACT: Mark Cain of Pentair, +1-651-639-5278